416 (8 April 2020)

Welcome!  The articles below caught my attention this week.  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. 

8 x 52 = 416.  What is now The Invisible Forces Weekly View began on 27 April 2011 as The Invisible Forces.  This 416th edition completes eight years of TIF/TIF Weekly.  (A one-year sabbatical was taken at the completion of the sixth year.)  This is also the last edition of The Invisible Forces Weekly.  I would like to thank you for allowing me to share and comment upon the many things that have caught my attention since April 2011.

            So, why stop now?  I feel no more articulate about this retirement than my retirement from UNC Asheville on 30 June 2015 after 32 years.  Let me just say that it seems like the right time to end this chapter of life and start writing a new one.

(2 April 2020)In the Informal Economy, There’s No Shelter From the VirusBloomberg.com

——–“From Southeast Asia to South American, the world’s 2 billion informal workers are suffering some of the earliest and most devastating effects of the coronavirus and social distancing.  Yet public aid packages have so far been largely directed at formal businesses and employees.  If governments like India’s want to manage Covid-19 and its economic fallout, they’ll need to act quickly to secure the health and safety of their informal workforces.”  In fact, “Roughly 60% of the world’s working population is employed in informal enterprises. . . . The world’s most vulnerable workers are easy to overlook in the best of times.  In the midst of a global pandemic, they need to be seen and heard more than ever.”

********The above is the opinion of Bloomberg columnist Adam Minter.  It is also true that “There is No Shelter From Climate Change.”  The article “Climate and Pandemic Models Speak Louder Than WordsBloomberg.com provides some perspective for comparing and contrasting models of climate and pandemics.  Perhaps we are now at the cusp of integrating the two.

(3 April 2020)The things we make that make us who we areScience

********This is a review of The Alchemy of Us: How Humans and Matter Transformed One Another, by Ainisa Ramirez.  As the reviewer notes, “The book’s central thesis is that we make materials and materials make us.”  This is developed in eight chapters with suggestive titles: Interact, Connect, Convey, Capture, See, Share, Discover, and Think.  Along the way,

Ramirez is particularly keen to debunk the idea that materials arise from flashes of insight experienced by extraordinary individuals, instead painting a picture of a diverse range of people from all walks of life drive by love, passion, and intellect.  The culture of innovation, she maintains, does not belong only to privileged elites, it can be found in all those who care enough to reinvent the material world and, as a result, themselves.

You can learn more about Ainissa Ramirez, who has Ph.D. in materials science and engineering from Stanford University, here.

Notes on The Nordic Theory of Everything: In Search of a Better Life, by Anu Partanen.  I’m not sure how I first learn about Anu Partanen’s book, but it was probably through a review by Michael Moynihan, [SR]Stockholm SyndromeThe Wall Street Journal.  As I look through the review now, it doesn’t look all that positive, but I did buy the book in December and was looking for a next read after finishing The Overstory, by Richard Powers.  And this is the book I chose.

            Anu Partanen is from Finland, having moved to the U.S. after she fell in love with a writer from New York City; she was fluent in English, he was not fluent in Finnish.  A journalist, she reflected frequently upon the differences between her home country and its Nordic neighbors, and the United States.  The result is her book.  Although I am only about one-fifth of the way through The Nordic Theory, it has certainly caused me to think more about the U.S. and its social programs, especially at the federal level. 

The big idea that appears early in the book, and which seems to be the foundation for the rest of it, is what she calls “the Nordic theory of love.”  It is discussed in chapter two, which begins with a discussion of the Pippi Longstocking books of Swedish writer Astrid Lindgren and makes its way quickly through the work of Lars Trägårdh, a Swedish scholar and historian, and Henrik Berggren, an historian and journalist.  The core idea of the Berggren-Trägårdh theory of love is that “authentic love and friendship are possible only between individuals who are independent and equal.”  And this is what Partanen refers to as the Nordic theory of love.  Partanen writes:

What Lars Trägårdh came to understand during his years in the United States was that the overarching ambition of Nordic societies during the course of the twentieth century, and into the twenty-first, has not been to socialize the economy at all, as is often mistakenly assumed.  Rather the goal has been to free the individual from all forms of dependency withing the family and in civil society: the poor from charity, wives from husbands, adult children from parents, and elderly parents from other children.  The express purpose of this freedom is to allow all those human relationships is to be unencumbered by ulterior motives and needs, and thus to be entirely free, completely authentic, and driven purely by love.

When viewed from this perspective, what federal governments do and do not do are very different.  Partanen provides much to think about in this election year.

Be well!


415 (1 April 2020)

Welcome!  The articles below caught my attention this week.  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. 

Here are two tools I learned about this week:

Online text highlighter.  While reading an article this week, I thought, “Wouldn’t it be nice to be able to highlight online text, so I could return to it more easily?”  So I searched and found that there is, indeed,  “an app for that.”  I installed the free Chrome extension Highlighter and it does exactly what I wanted.

EconoFactAnother “discovery” of the week was the website EconoFact, which I learned about via David Warsh’s Economic Principals.  “EconoFact . . . was founded in January 2017 by Michael Klein, of Tufts, and various colleagues. A former chief economist in the Office of International Affairs of the US Treasury Department, Klein was accustomed to writing policy briefs laying out options for decision-makers.”  Klein and colleagues aim “to convey to key journalists and others affecting policy in Washington and state capitals the scope of differences among mainstream views.”  You can learn more about EconoFact and its Mission here.  In its structure and concision, it strikes me as a policy variant of Bloomberg QuickTakes.

(25 March 2020)No Single Player Can Win This Board Game.  It’s Called PandemicThe New York Times

********Yes, this is a board game.  It was created by Matt Leacock—the author of this article—in 2008.  Pandemic is a co-operative game, in which the goal is for two to four players to co-operate to defeat infectious disease.  (I’ve been told that this game works better with four players.)  Amazon reviews of the game—there are more than 5,000—are glowing.  Leacock writes:

Players need to communicate their ideas clearly and effectively so that they are understood, acknowledged and challenged when necessary. They need to coordinate their plans to be most effective at slowing the spread of illness. More than anything, they need to cooperate: There’s no way any single player can win the game on their own.

A game for our time.

