398 (4 December 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription. 

(29 November 2019)Climate Change Adds Wrinkle to Art Collectors’ ConcernsThe New York Times

——–“If being a collector [of art] is imbued with the romance of money and taste, then keeping track of all the pieces in a collection is its opposite.  Verifying the purchase price and date, the artist’s information, the history of a work is about as romantic as accounting.  But this drudgery is increasingly becoming necessary for high-end collections as climate change makes severe weather worse in the coastal areas where the affluent tend to live.”  Lisa Lindsay, of the Private Risk Management Association, notes: “As we go into 2020, the days are gone when homeowners needed to just put an insurance policy in place to protect themselves but could then move on . . . People [now] need to work with someone who can put together a comprehensive plan.”

The stakes are high, as “the worldwide art collection in private hands is estimated to be worth more than $1.7 trillion.  But individual owners have been slower than institutions and companies to catalog what they have.”

********Businesses like Artwork Archive, Art Galleria, Artlogic, and Veevart have emerged “to help owners and artists catalog their works.  According to Ms. Lindsay, climate change has been the main factor in driving these changes.  She comments, “Climate change is a reality . . . These sever weather events are going to continue and maybe increase.  We need people to understand there’ plenty that can be done” to address the risks.

            It occurred to me while reading this that there climate change is a great disruptor of markets, just like digital technology.  Consequently, climate change presents many opportunities for entrepreneurial gain.  Along those lines, the article “Weather is turning into big business.  And that could be trouble for the publicThe Washington Post is worth perusing. 

            Not all entrepreneurs are successful, of course, and that underlies an intriguing article in The Wall Street Journal [SR]Why Entrepreneurs Don’t Learn From Their Mistakes.”  As the article notes, “Part of the folklore about successful entrepreneurs is that they succeeded because they first failed. . . . But this is a myth.  While second-chance stories are comforting, . . . research shows that entrepreneurs don’t learn from their mistakes.  In fact, it’s the opposite: Fail once and you’re most likely to fail again.”  Although there “are many reasons why this is so, . . . the most important is [that] . . . Learning is a complex process that usually doesn’t proceed as simply and obviously as we hope.  We struggle to take away lessons about what went wrong and then apply those insights to new situations.  Or we simplify our experiences and leave out key details that would help us get a complete picture of why things went wrong.”  For a lengthy academic paper on the subject, for the link to the ZEW Discussion Paper here.

(29 November 2019)We need a major redesign of lifeThe Washington Pos

——–“It’s time to get serious about a major redesign of life.  Thirty years were added to average life expectancy in the 20th century, and rather than imagine the scores of ways we could use these years to improve quality of life, we tacked them all on at the end.  Only old age got longer.  As a result, most people are anxious about the prospect of living for a century.”  But “Long lives are not the problem.  The problem is living in cultures designed for lives half as long as the ones we have.”  The Stanford Center on Longevity is working to create “The New Map of Life” while asking “How do traditional models of education, work, lifestyles, social relationships, financial planning, health care, early childhood and intergenerational compacts need to change to support long lives?”

********This is certainly a problem that engages all of the invisible forces—hand (economic), foot (legal and political), and handshake (social and historical).  This all seems obvious, though.  If one had an additional 20 years, say, to distribute over one’s life course, would you really put all of them in retirement? 

            You can learn more about the Stanford Center on Longevity and “The New Life Map” here.  On that same page, you can download a nine-page white paper on the Map.

(2 December 2019) [SR]The Water Wars that Defined the American West Are Heading EastThe Wall Street Journal

——–“Water stress, a hallmark of the American West, is spreading east. . . . Increasing competition for water is playing out across the Eastern U.S., a region more commonly associated with floods and hurricanes and one that was mostly a stranger, until recently, to the type of bitter interstate water dispute long seen in the West.  Eastern farmers’ rising thirst for water, together with urban growth and climate change, now is taxing water supplies and fueling legal fights that pit states against each other.  The shift has exposed the region to changes in water supply occurring globally as swelling populations, surging industrial demand and warmer temperatures turn a resource seen as a natural right into a contested one.”

