Welcome to week 305!  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.

(16 February 2017): “Trump Hates Trade Deficits, But Which Ones Really Matter?” (https://www.bloomberg.com/graphics/2017-mexico-trade-deficit/)

********This article provides a clear, graphically-based discussion of U.S. trade deficits and surpluses with a variety of its trading partners.  It provides information about imports, exports, and deficits/surpluses in relative terms for a variety of U.S. trading partners.  Surprisingly, the U.S. runs its largest relative deficit with Ireland (65%), followed by China (60%); the relative deficit with Canada is 2% and the relative deficit with Mexico is 12%.  The U.S. runs its largest relative surplus with the Netherlands (42%).

********Aggregate figures only tell a part of the story.  Here are two articles that provide a more personal view:

“What happened when factory jobs moved from Warren, Ohio, to Juarez, Mexico” (http://www.latimes.com/world/mexico-americas/la-fg-mexico-us-factories-20170217-htmlstory.html).  The article contains an eight-minute video which includes the voices of a worker in Warren who lost his job at Delphi and a worker in Juarez who now works for Delphi.

“With NAFTA in Trump’s crosshairs, Mexico’s border factories brace for the unknown” (https://wpo.st/G-Jd2).  The relationships between El Paso, Texas and Ciudad Juarez, Mexico will likely change should NAFTA be renegotiated.  Mattress manufacture provides an example.

Now that I think of it, I can’t recall having seen or read one article on cross-border movements of businesses between the U.S. and Canada in relation to NAFTA.  Why has there been an almost exclusive focus on movements between the U.S. and Mexico?

(17 February 2017): “How Economists are Fueling the Global Debate Over Refugees” (https://www.bloomberg.com/news/articles/2017-02-17/how-economists-are-fueling-the-global-debate-over-refugees)

********Reporter Michelle Jamrisko reviews and provides links to “A host of studies” that “aim to quantify how these outsiders integrate and impact the native born.”  If you are seeking a broad overview, but not a tidy summary, on the economic impacts of refugees, this is a good place to look.

(19 February 2017): “A Bee Mogul Confronts the Crisis in His Field” (https://www.nytimes.com/2017/02/16/business/a-bee-mogul-confronts-the-crisis-in-his-field.html)

——–California-based Bret Adee “is America’s largest beekeeper, and this is his busy season.”  He has some “92,000 hives” that he rents out to provide bee pollination services across the United States.  Right now, his bees are focused on California’s almond trees.  Those services go for “$180 to $200 a hive . . . There would be no almond crop—not to mention avocados, apples, cherries and alfalfa—without honey bees.  Of the 100 crops that account for 90 percent of the food eaten around the globe, 71 rely on bee pollination.”  Colony collapse is an issue for Mr. Adee, as it is for virtually all bee keepers.  In the year “that ended in April 2016, 44 percent of the overall commercial bee population died.”  Although neonicotinoids have been implicated in colony collapse, it is generally thought that there are other factors at work, too.

********A nice, contextualized story about honeybee colony collapse.  This is a bit different than usual because it focuses more on the perspective of bee keepers and what they are going through.  There is a real and growing demand for the services provided by large-scale bee keepers and some of them are meeting that demand by purchasing the bees of smaller producers who see no future in the business.

(22 February 2017): “Kenneth Arrow, Nobel-Winning Economist Whose Influence Spanned Decades, Dies at 95” (https://www.nytimes.com/2017/02/21/business/economy/kenneth-arrow-dead-nobel-laureate-in-economics.html)

********Kenneth Arrow, who won the Nobel Prize in Economics in 1972, passed away Tuesday after a long and fruitful career.  The particulars for his Nobel Prize, which he shared with John R. Hicks, can be found at: https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1972/arrow-facts.html.  An overview of his work can be found at: https://en.wikipedia.org/wiki/Kenneth_Arrow.  Arrow is one of the new economists who could have received multiple Nobels in economics had that been possible, his work was that influential and path breaking.  If I had to pick just one publication, however, as reflective of his importance, it would have to be Social Choice and Individual Values (https://www.amazon.com/Social-Choice-Individual-Values-Kenneth/dp/1614273456/), which was published in 1951.  By mathematically proving that individual preferences could lead to social preferences only under extremely repugnant conditions, i.e., dictatorship, his “Impossibility Theorem” shattered the dreams and redirected the thought of many who sought a firm basis for social decisions.

(22 February 2017): “How to Save a Dying Mall” (https://www.bloomberg.com/news/articles/2017-02-22/how-to-save-a-dying-mall)

——–The Hull Property Group of Savannah, Georgia “has spent the last decade bringing distressed malls back to life.  The company, which owns 29 malls across the U.S., sticks to a proven script that includes negotiating tax incentives with local governments, demolishing excess space, and reversing public perceptions that the property is struggling.”  Hull is “one of a small crowd of operators bucking the conventional wisdom that there are simply too many malls and that only those catering to wealthy shoppers will survive the death of legacy retailers.”  As one developer notes, if you can buy a mall “at 20 cents on the dollar, you can provide tenants with very profitable stores, because you can give them cheap rents.”

********The challenge of repurposing distressed malls fascinates me but one of the links of the article clearly indicates that it is a part of the more general problem of “distressed properties,” including such things as “landfills and abandoned chemical plants.”  Brownfield Listings (https://brownfieldlistings.com/) provides access to a list of distressed properties from across the U.S.  The listings can be searched by a variety of criteria (https://brownfieldlistings.com/search/moresearchoptions), including location.  For example, I search on North Carolina and a city-owned property of Asheville, North Carolina popped up!  Would you like to buy a brownfield property on Hilliard Avenue in Asheville?  I was especially intrigued by the Property Status criterion.  I wasn’t aware that, in addition to brownfields, there are also greyfields, greenfields, and redfields., among others.

May you have a good week!


Welcome to week 304!  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.

(7 February 2017): “The ‘Slow-Motion Terrorism of Pirate Capitalism’” (https://www.bloomberg.com/news/articles/2017-02-07/glass-house-the-slow-motion-terrorism-of-pirate-capitalism)

——–[A review, by Justin Fox, of Glass House: The 1% Economy and the Shattering of the All-American Town (https://www.amazon.com/gp/product/1250085802/), by Brian Alexander.]  Glass House is the “melancholic but gripping account” of the author’s “13-month stay, from December 2014 to January 2016, in the troubled, drug-ravaged city” of Lancaster, Ohio, “where he grew up.  There are tales of a heroin deal gone bad, an annual music festival fighting to survive, and people struggling to build a future in a place with a happier past.  But it’s the Anchor Hocking saga at the heart of it all that makes this book more than another elegy for good times in Middle America.”  In Alexander’s telling of the decline, but continued existence, of an iconic glass maker, what changed “wasn’t competition from Mexico or China—or at least not just that.  ‘Corporate America is what happened,’ a local policeman tells the author.  Alexander narrows that down, blaming it on ‘the slow-motion terrorism of pirate capitalism.’”  The names of Carl Icahn, Newell, Cerberus Capital Management, and Monomoy Capital Partners figure in this story.  Although “There are those who argue that leveraged acquisitions and restructurings of the sort that Anchor Hocking has endured make companies more efficient and steer capital to better uses. . . . Alexander makes a persuasive case . . . that from the perspective of Lancaster, it’s been one big fleecing.”

