370 (22 May 2019)

Welcome to week 370!  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 May 2019):Amazon rolls out machines that pack orders and replace jobsReuters.com

——–“Amazon.com Inc is rolling out machines to automate a job held by thousands of its workers: boxing up customer orders.  The company started adding technology to a handful of warehouses in recent years, which scans goods coming down a conveyor belt and envelops them seconds later in boxes custom-built for each item, two people who worked on the project told Reuters.”  Widespread adoption of these machines by Amazon “would amount to more than 1,300 job cuts across 55 U.S. fulfillment centers for standard-sized inventory.  Amazon would expect to recover the costs in over two years, at $1 million per machine plus operational expenses, they said.”

********A clear illustration of how advances in robotics are increasingly putting in jeopardy.  As the article concludes, “This is just a harbinger of automation to come.”  The ultimate goal is a “lights out” warehouse.

(15 May 2019):The pangolin black market is fueled by its scales, not its good looksMarketplace

——–“If you spend time browsing for cute animal photos on the internet, you may have stumbled across the pangolin.  The exotic animal may be adorable, but several species are endangered.  That’s because they are heavily trafficked for their scales.  Last month, the biggest ever seizure of pangolin scales was made in Singapore of 14.2 tons, or an estimated 36,000 pangolins.”  Pangolin are “the most trafficked mammal in the world . . . Pangolin scales are in demand primarily for traditional Chinese medicine.  They’re dried, ground into powder and used to supposedly cure anything from lactation difficulties to arthritis.”

********Here is a case where social and historical factors, i.e., the invisible handshake are driving the demand for pangolin scales (and thus in derived fashion, pangolin).  The word ‘trafficked’ caught my attention, which presumably means that a black (illegal) market is involved.  So what about legal markets?  The global numbers for legally slaughtered animals are quite dramatic, in 2014: 62.0 billion chickens were slaughtered, followed by 1.5 billion pigs, 648.7 million turkeys, 545.1 million sheep, 444.2 million goats, and 300.1 million cattle.  Evidently these animals are marketed but not trafficked.  You can learn more about these numbers here.  Interesting to see the concern for trafficked animals but not for marketed animals.

(15 May 2019):The Finance 202: Trump’s trade war sends big business to K StreetThe Washington Post

********K Street in Washington, D.C. is “known as a center for numerous lobbyists and advocacy groups,” so this article points to the importance of lobbyists during the trade war despite the fact that presently “only one of the top-20 lobbying firms  has a K Street address.”  (The article describes K Street as a metonym, i.e., “a word, name or expression used as a substitute for something else with which it is closely associated.”)  Why is there a rush to K Street?  “By more than doubling the duties on $200 billion worth of Chinese goods and threatening to extend that 25 percent levy to everything imported from the country, the Trump administration has created a new crowd of companies desperate for relief and lining up to hire Washington’s most connected operators to help.  The hope: to convince the U.S. Trade Representative to exclude their product from the new tariffs.  So the relatively impersonal market is, by these tariffs, displaced by relatively personal relationships.  I am reminded of the statement by John Adams, that the Massachusetts Constitution sought to establish “a government of laws and not of men.”  Perhaps the parallel statement is “an economy of markets and not of men”

(18 May 2019):The little-noticed surge across the U.S.-Mexico border: It’s Americans, heading southThe Washington Post

——–“President Trump regularly assails the flow of migrants crossing the Mexican border into the United States.  Less noticed has been the surge of people heading in the opposite direction. . . . If the thousands of Mexicans moving home are taken into account, the flow of migrants from the United States to Mexico is probably larger than the flow of Mexicans to the United States.  The American immigrants are pouring money into local economies, renovating historic homes and changing the dynamics of Mexican classrooms.”  In some cities, “Restaurants have adopted ‘American timing’—serving dinner at the ungodly hour of 6 p.m.”

********An interesting look at the flip side of the coin.  The “American timing” for serving dinner shows that sometimes economic factors can alter cultural factors, i.e., the invisible hand can influence the invisible handshake.

(18 May 2019):In Cities Where It Once Reigned, Heroin Is DisappearingThe New York Times

——–“Heroin’s presence is fading up and down the Eastern Seaboard, from New England mill towns to rural Appalachia, and in parts of the Midwest that were overwhelmed by it a few years back.  It remains prevalent in many Western states, but even New York City, the nation’s biggest distribution hub for the drug, has seen less of it this year.  The diminishing supply should be a victory for public health and law enforcement alike.  Instead, in cities like Baltimore, longtime users who managed to survive decades injecting heroin are now at far higher risk of dying from an overdose.  That is because synthetic fentanyl, a deadlier drug that is much cheaper to produce and distribute than heroin, has all but replaced it. . . . The reason fentanyl is everywhere is economic: Dealers and traffickers can make far more money from it than from heroin.  Instead of waiting months for poppy fields to grow in Mexico and farmers to harvest the brownish-black gum, which then gets refined into powder and shipped north, traffickers here and in Mexico can order fentanyl from China, or precursor chemicals to make it in clandestine labs, generating far more doses with far less labor.”

********Heroin, fentanyl, and opioids, all three show how changes in relative prices have led to significant shifts in drug usage and deaths.  Sam Quinones, of The New York Times, first made the connection between opioids and heroin in his outstanding 2013 book Dreamland: The True Tale of American’s Opiate Epidemic.  Quinones had the opioid story under control in 2013 but it has taken a long for concern to be filtered down from his book to public consciousness and state and federal governing bodies.  As Quinones argues, low-cost and easily available opioids led to heroin use when the opioid prices increased, and the relative price of heroin fell.  Interestingly, the word ‘fentanyl’ does not appear in the Index to Dreamland, so the story has advanced since then.  With the rise of fentanyl, and the increasing relative price of heroin, fentanyl usage has increased, although some of that usage is unintended.  All this sounds a bit too tidy, but it does show economic forces—the invisible hand—at work in the use of opioids, heroin, and fentanyl.

(19 May 2019):Why Some Europeans Get Cheap Beer and Others Don’tBloomberg.com

——–“There are three obvious reasons beer prices can differ among European countries.  One is that . . . Value-added taxes vary from country to country.  So do excise duties, reflecting a divergence of attitudes toward beer—from permissiveness . . . to considerable harshness . . . But the pretax prices also diverge widely.  Researchers who have studied food price differences attribute them, among other reasons, to consumption habits and wealth levels that diverge from country to country.  The beer price is negatively correlated with a country’s consumption level and positively correlated with per capita income.  Crudely put, in a wealthy country that drinks less beer, a bottle of lager will be more expensive.”

********The occasion for this piece seems to be a ruling by the European Commission to fine Anheuser-Busch InBev 200 million euros for market power abuse.  The fine was reduced when AB InBev cooperated with the investigation.  The description of the case is interesting and appears in the second paragraph of the article.  It shows how in the EU the language chose to relate product information can contribute to higher prices.

May you have a good week!

Bruce

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