(27 March 2020) [SR]’Frank Ramsey’ Review: The Most Genial GeniusThe Wall Street Journal

********Frank Ramsey is known by few outside of academia and by few within.  Nonetheless, he was one of the great prodigies of the 20th century.  He died in 1930, at the age of 26, but not before he made “indelible marks in philosophy, pure mathematics, mathematical logic, economics, probability theory and decision theory.”  What’s more, he appears to have been well liked.  Now Cheryl Misak, of the Department of Philosophy of the University of Toronto, has told his story for the first time in Frank Ramsey: A Sheer Excess of Powers (Oxford University Press, 2020).  No less a wide-ranging (and Nobel Prize winning) authority than Amartya Sen writes:

In this brilliantly written biography of Frank Ramsey, the philosophical and mathematical genius, Cheryl Misak helps us to understand how this innovative thinker could transform so much of the intellectual world of the twentieth century in a short life that ended before he turned 27. The story of Ramsey—his life, his ideas and his engaging arguments with others—as told by Misak is both deeply insightful and much fun to read.

The book-buying public seems to agree.  The book is out of stock at Amazon.

            You can learn more about Misak here.  Interestingly, she is a former Vice President and Provost at the University of Toronto

(27 March 2020)Why Are Tax Forms So Complicated? JSTOR Daily

——–Why are tax forms so complicated?  “One reason is that companies that benefit from the annoyance of tax season, like Turbo Tax, have put a lot of energy into making sure tax forms stay complicated.  But another is that the U.S. government uses tax breaks to accomplish a lot of things that other countries do through direct payments to citizens.  For example, instead of a child allowance sent to all parents, we have the child tax credit.” 

In a study by political scientists Christopher Faricy and Christopher Ellis, they found that “direct spending on things like Social Security, Medicare, and cash benefits to low-income families is highly visible.  On the other hand, tax breaks often go unnoticed.”  So, the authors assert, “the reason for packaging government spending as tax breaks is clear.”

********The paper by Faricy and Ellis—“Public Attitudes Toward Social Spending in the United States: The Differences Between Direct Spending and Tax Expenditures”—can be downloaded for free.  Go to the end of the “Tax Forms.”

(28 March 2020)Why Is America Choosing Mass Unemployment?The New York Times

——–Recent news that “more than three million Americans filed for unemployment benefits . . . has been greeted with surprising equanimity by the nation’s political leaders.  [As of April 2nd, 6.6 million have applied.]  They appear to regard mass unemployment as an unfortunate but unavoidable symptom of the coronavirus. . . . But the sudden collapse of employment was not inevitable.  It is a disastrous failure of public policy that has caused immediate harm to the lives of millions of Americans, and that is likely to leave a lasting mark of their future, on the economy and on our society.”  The U.S. reliance on unemployment benefits contrasts with the response of several European countries, for example, Denmark, the Netherlands, and the U.K., where central governments have agreed to compensate employers 80 to 90 percent of their payrolls, thus allowing workers to preserve their jobs, as well as “a sense of independence, identity and purpose.”

********This is an editorial.  It clearly points out that a reasoned alternative to mass unemployment exists, although maybe not so much in the short run,  Just as our tax forms are excessively complicated, so our social safety net is frayed and insufficiently comprehensive.  bullIt is not hard to imagine, though, the uproar that would result if the U.S. federal government were to pay significant portions of the payrolls of private companies.  So, why is America choosing mass unemployment?

(29 March 2020)The U.S. Tried to Build a New Fleet of Ventilators.  The Mission Failed.The New York Times

********This sobering tale tells how 13 years ago U.S. public health officials identified a crucial vulnerability of the health system: a shortage of ventilators.  “The plan was to build a large fleet of inexpensive portable devices to deploy in a flu pandemic or another crisis.  Money was budgeted.  A federal contract was signed.  Work got underway.”  But everything changed when a “multibillion-dollar maker of medical devices bought the small California company that had been hired to design the new ventilators.  The project ultimately produced zero ventilators.”  Evidently the firm that bought the smaller company saw the cheaper ventilators it was to produce as a threat to the profitability of the much more expensive ventilators it was already selling.  How might this have been avoided? 

(30 March 2020) [SR]’Extreme Economies’ Review: Let’s Make a DealThe Wall Street Journal

********Economist William Easterly here provides a positive review of Extreme Economics: What Life at the World’s Margins Can Teach Us About Our Own Future, by Richard Davies who is a fellow at the London School of Economics.  Through nine case studies of “extreme economies” “Mr. Davies draws a compelling portrait of market functioning—and sometimes malfunctioning—in all sorts of conditions and cultures.”  Easterly concludes, “It is clear from ‘Extreme Economies’ that the world deserves more market solutions and more competent governments.”  Happily, Davies’s book was also reviewed by The New York Times in January, which provides a review that is paywall free.  The reviewer, Matthew Yglesias, notes that the book

is divided into three parts—survival, failure, future—each of which subdivides into three case studies about specific places.  All nine studies are engagingly written and genuinely interesting, each a dive into a corner of the world you don’t hear much about that conveys, briefly and clearly, a sense of how this far-off place works.

Check out the Table of Contents at Amazon to learn the locations of the nine case studies.  Ultimately, Davies uses his tour through the extreme economies to argue for “a middle path between command-and-control planning and total marketization of everything has the virtue of being correct.”  That is not to say that Yglesias is impressed, holding that the conclusion reached is banal.  As he sees it, the failing of Davies’s book is it is insufficiently “animated by the thought that injustice stems not just from ‘mistakes’ of judgment but from malice an indifference on the part of the powerful.”  Best to read the book and make one’s own judgment.

Be well!


414 (25 March 2020)

Welcome!  The articles below caught my attention this week.  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 Covid-19 pandemic has provided many opportunities for reflection, so this weekly will be a bit different, more of a blog post than a review of the news from the perspective of the invisible forces. 

What really caught my attention this week—I’ve noticed this before—is how one big story with many facets can “crowd out” so much news.  I’d love to have some measures that would make that “crowding out” precise.  It has made me wonder about the decision-making processes for those who create media products.    

Newspapers have, in concept, so many column inches to fill each day.  This constraint is especially strict for print newspapers, not so much for online papers.  Who makes these decisions?  What factors are considered?  How are these decisions made?  It seems like magazines are in a similar situation.

