315 (2 May 2018)

Welcome to week 315!  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 to be read in their entirety, although complete articles may be found by an Internet title search.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(26 April 2018):A market-design economist wins the John Bates Clark medalThe Economist

——–The John Bates Clark medal is given each year to an outstanding economist under 40.  This year Parag Pathak received the medal for his work on market design, e.g., “creating mechanism to allocate resources without money, such as school places in Boston.”  According to the American Economics Association, Pathak’s work on improving pupil allocation has “influenced the lives of over 1m public school student.”

********As a graduate student, Pathak worked with Alvin Roth, who later won a Nobel Prize for his work on market design.  The complete AEA award announcement for Pathak can be read online.

(29 April 2018):In Fire-Scorched Oklahoma, Help Comes One Bale at a TimeThe New York Times

——–“The hay began arriving before the fires were out.  It came stacked on pickup trucks and strapped onto semis.  From a few counties away.  From halfway across the country.  For ranchers whose grazing land was destroyed by wildfires that tore across western Oklahoma this month, the cylindrical bales were an economic lifeline, a way to feed cattle marooned on grassless patches of charred red soil.  The hay was also free, provided not by lawmakers in Washington or Oklahoma City, but mostly by strangers in other corners of rural America.”

********This is one of the most thought-provoking articles I’ve read in a while.  Some of those donating hay did so because they had recently suffered the ravages of a wildfire, I suppose it is one variation of the expression “giving back” that is frequently heard, a sort of “do unto others as others have done unto me.”  The views expressed about asking and not asking for help are interesting, as is the importance of giving help without being asked.  All these point to deep-rooted attitudes formed by social and historical factors that affect what people do in times of crisis.  Most of all, though, I have been challenged to think of the role of time in relation to loss.  People who suffered loss long ago are not as likely to be the recipients of generosity as those who just incurred it.  It is as if some type of “discounting” of suffering is at work.  Although discounting is generally seen as a matter of time, no doubt there is “spatial discounting” also at work.  Spatial discounting, it turns out, is of increasing importance in public and environmental policy.

(2 May 2018): “The World’s Largest Brewers Have a New Weapon: Weak Beer” Bloomberg.com

——–“To boost sales in Australia, a land where the ability to drink large quantities of ale can be a badge of honor, brewing giants Anheuser-Busch InBev NV and Kirin Holdings Co. think they’ve found a new weapon: weaker beer. . . . a new era of healthier, image-conscious drinkers is cutting back on booze, forcing brewers to roll out weaker versions of everything from Stella Artois to local tipples such as James Boag and Hahn.”  According to global drinks analyst Jonny Forsyth of Mintel Group Ltd., “The mentality now is not to get drunk, but to drink.”  He notes that social media has played a role in this shift to weaker brews.  “Younger consumers weaned on smartphones are becoming wary of having embarrassing drunken photos of themselves appear on Instagram or of not looking their absolute best of Facebook the next day.”  This is not only an Australian trend, as “Around the world, brewers are turning to lighter liquids as beer consumption falls.”

********The expression “session beer” comes to mind, something I first read about some years ago in an article by former Asheville Citizen Times reporter Tony Kiss, aka, The Beer Guy.  Perhaps Tony was ahead of his time.  Evidently the so-called “midstrength segment” is expected to help “draw more young women to beer as well as bring back older drinkers who’d become fed up with the physical effects of full-strength ale.”  As Forsyth says, “That’s the way the market’s going.”  In craft beer, too, there is an increasing demand for “lighter and healthier drinks.”  It will be interesting to see if this shows up in Asheville . . . How could it not?

********Just as a note, Bloomberg.com is changing.  It now has a different appearance and more written content, and it is introducing a metered paywall.  Now one “can view 10 articles each month at no charge, as well as 30 minutes of Bloomberg TV livestream daily.  After 10 articles, we [Bloomberg] will ask you to become a digital subscriber.”  I do not welcome this development, but I can understand it.  In this form Bloomberg begins to be a closer substitute for The Wall Street Journal.  Something I will consider in the year to come.

May you have a good week!  Bruce

314 (25 April 2018)

Welcome to week 314!  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 to be read in their entirety, although complete articles may be found by an Internet title search.

A reader last week indicated that the “invisible links” now used were preferred to “visible links” but that it would be beneficial to include the name of the source of the article, e.g., The Washington Post.  This is a nice middle ground between the visible and the invisible.  The name of the source now follows the title of the article, much like scholarly citation practices.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(19 April 2018):Science hinted that cancer patients could take less of a $148,000-a-year drug.  Its maker tripled the price of a pillThe Washington Post

——–“A group of cancer doctors focused on bringing down the cost of treatments by testing whether lower—and cheaper—doses are effective thought they had found a prime candidate in a blood cancer drug called Imbruvica that typically costs $148,000 a year.”  But before they could develop a study and secure funding they learned “of a new pricing strategy by Janssen and Pharmacyclics, the companies that sell Imbruvica through a partnership.  Within the next three months, the companies will stop making the original 140-milligram capsule . . . [and] will instead offer tablets in four strengths—each of which has the same flat price of about $400, or triple the original cost of the pill.”  The pricing scheme “ensures dose reductions won’t save patients money or erode companies’ revenue from selling the drug.”

********The article goes on to discuss some of the complexities involved with the management of patients using Imbruvica and how the new pricing scheme will reduce the ability of physicians to respond to drug interactions in a timely way.  This situation simply calls out for a more rigorous and systematic analysis.

(19 April 2018):Why a Cashmere Sweater Can Cost $2,000 . . . or $30Bloomberg.com

——–“A plain, yet meticulously crafted, sweater made of the world’s finest cashmere can cost $2,000 or more from premier fashion labels such as Loro Piana.  You can also grab a simple sweater of 100 percent cashmere off a discount rack at Uniqlo for as little as $29.90. . . . So what makes one sweater better than another?  The price depends on the quality of the yarn, where the garment was manufactured, the number of units purchased by the brand, and the markup.  The quality of the raw material often matters the most.”