********This book looks like a good companion for Boom, Bust, Exodus: The Rust Belt, the Maquilas, and a Tale of Two Cities (https://www.amazon.com/Boom-Bust-Exodus-Maquilas-Cities/dp/0199765618), which I have read.  The story of Boom, however, was one of decline in Galesburg, Illinois driven by Nafta.  So, perhaps the story of Galesburg was also one of leveraged acquisitions and restructurings, a perspective I don’t recall from reading the book.

********Economic decline is, certainly, more complex than “just Nafta” or “just leveraged acquisitions.”  This seems like a good place to lay out the distinction between “wicked problems” and “tame problems.”  I ran across this distinction over the weekend while chasing down a sequence of links that led me to a post by media critic and journalism professor Jay Rosen.  The specific post is “Covering Wicked Problems” (http://pressthink.org/2012/06/covering-wicked-problems/).  Is the problem of economic decline in Galesburg, Illinois and Lancaster, Ohio a wicked problem?  If it is, treating it as a monocausal tame problem will not lead to its solution.  In drawing attention to wicked problems, I am reminded of the growing field of complexity economics, a relatively painless introduction for which is provided by Complexity and the Art of Public Policy: Solving Society’s Problems from the Bottom Up (https://www.amazon.com/Complexity-Art-Public-Policy-Societys/dp/0691169136/), by David Colander and Roland Kupers.

(8 February 2017): “Wonkblog: The business lobby’s hypocritical, one-size-fits-all answer to regulation: No” (https://wpo.st/zoHb2)

********Despite the title, this article make some general points that are worthy of consideration, discussing the role that cost-benefit analysis has played (is playing) in the analysis of federal regulation.

——–A contentious aspect of the presidency of Ronald Reagan was his “executive order requiring the government to perform cost-benefit analyses for every federal regulation.  The business community had long complained that government officials focused only on the benefits of regulation, while ignoring the costs to businesses and the economy as a whole.  Liberal interest groups—unions, consumer advocates and environmentalists—went bananas. . . . Any estimates of the benefits of regulation, they argued, were too squishy and too subjective—and downright immoral. . . . Ironically, today it is the business lobby and its cheerleaders in the Republican Party who are the skeptics.  They are only too happy to tote up every conceivable cost for those ‘crushing,’ ‘job-killing’ regulation, but resist toting up the benefits because—like the liberals of old—they view such estimates as too squishy and subjective.”

********The thrust of the article is to compare the “all benefit-no cost” approach once, supposedly, held by government officials, to the “all cost-no-benefit” approach now, supposedly, held by the business lobby, with the subjectivity, squishiness of the cost or benefit being ignored—effectively be set to zero—playing a pivotal role.  This is all-too-easy to understand: stress what advances your argument and ignore what does not advance your argument.  What is easy to understand, though, is not necessarily admirable.  The article winds up with a valuable point, i.e., that cost-benefit analysis “really is squishy and it often relies on subjective assumptions, whether it is done by regulators who want to find huge benefits from regulations or industry executives who want to find none.  That said, it is still [an] exercise . . . worth doing—not because of the precise answers it generates but because of the fact-based discipline it imposes on thinking about whether and how to regulate.”

********The use of costs and benefits in assessing federal regulation was put in place by Executive Order 12291, signed on 17 February 1981.  You can learn more about it at: https://en.wikisource.org/wiki/Executive_Order_12291.  There are five requirements set out in its Sec. 2. General Requirements.  Most relevant to this article are:

(b) Regulatory action shall not be undertaken unless the potential benefits to society from the regulation outweigh the potential costs to society;

(c) Regulatory objectives shall be chosen to maximize the net benefits to society;

Here is one recent book that deals with cost-benefit analysis as applied to environmental regulation: https://www.amazon.com/Costs-Benefits-Environmental-Regulation/dp/1784712116/.

(9 February 2017): “Trump Wants More American Cars in Japan.  Japan’s Drivers Don’t.” (https://www.nytimes.com/2017/02/09/business/trump-japan-american-cars.html)

——–“Detroit pines for a day when the sight of an American car on a Japanese street is not so notable.  Even as Japanese cars have taken a wide portion of the United States market, American brands are barely visible in Japan, a situation that has long frustrated American auto executives and trade negotiators and has become a renewed source of political friction under President Trump. . . . Such talk is alarming in Japan, where the auto industry is a pillar of the economy.”  Few American cars are sold in Japan.  “Of the nearly five million cars and light trucks sold in Japan last year, just 15,000 were American, or 0.3 percent.”  Although trade barriers are sometimes advanced as a reason for the dearth of American cars sold in Japan, there are others.  “Ingrained skepticism about American cars’ reliability and fuel efficiency is one problem.   Another is price.”  Supporting that notion is the fact that European brands like Mercedes-Benz and BMW have been relatively successful.  Kenji Kobayashi, the executive director of the Japan Automobile Importers Association, sees “a difference between European and American efforts to woo Japanese car buyers.  European brands advertise aggressively and have done more to customize their products for Japans, for instance by producing right-hand-drive versions of their vehicles—a seemingly obvious selling point, in a country where the driving lane is on the left, that American producers have long been criticized for ignoring.”

********The article makes clear that American cars, generally, do not have the product characteristics that Japanese consumers want, e.g., fuel efficiency, reliability, and relevance.  The failure to advertise doesn’t help, of course, but perhaps there is no reason to do so given the situation.  It is hard to avoid the conclusion that American automakers think that the Japanese market isn’t worth pursuing seriously.   As it stands, the Japanese buyers of American cars, which are overwhelmingly men, are “a bit unusual.”

(10 February 2017): “The surprisingly heated political battle raging over the word ‘milk’” (https://wpo.st/xDHb2)

——–“Chances are you’ve never stopped at your grocery store’s dairy case, baffled by the difference between ‘soy’ and ‘2%’milk.  But the dairy industry says consumers are confused—and it’s launched a war to clarify the facts for them.  Industry-backed bills in the House and Senate have recently sought to ban the makers of plant-based products from using the terms ‘milk,’ ‘cheese’ or ‘yogurt.’ . . . Now, as plant-based product sales continue to soar, Big Milk is ramping up its lobbying efforts against the companies that it says has misappropriated milks’ good name.  And the fledgling plant-based food lobby—arguably the David to milk’s Goliath—has promised to do the same.”

********As the article notes, “The showdown between dairy and nondairy milks has been a long time coming.  Consumption of conventional milk has been cratering since the 1950s, a product of both modern concerns about fat and the explosion of consumer beverage options after . . .  World War II.”  As we know, as the number of substitutes for a product increases, the demand for the product of the substitutable good will decrease, all other things being equal.  Dairy producers, presumably, believe that the removal of the word ‘milk’ will make products like almond milk and soy milk seem like poorer substitutes for the real thing, thereby increasing the demand for “real” milk.  Non-dairy producers, presumably, have beliefs that are somewhat similar, although affecting the demand for their products in the opposite direction.

