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.
The coronavirus is certainly in the news this week and will be for some time. Unsurprisingly there are a variety of economic angles on it and here are a few brief nods to some of them.
Macroeconomic Policy. (3 March 2020) [SR] “A Misplaced Faith in the Power of Central Banks” The Wall Street Journal. “Wall Street and President Trump have begged, admonished and tweeted fore Federal Reserve to come to the economy’s rescue. Tuesday morning, the Fed obliged. But their faith is likely to prove misplaced. The Fed cannot save the U.S. economy from the coronavirus, for two reasons. First, it can’t restart factors that are missing parts as the virus disrupts supply chains, nor can it persuade worried vacationers to fly. Second, and potentially more important, central banks are losing their grip on the business cycle.” But the good news is “that the same factors that make monetary policy less potent make fiscal policy even more so.”
Economic modelling of epidemics. (2 March 2020) “The first economic modelling of coronavirus scenarios is grim for the world” The Guardian. Warwick McKibbon, one of the authors of this article, has “modelled Sars and Mers epidemics” in the past. Now those skills are applied to the coronavirus, exploring seven scenarios about the spread and severity of the coronavirus. It notes, and this connects nicely with the article immediately above, “While cutting interest rates is an option, the shock will require a mix of monetary, fiscal and health policy responses. Quarantining affected people and reducing large scale social interaction would be an effective response.” It is said that “Many governments have been reluctant to invest sufficiently in their health care systems . . . [but the] idea that any country can be an island in an integrated global economy is being proved wrong.”
Globalization, epidemics, and the right. (5 March 2020) “A Global Outbreak Is Fueling the Backlash to Globalization” The New York Times. “The coronavirus that has seeped out of China, insinuating itself into at least 81 countries while killing more than 3,200 people, has effectively accelerated and intensified the pushback to global connection. . . . The epidemic has supplied Europe’s right-wing parties a fresh opportunity to sound the alarm about open borders. It has confined millions of people to their communities and even inside their homes, giving them time to ponder whether globalization was really such a good idea.” According to Ian Goldin, an Oxford University professor of globalization and development, “the coronavirus is merely the latest force to reveal the deficiencies of globalization as it has been managed in recent decades—an under-regulated, complacent form of interconnection that has left communities vulnerable to a potent array of threats.” But to some economists, “the moral of this story . . . is not that globalization is inherently dangerous: It is that market forces left unsupervised pose perils.”
The upside of the coronavirus. (5 March 2020) “Are streaming and delivery services booming amid coronavirus? We looked into it.” The Los Angeles Times. “The coronavirus . . . has hurt a wide spectrum of businesses. . . . But there are a handful of businesses, including ones in home entertainment or food delivery, that may even be helped by the health scare. JC O’Hara, chief market technician for equity research at trading firm MKM Partners, compiled what he called a ‘Stay at Home’ portfolio of stocks. Among the list of companies that he believed could hold up better against the coronavirus was online retail giant Amazon, streaming service Netflix, food delivery business Grubhub and gaming company Activision Blizzard.” O’Hara wrote, “We tried to identify what products/services/companies would potentially benefit in a world of quarantined individuals . . . What would people do if stuck inside all day?”
Theater movies and streaming would seem to be natural substitutes. If fewer people go to movie theaters, they are likely to be watching at home instead. Although there’s “little indication yet that U.S. consumers are staying home from theaters . . . studios have canceled film premieres, delayed productions and push back release dates to respond to the global situation.” Interestingly, “Movies such as the 2011 thriller ‘Contagion’ are gaining newfound popularity. the movie was the 270the most watched film in the Warner Bros. catalog in December, and this year it is the second most watched movie, the company said.” So, as a general principle, if two goods, more likely services, are substitutes, i.e., meet the same need or want, and one of them can be consumed in greater isolation than the other, one would expect an increase in the demand for the good or service with more isolation and a decrease in the demand for the good or service with less isolation, ceteris paribus.
(26 September 2013) “Hal Varian: the economics of the newspaper business” journalismfestival.com
********Hal Varian is the chief economist at Google. Interestingly, he was “founding dean of the School of Information” at the University of California, Berkeley, which sheds some light on why he was selected to receive an Italian journalism award in 2013.
In this piece he provides a summary, much like a Bloomberg QuickTake, of the economics of newspapers. He makes eight concise points regarding the relative decline of newspapers and in doing so points to the comparative advantages of newspapers and other types of media for conveying the news. Especially interesting to me was his discussion—point 5—of when people tend to read paper newspaper and online news. He writes: “When you look at loyal readers of paper newspapers, they tend to read the news during their leisure time; during breakfast, over the lunch hour, or in the evening. By contrast, online news is accessed throughout the day.” I miss my paper newspapers read while eating breakfast, a change that occurred because of very unreliable delivery.
In searching for a broader perspective, I searched a bit. Varian’s subject falls under the category of “media economics” and, from the perspective of the classification system of the Journal of Economic Literature, L82 Entertainment, Media. You can dig into the classification system here. Just keep clicking away on the category that interests you.