********The article provides a nice description of some of the things that producers look for in terms of fiber characteristics and what consumers look for in terms of the finished sweater.  Evidently American consumers value garment softness “above all else.”  Reminiscent of the sparkling wine called Champagne, which must come from a specific region of France, “only the product of the Kashmir goat is true cashmere.”

(20 April 2018): [SR] “Climate Fears Reshape Miami’s Housing MarketThe Wall Street Journal

——–“Concerns over climate change are beginning to reshape one of the country’s largest housing markets, with properties closer to sea level now trading at discounts to those at higher elevations.  Research published Friday in the Journal of Environmental Research Letters shows that single-family homes in Miami-Dade County are rising in value more slowly near sea level than at higher elevations, as buyers weigh the possibilities of more-frequent minor flooding in the short term and the challenge of reselling properties that decades from now could be permanently submerged.”  The Miami area is “a testing ground for the vulnerability of housing markets in other coastal cities, such as New York and Boston, because its elevation is as little as one foot above sea level and its porous limestone makes it especially vulnerable to rising sea levels.”

********The foundation publication of this article is “Climate gentrification: from theory to empiricism in Miami-Dade County, Florida,” which is downloadable in its entirety.  Its Abstract gives a clear statement of the hypotheses under consideration and the results found.  In short, climate risk as measured by elevation is clearly being reflected in the price of single-family homes in Miami-Dade County.  If you have had some exposure to multiple regression models in an economics or statistics course, you can study the results for yourself.

********Climate change is not restricted to coastal areas, as is pointed out in “Climate Lawsuits, Once Limited to the Coasts, Jump InlandThe New York Times.  Boulder and San Miguel Counties in Colorado, along with the city of Boulder, Colorado, have filed lawsuits against ExxonMobil and Suncor Energy arguing that “fossil fuels sold by the companies contribute to climate change, which in turn has exacerbated wildfires, droughts, sever storms and other symptoms of a warming planet that have far-ranging effects on agriculture and tourism.”  The article discusses some of the legal issues involved in such cases, including property rights, nuisance doctrines, state vs federal jurisdiction, and the role of the EPA.

(25 April 2018):The Fighting Has Begun Over Who Owns Land Drowned by Climate ChangeBloomberg.com

——–“A decade after the global financial crisis popularized the term ‘underwater real estate,’ parts of the U.S. are grappling with a new, more literal version of the problem.”  Holly Doremus, a law professor at the University of California at Berkeley, notes: “There’s no question it will be a huge fight . . . We don’t exactly know the boundaries of what the state can do.”  Although the “public trust doctrine” has long stipulated that “when it comes to coastal property, anything below the average high-tide line is owned by the government for the use and benefit of the public . . . [those] rules also cover what happens when the high-tide line moves.  If the movement happens suddenly—for example, if a portion of beach is washed away by a storm—the land owner retains title to the property provided he or she restores it to dry land.”  However, “if the high-tide line moves slowly, state ownership moves with it.  And because it’s Mother Nature taking the land, not the government, there’s no legal requirement for the government to compensate property owners.”  According to one legal scholar, due to climate change some of these rules, “don’t really make as much sense anymore.”

********This article is filled with interesting twists and turns.  Clearly our legal system has not sufficiently evolved to the point where ready answers can be provided for a long list of issues and actions related to climate change.  For example, if I am a landowner and my land is submerged, do I still have to pay taxes on the land?  Is it still my land?  If it isn’t my land, whose is it?  Will the ownership status of the land change if a state or federal agency reclaims the land and returns it to “dry” status?  Those who are going into environmental law will have much work to do in the decades to come.  Perhaps there are other areas, too, that are at issue but simply aren’t as dramatic, i.e., visible, as those related to inundated lands.

May you have a good week!  Bruce

313 (18 April 2018)

[The Invisible Forces Weekly: Economics with a Broader View] 313 (18 April 2018)

Welcome to week 313!  After a one-year sabbatical from TIF Weekly, I am looking forward to the discipline of summarizing and expanding upon online articles that catch my attention each week.  Thank you for joining me on the journey.

The setup of TIF Weekly will largely remain the same.  What are intended to be relatively objective “briefs” are preceded by dashes (——-), whereas additional material or relatively subjective comments are preceded by asterisks (*******).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may be found by an Internet title search.

In the past I have made visible the links for each article, but I will no longer follow this practice, using “invisible” links instead.  This will result in posts that are neater and more compact.

(12 April 2018):Why undertakers are worried

——-“Every minute more than 100 people die.  Most of these deaths bring not just grief to some, but also profits to others.”  As population aging takes place in the United States and many other countries of the developed world, annual death rates will climb, thus making the death business more attractive to a wide range of investors.  “The dead-body business is seen as highly predictable, uncorrelated with other industries, inflation-linked, low risk and high margin.”  But “in some of the world a profound shift is under way in what people want from funerals.”  According to Sherri Tovell, a Windsor, Canada undertaker, “the modern undertaker’s job is increasingly one of event planning.”

*******The article clearly lays out the wide range of developments taking place in the funeral industry and why an increase in the death rate may not result in increased revenues for members of the National Funeral Director Association.  Simply put, a wide range of substitutes for traditional funerals have been developed and are increasingly being purchased by the bereaved.

(13 April 2018):Climate Change Is Messing With Your Dinner

——-“The world’s dinner tables are seeing the impact of climate change.  As cold regions become warmer, and warm places hotter still, farming and fishing are shifting.  An evolving climate means big changes for people who grow, catch and rear for a living, and everyone else who buys and eats what they produce.”  Through it all, there are winners and losers.  “As temperatures rise, the best growing conditions for many crops are moving away froom the tropics, and from lower lying land to cooler climbs.  Fish and other underwater catches, too, are migrating to colder seas as their habitats warm.”

