Welcome to week 371! 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.
This week a book by my son, Will Larson, was published by Stripe Press: An Elegant Puzzle: Systems of Engineering Management. Will is Head of Foundation Engineering at Stripe, having taken his undergraduate degree in computer science at Centre College, a small private liberal arts college in Danville, Kentucky. If you are interested in learning a bit about the book and a bit about the author, you may be interested in reading the interview “How to Size and Assess Teams from an Eng Lead at Stripe, Uber and Digg” Firstround.com. It contains a thoughtful interview on matters pertaining to team size, working with team members, and how to provide for career opportunities for team members and oneself.
(22 May 2019): [SR] “You’ll Need a Lot More Money to Buy That Jar of Honey” The Wall Street Journal
——–“Global honey prices are at their highest levels in years, due to a new wave of consumer demand for natural sweeteners and declining bee populations that are hampering mass production.” Although has been used as a sweetener for centuries, it has become popular in recent years “with people looking for healthier alternatives to can sugar and high-fructose corn syrup. . . . In addition, it is being used more as an ingredient in shampoos, moisturizers and other personal-care products that companies market as naturally made.” Since 2013 the price of honey has climbed about 25%, “while the cost of sugar has fallen around 30% over the same time frame.” On the supply side, honey production has fallen due to colony collapses, winter losses, and “the conversion of large swaths of land to industrial crop farms” that have “reduced the amount of food—pollen—that is available for bees.”
(22 May 2019): “The radical plan to change how Harvard teaches economics” Vox.com
——–Economics 10 at Harvard University has long been one of the most popular courses on campus. Much like the proverbial ECON 101 of student lore, it provides the rudiments of how to think like an economist. Well-known economists Martin Feldstein and Gregory Mankiw have taught the course recently. Now, however, there is another course introducing students to how to do economics. It is Economics 1152: Using Big Data to Solve Economic and Social Problems and it is taught by celebrated economist Raj Chetty. Taking an empirical, rather than theoretical, approach, it provides students with an experience of how to use statistical tools that address important questions that relate to major political questions. Chetty is “focused on the roots and consequences of economic and racial inequality.”
********As the article notes, Economics 1152 seems to have succeeded in gathering a more diverse group of students than Economics 10. But in many ways 1152 seems more challenging. For many years a frequent point of discussion among economists was whether students should be introduced to microeconomics or macroeconomics first. The Harvard experience suggests that increasingly the point of discussion among economists will be whether students should be introduced to empirical and theoretical material first.
(23 May 2019): “Trump Wields a More Powerful Weapon Than Tariffs for Trade War” Bloomberg.com
——–“President Donald Trump’s trade war against China has so far focused on attacking imports. His new front: Weaponizing American exports.” The U.S. is seeking to “expand and toughen the export control regime that for decades has curbed the sale of defense-related technologies to rogue regimes and strategic rivals. . . . In closed-door deliberations the administration since last year has been discussing with companies and industry groups how to update and redefine the products on the Commerce Department’s export control list, a process that is expected to gel in the coming weeks.” Some businesses fear export controls more than tariffs. “Companies like General Electric, Google and Microsoft are worried it could bar them from competing in lucrative markets while reducing America’s capacity to innovate.”
********The whole concept of economic warfare is so at variance with the economist’s typical quest to identify situations where opportunities exist for mutually advantageous gain, win-win situations if you will. Nonetheless, there are those who want to pursue economic warfare. What are the options? This is not widely-discussed but here is a paper by two Czech economists that provides a broad overview of negative economic sanctions—see Table 1—during an economic and trade war. Wikipedia also provides an overview of the topic. Encyclopedia Britannica provides a description that has more narrative.
(23 May 2019): “When Big Rewards Don’t Pay Off” JSTOR Daily
——–“While we’d expect that when it comes to work, the greater the reward, the greater the effort and the better the performance, the truth is more complex. Scholars Dan Ariely, Uri Gneezy, George Loewenstein, and Nina Mazar . . . examine[d] the effect of reward on performance. What they found is that . . . Reward people too little, and they have no reason to put in any effort. Reward them just enough, and you’ll give them the necessary incentive to produce results. Raise the stakes too high, however, and while their effort might increase, counterintuitively enough, their performance might suffer.”
********The post is quite brief and in a variety of experiments they found that “across the board, performance was markedly worst in the highest reward category.” The link to the original article—not too technical, although some statistics—at the end of the post. My takeaway is that if incentives are too large, performance may suffer.
(23 May 2019): “The Wealth Detective Who Finds the Hidden Money of the Super Rich” Bloomberg Businessweek
********This piece discusses the work of UC Berkeley economist Gabriel Zucman who is “the world’s foremost expert on where the wealthy hide their money. His doctoral thesis, advised by [Thomas] Piketty [of Capital in the Twenty-First Century fame], exposed trillions of dollars’ worth of tax evasion by the global rich.” Zucman teamed with UC Berkeley colleague Emmanuel Saez to write the influential 2016 paper “Wealth Inequality in the United States Since 1918,” which “distilled a century of data to answer one of modern capitalism’s murkiest mysteries: How rich are the rich in the world’s wealthiest nation?”
********Aside from learning about Zucman, who appears on the cover of this week’s Bloomberg Businessweek, the article has much to so about the inequality of wealth in the U.S. and the difficulty of measuring wealth, the latter of which is important as Democratic presidential candidates like Elizabeth Warren are proposing to tax wealth in order to increase tax revenues. The article includes a five-minute video that provides a nice overview of the work of Zucman and Warren’s proposed wealth tax. Wealth taxes are not new, “At least 15 European countries have tried them; all but four have repealed them, most recently France.” I looked for a reliable reference, including country names, on the European wealth tax. The National Review came closest.
(24 May 2019): “Florida Is the Big Winner as the Wealthy Move Out of Northern States” Bloomberg.com
——–“Roughly 5 million Americans move from one state to another annually and some states are clearly making out better than others. Florida and South Carolina enjoyed the top economics gain [with Florida far ahead], while Connecticut, New York and New Jersey faced some of the biggest financial drains according to a Bloomberg analysis of state-to-state moves based on data from the Internal Revenue Service and the U.S. Census Bureau.”
********The Bloomberg analysis looks at the aggregate difference of the income of people leaving a state minus the income of people entering a state to measure financial gain, so this is a bit different from measuring inflows and outflows of people, although the two are related. The biggest financial loser was New York. “While long a haven for retirement, Florida’s effort to lure Wall Street executives has gained traction thanks to a provision in the federal tax law passed by the Trump administration that hits residents of high-tax states by putting a lower cap on state and local tax deductions”
May you have a good week!