Television broadcasts, in particular news broadcasts, have so many seconds to fill each day.  Who makes these decisions?  What factors are considered?  How are these decisions made?  I am reminded a bit of the TV shows The Newsroom and Sports Night, which provide dramatic answers to these questions.

Need I go on?  Essentially, every media product is created by people facing constraints, some more binding than others.  Who makes these decisions?  What factors are considered?  How are those decisions made?   Maybe this is too narrow a statement, since more and more media products are being created by algorithms, with relatively little human intervention, but someone has to create the algorithms.  I welcome the thoughts, and especially references, of those who have some specific examples to relate.

Aside from media products, the Covid-19 pandemic has led me to think about interdependence.  Three pairs of articles follow. 

Here are two that relate to labor markets:

(20 March 2020) Coronavirus Threatens More Than 15 Million U.S. Hospitality JobsBloomberg.com.  The article provides information about the number of hospitality workers in a variety of metropolitan areas, as well at the workforce share of hospitality workers.  Asheville, North Carolina appears the respective numbers are 33,000 and more than 13.5%.  Check out the map and place your cursor over a city that interests you.  Here is the story for Las Vegas and Orlando.

(22 March 2020) Help Wanted: Grocery Stores, Pizza Chains and Amazon Are HiringThe New York Times.  As more people “shelter in place,” the demand for people who will bring things to them has increased.

Here are two that relate to products markets:

(9 March 2020) Global oil demand to decline in 2020 as coronavirus weighs heavily on marketsInternational Energy Agency.  The curtailment of travel and broader economic activity means oil usage has declined sharply. 

(21 March 2020) Freezers Sell Out as Consumers Stock UpThe New York Times.  The demand for small freezers, roughly 5 cubic feet, has skyrocketed.  The fact that that are “mostly made in China” has made restocking harder.  In a similar fashion, this is “A Boom Time for the Bean Industry The New York Times.  Canned and dried beans are  being purchased by people who have never eaten them before.

Here are two that provide broader perspective:

(13 March 2020)Retailers’ Worries About Impact of Coronavirus Shift From Supply to DemandAdweek.  Moving on from supply-chain concerns, this thoughtful and lengthier piece that takes a broader view of supply and demand in many markets. 

(16 March 2020)Will the Coronavirus End Globalization as We Know It?Foreign Affairs.  It argues that “the pandemic is exposing market vulnerabilities no one knew existed.” 

So, what to make of all this?  What had struck me, before I assembled the six articles above in the way I did, is the complexity of market interdependence.  There is nothing new about this, it is just that the coronavirus is the present disrupting event.  As the first pair of articles make clear, labor demand has dropped dramatically in some markets, while demand has increased in others.  Likewise, the second pair of articles show that product demand has dropped dramatically in some markets, while demand has increased in others.  The third pair of articles broaden out the analysis, essentially asking us to think about demand and supply in all markets, and then to examine the risk associated with being interdependent, a big question indeed. 

So, yes, market interdependence is complex.  I’d love to have some measures that would make that complexity precise.  Maybe then we could come address more mindfully the costs and benefits of interdependence.  Right now the costs are prominent, but the benefits are obscured.

Be well!


413 (18 March 2020)

Welcome!  The articles below caught my attention this week.  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.

(8 March 2020) “Thomas Piketty Turns Marx on His Head” The New York Times

********This is a review, by Paul Krugman, of the English translation of Capital and Ideology, by Thomas Piketty.  At 1,093 pages, it is a very sizable follow up to Piketty’s best-selling 2014 book Capital in the Twenty-First Century, which was a mere 816 pages long.  The head-turning noted above is indicated in this paragraph of Krugman’s review:

In Marxian dogma, a society’s class structure is determined by underlying, impersonal forces, technology and the modes of production that technology dictates. Piketty, however, sees inequality as a social phenomenon, driven by human institutions. Institutional change, in turn, reflects the ideology that dominates society: “Inequality is neither economic nor technological; it is ideological and political.”

It is a nice conceit, this head-turning.  It is an echo of what is conventionally said about Marx, i.e., that he stood “Hegel on his head.”  So, if Marx stood Hegel on his head and Piketty stood Marx on his head, is Piketty a Hegelian?  Probably not.  This isn’t so evident in Krugman’s review, but it comes through quite clearly in a review in The Guardian.  He is not so much “a man with a plan” but a man “fixated on statistics” over space and time.  As the reviewer notes, “Piketty is a brilliant and relentless anorak.”  (Evidently, ‘anorak’ is British slang for “a person who has a very strong interest, perhaps obsessive, in niche subjects.”  It is to Piketty’s credit that inequality is no longer a niche subject but one that concerns all but a few.)  As William Davies, the Guardian reviewer notes, “Piketty’s theoretical innocence has always been part of his charm . .  [He] gives us history without a motor, a series of variations in income and wealth that happen because people at the time wanted and allowed them to.”  Further noting, “inequality is illegitimate, and therefore require ideologies in order to be justified and moderated. . . . The overturning of regressive ideologies is therefore the main condition of economic progress.”  But how to do that?  Therein lies, I think, part of Krugman’s dissatisfaction with Piketty’s latest effort.

(15 March 2020) [SR]’Experimentation Works’ and ‘The Power of Experiments’ Review: Test, Test and Test AgainThe Wall Street Journal

********Two recent books are reviewed in this piece about contemporary uses of experimentation, especially in the sphere of business.  They are:

Experimentation Works: The Surprising Power of Business Experiments, by Stefan H. Thomke, who is a Harvard Business School professor.

The Power of Experiments: Decision Making in a Data-Driven World, by Michael Luca and Max H. Bazerman, who are also Harvard Business School professors.

Francis Bacon is conventionally referred to as the founder of the experimental method in his Novum Organum (1620), a nifty, probably not coincidental, 400 years ago.  What comes across clearly in the review is the power of small things systematically pursued.  Thomke, in his discussion of A/B testing, notes how businesses are tapping into “the power of high-velocity incrementalism, while Luca an Bazerman examine how nudges combined with “the tools of behavioral economics” can be put to policy use.  Overall, Thomke, Luca, and Bazerman “balance their passion for experiments with a recognition of its limits. . . . Experiments are often unsettling to contemplate and difficult to execute—and their conclusions hard to accept.  Still they are a powerful tool for curious teams with the confidence, and humility, to embrace the Baconian challenge.”

