361 (20 March 2019)

Welcome to week 361!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

(13 March 2019):Amazon gets an edge with its secret squad of PhD economistsCNN.com

——–“Estimating inflation is a tricky and complex task.  In the United States, the government’s Bureau of Labor Statistics sends testers to stores to record the price of everything from chees to ties, and surveys consumers over the phone about what they spend on gas and funeral services.  Amazon thinks it could do it better.  With help from outside researchers, the company’s economists are working on a way to measure inflation using thousands of transactions across its own platform. . . . That’s just one way Amazon is using the squad of economists it has recruited in recent years.  The company has turned so many businesses, from retailing to cloud computing, inside out.  Now Amazon is upending the traditional role of economists within companies, as well as the field of economics.”  In recent years, “Amazon has hired more than 150 PhD economists, making it probably the largest employer in the field behind institutions like the Federal Reserve, which has hundreds of economists on staff.”

********The changing role of the economist in private business is one of the key points of this article, a role change that is especially clear in the context of Amazon but applies more generally to tech companies.  One of the factors attracting economists to companies—aside from money—is the ability to work with extraordinarily large data sets.  One of the factors that are concerning is that most of the research that they perform will not see the light of day; economists are often required to sign non-disclosure agreements, somewhat equivalent to research performed for the CIA classified Secret.  Historian of economics Beatrice Cherrier expands upon the significance of the rise of private data: “Before, economists used to work on public data . . . And now, if they want to study behavior, the tech companies have it, and it’s proprietary.”

(14 March 2019): “One Way to Make Reparations Work: Address the black-white wealth gap” Bloomberg.com——–[A column by Bloomberg writer Noah Smith, who previously was an assistant professor of finance at Stony Brook University.]  “The issue of reparations for African Americans, is, of course, full of moral and historical issues that one column, even by someone with much greater understanding and deeper knowledge than me, could ever resolve.  But since the proposal is now being taken seriously, it’s worth thinking about the economics of how it could and should work.”  This is a valuable article that suggests the power of the market to influence a discipline.

********I am going to let the words of Noah Smith speak for themselves.  Please read the article to get a sense of some of the issues.  Among familiar figures noted are Ta-Nehisi Coates, Democratic presidential candidates Julian Castro, Kamala Harris, and Elizabeth Warren, and conservative columnist David Brooks of The New York Times.  Smith raises an essential question: “what the goal of reparations would actually be.”  He goes on to state that “One obvious target is to reduce the persistent black-white wealth gap.”  Such a focus allows him to bring economic thinking into the picture, however successfully you will have to judge for yourself.  To get a glimpse of some of the complexity that exists without that focus, a look at the column of David Brooks is important.  As he sees it, “I don’t think one can grasp the full amplitude of racial injustice without invoking the darkest impulses of human nature.”

********One approach to reduce the wealth divide is the use of “baby bonds,” a policy advance “by economists William Darity and Darrick Hamilton.  If done as a form of reparations, the program would simply endow every black child with a government trust fund, worth perhaps $21,000 to $47,000.  The proposal would have to be modified to give some money to the parents, grandparents and other family members of the recipients, but that’s the basic idea.”  But there are many additional issues raised by Smith that make this proposal fraught with difficulties.  What a fascinating, challenging, and important course would “The Economics of Reparations” be.  So much could follow from it.

(14 March 2019):How Big Tobacco Hooked Children on Sugary DrinksThe New York Times

——–What do “ads featuring Joe Camel, Kool-Aid Man and the maniacal mascot for Hawaiian Punch have in common?  All three were created by Big Tobacco in the decades when cigarette makers, seeking to diversify their holdings, acquired some of America’s iconic beverage brands.  They used their expertise in artificial flavor, coloring and marketing to heighten the products’ appeal to children.  That tobacco companies sold sugar-sweetened drinks like Tang, Capri un and Kool-Aid is not exactly news.  But researchers combing through a vast archive of cigarette company documents at the University of California, San Francisco stumbled on something revealing: Internal correspondence showed how tobacco executives, barred from targeting children for cigarette sales, focused their marketing prowess on young people to sugary beverages in ways that had not been done before. . . . Using child-tested flavors, cartoon characters, branded toys and millions of dollars in advertising, the companies cultivated loyalty to sugar-lade products that health experts said had greatly contributed to the nation’s obesity crisis.”

********This article draws heavily upon “Tobacco industry involvement in children’s sugary market” published in The BMJ.  It is all too easy to understand that a company prohibited from using its intellectual skills and know how in one area will look for other areas to use them.  A forthcoming book—May 2019—may be of related interest.  Its title is The Age of Addiction: How Bad Habits Became Big Business.  Written by David T. Courtwright, “a leading expert on addiction,” the book is a “singularly authoritative history of how sophisticated global businesses have targeted the human brain’s reward centers, driving us to addictions ranging from oxycodone to Big Macs to Assassin’s Creed to Snapchat—with alarming consequences.”  I ran across this book in a very short book excerpt of The Atlantic.

(15 March 2019): [SR]How Sears Lost the American ShopperThe Wall Street Journal

********This article provides a broad overview of events and circumstances that resulted in the fall of Sears from its hay day in the 1970s to its current state.  It is not a pretty story, but it is an interesting one.  Here is the story, “told by eight people who lived it (edited from interviews).  Mr. Lampert, who is poised to steer a vastly shrunken Sears out of bankruptcy, declined to be interviewed.” 

(18 March 2019):In the age of the selfie, a younger market for cosmetic proceduresMarketplace

********The title pretty much says it all, driven by image-sensitive social media, younger people are making use of cosmetic procedures once primarily used by more mature customers.  In particular, the number of Botox injections “administered to 18 to 37-year-olds have increased more than 20 percent in the past five years. . . . Carrie Strom, Allergan’s vice president for medical aesthetics, described Botox as ‘the gateway to all aesthetics’.”  As a result, “Allergan is tripling its marketing budget to $150 and paying social media influencers to promote the products.”

(18 March 2019):Alan Krueger Led a Quiet Economics RevolutionBloomberg.com

——–Princeton University economist Alan Krueger “died over the weekend at the age of 58.  In his outstanding but too-brief career, Krueger helped turn the economics profession into a more empirical, more scientific enterprise.  His research shed light on many of the most important policy issues facing the U.S., and he put that knowledge to good use working for two presidential administrations.”  Krueger’s respect for evidence made him “an important voice in an economics profession in the midst of rapid change.  In recent decades, the theory-heavy economics of the 1970s and 1980s has given way to more empirical approaches.  The most important change has been what economists Joshua Angrist and Jörn-Steffen Pischke call the ‘credibility revolution’—using carefully designed studies to isolate cause from effect, instead of simply looking at correlations or relying on a theoretical model that might be wrong.”  Indeed, Krueger was “a key figure in this revolution, helping to pioneer the use of natural experiments.”

********The survey article in which Krueger is one of the prominent figures is the 2010 article “The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics.”  You can download a copy of the article, aimed at a more general audience, here.  Many articles have been appearing upon the death of Alan Krueger.  The article in The New York Times provides additional information, as well as the cause of his death.  RIP Alan Krueger.

********The Times article showed a graph summarizing recent use of natural experiments and quasi-experiments, laboratory experiments, and randomized controlled trials in National Bureau of Economic Research publications on public economics.  That graph came from a series of 42 slides by Henrik Jacobsen Kleven on “Language Trends in Public Economics.”  It seems like a useful of Themes, Methods, and Specific Terms being employed in economics.

May you have a good week!

Bruce

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