(15 February 2017): “Is the Chicken Industry Rigged?” (https://www.bloomberg.com/news/features/2017-02-15/is-the-chicken-industry-rigged)

——–In a December 2016 earnings call, Sanderson Farms CEO Joe Sanderson reassured bank analysts “that the company’s recent profits weren’t about to disappear, as the chicken industry’s usual business cycle dictated they would.”  But Sanderson told them “that the industry had learned from its mistakes.  There wouldn’t be a bust this time.  Then he said something rather extraordinary: His competitors weren’t planning to ramp up production.  He knew this because it had been communicated to him by a virtually unknown company.  ‘I see a lot of information from Agri Stats the tells me nobody’s going to ramp up’ . . . Sanderson was right.  The following year, Sanderson Farms reported that its profits had surged 64 percent.  For the next six years, production cuts and skyrocketing profit margins were the norm in the $90 billion chicken.”  Although “puzzled industry watchers . . . speculated that a merger spree during the 1980s and 1990s were responsible” for increased profit margins, “Sanderson’s conference call suggested another source for the shift: Agri Stats, a private service that gathers data from poultry processors, produces confidential weekly reports, and disseminates them back to companies that pay for prescriptions.”  Access to highly detailed data about “the internal operations of the nation’s biggest poultry operations, including bird sizes, product mixes, and financial returns at participating plants” is very unusual.  Agri Stats “gathers information from more than 95 percent of U.S. poultry processors.”  Minneapolis law firm Lockridge Grindal Nauen has “filed a class-action lawsuit against more than a dozen of the nation’s largest chicken companies, alleging that they colluded to inflate chicken prices from 2008 to 2016. . . . The suit says that Agri Stats “acted as an agent and/or co-conspirator” of the defendants.

********Agri Stats (http://www.agristats.com/) was founded by Jim Cox, who was born in the Great Depression, in 1985.  The broad outline of his early years is related in the article; Cox worked up to 80 hours a week on a dairy farm while paying his way through Purdue University.  The article shows convincingly the value of highly detailed production information, information that Agri Stats is now trying to bring to hog production.  Three more things caught my attention:

  • Clients of Agri Stats “submit their sales invoices in real time—when someone sells a truck of chicken to the Kroger grocery chain, for example, the invoice goes to Agri Stats soon after.”


  • Then there is the influence of industry analysts. When veteran stock analyst Timothy Ramey of Pivotal Research Group “downgraded shares of Tyson from ‘buy’ to ‘sell’ and slashed his valuation of the company shares” in the wake of the filing of the lawsuit, Tyson issued a statement dismissing his speculations on the same day.  Nonetheless, “its stock fell about 9 percent that day.”  Since his note, the “company’s stock is down 12 percent.”


  • Finally, there is the judgment of University of Wisconsin law professor Peter Carstensen, who notes that: “Getting detailed information is a particularly useful form of collusion . . . because it allows conspirators to make sure they’re all following through on the agreement.” Having this kind of information generates trust that firms are not cheating.

An article worth reading in its entirety.

May you have a good week!


303 (8 February 2017)

Welcome to week 303!  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.

(2 February 2017): “One Tiny Widget’s Dizzying Journey Shows Just How Critical Nafta Has Become” (https://www.bloomberg.com/graphics/2017-trump-protectionism-alters-supply-chain/)

********This brief article shows the movement of a capacitor from its origins in Asia to the U.S., Mexico, and Canada.  While doing so one can see how NAFTA and U.S. tax laws have influenced the many links in one supply chain.

(2 February 2017): “Full Employment May Be Redefined as Trump Attacks U.S. Benchmark” (https://www.bloomberg.com/news/articles/2017-02-02/full-employment-may-be-redefined-as-trump-attacks-u-s-benchmark)

********As the article points out and as is well known, the most frequently reported measure of unemployment, which is known by labor statistics professionals as U-3, has some problems, in particular, it doesn’t include “discouraged workers.”  There are, in fact, six different unemployment measures—U-1 through U-2—that are regularly created and used by groups such as the U.S. Federal Reserve in making policy.  The article provides a graph of three measures—U-3, U-5, and U-6—from 2008 through 2016, shown that their behavior over time are closely related.  Measures U-1 through U-6 are discussed in two publications:

“BLS introduces new range of alternative unemployment measures” (https://www.bls.gov/opub/mlr/1995/10/art3full.pdf)

“The Unemployment Rate and Beyond: Alternative Measures of Labor Underutilization” (https://www.bls.gov/opub/ils/pdf/opbils67.pdf)

Although not mentioned in the article, the money supply also has alternative measures which, like those for unemployment, are appropriate for different purposes.  You can learn more about those measures—M1 and M2—at: https://www.federalreserve.gov/faqs/money_12845.htm.

(3 February 2017): “The End of Employees” [SR](https://www.wsj.com/articles/the-end-of-employees-1486050443)

——–“Never before have American companies tried so hard to employ so few people.  The outsourcing wave that moved apparel-making jobs to China and call-center operations to India is now just as likely to happen inside companies across the U.S. and in almost every industry. . . . The contractor model is so prevalent that Google parent Alphabet Inc., ranked by Fortune magazine as the best place to work for seven of the past 10 years, has roughly equal numbers of outsourced workers and full-time employees, according to people familiar with the matter. . . . The shift is radically altering what it means to be a company and a worker.  More flexibility for companies to shrink the size of their employee base, pay and benefits means less job security for workers. . . . Some economists say the parallel workforce created by the rise of contracting is helping to fuel income inequality between people who do the same jobs. . . . No one knows how many Americans work as contractors, because they don’t fit neatly into the job categories tracked by government agencies.  Rough estimates by economists range from 3% to 14% of the nation’s workforce, or as many as 20 million people.”  According to staffing executives, “Companies . . . are rapidly increasing the numbers and types of jobs seen as ripe for contracting.  At large firms, 20% to 50% of the total workforce often is outsourced.”

********This is a very informative article that would be worth reading in its entirety—you may be able to if you search on its title.  Steven Berkenfeld, an investment banker, “says companies of all shapes and sizes are increasingly thinking like this: ‘Can I automate it?  If not, can I outsource it?  If not, can I give it to an independent contractor or freelancer?”  According to Berkenfeld, “very few jobs make it through that obstacle course.”  And hiring an employee is “a last resort.”  This is an interesting time to a labor economist or to be a department of Human Resources.

********This is a good place to notice The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (https://www.amazon.com/Sharing-Economy-Employment-Crowd-Based-Capitalism/dp/0262034573), by Arun Sundararajan.  You can read a review of the book at: http://www.chronicle.com/article/The-Sharing-Economy-Comes-to/238992.  From what I can discern from the review, Sundararajan has a somewhat sunnier view of the changes in the labor market than the one suggested by the article in The Wall Street Journal.

(8 February 2017): “The Big Reason Whites Are Richer Than Blacks in America” (https://www.bloomberg.com/news/articles/2017-02-08/the-big-reason-whites-are-richer-than-blacks-in-america)

——–A new study, “The Asset Value of Whiteness: Understanding the Racial Wealth Gap,” explodes standard explanations and solutions for the wealth gap.

The table of contents says it all:

  • Attending college does not close the racial wealth gap.
  • Raising children in a two-parent household does not close the racial wealth gap.
  • Working full time does not close the racial wealth gap.
  • Spending less does not close the racial wealth gap.

What does account for the racial wealth gap?  This is a question still under investigation.  However, “One powerful factor seems to be that whites are five times as likely as blacks to receive substantial gifts and inheritances, and the sums they get tend to be much larger.”  The wealth advantage of whites’ and the blacks’ disadvantage “gets passed down from generation to generation.”

********The study mentioned in the article can be found at: http://www.demos.org/publication/asset-value-whiteness-understanding-racial-wealth-gap.  (The link in the Bloomberg article that was supposed to take the reader to it did not work.  This one does.)  My understanding of the article is that legal and political factors—the invisible foot—are the primary factors perpetuating the racial wealth gap.