(16 March 2020) [SR]’Golden Gates’ Review: Build It Here, Build It NowThe Wall Street Journal

********On February 13th The New York Times published an article by Conor Dougherty on California’s housing crisis.  His book Golden Gates: Fighting of Housing in America is now reviewed, in the context of the Yes in My Backyard (Yimby) Act, “introduced by Reps Trey Hollingworth (R., Ind.) and Denny Heck (D., Wash.), recently passed by the House of Representatives.”  As the review notes, “The term ‘Yimby’ in the bill’s title is a play on Nimby, or ‘not in my backyard,’ the moniker given to a person who, while not necessarily opposed to new housing, strongly opposes development in his own neighborhood.”  The Yimby Act “requires cities seeking community-development funds from the federal government to report their progress in removing local regulatory obstacles, such as restrictive zoning rules or onerous permitting processes, that hamper housing affordability by limiting new construction.”  You can read the text of the bill—five pages—here.  Broader information about the bill can be found here.

            The reviewer notes, that those wishing to have “a compelling and accessible overview of . . . [California’s] housing crisis, there is no better book than Conor Dougherty’s ‘Golden Gates: Fighting for Housing in America.’”  Dougherty has “a gift for telling the stories of people struggling to overcome California’s housing dysfunction.”  His account “makes it clear that the California Yimbys are only getting started.”  More broadly, the Yimby Act “signals a growing bipartisan consensus that regulatory burdens in local housing markets are a source of regional and national impediments to economic growth and upward mobility.”

Be well!


412 (11 March 2020)

Welcome!  The articles below caught my attention this week.  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 Covid-19 outbreak continues to dominate the news and it is increasingly affecting day-to-day life even in areas where no cases have been found.  I’m sitting at home on a Sunday morning, rather than attending church and shopping, because today there is virtual church and I shop after real church.  Everyone will have a story to tell.  My disruption is tiny.

            What struck me the most this week was the phrase “flatten the curve.”  The basic idea is that the peak of an epidemic can be lowered by a variety of actions.  The Guardian touches upon this idea in its article  (10 March 2020)Covid-19 outbreak: what do health experts mean by ‘flattening the curve’?”  What really caught my attention—I saw it first in The Wall Street Journal, although I’ve lost the reference—was the figure that introduced capacity into the mix.  Here is the diagram.

In the very short run—more conventionally called the market period, a period of time when neither health-care facilities nor health-care personnel can be varied—health care capacity is effectively fixed.  (In reality, health-care personnel expand their work hours dramatically.)  Thus interventions aiming to “flatten the curve” reduce peak demand so that quantity demanded is closer to quantity supplied (capacity).  In other words, flattening the curve reduces the “excess demand” for health care by reducing the need for health care.  This would give rise to fewer deaths and cases, while also extending the time that the deaths and cases are with us.  In relation to this, here are some things to read:

Conventional economics looks at price as a means of equilibrating quantity demanded and quantity supplied.  But in the present situation, health policy is the means for equilibration.  In fact, I’m having a hard time thinking about how price adjustment would work in the time of coronavirus.  Perhaps this situation suggests something broader.  What do you think?

(27 February 2020)Abortion Clinics Are Getting Nickel-and-Dimed Out of BusinessBloomberg Businessweek

********Abortion provides an opportunity to examine all of the invisible forces—hand (economic), foot (legal and political), and handshake (social and historical).  Many abortion providers are businesses and they will cease operating if they can’t make a profit.  That profit is dependent upon the legal and political context in which they are operating.  And that context is highly dependent upon cultural values that are socially and historically influenced.  All this is seen clearly in the following excerpt.

——–“Anti-abortion activists have adopted a two-part strategy.  On one hand, they lobby for the continued passage of laws like . . . [those that] Court-abortion rights advocates refer to . . . as TRAP (Targeted Regulation of Abortion Providers) laws.  And on the other, they try to raise providers’ operating costs directly or otherwise pressure clinics out of existence.  It appears to be working.  The number of independent clinics, which account for 60% of U.S. abortions, was down to 344 as of November, one-third fewer than in 2012 . . . In the parts of the country most hostile to abortion, rates are declining sharply.”

********As the article notes, abortion providers have faced a host of actions that increase their direct costs, for example, requiring that facilities be designated as “surgery centers” and mandating extra clinic visits for women seeking an abortion.  Closely related, vendors of clinics are sometimes “targeted by protesters” making it difficult to get work done at the clinics, so security guards are often hired, too.  Although “abortion is one of the safest possible things that a health provider can” do, insurance can be hard to find as many providers don’t want to bear the perceived risk.

            Aside from the clear intention of anti-abortion activists, I was fascinated by how little abortions cost and how little those costs have increased over the years.  The article notes: “In an era of high medical cost inflation, abortion is an outlier.  A first-trimester abortion might cost between $400 and $1,000, depending on the method and the clinic.”  Nikki Madsen, the executive director of the Abortion Care Network, “calculates that in her 15 years in the field, the price of an abortion has gone up only $50.”  Why?  “Prices remain static because abortion exists largely outside the traditional health insurance model.”  Frequently, no insurance coverage is available, and when available, often not affordable; low-income women got 3 out of 4 abortions in the U.S. during 2014.  As a result, abortion is “largely a cash business, with doctors charging what they believe a patient, rather than an insurer, can pay.”  There is a bigger lesson here.

Be well!


411 (4 March 2020)

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 BanksThe 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 worldThe 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 GlobalizationThe 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 businessjournalismfestival.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 normsThe 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 LifeBloomberg.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 TradeThe 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 gasesScience

********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!


410 (26 February 2020)

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.

(19 February 2020) [SR]Grocers Wrest Control of Shelf Space From Struggling Food GiantsThe Wall Street Journal

——–“The biggest U.S. food makers, already dealing with increased competition and shifting consumer tastes, now face an additional threat: supermarkets are taking away prime shelfs space.  Grocers are relying on their own proprietary research to decide how and where to shelve certain products, rather than relying on companies that well well-known brands to tell them what to put on what shelf at what price.  The shift is resulting in less space for traditional supermarket staples from companies such as General Mills Inc. and Clorox Co. in favor of niche items and store brands that deliver higher margins and are often in higher demand. . . . The diminished power of ‘category captains’—the top sellers of products such as soup or cereal—is the biggest change to the way food is sold since Walmart Inc. expanded its grocery offerings 30 years ago, industry veterans say.”