*******This article examines the impact of climate change on a small number of objects of human desire, for example, wheat, wine, coffee, lobster, and the like, as well as the predictable impacts on price, lower prices when supply increases and higher prices when it falls.  In addition, it says a little bit about the people who will be impacted by climate change; people in tropical and equatorial regions seem to be in for the worst of it.  What is especially useful, though, is its effort to say something about how quality will be affected by climate change.  This is done most notably for the nutrient levels of rice, wheat, and corn, which have been shown to have lower amounts iron, protein and zinc when CO2 levels increase.

*******The methods used to arrive at predictions are multiple, but one that is increasingly being used due to rapid growth of computational power is agent-based modeling.  There is a nice discussion of it in an article in Science, “Free agents.”  Investing ten minutes reading the article will give you a sense of the promise and the substantial development costs of modeling social behavior “from the bottom up.”  The Santa Fe Institute now offers a free tutorial on agent based modeling, using the NetLogo programming language as its vehicle.  You can learn more about it here.

(17 April 2018):2018 Pulitzer Prize Winners: Full List

——-The 2018 prizes “encompassed, among other topics, stories of abuse in the workplace; construction of a U.S.-Mexico border wall; and a profile of Dylann Roof, who was charged with killing several people in a Charleston, S.C., church.”  For Local Reporting, the staff of “The Cincinnati Enquirer” won for its “multimedia narrative of seven days inside the city’s heroin epidemic, a period in which 18 people died and at least 180 overdoses were reported across the area.”

*******The Pulitzer Prize was first awarded in 1917 and has undergone changes over time due to the “flexible will” of Joseph Pulitzer.  It is instructive too look through the list and see the variety of topics (and papers) that were thought to be Pulitzer worthy.  A look through the list will surface work that encompass all of the invisible forces: hand, handshake, and foot.  The work of “The Cincinnati Enquirer” is an exceptionally clear case.  The book by Jack E. Davis, The Gulf: The Making of an American Sea, sounds intriguing.  The Gulf referred to, by the way, is the Gulf of Mexico.  Evidently, the book by Davis is the first “comprehensive history” of “the world’s tenth-largest body of water.”  Another book that bears notice is Locking Up Our Own: Crime and Punishment in Black America, by James Forman, Jr.

May you have a good week!  Bruce

312 (12 April 2017)

Welcome to week 312!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

Sabbatical

According to Wikipedia (https://en.wikipedia.org/wiki/Sabbatical),

Sabbatical or a sabbatical . . . is a rest from work, or a break, often lasting from two months to a year. The concept of sabbatical has a source in shmita, described in several places in the Bible. For example, in Leviticus 25, there is a commandment to desist from working the fields during the seventh year. Strictly speaking, this means a sabbatical would last one year.

With this definition, I am announcing that, after six years—312 weeks—I am taking a sabbatical in the strict sense, i.e., one year.  That means that issue 313 of The Invisible Forces Weekly will appear on Wednesday, April 18th, 2018.  I hope you will be open to receiving my “briefs” and comments at that time, whatever form they might take.

Let me say that I don’t intend to write the great American novel during the next year, although I will probably read a few, and I don’t intend to climb Mount Everest, although I do hope to climb a few mountains in western North Carolina.  Without going into detail, I look at the next year as a time to “freshen up,” in effect, spring cleaning for the rest of my life.

While I am “freshening up” you might want to check out a few of the many “substitutes” for TIF Weekly.  I suggest two sources to investigate: the listings of Blogs and Journalists presented at Economic Principals (http://www.economicprincipals.com/) and the Blogs, Commentaries, and Podcasts listed by Resources for Economists (https://www.aeaweb.org/rfe/showCat.php?cat_id=96).  I am confident that you will find something that will address your interests.  With that said, thank you for your interest in TIF Weekly.

(6 April 2017): “Cannabis Two-Step: Raise Cash in Canada, Spend It in U.S.” (https://www.bloomberg.com/news/articles/2017-04-06/pot-companies-flock-to-canada-as-u-s-laws-stymie-share-listings)

——–“When Hadley Ford created a company for investing in the fast-growing business of legal marijuana, the former Goldman Sachs Group Inc. investment banker left New York and headed north of the border.  While more than half of U.S. states allow marijuana for medical or recreational use, the drug is still outlawed by the federal government, starving pot entrepreneurs of institutional capital. . . . So Ford created a public company that raises money in Canada, where medical marijuana is allowed. . . . The move gave Ford entrée into a vibrant public market for cannabis and a way to fund investments in the U.S. . . . Ford, 57, is among a growing list of entrepreneurs who are capitalizing on the difference between the two nations when it comes to marijuana.”

********Different legal treatments for the same product almost always create an opportunity for gain.  People like Hadley Ford, who identify these differences and are able to conceive of a business model that will realize those gains, have the potential to reap large financial gains.  In essence, differences in social and historical forces (the invisible handshake) give rise to differences in legal and political forces (the invisible foot), which give rise to differences in economic forces (the invisible hand).  I think we need more educational opportunities for students to range broadly over the disciplines of sociology, political science and law, and economics.  Those students would benefit, too, from the knowledge being constructed by researchers on complexity.  Melanie Mitchells’ book Complexity: A Guided Tour (https://www.amazon.com/Complexity-Guided-Tour-Melanie-Mitchell/dp/0199798109/) provides an introduction to the subject.

(10 April 2017): “Fewer Tomatoes in Ketchup?  East Europeans Pursue Parity at the Grocery” (https://www.nytimes.com/2017/04/09/world/europe/fewer-tomatoes-in-ketchup-east-europeans-pursue-parity-at-the-grocery.html)

——–“The countries of Eastern and Central Europe have long bridled at being treated like the poor cousins of the European Union family.  It does not help that even after more than a dozen years in the bloc, wages remain lower, corruption persists and public services, like schools and hospitals, are far scruffier.  But now that sense of resentment—of being treated as second-class citizens by more prosperous neighbors—is reaching even into the regions refrigerators and cupboards.  With rising passion, prominent politicians and local news media have taken up the issue of whether Eastern Europeans are being sold inferior products.”