A textbook that looks somewhat interesting is The Media Economy, by Alab B. Albarran. This seems like a very general introduction with no specific chapter devoted to newspapers. That is not the case for the Handbook of Media and Economics, 2 volumes. (The Amazon entry is marred by an incorrect book image but click on it anyway to see the Table of Contents.) Volume 1A, chapter 9, is “Newspapers and Magazines,” which seems spot on—magazines are experiencing challenges not unlike those faced by newspapers. The chapter can be downloaded as a pdf from semanticscholar.org.
(6 February 2020) “Economists discover the power of social norms” The Economist
********This article provides a précis of the Richard T. Ely Lecture of the American Economic Association, by University of Chicago economist Marianne Bertrand on “Gender in the 21st Century.” The lecture is 56-minutes long and can be viewed here. (I have only viewed a few minutes of the lecture.)
——–“Over the past generation women have made substantial economic gains, even as progress on other measures of social equality has been uneven. Their average level of education has caught up to that of men across rich and poor countries alike. . . . Income may be divided less equally across the workforce as a whole, but it has become more evenly spread between men and women. In America women account for nearly 30% of the top tenth of earners, up from 5% in the 1960s. That said, progress is far from complete. . . . Although economics ought to be keenly interested in such matters, not least because of gender inequalities in the profession, it has not always been of much help in understanding them. That is changing, however, in ways that could transform the field.”
Bertrand’s work exemplifies that evolution. She notes that over the past few decades, “gender gaps in the rich world have had ever less to do with overt discrimination . . . and ever more to do with women’s decisions. Their choice of degree subject is one. . . . Mor powerful still is the effect of childbirth. . . . Economists, historically, have let the matter rest there, chalking such choices up to rational self-interest. . . . De gustibus non est disputandum, they say: there is no accounting for tastes. But perhaps there is. As Ms Bertrand noted in her lecture, other social sciences, like social psychology, reckon that preferences are socially determined. In this view, people’s choices are influenced by norms, which specify the roles and behaviours that are appropriate for men and women. . . . Ms Bertrand’s arguments may not seem particularly subversive. But they carry implications that extend beyond gender discrimination. Her analysis suggests that the decision to participate in a market is not simply about maximizing utility given a set of tastes and constraints. Markets, rather, are part of a suite of fluid social forces that shape behaviour. Economists cannot claim to understand the markets until they understand those forces.”
********Surely tastes develop in the contexts of family and community, broadly considered. Historically, economists have proceeded as if tastes are given, i.e., the starting point for thought, and left the question of how tastes are formed to others, perhaps sociologists or social psychologists. Also historically, economists have been perhaps a little too comfortable with that convenient division of labor. Bertrand seems to be pointing to the importance of restructuring that division of labor. This is an example of being oriented to a particular problem than to a particular approach (methodology). Surely it is worth viewing Bertrand’s lecture and hearing what is possible by doing things differently.
(21 February 2020) “A Year Is Too Short for a U.S. Worker to Earn Middle-Class Life” Bloomberg.com
——–“The typical American man needs to work 53 weeks to pay for the basics of middle-class family life, and that rises to 66 weeks for a woman who’s the sole breadwinner, according to a new study. Those figures for 2018 compare with just 30 weeks for males at the median weekly wage in 1985 . . . For the median female worker, the figure rose from 45 weeks.”
********These figures were developed by Oren Cass, “a conservative scholar” of the Manhattan Institute, in a paper that “attempts to build a ‘cost of thriving’ index.” In response to criticism, “Cass acknowledges that his index is an imperfect measure, describing it as a ‘starting point.’” What struck me about the article is the vividness of characterizing gender wage differences in terms of how long one has to work to earn a given standard of living. Everyone has just 52 weeks a year.
(2 March 2020) [SR] “In ‘ZeroZeroZero,’ A Gritty and Global View on the Drug Trade” The Wall Street Journal
——–ZeroZeroZero, a new eight-part Amazon series, “is the latest series after ‘Narcos,’ ‘McMafia’ and ‘Gomorrah’ to take a global view of crime. In this tale . . . Italian writer and director Stefano Sollima take viewers across three different continents . . . In the series, Mr. Sollima and his co-directors (Pablo Trapero and Janus Metz) focus on the small-time dealers of a Calabrian cartel that purchases the cocaine; the Mexican cartel that is selling it; and the Lynwoods: a wealthy American shipping family that brokers the deal.”
********And so there are international supply chains in the drug world, just as there are in the legal commercial world. One wonders, “How have the supply chains of the drug world been affected by the coronavirus? How will they be affected in the weeks to come?
(3 March 2020) “A law professor investigates the legal decision to regulate U.S. greenhouse gases” Science
********This is a review of The Rule of Five: Making Climate History at the Supreme Court, by Richard J. Lazarus. It notes that “The U.S. Supreme Court’s 2007 decision in Massachusetts v. Environmental Protection Agency is widely seen as the most important U.S. environmental ruling of all time. But the suit . . . was almost never brought. Richard J. Lazarus’s wonderful new book . . . is the inside story of how this case came to be, how its lawyers struggled and fought over theories an roles, and how the late Justice John Paul Stevens patched together the five votes needed to secure a majority.” This looks like essential reading, showing how legal and political affect human behavior.
May you have a good week!