********Evidently retailers have derived income from “heavy slotting fees big brands pay for prime space” but now “retailers are more focused on doing what it takes to maximize sales growth even if it means giving up some of those fees by stocking more of their store-branded products.”  Since, as the article notes, the category-captain role began dissolving over “the past 18 months,” one wonders what happened.  New software?  Is it only recently that retailers have become aware that there might be a benefit to foregoing slotting fees to advance their own products?

            Somewhat connected to this article—software and movement away from big brands—is “The Crop Software Behind Your Daily Cup of CoffeeBloomberg.com.  The company behind the software is Cropster, which “started as a tool to lift coffee producers out of poverty” and now has “a bigger mission: to save the entire global food supply.”  Tools for coffee roasting have been central to Cropster’s success.  Its CEO, Norbert Niederhauser, saw that “roasters had two things going for them: the need for more precise tools and the ability to pay for them.”  A contributing factor was the current “Third Wave” of coffee.  Big-brand coffee was the First Wave, with the likes of Folgers and Maxwell House.  The Second Wave was “driven by such chains as Starbucks and Peet’s  Now the Third Wave was beginning to build” with boutique brands “such as Intelligentsia, Blue Bottle, and Stumptown . . . selling . . . higher-cost, single-origin, and artisanal coffees produced by craft roasters.”  Sounds like a familiar path.

(20 February 2020)Poverty Is All About Personal Stress, Not LazinessBloomberg.com

——–“Economists are starting to accumulate evidence that instead of being indolent layabouts, poor people are harried and frantic.  To deal with a world of precarity, where any misstep or piece of bad luck can lead to disastrous consequence, requires a massive amount of cognitive effort.  And it’s the stress of that constant effort, rather than bad morals or welfare-inspired laziness, that drives many poor people to make subpar decisions.  Economist Sendhil Mullainathan of Harvard University has been at the forefront of the effort to better understand the challenges of poverty. . . . Scarcity, he believes, begets stress, which leads to bad decisions, which creates even more scarcity.  Thus poor people get trapped in an exhausting but inescapable cycle of precarity.”

********The basic idea is that stress affects cognitive performance, something that is true for both real and imagined circumstances.  E.g., a study of “farmers in a poor region of Brazil, found that both actual droughts and being forced to think about droughts reduce cognitive performance.”  If this line of argument is correct, “it has importance consequences for how governments try to alleviate poverty.  Instead of being conditional on work—which simply adds one more source of stress and risk—welfare benefits should be unconditional.”  Applicable, it would seem, to work requirements to qualify for various benefits such as the Supplemental Nutrition Assistance Program.

(21 February 2020)The U.S.-Iran Pistachio War Is Heating UpBloomberg.com

********In fact, it seems like the “war” is almost over.  “Persia enjoyed a virtual monopoly on cultivating the hardy yet demanding pistachio tree for at least 1,000 years.”  But climate change, diminishing water resources, and poor governance have led to lower production in Iran.  An important ingredient in Iranian cuisine, “The dearth of harvests has led to a kind of despair.”  Producers are now looking outside of Iran to grow pistachios, for example, Georgia.  Although the U.S. is a relative newcomer, starting “to produce pistachios only in 1976, [it] has now overtaken Iran as the world’s leading producer.”  The article provides a good example of the invisible forces at work, as U.S. import duties and outright bans on Iranian pistachios have contributed to the relative decline of Iran’s crop globally.

(21 February 2020)The Gas Station M&A Frenzy Looks Like a BubbleBloomberg.com

********This article examines what seems to be a good idea—buying up gas stations at a time when households are getting smaller with an idea toward expanding the consumer offerings at the station—while considering that the likely expansion of electric cars will reduce trips to gas stations.  Social change and technological change are front and center in this exploration.

            Consistent with the expansion of electric cars is the dramatic growth of solar farms.  That expansion is made clear in “Super-Size Solar Farms Are Taking Over the WorldBloomberg.com.  It begins: “All of a sudden, solar energy is huge.  As many of the world’s major governments and corporations move to transition the global power supply away from fossil fuels, developers are transforming swaths of empty desert, agricultural land, and rural lakefront into vast solar energy farms  The mega-size projects represent a new class of renewable power capacity that’s finally approaching the scale of coal-, oil-, and natural-gas fired plants.”  In fact, in 2019, developers commissioned “at least 35 projects of at least 200 megawatts worldwide . . . With about 3,000 solar panels needed for each megawatt of capacity, a 200-megawatt project would be at least as big as 550 American football fields.”  In southern Egypt there is a 1.5- gigawatt project that has “more capacity than many nuclear power plants.”

(22 February 2020)The Virus Is Interrupting Supply Chains From Watches to LobstersBloomberg.com

********This week has seen the largest decline in U.S. stock indices since 2008 due to investor concern over the possible consequences of the Coronavirus.  This article explores some of the likely consequences on the supply chains of a variety of products: Hong Kong watches; American board games; masks made in Mexico; German auto parts; Indonesian garments; Malaysian pets; sea transport; New Zealand lobsters; Japanese heavy equipment; and Vietnamese furniture.  I’m familiar with the expression “the interdependent web of all existence,” which expresses how plants, animals, and human are interconnected.  In fact, there is also an “interdependent web of all markets” and this article provides some good illustrations.

(25 February 2020)Checkup for $30, Teeth Cleaning $25: Walmart Gets Into Health CareBloomberg.com

——–Calhoun, Georgia, about a one-hour drive north of Atlanta, is home to Walmart’s ambitious move to fulfill a basic need for all Americans—health care.  Inside the new Walmart Health center, “Walk-ins are welcome but most appointments are booked online beforehand.  No insurance?  No problem.  Need a lab test on Sunday?  Sure thing.”  Perhaps “The first thing you see at Walmart Health is the price list.”  So, “Whatever a patient needs, she knows the price upfront—a huge departure from how health care usually works.”  Health care has been on Walmart’s radar for some time, but it took a back seat to other strategic priorities.  But now health care’s time has come.  As Walmart attempts “to grab a bigger slice of the nation’s $3.6 trillion in heath spending”, it is “harnessing its greatest asset—the 150 million people coming through its 4,756 stories each week.”  In doing this, Walmart is pitted “against rivals such as CVS Health Corp. . . . and creates a new front in Walmart’s battle against Amazon.com Inc.” and Walgreens.