********The article clearly indicates that there is evidence to suggest that Eastern and Central European countries are being sold products that are different from, indeed inferior to, those sold in adjacent countries like Austria and Germany.  It seems like the time is right for a more comprehensive comparative study of products in the EU countries.  The article indicates that product differentiation, for whatever reason, is being seized upon by politicians in Eastern and Central European countries.

(10 April 2017): “The Birth of Planned Obsolescence” (https://daily.jstor.org/the-birth-of-planned-obsolescence/)

********In this post, Livia Gershon outlines “the story of how we became a nation that buys stuff and then throws it away at an astonishing pace.”  She does this by summarizing Nigel Whiteley’s 1987 article “Toward a Throw-Away Culture.  Consumerism, ‘Style Obsolescence’ and Cultural Theory in the 1950s and 1960s.”  Important to this development was the 1932 book Consumer Engineering: A New Technique for Prosperity, by Roy Sheldon and Egmont Arens, in which the expression “creative waste” was introduced.  1932 was not an auspicious time to introduce a book espousing creative waste, to say the least.  But “for a rising middle class in the 1950s, possessions—particularly cars—became a way to advertise a family’s social position.”  All this is, of course, an echo of Thorstein Veblen’s “conspicuous consumption” as developed in his classic 1899 book The Theory of the Leisure Class (https://www.amazon.com/gp/product/0199552584/).

(11 April 2017): “Book Pins Corporate Greed on a Lust Bred at Harvard” (https://www.nytimes.com/2017/04/10/business/dealbook/11-andrew-sorkin-harvard-business-school.html)

——–“If you were to look for one ingredient that binds together the nation’s chief executives, top managers and boards of directors, you’d find a remarkably consistent commonality, now and in generations past: A disproportionate number of them are graduates of Harvard Business School. . . . It is hard to overstate the school’s influence on corporate America.  That’s why a new, exhaustive history of the school is causing a stir before it is even out.  The book, “The Golden Passport,” by the veteran business journalist Duff McDonald, is a richly reported indictment of the school as a leading reason that corporate America is disdained by much of the country.”  McDonald points to the arrival of financial economist Michael C. Jensen in 1985 as contributing to an “ideologically driven hijacking of the study of finance [that] served as a cynical repudiation of everything that come before him at the school.”

********You can learn more about McDonald’s book at: https://www.nytimes.com/2017/04/10/business/dealbook/11-andrew-sorkin-harvard-business-school.html.  At 672 pages, this is a lengthy indictment of H.B.S.  As the reviewer, Andrew Ross Sorkin, notes, “in example after example, Mr. McDonald sets out his thesis that money and influence have distorted both the school’s curriculum and the worldview espoused by its professors, who themselves are on the payroll of corporate America as part-time advisers and consultants.”  This seems like a book that will repay careful reading when it is released later this month.  I encountered the George Bernard Shaw story related in the review when I took my first undergraduate course in microeconomics.

********The relationship between the university and business, as developed by McDonald, has long been a matter of discussion.  I see some of this in President Eisenhower’s Farewell Address, which is amply discussed in the book Unwarranted Influence: Dwight D. Eisenhower and the Military-Industrial Complex (https://www.amazon.com/Unwarranted-Influence-Eisenhower-Military-Industrial-Complex/dp/0300177623/).  But a much fuller development is provided in the post “Scientists Have Always Been Political” (https://daily.jstor.org/scientists-have-always-been-political/) and its foundation article (2009) “The Professional and the Scientist in Nineteenth-Century America.”

(12 April 2017): “In the Tennessee Delta, a poor community loses its hospital—and sense of security” (http://wapo.st/2nAF1Z8)

——–Haywood Park Community Hospital of Brownsville, Tennessee closed its doors three years ago this summer.  Its closing is one story in “an epidemic of dying hospitals across rural America.  Nearly 80 have closed since 2010, including nine in Tennessee, more than in any state but Texas.  Many more are considered fragile—downstream victims of federal health policies, shifts in medical practice and the limited tolerance of distant corporate owners for empty beds and financial losses.  In every rural community, the ripple effects of a lost hospital are profound, reverberating beyond the inability of would-be patients to get immediate care.  Many of the best jobs in town vanish.  Local leaders trying to recruit new industry face an extra hurdle.”  People needing emergency health care do not vanish, however, leading Brownsville mayor Bill Rawls to say, “The emergency room now is the back of an ambulance.”

********A brief summary of state-by-state rural hospital closings can be found a t: http://www.beckershospitalreview.com/finance/a-state-by-state-breakdown-of-80-rural-hospital-closures.html.  The summary, in turn, seems to be based upon the work of the North Carolina Rural Health Research Program (http://www.shepscenter.unc.edu/programs-projects/rural-health/rural-hospital-closures/).  The latter resource is especially interesting and flexible as it provides the ability to sort on various criteria and provides a map of closed-hospital locations.  There are some discrepancies regarding numbers, e.g., the article indicates that 9 Tennessee hospitals have closed but I only see 8 in the sources but probably not a matter of concern.  This is another indicator of how the changing conditions of life in rural areas.

May you have a good year!

Bruce

311 (5 April 2017)

Welcome to week 311!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

Upcoming Sabbatical.  Please note that TIF Weekly will be on sabbatical for one year following the distribution of 312, which will complete its sixth year.  More details will be provided when 312 is distributed.  TIF Weekly 313 will be distributed on Wednesday, April 18th, 2018.

(29 March 2017): “Chase Had Ads on 400,000 Sites.  Then on Just 5,000.  Same Results.” (https://www.nytimes.com/2017/03/29/business/chase-ads-youtube-fake-news-offensive-videos.html)

——–“As of a few weeks ago, advertisements for JPMorgan Chase were appearing on about 400,000 websites a month. . . . Now, as more and more brands find their ads popping up next to toxic content like fake news sites or offensive YouTube videos, JPMorgan has limited its display ads to about 5,000 websites it has preapproved, said Kristin Lemkau, the bank’s chief marketing officer.  Surprisingly, the company is seeing little change in the cost of impressions or the visibility of its ads on the internet, she said. . . . The change illustrates the new skepticism with which major marketers are approaching online ad platforms and the automated technology placing their brands on millions of websites.”