(8 February 2017): “’A Conservative Climate Solution’: Republican Group Calls for Carbon Tax” (https://www.nytimes.com/2017/02/07/science/a-conservative-climate-solution-republican-group-calls-for-carbon-tax.html)

——–“A group of Republican elder statesmen is calling for a tax on carbon emissions to fight climate change.  The group, led by former Secretary of State James A. Baker III, with former Secretary of State George P. Shultz and Henry M. Paulson Jr., a former secretary of the Treasury, says that taxing carbon pollution produced by burning fossils fuels is ‘a conservative climate solution’ based on free-market principles.  Mr. Baker is scheduled to meet on Wednesday with White House officials, including Vice President Mike Pence, Jared Kushner, the senior adviser to the president, and Gary D. Cohn, director of the National Economic Council, as well as Ivanka Trump.  In an interview, Mr. Baker said that the plan followed classic conservative principles of free-market solutions and small government.”

********The proposal for the carbon tax, as well as additional related items, is a product of the Climate Leadership Council, about which you can learn more at: https://www.clcouncil.org/about-us/.  The proposal is contained in “The Conservative Case For Carbon Dividends” (https://www.clcouncil.org/wp-content/uploads/2017/02/TheConservativeCaseforCarbonDividends.pdf).  It is an impressive list of contributors, including economists Martin Feldstein and N. Gregory Mankiw among others.  This eight-page document lays out “The Four Pillars of a Carbon Dividends Plan,” which are worth looking at and reflecting upon.  This document is connected to a companion document of twenty-pages, “Unlocking the Climate Puzzle” (https://www.clcouncil.org/wp-content/uploads/2017/02/Unlocking_The_Climate_Puzzle.pdf), authored by Ted Halstead.  Authors of “The Conservative Case” document are spreading the word in opinion pieces running in national newspapers, e.g., The New York Times (https://www.nytimes.com/2017/02/08/opinion/a-conservative-case-for-climate-action.html) and The Wall Street Journal [SR](https://www.wsj.com/articles/a-conservative-answer-to-climate-change-1486512334).

May you have a good week!


Welcome to week 302!  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.

(26 January 2017): “What did NAFTA really do?” (http://rodrik.typepad.com/)

********This link takes you to the blog of Harvard University economist Dani Rodrik, which I found in the WSJ article “Nafta’s Net U.S. Impact Is Modest” [SR](http://www.wsj.com/articles/naftas-overall-u-s-impact-is-modest-1485469689).  Rodrik provides a clear, research-based summary of NAFTA’s impact.  You will need to scroll down a bit to read his post but it will be worth it.  He notes, “So here is the overall picture that these academic studies paint for the U.S.” NAFTA produced large changes in trade volumes, tiny efficiency gains overall, and some very significant impacts on adversely affected communities.”  In one of the studies he cites, by John McLaren and Shushanik Hakobyan, the largest impacts noted were in “parts of Georgia, North Carolina, South Carolina and Indiana.”  The workers who were most adversely affected were “high school dropouts in industries that depended heavily on tariff protections in place prior to NAFTA.  These workers saw wage growth drop by as much as 17 percentage points relative to wage growth in unaffected industries.”

(27 January 2017): “Homeowners’ Quest for the Best Schools” [SR](http://www.wsj.com/articles/homeowners-quest-for-the-best-schools-1485443381)

——–“Houston lawyer Anne Ferazzi Hammett spent about three months last spring looking for a great high school for her teenage daughters, Anna and Nora.  Then she discovered Westlake, a high school that gets top marks in academic rankings and draws strong reviews from parents.  The only drawback: The school is located in Austin, Texas, about 165 miles northwest of the Hammetts’ home.  Nonetheless, Ms. Ferazzi Hammett and her husband, Rick Hammett, bought a $2.25 million house in Westlake’s school district, and they and their daughters will move in June. . . . For some home buyers, there is no factor more important than the public schools their children will attend.  They analyze student-body performance on standardized tests, school rankings, what percentage of alumni go on to four-year colleges and which schools send students to Ivy League or top-tier states universities.  They then uproot their lives to move within these districts’ boundaries, where homes can cost hundreds of thousands of dollars more than nearby homes zoned to different schools.”

********No doubt the importance of public school quality is something that every realtor knows very well.  The article goes on to note: “In an analysis of 1.6 million home listings in the U.S. through the first six months of 2016, Realtor.com found that houses in public-school districts with GreatSchools ratings of 9 or 10, the highest scores possible, were priced, on average, 77% higher than homes in nearby districts with scores of 6 or lower.  Additionally, homes located in top districts sell four days faster—at 58 days—than the national median of 62 days.”  Evidently, as the article also notes, people who move to a school district frequently move away from it after their children graduate.

********The GreatSchools ratings were new to me.  You can learn more about them, and check out your area and schools, at: http://www.greatschools.org/.

(27 January 2017): “To Understand a Tax on Mexican Imports, Consider the Avocado” (https://www.nytimes.com/2017/01/27/business/economy/importers-tax-mexico.html)

********This article does a light run through of some of the consequences of a 20% tax on imported goods, taking the avocado as an example; “more than nine of every 10 imported avocados come from Mexico.”  Avocados are the primary ingredient in guacamole, but onions are used, too; “seven out of eight onions eaten by Americans are grown in the United States.”  This provides the reporter with an opportunity to explore how the import tax would affect the production of avocados in Mexico and the production of onions in the U.S.  The analysis seems sound to me until the likely downward revision of the corporate income tax is taken up.  Since this is a tax on profit, I do not see why it is at all likely that businesses will “share” their profits with consumers.

********Avocados and onions are interesting to think about.  As the article points out, it takes four or five years for a newly planted avocado tree to bear fruit, so a U.S. avocado production response would take time.  Onions, on the other hand, can be planted on an annual basis, so onion production could adjust within a year.  When dealing with things that grow, production lags are common.

(27 January 2017): “Uneasy About the Future, Readers Turn to Dystopian Classics” (https://www.nytimes.com/2017/01/27/business/media/dystopian-classics-1984-animal-farm-the-handmaids-tale.html)

——–Margaret Atwood’s The Handmaid’s Tale “is among several classic dystopian novels that seem to be resonating with readers at a moment of heightened anxiety about the state of American democracy.  Sales have also risen drastically for George Orwell’s ‘Animal Farm’ and ‘1984,’ which shot to the top of Amazon’s best-seller list this week.  Other novels that today’s readers may not have picked up since high school but have landed on the list this week are Aldous Huxley’s 1932 novel, ‘Brave New World,’ and Sinclair Lewis’s 1935 novel ‘It Can’t Happen Here.’ . . . The sudden prominence of such novels reflects a renewed public interest in decades-old works of speculative fiction as guides for understanding our current political moment.”

********The broader point of the article is that some (many?) are struggling to make sense of the changing landscape of politics and government in the U.S., and are turning to classic works of fiction to do so.  It is interesting to think about political change translates into book sales (or a loss of book sales).  A desire to understand is an important factor but so is whether one is a reader of books or not.  My guess is that those who are struggling to make sense of the changing landscape are also readers of books, so the impact on demand of dystopian novels has been pronounced.  In relation to this, I wonder has been the impact on books such as Trump: The Art of the Deal (https://www.amazon.com/Trump-Art-Deal-Donald-J/dp/0399594493/)?  Almost 50% of presidential voters chose Donald Trump in the last election.  What books would they be likely to buy in light of the election?  Are there fictional works that come to mind or are they more likely to be focused on nonfiction works?