********The article concludes, “if Walmart’s goal is to be the front door of health care in America, one thing in its favor is that it already controls so many doorways to American consumers.”  As consultant Chas Roades notes, “Everyone says, ‘Look out, Amazon is getting into health care,’ but it’s way more scary if Walmart really puts these pieces together . . . Now they’re really getting serious about it.”  Health care services would seem to be a business in which a physical presence—bricks-and-mortar—is essential.

May you have a good week!


409 (19 February 2020)

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.

(13 February 2020)Never Mind the Internet.  Here’s What’s Killing MallsThe New York Times

********This piece is by Austan Goolsbee, an economist at the University of Chicago.  The decline of brick-and-mortar retail in the U.S. has been widely attributed to e-commerce, most notably Amazon.  But Goolsbee indicates that there is a bigger story, pointing out that there are three “major economic forces” that have had a bigger impact than the Internet.  They are big box stores, income inequality, and the move toward services instead of things.  I thought his discussion about income inequality was especially interesting.  He concludes by saying, “In short, the broad forces hitting retail stores are more a lesson in economics than in the power of disruptive technology.  It’s a lesson all retailers will have to learn someday—even the mighty Amazon.”

(13 February 2020)Shopping under the influenceThe Washington Post

********This article connects nicely with Goolsbee’s third force—the move toward services instead of things.  In Nordstrom’s new flagship store in New York City, “the most buzzed-about attraction” is a full bar, to be specific, Shoe Bar, which serves $17 cocktails, sells wine by the glass, and has a half dozen craft beers.  It is packed by 4 pm most days.  Customer Kathy Miller, of Carefree, Arizona, notes: “To attract shoppers these days, you have to do something different and fun . . . And, of course, the more you drink, the more you spend.”  This phenomenon is not limited to NYC and seems to be growing.  “Across the country, shopping centers, malls and major chains . . . are increasingly allowing—even encouraging—customers to imbibe while they browse.  It’s the latest attempt by stores to offer shoppers an experience they can’t get online.”  That said, the article also mentions that there is some evidence that those shopping online may be influenced by alcohol, too.  Evidently, drinking and browsing can be done in-store and online.

(13 February 2020)The Green MileThe Washington Post Magazine

********Coal mines and their aftermath are the subject of this article, especially the coal mines of Eastern Kentucky.  The central figure in the story, human-wise, is Patrick Angel, who for 25 years oversaw the reclamation efforts of lands that had been strip-mined or mountaintop-removed.  “He told coal companies to do one thing when they were done with a site: pack the remaining rubble as tightly as possible, and plant grass—the only type of plant he trusted to hold the ground in place.”  Eventually he “realized something was very wrong.  The big, productive, life-nurturing forests of Appalachia weren’t just slow to come back; they weren’t coming back, period.”  Angel “has spent the rest of his career undoing the damage.”  What has proven far more effective in returning forests to barren lands are large machines that “drag two massive, fanglike shanks that . . . rip open the ground in a checkerboard pattern, loosen soil and make room for growing tree roots.  Then small armies of volunteers . .  descend on the site . . . [to] plant tulip trees, oaks, pines and chestnuts.  What was once a forest brimming with diverse life, before becoming a denuded strip mine and then a weedy rubble pile, would be a forest again.  Thanks in large part to Angel, now 70, more than 187 million trees have been planted on about 275,000 acres of former mines.”  Angel provides a powerful example of looking, learning, and acting.

(13 February 2020)Build Build Build Build Build Build Build Build Build Build Build Build Build BuildThe New York Times

********Housing, especially affordable housing, is one of the major problems facing the United States, most especially in California, where homelessness in Los Angeles and San Francisco receives regular attention in local and national media.  This article tells the story of one well-to-do town, Lafayette, California, east of Oakland, and its efforts to prevent the construction of a 315-unit housing development.  The story will sound familiar to residents of the Asheville, North Carolina area, where each new development meets strong resistance from those who live nearby.  The author of this article, Connor Dougherty, is also the author of Golden Gates: Fighting for Housing in America.  You can read a review here.

            The City Manager of Lafayette, Steve Falk, had a front-row seat in the negotiations, discussions, yelling, and character assassination that were all part of the consideration of the housing development.  Ultimately, he would lose his job because he came to understand housing development differently because of how his involvement.  In this way, he reminds me of Patrick Angel and Eastern Kentucky.  The person who was instrumental in changing the mind of  Falk was Sonja Trauss, an outspoken housing advocate, who was a persistent champion of housing construction.  She founded a movement—“YIMBY for Yes in My Back Yard—[that] has become an international phenomenon, with supporters in dozens of housing-burdened regions including Seattle; Boulder, Colo.; Boston; Austin, Texas; London and Vancouver.”  YIMBY, of course, is a play on NIMBY—Not in My Back Yard.  You can learn more about the YIMBY movement here.

            Trauss would later speak at a City Council meeting in Lafayette on the development.  She noted that “the entire notion of public comment on new construction was inherently flawed, because the beneficiaries—the people who would eventually live in the buildings—couldn’t argue their side.”  It is a good point, one that is broadly applicable to a variety of social phenomena.  As the article notes near its beginning, the real solution to the housing problem is sociological.  People “are going to have to change.”

(13 February 2020)N&O Parent Company McClatchy Files for Bankruptcy Indy Week

——–“McClatchy Co., the second-largest newspaper chain in the country, filed for bankruptcy Thursday [the 13th] . . . If a bankruptcy judge accepts McClatchy’s restructuring plan, after 163 years of family control, the company will be delisted from the New York Stock Exchange and turned over to a hedge fund.  In North Carolina, McClatchy owns The News & Observer, The Charlotte Observer, and the Durham Herald-Sun.