********As the article notes, the practice of preapproving sites is known as “whitelisting.”  When one considers the care that businesses and other organizations give to nurturing their brand, it is hard to believe that JP Morgan Chase is just becoming aware of its importance.  The terms ‘whitelists’ and ‘blacklists’ are both in common use.  Blacklisting is the practice of disapproving sites.

(29 March 2017): “Elephants Get a Reprieve as Price of Ivory Falls” (https://www.nytimes.com/2017/03/29/world/africa/ivory-elephants-china.html)

——–“The price of ivory in China, the world’s biggest market for elephant tusks, has fallen sharply, which may spell a reprieve from the intense poaching of the past decade.  According to a report released on Wednesday by Save the Elephants, a respected wildlife group in Kenya, the price of ivory is less than half of what it was just three years ago, showing the demand is plummeting.  Tougher economic times, a sustained advocacy campaign and China’s apparent commitment to shutting down its domestic ivory trade this year were the drivers of the change, elephant experts said.”

********You can find the press release from Save The Elephants at: http://www.savetheelephants.org/about-ste/press-media/?detail=dramatic-changes-in-china-s-ivory-trade.  At that site it is possible to download a pdf of the 88-page report “Decline in the Legal Ivory Trade in China in Anticipation of a Ban,” by Lucy Vigne and Esmond Martin.  STE is based in Nairobi, Kenya.

(1 April 2017): “Free exchange: Will robots displace humans as motorized vehicles ousted horses?” (http://www.economist.com/news/business-and-finance/21719761-probably-not-humans-have-lot-learn-equine-experience-will-robots)

——–“In the early7 20the century the future seemed bright for horse employment.  Within 50 years cars and tractors made short work of equine livelihoods.  Some futurists see a cautionary tale for humanity in the fate of the horse: it was economically indispensable until it wasn’t.  The common retort to such concerns is that humans are far more cognitively adaptable than beasts of burden.  Yet as robots grow more nimble, humans look increasingly vulnerable.”

********This appeared as “Remember the mane” in the print edition of The Economist.  The article appears to be based upon “Robots and Jobs: Evidence from US Labor Markets,” by Daron Acemoglu and Pascual Restrepo.  A pdf of this lengthy mathematical paper can be downloaded at: http://www.nber.org/papers/w23285.  The abstract of the article notes: “According to our estimates, one more robot per thousand workers reduces the employment to population ratio by about 0.13-0.34 percentage points and wages by 0.25-0.5 percent.”

********If robots have something to say about the demand for human labor, so-called labor-saving devices do, too.  This second dimension shows up, albeit in a minor way, in the JSTOR Weekly post “How America Tried (And Failed) To Solve Its ‘Servant Problem’” (https://daily.jstor.org/how-america-tried-and-failed-to-solve-its-servant-problem/).  “In 1928, a group called the National Council on Household Employment brought together working servants, labor activists, efficiency experts, and even future First Lady Eleanor Roosevelt to try to solve the so-called ‘servant problem.’”  When it released its report, the concluded that “not only was domestic service undesirable because of its low pay and unlimited hours, but that the terms ‘servant’ and ‘maid’ alienated would-be domestics.”  The unwillingness of the employers of servants to pay more (or enhance the prestige of servant labor), as well as the expansion of non-servant employments led to the virtual elimination of servants as an employment category.  The article on which this post is based, “Experts and Servants: The National Council on Household Employment and the Decline of Domestic Service in the Twentieth Century,” is downloadable as a pdf.

(2 April 2017): “A Real Estate Boom, Powered by Pot” (https://www.nytimes.com/2017/04/01/business/a-real-estate-boom-powered-by-pot.html)

——–“Legalized marijuana has already upset societal norms, created a large legal gray area and generated a lucrative source of tax revenue.  Now it is upending the real estate market, too.  In the more than two dozen states that have moved to legalize pot, factories, warehouses and self-storage facilities are being repurposed for the cultivation and processing of potent marijuana plants and products.  Suburban strip malls and Beaux-Arts buildings have been reimagined as storefronts selling pre-rolled joints and edibles.  And because the marijuana business comes with added baggage, landlords and property owners are charging a premium for new tenants working in the cannabis business.”

********This article, in fact the paragraph above, shows all the invisible forces at work.  The shifting boundaries of marijuana law at the state level, take center stage; federal law regarding marijuana, but not its enforcement, has remained unchanged in recent years.  This has increased the demand for warehouse-type buildings suitable for growing marijuana.  Of particular interest is the role of uncertainty in marijuana operations.  Increased enforcement of federal law would diminish the retail and wholesale markets for marijuana, as well as property values.  Legalization of marijuana at the federal level would decrease the risk of participating in the industry and likely lead to an increase in supply and lower prices at retail and wholesale, reducing property values.  Then there is the interesting question of interstate commerce, mentioned in the article.  Moving marijuana across state lines is currently illegal, effectively creating as many (legal) markets for marijuana as there are states in which it is legal.  But a federal law legalizing marijuana and its movement across state lines would dramatically change where marijuana is grown, no doubt leading it to be cultivated where energy costs are low, although some brands will promote that their product is locally grown.  Is there another market where so much seems to be in play?

********I recently read The Economics of Prohibition (https://www.amazon.com/Economics-Prohibition-Mark-Thornton/dp/1610160479/), by Mark Thornton.  I was looking for a book that took a broad view of prohibitive activities, not just alcoholic prohibition, and the book provided an entry into the literature.  Thornton is a member of the Austrian school of economics (https://en.wikipedia.org/wiki/Mark_Thornton) and those ideas are reflected in the book.  What struck me as particularly valuable in the book was its emphasis on the existence of substitutes, sometimes many substitutes, for any given product.  What is true for a Toyota Corolla is also true for marijuana.  That being the case, the recent Guardian article “Big Pharma’s anti-marijuana stance aims to squash the competition, activists say” is very interesting.  The gist of the article is that marijuana is viewed by pharmaceutical companies as a substitute for some of their products.  It is no surprise, then, that Insys (http://www.insysrx.com/) is reported as having contributed $500,000 to (successfully) defeat a recent marijuana legalization effort in Arizona and not long afterward obtained FDA approval for its own “lab-made liquid form of tetrahydrocannabinol (THC).”  The product, Syndros (http://syndros.com/), is “approved for use in treating anorexia associated with weight loss in patients with AIDS, and nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional antiemetic treatments.”