********JSTOR Daily has a related piece this week: “Friday Reads: George Orwell’s 1984” (https://daily.jstor.org/friday-reads-george-orwells-1984/).  One of the foundation articles for it is “Crisis?  Whose Crisis?  George Orwell and Liberal Guilt.”  The article notes that “Orwell was fixated on what he deemed ‘one of the more embarrassing moments in twentieth-century liberalism: the failure of middle-class liberals to connect with the working class.’”

(29 January 2017): “What are the best NC colleges to improve your financial future?” (http://www.newsobserver.com/news/business/article129415924.html)

——–“The University of North Carolina released its strategic plan a couple weeks ago.  Documents like this usually aren’t very exciting, but this one has far-reaching implications for our state.  Included in the mix: a commitment to enroll more low-income and rural students and help them get all the way to graduation.  And a pledge to keep the system affordable and accessible for qualified in-state high school students.”  This commitment is important for the future of North Carolina because the state “has one of the lowest mobility rates in the country . . . [and education] is a proven way to” increase mobility.  “To track how well colleges and universities are fostering upward economic mobility, The Equality of Opportunity Project recently release a Mobility Report Card.  Using data from 30 million college students, the report looks at the distribution of family income when a student enrolls . . . and if students are able to ascend income brackets once they graduate.”  In light of that data, “the universities that have the strongest track record in promoting upward mobility are Elizabeth City State, Winston-Salem State, North Carolina Central, Fayetteville State and North Carolina A&T, in that order.”

********Here are three websites, identified from a link in the article, that provide relevant information:

The Equality of Opportunity Project (EOP)) homepage: http://www.equality-of-opportunity.org/

The EOP page for colleges: http://www.equality-of-opportunity.org/college/

A tool developed by The New York Times to identify “Economic Diversity and Student Outcomes at America’s Colleges and Universities: Find Your College” (https://www.nytimes.com/interactive/projects/college-mobility/).  Simply entire the college you are interested in the box near the headline.

A page that I found especially thought provoking was “Some Colleges Have More Students From the Top 1 Percent Than the Bottom 60.  Find Yours” (https://www.nytimes.com/interactive/2017/01/18/upshot/some-colleges-have-more-students-from-the-top-1-percent-than-the-bottom-60.html).  There is a box provided to add a school of interest to the list.

********The private benefits of higher education, of course, are only a part of the story—there are also public benefits.  The Chronicle of Higher Education has a nice article this week that summarizes the public benefits, which you can find at: http://www.chronicle.com/article/Beyond-the-College-Earnings/239013.  The governmental recognition of the social benefits has long be a guiding element of higher education policy at least as long as the Morrill Act of 1862 (https://en.wikipedia.org/wiki/Morrill_Land-Grant_Acts), which gave rise to the many land-grant colleges and universities that dot the U.S.  A data-filled and highly-graphical look at the impacts of higher education can be found in Education Pays 2016: The Benefits of Higher Education for Individuals and Society (https://trends.collegeboard.org/sites/default/files/education-pays-2016-full-report.pdf), by Jennifer Ma, Matea Pender, and Meredith Welch.  It is a publication of The College Board (https://www.collegeboard.org/).

********A different kind of mobility—geographic mobility—is examined in “The academy and the marketplace: Mediocre academic researchers should be wary of globalisation” (http://www.economist.com/news/science-and-technology/21715639-effects-foreign-competition-professors-mathematics-mediocre-academic).  In a “a forthcoming paper in the Journal of Human Resources, George Borjas of Harvard University, and Kirk Doran and Ying Shen of the University of Notre Dame, study the effects of globalisation on a select group of particularly brainy Westerners: professors of mathematics.”  By examining the “natural experiment” that occurred with China’s liberalization in 1978, they found that the scholarly productivity of Chinese-American professors increased from the influx of Chinese students and “the relative productivity of non-Chinese American academics fell, as weaker papers were crowded out.”  In an earlier paper Borjas and Doran examined the impact of the influx of Soviet mathematicians from the “abrupt collapse of the Soviet Union.”  The increased supply of mathematicians in the U.S. led to increased unemployment among “newly minted American maths graduates.”  Here are, what appear to be, the relevant paper and article:

“Ethnic Complementarities after the Opening of China: How Chinese Graduate Students Affected the Productivity of their Advisors” (http://www.nber.org/papers/w21096.pdf)

“The Collapse of the Soviet Union and the Productivity of American Mathematicians” (http://www3.nd.edu/~kdoran/Doran_Math.pdf)

I wonder if similar work has been done in relation to the scholars who fled Europe in the wake of the rise of Hitler.

********While we are on the subject of international labor markets, the piece “Brazilian Gang Enlists FARC Rebels for Drug Trade” [SR](https://www.wsj.com/articles/brazilian-gang-enlists-farc-rebels-for-drug-trade-1485858609).  The negotiated peace between FARC and the Colombian government, which resulted in the 2016 Nobel Peace Prize (https://www.nobelprize.org/nobel_prizes/peace/laureates/2016/), has identified FARC members as attractive recruits for Brazil’s “largest criminal organization . . . the First Capital Command or PCC.”  Vladimir Aras, who heads “the international cooperation unit of the Brazilian Prosecutor General’s Office,” notes that “The peace deal between Colombia’s government and the FARC is fantastic . . . But it generates a side effect, which will be the idling of many FARC members.”  In addition, some members of FARC “have opted out of the process altogether.  Guerilla units in the lawless jungles of southeast Colombia, near the Brazilian border, have broken ranks with the FARC over the peace pact.”  As is no doubt obvious, some members of FARC will conclude that they will be better off working for the PCC than in some alternative line of work.

********A very useful site identified by the article is InSight Crime: Investigation and Analysis of Organized Crime: http://www.insightcrime.org/.  The site is global in its coverage.

(1 February 2017): “Saudi Arabia Plans the World’s Cheapest Power With Solar and Wind” (https://www.bloomberg.com/news/articles/2017-02-01/saudis-plan-1st-renewables-bids-with-world-s-lowest-power-cost)

********The title of this very brief article pretty much says it all.  Saudi Arabia “plans to produce 9.5 gigawatts of power from renewable energy sources by 2023.”  Evidently the country with the world’s second-largest proven oil reserves (https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves), following Venezuela, is actively pursuing renewable energy.

May you have a good week!


301 (25 January 2017)

Welcome to week 301!  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 January 2017): “The Upshot: Presidents Have Less Power Over the Economy Than You Might Think” (https://www.nytimes.com/2017/01/17/upshot/presidents-have-less-power-over-the-economy-than-you-might-think.html)

——–“Presidential reputations rise or fall with gross domestic product.  The state of the economy can determine if presidents are re-elected, and it shapes historical memory of their success or failure. . . . But the reality is that presidents have far less control over the economy than you might imagine.  Presidential economic records are highly dependent on the dumb luck of where the nation is in the economic cycle.  And the White House has no control over the demographic and technological forces that influence the economy.  Even in areas where the president really does have power to shape the economy . . . the relationship between presidential action and economic outcome is often uncertain and hard to prove.”

********The article does a nice, compact job of summarizing the principal factors that affect economic performance, indicating those areas where the president has little direct control—monetary policy—and slight direct control—fiscal policy.  Other areas of potential influence affect the economy slowly.

********There are things, however, that can affect the economy very quickly—political events.  This is discussed briefly in “How Political Events Change Currency Value” (https://daily.jstor.org/how-political-events-change-currency-value/).  The post points out that the effect of these events tend to be transient and short term, whereas larger economic factors “are the fundamental determinants of a currency’s health.”  The foundation article for this post is “Democracy and Markets: The Case of Exchange Rates,” which appeared in the American Journal of Political Science in 2000.  The article can be accessed at the bottom of the post.