********This seems like old news—just another example of the hard times befalling print media.  The News and Observer and The Charlotte Observer have the largest circulation of North Carolina newspapers.  This development comes not long after the largest newspaper company in the nation was created when “Gannett, the parent company of USA Today and more than 100 other dailies, and New Media Investment Group, the owner of the newspaper chain GateHouse Media, announced their intention to join forces.”  In November, 2019, “shareholders at the two companies voted yea.  And now one in five daily papers in the United States has the same owner, under the Gannett name.”  The Asheville Citizen-Times is a Gannett paper. 

It is hard to imagine that the Gannett merger had much to do with the bankruptcy of McClatchy, no doubt both developments are the result of diminishing revenues from print distribution, largely driven by decreasing advertising.  What is the alternative to merger?  Bankruptcy.  You can learn more about the McClatchy bankruptcy filing in The New York Times.  As the article notes, “If the Chapter 11 plan gains court approval, McClatchy would become the latest newspaper company to fall under the control of Wall Street investors, an unlikely relationship that has become more common as the financial industry seeks to wring profits from an ailing business.”

(17 February 2020)The Health System We’d Have if Economists Ran ThingsThe New York Times

********This article reports some of the results of a survey of 200 Ph.D. health economists.  It is mostly descriptive, rather than analytical.  The article concludes noting that “If health economists were in charge of the health system, not a lot would change, with some notable exceptions.  Medicaid would not have work requirements . . . and taxes would go up for Medicare and for employer-based health insurance.” 

            I searched for the report that must have served as the foundation for this article but could not find it, the closest relevant site being from a 2019 conference.  You can learn more about the American Society of Health Economists here

            One issue not reported on—presumably not inquired about in the survey—is the problem of “surprise” medical bills.  Although “two-thirds of Americans say they are worried about being able to afford an unexpected medical bill” and “Nearly eight in 10 American say they want federal legislation to protect patients against surprise bills,” there seems to be little movement towards resolving the “three-way competition” among hospitals, doctors, and insurers that is a source of the problem.

May you have a good week!


408 (12 February 2020)

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. 

(10 February 2020)What You Need to Know About the Spreading CoronavirusBloomberg.com

********This is a Quicktake on the Coronavirus, update on February 10th from a post on January 6th.  This post covers the basics.

            The coronavirus provides an opportunity to examine a host of issues not regularly covered.  For example, what does the legal term force majeure mean?  It seems to fall under the umbrella of “acts of God.”  Bloomberg has a nice discussion of the expression in “When God Appears in Contracts, That’s ‘Force Majeure’.”  Simply put, unanticipated events such as the spread of the coronavirus provide an opportunity for contractual parties to void their contracts.  It strikes me as a great topic for a master’s thesis or doctoral dissertation, e.g., “Force majeure and the Flu Pandemic of 1918.”  Also known as the Spanish Flu, this public health disaster must have lead to many canceled contracts.

            Global trade has certainly been disrupted by the coronavirus, and many China-related links in supply chains have been temporarily broken.  This point is clearly illustrated by “Ships Are Skipping China and It’s Causing Turmoil for TradeBloomberg.com.  As the article notes, “February 2020 will come to be remembered as a period of historic disruption to physical supply chains the world over, as the coronavirus wrecks trade.”  The impact on container shipments, chemicals, dry bulk commodities, and crude and oil products have been especially significant as China’s role in world trade has increased.  Shipping companies like AP Moller-Maersk A/S, the world’s largest shipper, has been especially affected “because 90% of all trade moves by sea and China has grown into the maritime industry’s main source of cargoes.”  It is estimated that almost 600,000 20-foot [container] boxes are currently out of action as a result of the virus. .  . Though rates can vary, using an estimate of $1,000 per container, that means shippers had to stomach a hit of $600 million this week.”

(11 February 2020)Should College Athletes Profit From Their Fame?  Here’s Where the Debate StandsThe New York Times

——–“The National Collegiate Athletic Association and its sprawling membership of schools are mire in fights—behind closed doors, in statehouses and on Capitol Hill—over whether and how student-athletes should be allowed to profit off their renown.”  California legislation—effective 2023—has provided an impetus to forward the conversation.  Taken a nod from California, “lawmakers in dozens of other states” are considering “bills of their own, and many have drawn bipartisan backing.  Some of those proposals would take hold far faster than the California law.  In Florida, for instance, one proposal was written to go into effect this summer if it passes.”  Given the fear that a crazy quilt of state laws “could undermine rules that apply to colleges nationwide,” the NCAA “has conceded that it must modernize its bylaws.”  Some withing the NCAA are looking for “a congressional solution” that would provide a uniform approach to all colleges and provide “legal cover to a multibillion-dollar industry where antitrust issues are a chronic concern.”

********Evidently, the NCAA’s Article 12, “which covers amateurism and athletic eligibility, is under the greatest scrutiny by elected officials across the county.”  Part of the article “bars a student-athlete from accepting compensation in exchange for allowing ‘his or her name or picture to advertise, recommend or promote directly the sale or use of a commercial product or service of any kind.”  In addition, the bylaws forbid activities like “taking cash for autographs or monetizing social media challenges.”  Agents are another issue.

            One can’t help but think that the so-called nobility of amateurism in sport is a vestige of a day long gone.  Given that, it is hard to see the struggle between the NCAA (and its members) and college athletes as anything other than an economic competition.  I would like to see someone clearly lay out what is at stake for the NCAA, its members, and college athletes to loosening the bonds of amateurism.  That might help provide some useful perspective.

            The presumed occasion for the NYT article is a testimony before “the U.S. Senate Committee on Commerce, Science and Transportation on the issue of name, image and likeness (NIL).”  You can learn more about the testimony here.  It included a panel which included the president of the NCAA, Mark Emmert.  Senator Richard Blumenthal, in his questioning, got Emmert, and all the other members on the panel, to indicate that the current model of name, image and likeness needs to be “radically modified.”

May you have a good week!


407 (5 February 2020)

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.