********While we are on the subject of marijuana, here is a related piece on hemp and the N.C. Industrial Hemp Commission, the latter of which was create by the General Assembly in 2015.  The Commission is considering joining a suit against the DEA and its ruling that “products made with CBD or cannabidiol hemp, which are in the same cannabis family as marijuana, are illegal and cannot be transported across state lines.”  From what I gathered from the article, it is currently legal “to import [hemp] seed from Europe or Canada” but it is illegal to purchase hemp seed from another state.  It is easy to understand the frustrations of would-be and actual hemp producers of having to operate in such a legal environment.  The article includes an informative two-minute video with David Schmitt of Industrial Hemp Manufacturing that discusses how hemp is processed and its economic benefits for farmers.

(5 April 2017): “Minority Neighborhoods Pay Higher Car Insurance Premiums Than White Areas With the Same Risk” (https://www.propublica.org/article/minority-neighborhoods-higher-car-insurance-premiums-white-areas-same-risk)

********An interesting piece of investigative journalism by ProPublica.  The introductory material for the article notes: “Our analysis of premiums and payouts in California, Illinois, Texas and Missouri shows that some major insurers charge minority neighborhoods as much as 30 percent more than other areas with similar accident costs.”  The article is lengthy but you can get a clear picture of instances of disparate premiums from two graphical figures showing GEICO premiums in Illinois and Missouri.  A very attractive feature of the article is that it provides detailed information about how it did its study (https://www.propublica.org/article/minority-neighborhoods-higher-car-insurance-premiums-methodology).  Consequently, it should be (relatively) easy to use their work to study other states.

May you have a good week!

Bruce

310 (29 March 2017)

Welcome to week 310!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

Upcoming Sabbatical.  Please note that TIF Weekly will be on sabbatical for one year following the distribution of 312, which will complete its sixth year.  More details will be provided when 312 is distributed.  TIF Weekly 313 will be distributed on Wednesday, April 18th, 2018.

(23 March 2017): “How The ‘Scarcity Mindset’ Can Make Problems Worse” (http://www.npr.org/2017/03/23/521195903/how-the-scarcity-mindset-can-make-problems-worse)

********This seven-minute audio broadcast by NPR reporter Shankar Vedantam discusses some of the research on scarcity by economist Sendhil Mullainathan and psychologist Eldar Shafir on the cognitive consequences of scarcity.  They are the authors of Scarcity: The New Science of Having Less and How It Defines Our Lives (https://www.amazon.com/Scarcity-Science-Having-Defines-Lives/dp/125005611X/).  Their work, which falls squarely in the universe of behavioral economics, is discussed at some length in Harvard Magazine (http://harvardmagazine.com/2015/05/the-science-of-scarcity).

(23 March 2017): “America’s Farmers Say There’s a Conspiracy to Steal Their Milk Money” (https://www.bloomberg.com/news/articles/2017-03-23/dairy-farmers-say-someone-is-stealing-their-milk-money)

——–“As far as staples go, dairy is pretty central to the American diet.  After all, knowing  cost of a gallon of milk remains a campaign-trail test for whether a politician is out of touch.”  With milk sales in decline, dairy farmers have fallen on hard times.  But some of those hard times appear to be the result of people who are supposed to looking after their interests.  In a long-running class action, farmers claim that they “haven’t been getting their fair share in this multi-billion dollar industry.  The litigation, filed by dairy farmers in 2009, names DairyAmerica and its affiliate California Dairies as defendants.  The plaintiffs allege that DairyAmerica and its members, cooperatives like California Dairies which acquire dairy products from farmers and sell them in bulk, have been actively misleading U.S. regulators about the price they charge for nonfat dry milk, which goes into everything from infant formula to candy bars.  In doing so, the farmers claim, the cooperatives sought to boost profits at their expense—by millions of dollars.”

********As the article points out, “the dairy market operates very differently from other segments of the U.S. economy.”  As Andrew Novakovic of Cornell University notes, “I don’t think there’s another industry in the U.S. economy that is as heavily price regulated.”  This price regulation has apparently left the industry open, if those bringing the class action are correct, to widespread pricing fraud made possible through the development of two sets of accounting figures at DairyAmerica: “The first set of figures would consist of accurate figures from the actual sales of nonfat dry milk in the export market to foreign customers.  The second set of figures would consist of fabricated export sales figures that were created internally at DairyAmerica.”  The first, lower, set of figures were used as to (under) compensate dairy farmers.  This makes for an astonishing read.

(23 March 2017): “’Deaths of Despair’ Are Surging Among the White Working Class” (https://www.bloomberg.com/news/articles/2017-03-23/white-working-class-death-rate-to-be-elevated-for-a-generation)

——–New research by Anne Case and Angus Deaton, both of Princeton University, has drawn additional attention to the climb of mortality and morbidity, “which measure chances of death or illness within and age group,” since the late 1990s for less-educated whites between 45 and 54.  That came as progress against “heart disease and cancer slowed and drug overdoses, suicide and alcoholism—so-called ‘deaths of despair’—became pervasive.”  According to Case and Deaton, “Distress born of globalization and technological change probably drove the deadly outcome.”

********Sir Angus Deaton won the Nobel Prize in Economics in 2015 (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2015/deaton-facts.html).  The new research mentioned in the article is “Mortality and morbidity in the 21st century,” a pdf of which can be downloaded at: https://www.brookings.edu/bpea-articles/mortality-and-morbidity-in-the-21st-century/; the paper is 60 pages long but contains a lot of discussion as well as a substantial number of figures toward its end, i.e., starting on page 45 of the pdf.  At the same link, you can view a four-minute video with Case and Deaton discussing their work.  Also useful is the five-minute NPR interview at: http://www.npr.org/sections/health-shots/2017/03/23/521083335/the-forces-driving-middle-aged-white-peoples-deaths-of-despair.

