396 (20 November 2019)

Welcome!  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.

(12 December 2010)The Efficiency DilemmaThe New Yorker

********The subtitle of this article is “If our machines use less energy, will we just use them more?”  It is an exposition of “the Jevons Paradox,” which grew out of the 1865 book The Coal Question, by British economist William Stanley Jevons; a useful discussion of the book can be found here.  The paradox is to the effect that “efforts to improve energy efficiency can more than negate any environmental gains.”  This idea is closely related to the rebound effect of conservation and energy economics.

I read The Coal Question decades ago and it struck me at the time that it made an argument similar to that made by Thomas Robert Malthus in the 1798 book An Essay on the Principle of Population in that it considered that ultimate consequences of exponential growth.  In the case of Malthus, population grows exponentially until it bumps up against food constraints.  In the case of Jevons, coal consumption grows expo exponentially until it bumps up against coal constraints.  This article makes it clear that there is more to The Coal Question than my takeaway.  “The Efficiency Dilemma” provides a good illustration of how increased savings in the use of a product in one use can lead to its deployment in many other uses, with energy use being a leading example.  The article suggests that Jevons was working his way to the concept of sustainability when he wrote that “Britain faced a choice between ‘brief greatness and longer continued mediocrity.’”  His preference was for a longer term.

(7 December 2016)A Short History of the Most Important Economic Theory in TechFast Company

********This article summarizes the content of “one of the Harvard Business Reviews’ most influential articles ever, ‘Increasing Returns and the New World of Business,’ by theoretical economist W. Brian Arthur.”  You can read “Increasing Returns” here.  As “A Short History” notes, increasing returns are “at the heart of the success of companies such as Google, Facebook, Uber, Amazon, and Airbnb.”  In fact, many a startup has argued for the importance of increasing returns for its plausible success. 

(5 November 2019)The Economist Who Wants to Ditch MathMarker

********This is yet another take on Robert Shiller’s book Narrative Economics and the presumed alternative it provides to the conventional, mathematically oriented approach to economics.  The article notes that “normally voluble economists have treated ‘narrative economics,’ . . . as though it doesn’t exist.”  Evidently it is hard to find economists to speak “on the record” about Shiller’s ideas.  One economist who would was Joel Mokyr, an economic historian at the Northwestern University. who notes that “What he [Shiller] calls ‘narrative’ other people call ‘expectations’ or ‘beliefs’ . . . The word ‘narrative puts old wine in new bottles.  We have always known about certain belies about the economy, and that people operate on those beliefs.  That is hardly a revolutionary insight.”

            What stood out for me in the article is its discussion of the role of epidemiology in Shiller’s work.  In doing so a 1927 paper by two Scottish scientists is related, as well as a 1993 book by sociologists Bryan Jones and Frank Baumgartner.  Epidemiology provides a good model for how ideas are transmitted through time and space, as Shiller notes.  He found that the that “the eruption of viral stories on the internet” followed the pattern established by Kermack and McKendrick, saying that “It’s like being an epidemiologist but in the world of ideas.”  (Incidentally, the ideas or Kermack and McKendrick were hardly nonmathematical, as a glimpse of the piece from Wikipedia will make clear.)

(13 November 2019) [SR]Kashmir’s $1,000-a-Pound Saffron Crop Withers After India LockdownThe Wall Street Journal

——–When the Indian government stripped its region of Kashmir from its relative autonomy in August, it also put the area’s saffron crop at risk  The spice, typically sells wholesale for “over $1,000 a pound” and “Hordes of buyers normally descend to snap up the product.  But this year is different.”  Farmers of saffron and other cash crops” have been unable to communicate with potential buyers and “insurgent groups and street protesters press pickers, traders and transporters not to work to protest the Indian government’s policy shift.”  As a result of these developments, growers in Pampore, known as Kashmir’s “Saffron Town,” are expecting a fall in income.

********Saffron is derived from the stigma of the flower of Crocus sativus, which can grow many places—Iran produces about 90% of the world’s saffron—including Western North Carolina (my wife harvested a few threads earlier today).  You can learn more about saffron here.  The article nicely illustrates how policy changes can upset a well-developed market of long standing.

(13 November 2019)The Zombie Storefronts of AmericaThe Atlantic

********This article examines the role that “pop-up” stores have played in repurposing vacant storefronts.  Those “pop-up” entrepreneurs “are all banking on the same short-term bet: People still want to shop in stores, even if what they want that store to be in six months is completely different. . . . In the pop-up-shop economy, place and time are as essential to success as what’s going on inside the storefronts themselves.  People want to have a day out, and they want to tell their friends they bought the new print hanging in their apartment at a cute little boutique everyone else missed out on.”

(15 November 2019) [SR]The Boardroom Sage Who Was Into Good Governance Before It Was CoolThe Wall Street Journal

********The Business Roundtable caused quite a stir when it moved from a shareholder view of corporate purpose (1997), which was strongly influenced by the views of Milton Friedman, to a stakeholder view (2019).   The BR, formed in 1972, has been issuing such statements since 1978.  As it turns out, the 2019 version looks back, in some ways, to a statement issued in 1981 developed by Ira Millstein, now 93 and still active, that argued “that companies have larger obligations to society that go beyond profits.”  (I was unable to find an online accessible copy of the 1981 document.  Even library copies are hard to come by.)  Commenting upon the 2019 statement, Millstein said that the 2019 statement is “a good first step, but it needs a lot of work.  I want to see it spelled out.  At the moment, it’s sort of wishful thinking, not meat and potatoes.”  The statements of the Business Roundtable are simply crying out for someone to take a systematic look at their evolution over time and discuss their relevance in a broader context.

(17 November 2019)Electric-Car Onset Leaves Lubricant Industry Facing Kodak’s FateBloomberg.com

——–“The $146 billion lubricants industry is at risk of suffering the same fate as Kodak, thanks to the rise of electric vehicles.  From Volkswagen AG to Nissan Motor Co., carmakers are switching to battery-powered models that use fewer greases than combustion vehicles.  With demand expected to decline from 2025, lubricant makers are wary of Eastman Kodak’s demise when it failed to grasp the potential of the digital camera in the 1970s.”  Piston-driven cars “typically use 40 different oils.”  EVs, on the other hand, “need a grease that can cool and lubricate the motor, while also protecting the electronics on-board and being compatible with non-metal materials like plastics.”  Those in the lubricant industry, however, do not see a cliff edge for their products and are working diligently to develop and market lubricants for EVs and their particular needs.  Overall, it is expected that “There’ll be a significant decrease in [lubricant] volume but not value.”

May you have a good week!  

Bruce

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