(19 January 2017): “Get Rich.  Save the World.  Gut Fish” (https://www.bloomberg.com/news/features/2017-01-19/get-rich-save-the-world-gut-fish)

********This article is hard to summarize.  In part, it is the story of 32-year-old venture capitalist Rod Baird who is looking in unusual places to invest.  In this case it is the waterways of western Kentucky.  In part, it is the story of “Lula Luu and John Crilly, . . . energetic former academics” who created the business Fin Gourmet, which draws upon the abundant Asian carp to make its products.  And in part it is the story of Ronny Hopkins, a commercial fisherman in Kentucky.  As Baird notes, “If Donald Trump wants to deliver on his promise to create rural jobs, he doesn’t need to create anything out of thin air.”  The problem is that “The talent is there, but the capital isn’t.”

********What drew me to this article was its explicit mention of carp, which was (and presumably is) ubiquitous in the Rock River of my hometown of Watertown, Wisconsin of my youth.  Were people really harvesting carp and selling them in restaurants as something desirable?  Yes.  It turns out that Asian carp are something else.  They can “grown into 70-pounders known to jump as high as 10 feet.”  As the article notes, there a lots of YouTube videos shown the carp “in flight.”  Here is one: https://www.youtube.com/watch?v=tLmJjRqXDCo.  Evidently the sound of boat motors sets them off.

(21 January 2017): “Schumpeter: Businesses can and will adapt to the age of populism” (http://www.economist.com/news/business-and-finance/21714935-how-executives-balance-shareholder-expectations-and-social-pressures-businesses-can)

——–“As they slid down the streets of Davos this week, many executives will have felt a question gnawing in their guts.  Who matters most: shareholders or the people?  Around the world a revolt seems under way.  A growing cohort—perhaps a majority—of citizens want corporations to be cuddlier, invest more at home, pay higher taxes and wages and employ more people, and are voting for politicians who say they will make all that happen.  Yet according to law and convention in most rich countries, firms are run in the interest of shareholders, who usually want companies to use every legal means to maximise their profits.”  Although naïve executives “fear that they cannot reconcile these two impulses . . . Wiser executives know that shareholder value comes in shades of grey.”  Schumpeter “reckons there are six distinct corporate tribes, each with its own interpretation of what shareholder value means.  Firms have some flexibility to choose which one they belong to.”

********The column lays out a spectrum of tribes, with corporate fundamentalists on the far right and corporate apostates on the far left.  In between, moving from right to left, there are corporate toilers, corporate oracles, corporate kings, and corporate socialists.  This is what it would look like without the modifier:

apostates     socialists     kings     oracles     toilers     fundamentalists

According to the article, most Western firms are toilers that “believe in the primacy of shareholder value but are prepared to be more patient than the fundamentalists.  From the standpoint of the invisible forces, the group of oracles is especially interesting, as they “want to maximise profits within the law, but with a twist.  They think the law will evolve with public opinion and so they voluntarily do things today that they may be required to do tomorrow.”  All in all, the article provides a useful perspective on the factors considered by corporate executives and boards in making decisions.

********In relation to this, the article “What to Expect from Trumponomics: Quick Take Scorecard” (https://www.bloomberg.com/politics/articles/2017-01-20/trumponomics-is-jawboning-by-another-name-quicktake-scorecard) is of some interest.  The key sentence, as you will see, appears in the first paragraph: “Early in his first press conference as president-elect, Donald Trump said he would make pharmaceutical companies bid for U.S. business because they were ‘getting away with murder’ on drug prices.  Indexes that track pharmaceutical stocks plummeted.  It was classic Trump, doing what economists call ‘jawboning,’ or moving markets today with threats of action in the future” [italics added].

(25 January 2017): “Mall Owners Rush to Get Out of the Mall Business” [SR](http://www.wsj.com/articles/mall-owners-rush-to-get-out-of-the-mall-business-1485262801)

——–“Mall landlords are increasingly walking away from struggling properties, leaving creditors in the lurch and posing a threat to the values of nearby real estate.  As competition from online retailers batters store owners, some of the largest U.S. landlords are calculating it is more advantageous to hand over ownership to lenders than to attempt to restructure debts on properties with darkening outlooks.  That, in turn, leaves lenders with little choice but to unload the distressed properties at fire-sale prices.”  Although the abandonment of such properties can negatively impact the creditworthiness of borrowers, this is not always the case.  Regarding this Steven Marks, the head of the U.S. REIT group of Fitch Ratings, notes such defaults need not be negative: “If anything, we oftentimes view these transactions positively, as it indicates financial discipline to not commit corporate capital towards failing or uneconomic investments.”

********As the article notes, “In the case of a default, creditors make claims only on the collateral that backs the loan, not on the borrower itself.”  Perhaps that is why (some) student loans are treated differently than mall loans—the lack of collateral.  In the absence of a real asset to sell, students cannot walk away from the loan.  Some former students die still owing on their loans.

********The article made me think about the topic of “recycling malls.”  A couple of readers of the WSJ mentioned four possibilities: educational institutions, municipal (county or state) administration, offices, and housing.  I’m sure there are others.  What an interesting study it would be to see what is happening to these malls.  A good place to start for ideas would be to sift through the Comments to this article.

May you have a good week!


Welcome to week 300!  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.

(11 January 2017): “Will We Always Have the Poor Among Us?” (http://daily.jstor.org/will-we-always-have-the-poor-among-us/)

——–“Assurances to the contrary from Jesus . . . , we may be close to ending poverty as we know it.  That’s the good news shared recently by New York Times columnist Nicholas Kristof: simply put, the number of poor among us is declining rapidly.  According to the latest figures from the World Bank, in 2011 only 14 percent of the world’s population lived in ‘extreme’ poverty, down from 35 percent in 1993.  The improvement in conditions around the world has been steady enough that in late 2015 when UN member nations set themselves 17 new ‘Sustainable Development Goals,’ first on the list was to eradicate extreme poverty by 2030.  Similar good news has emerged from the Census Bureau about poverty levels in . . . the US.  If you think this sounds too good to be true, you’re not alone.  as Kristof reports, 95 percent of Americans today believe poverty is getting worse, a perception they share with the great majority of the developed world.”

********The general perception about poverty is perfectly consistent with the argument put forward in an article in The Washington Post (https://www.washingtonpost.com/posteverything/wp/2016/12/29/stop-saying-that-2016-was-the-worst-year/) noted in TIF Weekly 298, i.e., people tend to be unaware of long-term trends, focusing instead on recent events.  The article goes on to examine a variety of notions of ‘poverty’, drawing upon a 2005 article in the Journal of Epidemiology & Community Health.  In so doing attention is given to the “capabilities view” of human well-being developed by Amartya Sen and Martha Nussbaum.  The article provides references to an important publication of each author.