********The new research has been widely covered in the media, so this is just one of many articles that could have been mentioned.  The articles I’ve seen have tended to focus on Figure 1.1 (p. 45) of the pdf.  This is a dramatic figure in that it shows a “crossing” of mortality rates for White non-Hispanics high school or less and Black non-Hispanics, an image that is easy to misconstrue since the Black non-Hispanics group doesn’t appear to be constrained to be high school or less.  That is, the two groups seem not to be directly comparable in relation to education.  To get greater comparability, you need to look at Figure 1.2 (p. 45).  There you will see that Blacks continue to have higher mortality rates than Whites throughout the study period for non-Hispanics with a high school degree or less.  What clearly is true, however, is that the mortality gap between Blacks and Whites have fallen dramatically, with Black rates generally falling and White rates generally increasing.  In recent years, though, rates for Blacks and Whites have been increasing.  The many Figures of the paper that start on page 45 are, to say the least, shocking.

(24 March 2017): “UPS Loses N.Y. Trial Over Reservations’ Untaxed Cigarettes” (https://www.bloomberg.com/news/articles/2017-03-24/ups-found-liable-in-new-york-lawsuit-over-untaxed-cigarettes)

——–“United Parcel Service Inc. was found by a judge to have turned a blind eye to shipments of untaxed cigarettes to New Yorkers from American Indian reservations that undermined anti-smoking efforts. . . . U.S. District Judge Katherine B. Forrest in Manhattan on Friday ruled that UPS failed to comply with a 2005 deal it struck with the state to fix the problem without going to court.”  New York “has the highest state cigarette tax at $4.35 a pack on top of a $1.50 local New York City tax.”  Over 50 percent of the “total cigarette market in New York consists of smuggled cigarettes.”

********The article appears to be based upon a study of the Tax Foundation, “Cigarette Taxes and Cigarette Smuggling by State, 2014,” (https://taxfoundation.org/cigarette-taxes-and-cigarette-smuggling-state-2014/), date 17 January 2017.  The list of Key Findings contains such notable points as “New York has the highest inbound smuggling activity” at 55.4 percent of cigarettes consumed and “New Hampshire has the highest level of outbound smuggling at 81.1 percent of consumption, likely due to its relatively low tax rates and close proximity to high tax states in the northeastern United States.”  Figure 1 shows a positive correlation between excise tax rates and cigarette smuggling as a percentage of consumption.  I’m sure the correlation would have been even tighter had proximity been considered.  In any event, the relationship between excise tax rates and smuggling is not the least bit surprising.  Tax differentials provide opportunities for gain and some will be enticed by them regardless of legality.

(27 March 2017): “Mexican Farmers Fight to Oust Border Brewery” [SR](https://www.wsj.com/articles/mexican-farmers-fight-to-oust-border-brewery-1490616001)

——–Thousands of farmers in Mexicali, Mexico [about 100 miles ESE of San Diego] “are rallying to an unusual cause: driving a big U.S. manufacturer out of town, ideally with help from U.S. President Donald Trump.”  At issue is the construction of a $1.4-billion-dollar brewery being built by Constellation Brans, “the third-largest U.S. beer producer and the brewer of Corona, the best-selling beer in Mexico. . . . None of the beer to be brewed in Mexicali is destined for the Mexican market.”  Farmers are concerned that “the plant will use too much water, taxing the aquifer in an area where aging irrigation infrastructure and a naturally low water table have already forced farmers to pull tens of thousands of acres out of production.”  In recent decades, “Mexico has re-engineered its economy to focus on exports.  While hundreds of thousands of workers have benefited from higher wages, mainly in large cities and in border assembly plants known as maquiladoras, the agricultural sector has suffered from a lack of investment and increased competition from larger, more technologically advanced farms in the U.S.”

********Carlos de la Parra, a professor of environmental- and urban-studies at the College of the Northern Frontier in Tijuana, provides a prototypically economic comment when he notes that “Historically, the Mexicali Valley was all about farming, but more and more, if you want to increase the aggregate value of the use of water, you want to attract more industry.”  I.e., water can be used in agriculture and it can be used in industry.  From the perspective expressed, the water goes to the use that generates the greatest monetary value.  As the article points out, the “local water table is getting lower and lower.”  In the 1990s “wells used to be 100 feet deep,” but now they must go down to 250 feet.”  So, the addition of more industry has increased the unit-cost of production for agricultural products, a classic example of a negative production externality (http://www.economicsonline.co.uk/Market_failures/Externalities.html).

********A related article that also deals with Mexican agriculture, this time corn production, appeared in The Los Angeles Times as “Mexico’s bargaining chips with Trump?  How about a corn boycott” (http://www.latimes.com/world/mexico-americas/la-fg-mexico-corn-boycott-20170329-story.html).  In 2016 the U.S. exported 13.9 million tons of corn to Mexico, as compared to 3.1 million tons in 1994, the year NAFTA went into effect.  So, yes, U.S. corn farmers would stand to lose a lot from a boycott of corn by Mexico.  It is interesting to me that NAFTA enabled a decrease in industrial jobs in the U.S. and an increase of industrial jobs in Mexico, and simultaneously enabled a decrease in agricultural jobs in Mexico and an increase of agricultural jobs in the U.S.  This is the way it is supposed to work, but in both the U.S. and Mexico, the people who lost their jobs are not happy about it.  No doubt there has been a diminution of knowledge and skill in relation to both types of activity over the last 23 years.

May you have a good week!