(31 January 2020)How Private Equity Buried PaylessThe New York Times

********One of the big stories in Asheville, North Carolina during the last week involved the liquidation/bankruptcy of the Earth Fare natural food chain.  Extensive reporting on Earth Fare has appeared in The Asheville Citizen-Times, most notably “From one Asheville store to over 50 locations, here’s what led Earth Fare to bankruptcy,” by reporter John Boyle  The article is quite thorough but doesn’t say much about the private equity firm Oak Hill Capital, which purchased the firm from Roger Derrough, a co-founder of Dinner for the Earth which later became Earth Fare, in 2007.  The NYT article provides description and analysis of the effects of private equity on Payless ShoeSource, giving additonal context for thinking about the demise of Earth Fare. 

            Private equity is a big topic with contrasting views about its efficacy and desirable.  Vox has an article that provides accessible information.  See “What is private equity, and why is it killing everything we love?”  It provides basic discussion about its role, some of the recent challenging cases, including Payless, and notes additional literature, for example, “The Demise of Toys ‘R’ Us Is a Warning” in The Atlantic.

(1 February 2020) [SR] “The Oddsmakers of the College Deathwatch” The Chronicle of Higher Education

——–“For years, businesspeople, pundits, and policy makers have speculated on the health of the higher-education sector, and some predictions of a die-off among the nation’s colleges have only gotten more dire over time.”  The likes of Peter Drucker, Clayton Christensen, and Andrew S. Rosen have figured among the doomsayers.  

But now “a small industry of higher-education oddsmakers armed with data has emerged.  A wave of government agencies, media outlets, companies, and scholars are crunching numbers on finances, retention, and rankings to determine just how doomed particular colleges are, exactly.”  Although such information has “long been used to assess the health of private companies . . . colleges can be far more complicated entities, with missions and goals that don’t fit neatly into profit and loss categories.”  Analysts at Moody’s Investors Service are “skeptical of rating a college’s future performance on a handful of numbers.”

One recent look at how the market pressures facing higher education is The College Stress Test, which “includes a section on how to calculate the market stress of a private, public, or two-year college—and, by extension, determine how endangered that particular college is.”  The approach of Stress Test differs from that of the ed-tech company Edmit, which came up “with a formula to determine how long private colleges had before they would run out of money and be forced to close.  Recently, Edmit and Inside Higher Ed had intended to publish a list of private colleges that were likely to close to but “decided not to release the list when various institutions threatened to sue.”

********The Inside Higher Ed article can be read here.  Regular and reliable financial assessment of financial viability certainly seems desirable but is fraught with interpretive challenges.  Higher education accrediting bodies routinely require colleges and universities to assess viability.  What do they look at and how do those elements compare to those of Stress Test and Edmit?

            For a related article in The Chronicle, see [SR]What Higher Ed Can Learn From Health Care.”  It is an interview with Peter Ubel, “a physician who is a professor in Duke University’s School of Business” and the author of Sick to Debt: How Smarter Markets Lead to Better Care.  Drawing parallels between health care and higher education, he says “I realize that I’ve been making my living off both education and health care, and they’re the parts of the economy where the cost has gone up far faster than overall inflation.”  Change in health care “have in many ways mirrored those in higher ed: Just as colleges have turned to adjuncts and distance education, hospitals now rely more on physician assistants and technology, like telemedicine, to help scale their services.  Small hospitals and clinics are also increasingly consolidating, an outcome that seems likely for the nation’s small institutions.”

            The article’s author, Scott Carlson, who also wrote “Oddsmakers,” comments: “a big part of Ubel’s solution to helping “both society and individuals save money” relies on making costs and quality transparent to the public.  College leaders should consider whether his prescription for what ails health care could work in higher ed.”  In drawing out the comparison between health care and education, he notes that they are both “labor intensive—and it’s highly trained labor at that, and you’re competing for that labor pool.  That’s expensive.  And quality is difficult to judge.  If you just look at the outcomes . . . you don’t know how good students were at math when they got to that school, or how bad the patients’ heart disease was when they got to that hospital.”

(1 February 2020)Tax code isn’t neutral on race, researchers findThe Washington Post

********This article summarizes some of the results of a recent publication of the nonpartisan Tax Policy Center—“Racial Disparities and the Income Tax System.”  By talking a close look at tax Form 1040, it is found that “tax policies can . . . exacerbate income and wealth inequalities stemming from long-standing discrimination in areas such as housing, education, and employment.”  The Center has an interactive guide that explains “various ways in which the tax code contributes to racial inequities.”  It is worth a look.

            While we are on the subject of disparities, a review of the book The Uncounted, by Alex Cobham, is worth a look.  The article’s title, “Missing population data hinder good accounting and fair resource distribution” Science.  As its lead-in reads, The Uncounted “documents how shortcomings of data in two key areas—population and finances—work together to exclude certain groups from exerting political power while simultaneously conveying greater political power to other groups.  Cobham . . . focuses on the extent to which many marginalized populations are often not counted in official statistics and the extent to which wealthy individuals and families are often able to hide their financial resources, properties, and other holdings from the government to avoid paying taxes on these assets.”

(4 February 2020)Coronavirus Adds to Pressure for U.S. Oil IndustryThe New York Times

——–“At a time when they are already cutting jobs and weighed down by debt, American oil producers are bracing for the latest shock to hit world energy markets: the economic effects of the coronavirus outbreak on China and beyond.  Oil and natural gas producers have been suffering from low commodity prices for the past year and now expect a sharp drop in global prices for their products.  As a result, they are preparing to slash investments in exploration and production.”  The virus has chiefly affected China thus far, and it “buys only about 200,000 barrels a day of oil and refined transportation fuels from the United States, out of 8.5 million barrels of total daily American exports.  But oil is a global commodity, and benchmark prices are set on world markets, not domestically.  Lower prices mean lower profits.”

********The basic idea, of course, is that the virus, as it spreads, will reduce the demand for oil and refined transportation fuels, which will decrease the prices of those products.  As a result, producers will tend to have lower profits and some consumers will be faced with lower prices—good for them.  But then there are all the jobs that are lost in the oil industry, domestic and international.

            Perhaps the most valuable insight from the article is related to looking at the SARS epidemic of 2002-3 for insight into the impact of the coronavirus in 2020.  The important being this: “China has become a much more important engine to the world economy over the last 17 years, and medical researchers cannot be sure that the new virus will fade during warmer weather like the flu.”  Given that, the impact of the coronavirus on the global economy may well be larger than that of the SARS epidemic.

May you have a good week!