(13 January 2017): “Edmund Burke and the Birth of Traditional Conservatism” (http://daily.jstor.org/edmund-burke-and-the-birth-of-traditional-conservatism/)

——–“Edmund Burke (1729-1797) is the philosophical fountainhead of modern conservatism.  But he didn’t start out that way.  The Irish-born politician started as a fiery Whig, a voice for American independence and for Dissenters and radicals at home in Great Britain.  He stood against slavery and pros3ecuted the head of the British East India Company for corruption.  Then he met the French Revolution, and his views seemed to change abruptly. . . . But was it, indeed, the French Revolution that caused ‘an abrupt political tack from advocating parliamentary reform, religious toleration, and American liberty’?  Or was Burke’s critique of the French Revolution, as Burke himself sometimes argued, ‘first and foremost a parable for the English of his day’?  Historian McCalman argues that understanding Burke’s domestic experience is key to explaining his transformation.  According to McCalman, Burke’s radical transformation was greatly fanned, if not sparked, by the Gordon Riots of 1780.  Names after Lord George Gordon, the firebrand head of the Protestant Association (and onetime friend of Burke), this chaotic political uprising essentially scared the reformer out of Burke.”

********Burke’s Reflections on the Revolution in France (1790) is one of those essential books that I have yet to read, even though it is widely acknowledged to be the source of the intellectual thread of conservative thought.  What I find fascinating about the discussion of the Gordon Riots is that Burke evidently had much time—ten years—to reflect upon revolution-like events that affected him personally, so perhaps the French Revolution simply provided him with the opportunity to write out ideas that had long been developing.  Not so much, then, a momentary flash, but something sustained.  There is a link to the McCalman article, “Mad Lord George and Madame La Motte: Riot and Sexuality in the Genesis of Burke’s Reflections on the Revolution in France, at the bottom of the post.

(13 January 2017): “Working for an Algorithm Might Be an Improvement” (https://www.bloomberg.com/view/articles/2017-01-13/working-for-an-algorithm-might-be-an-improvement)

——–“Bridgewater, the world’s largest hedge fund, has been portrayed as a bizarre Moneyball-type machine in which employees’ every move is monitored and assessed, increasingly by computer algorithms.  Awful as that may sound, what if it’s actually a step toward a happier and more prosperous world?  Granted, descriptions of the place—including a recent Wall Street Journal article to which founder Ray Dalio has taken vociferous offense—make it seem pretty dystopian.  The firm, for example, amasses employee data to produce individual ‘Baseball Cards,’ with scores and ratings on dozens of attributes.  That’s great if the system turns you into a Honus Wagner card, but possibly demoralizing for anyone else.”  But Bridgewater isn’t the only company employing algorithms.  “Offices around the country are deploying tools to continuously monitor and assess employee activity.”  Such approaches are thought to stem from the work of Frederick Winslow Taylor, especially the 1911 Principles of Scientific Management (https://www.amazon.com/Principles-Scientific-Management-Frederick-Winslow/dp/0486299880/).  “Yet the theory’s namesake, Frederick Taylor, didn’t set out to maximize efficiency at the expense of employees’ sanity.  Rather he wanted to improve worker welfare.  The Progressive movement was in its early days, and social and political activists wanted to stop industrialists from exploiting the working class.  Taylor believed that his system for greater productivity would align the interests of employees and management.”

********The article indicated that the measured developed by Taylor, and as they are used by Bridgewater, are meant more to be used for employee coaching rather than employee winnowing.  Perhaps I should read the book.  Regardless, as the article indicates, the same measure that can be used to coach can also be used to winnow.  An overview of Taylor and his work can be found at: https://en.wikipedia.org/wiki/Frederick_Winslow_Taylor.

********Imbedded in the Bloomberg article is a link to another article in The Financial Times that has an informative and somewhat lengthy article “Gig Economy: When your boss is an algorithm” (https://www.ft.com/content/88fdc58e-754f-11e6-b60a-de4532d5ea35).  Within it there is a link to an nine-minute podcast “Return of ‘Taylorism’ on steroids” (http://podcast.ft.com/2016/09/08/return-of-taylorism-on-steroids/).

(15 January 2017): “A gynecologist secretly photographed patients.  What’s their pain worth?” (http://wpo.st/lyjR2)

********The article takes up the challenging problem of how to assign monetary awards to thousands of women who suffered psychological trauma associated with surreptitious photographs taken by a trusted gynecologist.

(15 January 2017): “Tax Refund Loans Are Revamped and Resurrected” (https://www.nytimes.com/2017/01/15/business/tax-refund-loans-are-revamped-and-resurrected.html)

——–Tax-refund loans are returning but this time with a difference.  Formerly such loans were issued by tax-preparation firms like H&R Block and its competitors with high interest rates and fees, but such loans became “nearly extinct after a regulatory crackdown that forced most major banks out of the market.”  But with the disappearance of such refund-anticipation loans (RALs), customers for tax-preparation services also disappeared.  So now, “The nation’s big tax-preparation companies are so desperate for customers that they are willing to put money up front—with absolutely no hidden fees or interest charges, and no ironclad guarantees that the companies will get paid back.”  As customers return, firms like Jackson Hewitt are treating the loans, with origination costs of $32-36, as “a marketing expense.”  Firms issuing such loans are looking to make up the costs of such loans by selling “add-on products” and the additional fees associated with them.

********It is interesting to see how the RAL has morphed in response to regulatory change and the subsequent reduction in customers.  In relation to this, I was struck by the statement of Greg Steinlicht of H&R Block, “This [offering of no-cost loans] is an effort to arrest our client loss, to bring more people to our office . . . The product went away for several years, but the client demand for it never did.”

(16 January  2017): “A Rare Corner of Finance Where Women Dominate” (https://www.nytimes.com/2017/01/16/business/dealbook/women-corporate-governance-shareholders.html)

——–“Women hold the top positions in corporate governance at many of the biggest mutual funds and pension funds—deciding which way to vote on the directors of a company board.  They make decisions on behalf of teachers, government workers, doctors and most people in the United States who have a 401(k).  The corporate governance heads at seven of the 10 largest institutional investors in stocks are now women, according to data compiled by The New York Times.  Those investors oversee $14 trillion in assets.”

********I didn’t see much in the way of explanation regarding the perceived dominance of women in corporate governance.  That being said, the article notes that “Corporate governance is playing a growing role within the broader ecosystem of corporate America.  Each spring, publicly traded companies hold shareholder meetings and outline business strategy for the coming year.”  It is further noted that the voting power on institutional investors “is rarely wielded to confront companies. . . . And their approach contrasts sharply with that of brash activist billionaires like William A. Ackman and Daniel S. Loeb, who have made a name for themselves as corporate agitators” who bring about change “by theatrically pounding on the front doors of companies and using the public court of opinion to bully companies into changing their strategies.”  Perhaps women tend to better able to navigate the diplomacy of corporate governance than men.

(17 January 2017): “As Pot Prices Plunge, Growers Scramble to Cut Their Costs” (https://www.bloomberg.com/news/articles/2017-01-17/as-pot-prices-plunge-growers-scramble-to-cut-production-costs)

——–“The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge—and an opportunity for companies that can help cut production costs.  Prices are tumbling as formerly illicit cultivators emerge from the shadows to invest millions of dollars in massive pot factories.  In Colorado, the average price sought by wholesalers has fallen 48 percent to about $1,300 a pound since legal sales to all adults started in January 2014, according to Cannabase, operator of the state’s largest market.  Supply is surging as growers expand and install the latest agricultural technology.”  According to John Chandler, a vice president at Urban-Gro of Lafayette, Colorado, a focus on efficiency “can cut production costs for some indoor growers to less than $300 a pound from more than $1,000.”  Some anticipate that the “regulated market in North America could triple to more than $20 billion in five years, from $6.7 billion last year . . . One caveat surrounding the booming cannabis industry is President-elect Donald Trump’s choice for attorney, Senator Jeff Sessions of Alabama, an ardent marijuana foe.  But it remains to be seen if Trump or the Republican-controlled Congress will attempt to challenge the states that have legalized the drug.”