********The article focuses on water conflicts between Florida and Georgia over the “Apalachicola-Chattahoochee-Flint River basin.”  In this case, the conflict pits Georgia farmers, who are using water for irrigation, against Florida oysterman, who need fresh water for oysters.  The more water used in Georgia, the less there is for Florida.  According to some water experts,  eastern states are “unprepared for scarcity, armed with a patchwork of regulations and laws that assume water will remain plentiful.  Unlike in the West, where most major river basins are governed by interstate compacts, only a few such agreements exist in the East.”

(3 December 2019)Exposé of data gender bias wins FT/McKinsey book prizeThe Financial Times

——–“Caroline Criado Perez has won the 2019 Financial Times and McKinsey Business Book of the Year Award for Invisible Women, her examination of how designers and developers have perpetuated bias toward men in the data they use.  In an earlier FT review of the book, it was noted: “Criado Perez comprehensively makes the case that seemingly objective data can actually be highly male-biased, and that public spending, health, education, the workplace and society in general are worse off as a result.”

********The full title of Criado Perez’s book is Invisible Women: Data Bias in a World Designed for Men.  Bias is a very general idea and is likely to be prevalent in most empirical studies.  One can easily imagine a host of books entitled Invisible X: Data Bias in a World Designed for Y.  In the rush to establish the relevance of a piece of research, it is all too easy to ignore of conveniently forget about the data (and the assumptions) made to arrive at one’s results.

            An article that points out the consequences of a different kind of data ignorance is “When a Disappointment Helped Lead to a Nobel PrizeThe New York Times.  Earlier in his career, Michael Kremer conducted a study on school children in western Kenya, expecting to find that the provision of textbooks would improve student performance.  But the preliminary results indicated that such provision did not improve student performance, which “shocked” Kremer.  Reflecting on his results led Kremer “to think harder about the schooling system in Kenya.  He said he began to realize that one problem was an excessive focus on top students, and he went on to design and test other measures that would help a broader range of people.”  Ultimately, it seems, as the textbooks were designed for the top students, students who were not-so-capable struggled to use them.  The author of this article, Seema Jayachandran, was a student of all three winners of this year’s Nobel Prize in Economics.

            Six books were in contention for the 2019 Award.  You can the short list here.

(3 December 2019)Hemp Industry Is Cleared to Do Business With BanksThe New York Times

——–“The number of banks in the United States willing to lend to hemp producers can be counted on one hand.  That is about to change.  Federal and state bank regulators announced Tuesday that they were scrapping a burdensome requirement that banks said kept them away from the hemp business.  Banks will no longer have to treat their hemp customers as suspicious and file reams of paperwork to anti-money-laundering authorities for each interaction.  The change could provide a major boost to a niche product that began its own legalization process last year.”

********As noted in the article, the inability to access the banking system has been one of the factors holding back the expansion of hemp in many quarters.  The actions of federal and state regulators, which “does not affect the legal marijuana businesses dealing with the same problems,” is a step forward to allowing banks to “dive into a lucrative new industry that has been plagued by security concerns and is desperate for even the most basic services, like checking accounts and credit card processing.”

May you have a good week!  

Bruce

397 (27 November 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

Happy Thanksgiving!

(20 November 2019)The Big Business of Unconscious BiasThe New York Times

——–Lately the diversity, equity, and inclusion (DEI) industry, also known as the diversity and inclusion (DI) industry “is booming, creating new career paths and roles.  Institutions and businesses are trying to correct power imbalances, which means a growing need for experts who can help address and define issues like unconscious bias.”  Michelle Kim of experiential DEI workshop Awaken, of Oakland, California, notes: “Were seeing employees demanding action, not just lip service.”  Overall, postings for DEI-related jobs “were up more than 25 percent from August 2018 to August 2019.”  The industry is no longer “approaching these issues with perfunctory, so-called sensitivity training . . . Today, no one is going to ‘hug it out’ after a single lecture about embracing difference.”  The sessions of Awaken are “taught over the course of months, . . . [combining] large group activities, self-reflection and small group conversations, and focus on themes like exploring identities, overcoming microaggressions, thoughtful ally-ship and, most recently, inclusive language.”

********The article goes on to note, “Millennials’ expectation of inclusion is part of what is driving C.E.O.s and directors to bring in D.E.I. consultants.  That generation [1981-1996] will make up 75 percent of the work force by 2025, according to Brookings, the nonprofit public policy organization.”  You can find the source of that statement here.