Bruce

309 (22 March 2017)

Welcome to week 309!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(17 March 2017): “Wages rise on California farms.  Americans still don’t want the job” (http://www.latimes.com/projects/la-fi-farms-immigration/)

——–Farmers in California “are being forced to make difficult choices about whether to abandon some of the state’s hallmark fruits and vegetables, move operations abroad, import workers under a special visa or replace them altogether with machines.  Growers who can afford it have already begun raising worker pay well beyond minimum wage.  Wages for crop production in California increased by 13% from 2010 to 2015, twice as fast as average pay in the state . . . Some farmers are even giving laborers benefits normally reserved for white-collar professionals, like 401(k) plans, health insurance, subsidized housing and profit-sharing bonuses. . . . But the raises and new perks have not tempted native-born Americans to leave their day jobs for the fields.  Nin in 10 agriculture workers in California are still foreign born, and more than half are undocumented, according to a federal survey.”  Growers with high-value crops, such as the Cabernet Sauvignon grapes of Napa Valley, “are luring employees from fields in places like Stockton that produce cheaper wine grapes or less profitable fruits and vegetables.  Growers who can’t raise wages are losing their employees and dealing with it by mechanizing, downsizing or switching to less labor-intensive crops.”

********A clear example of the impact of more restrictions on the international movement of labor.  Much of the article is built around the experience of growers of “low value” grapes near Stockton and that of growers of “high value” grapes in Napa.  Low-value growers are losing their workers because they are being bid away by high-value growers.  Although higher wages might be expected to entice American workers to compete for these jobs, even hourly wages of $19.50 have been unable to draw and retain them.  Low-value grape growers who are unable to higher workers are looking to mechanize their processes or move into products like almonds and olives that require much less labor.  Growers who mechanize will have some transition costs, too, as the planting of vines—spacing of plants and the like—will need to be adjusted so they can be mechanically harvested.  For a look at another domestic industry being affected by a reduction in international workers, see the Wisconsin-focused article “Dairy farms fear Trump’s immigration policies” (http://www.jsonline.com/story/money/business/2017/03/06/dairy-farms-fear-trumps-immigration-policies/98700808/).  “By some estimates, up to about 80% of the hired help on large Wisconsin dairy operations is immigrant labor — with a large percentage of those workers being undocumented. . . . Dairy farmers say they get almost “zero response” from native-born job applicants, even when the pay is comparable with nearby factories.

********The agricultural labor situation in California is being affected directly by a decrease in the supply of agricultural labor due to changes in federal government policy regarding the international movement of labor.  Decisions made by the European Union regarding the production of beet sugar in the EU will affect the supply of sugar in the EU and bring about significant turmoil in countries that have traditionally large-scale exported of cane sugar.  This topic is developed at reasonable length in “Europe Is Waving Goodbye to Sugar Cane” (https://www.bloomberg.com/news/articles/2017-03-16/sugar-trade-that-made-our-modern-world-longs-for-sweet-hereafter).  As the article notes, “The European Union’s decision to remove limits on its own beet-sugar output from October means less demand for cane growers from Jamaica in the Caribbean, to the Pacific Island of Fiji, and Swaziland in southern Africa.”  Especially hard hit will be high-cost producers like Belize and Guyana, which “produce less than 6 tons of sugar per hectare cultivated, compared with an average of about 10 for giants like Brazil.”  On the international scene, Belize and Guyana are in much the same position as low-value grape growers in Stockton, California.

(17 March 2017): “The Upshot: What if Sociologists Had as Much Influence as Economists?” (https://www.nytimes.com/2017/03/17/upshot/what-if-sociologists-had-as-much-influence-as-economists.html)

——–“Walk half a city block in downtown Washington, and there is a good change that you will pass an economist.  People with advanced training in the field shape policy on subjects as varied as how health care is provided, broadcast licenses auctioned or air pollution regulated. . . . And there are economists sprinkled throughout the government—there is an entire council of them advising the president in most administrations [the Council of Economic Advisers], if not yet in this one.  But . . . there just may be a downside to this one academic discipline having such primacy in shaping public policy. . . . Another academic discipline may not have the ear of presidents but may actually do a better job of explaining what has gone wrong in large swaths of the United States and other advanced nations in recent years.”  The discipline?  Sociology.  This is not a new idea.  “In 1967, [Minnesota] Senator Walter Mondale actually proposed a White House Council of Social Advisers; he envisioned it as a counterpart to the well-entrenched Council of Economic Advisers.”  The CSA was never created, but if it had been it would have broadened the perspective beyond that of the CEA.  “For starters, while economists tend to view a job as a straightforward exchange of labor for money, a wide body of sociological research shows how tied up work is with a sense of purpose and identity.”

********You can read a one-paragraph description of the CSA at: http://moses.law.umn.edu/mondale/publicwelfare.php.  If you then google “The Full Opportunity and Social Accounting Act” you will find much information about the proposed act, which never passed despite repeated submissions in 1967, 1969, 1971, and 1973.  It would be very interesting to study the history of the proposal, especially the questioning and testimony of the hearings.  Can the arguments for a CSA be much different in 2017 than in 1967?  I just noticed that it is the fiftieth anniversary of the proposed act.

(20 March 2017): “U.K. Trade Policy After Brexit Must Reckon With Gravity” (https://www.wsj.com/articles/u-k-trade-policy-after-brexit-must-reckon-with-gravity-1489928402)

——–“Economists have for decades observed that the volume of trade between economies is tightly linked to their size and proximity.  Countries export more to big economies than they do to small ones, and they trade more with neighbors than with markets further away.  For the economists who first discerned them, these patterns recalled the effect of gravity on celestial bodies in classical physics, where the force exerted by one object on another is determined by mass and distance. . . . The role of gravity in international trade highlights a potential problem for Prime Minister Theresa May as she begins complex negotiations to withdraw the U.K. from the European Union.  The EU is big and nearby, making it a critically important trade partner for the U.K.”  Dutch economist Jan Tinbergen, who shared the first (1969) Nobel Memorial Prize in economics, is typically credited with the idea of describing international trade as a gravity-like relationship between countries.

********The gravity model of international trade is discussed and formalized in Wikipedia (https://en.wikipedia.org/wiki/Gravity_model_of_trade).  You can learn more about Tinbergen’s life and work at: http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1969/tinbergen-facts.html.

May you have a good week!

Bruce