********A nice example of the interaction of the invisible foot—legal and pollical forces—and the invisible hand—economic forces.  In some sense the market demand for legal marijuana has always been there.  What is different is that the market supply of legal marijuana has expanded as laws have changed in some states.  With increased supply and unchanged demand, market prices have fallen and reduced the profitability of firms.  This has put more urgency in the cost-cutting activities of firms, leading them to increase scale and modernize production.  As the article goes on to note, however, there is now increased legal risk from the incoming administration.  It will be interesting to see how this plays out.

May you have a good week!


299 (11 January 2017)

Welcome to week 299!  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.

(4 January 2017): “Why Men Don’t Want the Jobs Done Mostly by Women” (http://www.nytimes.com/2017/01/04/upshot/why-men-dont-want-the-jobs-done-mostly-by-women.html)

——–“It hasn’t been a great time to be a man without a job.  The jobs that have been disappearing, like machine operator, are predominantly those that men do.  The occupations that are growing, like health aide, employ mostly women.  One solution is for the men who have lost jobs in factories to become health aides.  But while more than a fifth of American men aren’t working, they aren’t running to these new service-sector jobs.  Why?  They require very different skills, and pay a lot less.  They’re also seen as women’s work, which has always been devalued in the American labor market.”  People who study the movement of men into fields in which women traditionally work, say that “Much of men’s resistance to pink-collar jobs is tied up in the culture of masculinity.”  Indeed, “Many unemployed men who did manual labor say they can’t take the time and make the effort to train for a new career because they have bills to pay.  And they say they chose their original careers because they wanted to build things, not take care or people.”

********I just finished reading Boom, Bust, Exodus: The Rust Belt, the Maquilas, and a Tale of Two Cities (https://www.amazon.com/Boom-Bust-Exodus-Maquilas-Cities/dp/0190608862/), by Chad Broughton, and the discussions of the retraining efforts of men and women in Galesburg, Illinois in consequence of the closing of the enormous Maytag facility there seem largely, but not perfectly, consistent with this article.  Galesburg’s story is one of bust, while that of Reynosa of Tamaulipas, Mexico is one of boom.  This is one of those books, published in 2015, that makes the election of Donald Trump easier to understand.

********Although there may have been a boom in Reynosa, not everyone prospered as much as expected.  That seems, in part, to be due to the failure of economic policy-makers in Mexico.  This seems to be the main point of “Mexicans Are the Nafta Winners?  It’s News to Them” (http://www.nytimes.com/2017/01/04/world/americas/mexico-donald-trump-nafta.html).  One might conclude that the policy-makers believed too much in the power of laissez-fairydust the wonderful expression that recently won the American Dialect Society’s Creative Word of the Year.  University of Michigan linguist and English professor has an informative and entertaining article on all the words that you can find at: http://www.chronicle.com/blogs/linguafranca/2017/01/08/words-of-the-year-2016/.

(5 January 2017): “The High-Cost, High-Risk World of Modern Pet Care” (https://www.bloomberg.com/news/features/2017-01-05/when-big-business-happens-to-your-pet)

——–“Pet care is undergoing the same sort of consolidation transformed human health care in the 1990s.”  The story of veterinarian John Robb provides an example while also providing a glimpse into some of the veterinary practices that are employed.  “In 1999 he sold his first practice for $1 million to VCA—then called Veterinary Centers of America—a consolidator that’s bought hundreds of animal hospitals and trades on the Nasdaq exchange under the ticker WOOF.  Then, in 2008, he paid $400,000 for his Banfield franchise in prosperous Stamford [, Connecticut.]  Banfield had itself traded hands just a few months before, when the veterinarian who founded the company sold it to Mars, the giant candy and pet-food manufacturer.  The change had dire consequences for Robb and, he says, for millions of pets.”

********The article is of interest from many perspectives.  First, it provides a look at how consolidation is playing out in veterinary care services.  Second, it summarizes some of the veterinary practices employed by the consolidated units.  Third, it points out the increasing role of lab fees in pet care.  Finally, it gives a bit of information related to vaccines and the role that a body like the American Animal Hospital Association play in developing suggested veterinary practice.

********The article in Bloomberg Businessweek appeared on the eve of Mars acquisition of VCA for $7.7 billion.  VCA “owns about 800 animal hospitals, a lab business and dog day care franchises that operate under the name camp Bow Wow.”  Bob Antin, the CEO of VCA, was not looking to sell his business, but he said that “the prospect of joining Mars, and no longer being a public company, was intriguing.”  You can learn more at: https://www.nytimes.com/2017/01/09/business/dealbook/mars-to-buy-pet-hospital-chain-for-7-7-billion.html.  Particulars about the purchase of VCA can be read at: http://www.mars.com/docs/default-source/default-document-library/mars-incorporated-to-acquire-vca-inc.pdf.

(8 January 2017): “Data Could Be the Next Tech Hot Button for Regulators” (https://www.nytimes.com/2017/01/08/technology/data-regulators-google-facebook-monopoly.html)

——–“Wealth and influence in the technology business have always been about gaining the upper hand in software or the machines that software ran on.  Now data—gathered in those immense pools of information that are at the heart of everything from artificial intelligence to online shopping recommendations—is increasingly a focus of technology competition.  And academics and some policy makers, especially in Europe, are considering whether big internet companies like Google and Facebook might use their data resources as a barrier to new entrants and innovation.”

********The article provides a useful summary of some of the issues that relate to the commercial use of large data sets, especially those that are private.  As it indicates, although proprietary knowledge can be used to charge personalized prices, that same knowledge can be used to create personalized goods and services.  Thus, although personalizing may lead to higher prices, it may also lead to higher quality goods and services.  According to Andrew Ng, a former Google scientist who now is chief scientist at Chinese Internet search giant Baidu, “Data is the defensible barrier, not algorithms.”

(9 January 2017): “Farmers Get Creative in Reaping Profits” [SR](http://www.wsj.com/articles/farmers-get-creative-in-reaping-profits-1483957802)

——–“Instead of selling all of this fall’s record corn harvest to ethanol plants or foreign livestock farmers, Jim and Jamie Walter are turning a portion into a more lucrative product: whiskey.  The father-and-son Illinois farmers are among a small group finding unique ways to wring money from their crops, while a commodity glut pushes grain prices to multiyear lows.  They hope satisfying a consumer shift toward locally made, high-quality products will be more reliably profitable than turbulent global grain markets.”  These developments counter some longer-term trends.  “Since World War II, grain farmers have sought to boost profits mostly by increasing yields, driving down costs and expanding their operations.  Bigger, more sophisticated equipment and high-tech seeds have encouraged a trend toward larger, more capital-intensive farms.  Now, growing demand for locally produced food and drinks is coinciding with concerns about volatile crop prices, providing an opportunity for farmers to try shrinking the gap between their crops and consumers.”

********It is interesting to see how changing consumption patterns driven by cultural trends can result in a change of how farmers think about what and how they produce.  Surely the ethanol boom affected corn production.  But with the passing of that boom and the resulting lower corn prices, farmers had to rethink their approach, e.g., decide to expand output to reduce average cost, produce other crops with existing land, or use existing output to produce new products.  With the last approach, it might well be necessary to change existing output, too, as the corn that appeals to cattle and makes good ethanol, may not be the type that appeals to those who drink locally-sourced corn whiskey.

May you have a good week!