            Universities such as Cornell, Georgetown, and Yale off “certificate programs and online courses” on DEI, and Textio software “can scan thousands of documents for language bias.”  Learn more about Textio here, as well as its product Textio Hire, which scores writing on a number of criteria, including bias.  Artificial Intelligence seems to underly their software.  There are some great opportunities for “with it” people who write well and are computer savvy.

            While we are on the subject of AI, this seems like a good place to mention a blog I recently ran across, The Enlightened Economist of Diane Coyle; Coyle is the Bennett Professor of Public Policy at the University of Cambridge and the author of GDP: A Brief but Affectionate History.  Her post of November 18, 2019 summarizes notes three books on AI and recommends a reading order. 

(21 November 2019)Inside the bloody cartel war for Mexico’s multibillion-dollar avocado industryThe Los Angeles Times

——–The Mexican criminal group called the Viagras are setting up a grow operation in Michoacan state.  Not marijuana, it turns out, but avocados.  Illegally clearing forests to do so, they are planting their own groves of “green gold.”  More than “a dozen criminal groups are battling for control of the avocado trade in and around the city of Uruapan, preying on wealthy orchard owners, the laborers who pick the fruit and the drivers who truck it north to the United States.”  As a result, “Homicides are at an all-time high in Mexico . . . Yet much of the killing today has little to do with drugs.  Organized crime has diversified. . . . Compared with drug trafficking, a complex venture that requires managing contacts across the hemisphere, these new criminal enterprises are more like local businesses.  The bar to entry is far lower.”  According to Falko Ernst of the International Crisis Group, “For many of those smaller groups, it’s far easier to just prey on local populations.”  Michoacan state, as it turns out, “is a microcosm of what is happening elsewhere in the country—and a potent illustration of how the government has unintentionally fueled more violence.”

********As the article goes on to note, the increased demand for avocados in the U.S., where per capita consumption went from 2.1 pounds in 2001 to 7.5 pounds in 2018, has helped make the avocado business increasingly attractive.  Interestingly, Michoacan is “the only state in the country allowed to the United States, which banned avocados from Mexico until 1997 over concerns about pests.”

(22 November 2019)If that was a retail apocalypse, then where are the refugees?The Washington Post

********This article is complex and hard to summarize, but it deals with the role of retail jobs as an entry to the labor force.  Evidently the hardest-hit sectors “are those we often associate with shopping malls, such as clothing, department, toy and electronic stores.  Remove such stores, in fact, and you’ll find retailers added tens of thousands of jobs since early 2017.  Building materials, groceries, auto parts and gas-station convenience stores led the way.”  And those people leaving their jobs “seems to be related to them quitting, rather than getting fired or laid off.  Quitting is generally considered healthy it shows workers are confident they can get better offers.”  Economist Nick Bunker of Indeed, a job site, notes: “People often think the sign of a weaker labor market is lots of layoffs . . . But an unappreciated symptom of a weak labor market is employers pulling back on hiring.”  Quits, it would appear, has made firing workers to reduce the workforce unnecessary.  So, if some retail businesses are not hiring workers ready to enter the workforce, where are they being hired?  It may be that “many will instead find their first job in food services, the one industry more precarious and lower-paying than retail.”  Perhaps a strong economy will allow more robust hiring in “non-mall retail sectors.”  As Bunker said, “Lot’s of people lose their jobs in good economies; they just get hired again quickly . . . We really get into trouble when employers aren’t looking to hire.”

(24 November 2019)Why Scientists Defend Dangerous IndustriesThe Chronicle of Higher Education

********This article is an interview with David Michaels, the former top official at OSHA for seven years and the author of the forthcoming (2020) book The Triumph of Doubt: Dark Money and the Science of Deception.  (The link provided includes access to the Table of Contents.)  Evidently the book is a take on the ways that money has been a corrupting influence on university research and provides illustrations of that corruption, as well as suggestions how to diminish it.  Full disclosure of potential conflicts of interest is his primary recommendation.  The title provides echoes to two well-received books: Merchants of Doubt (2011) and Dark Money (2017), both of which I have read.  In 2008 Michaels published Doubt Is Their Product: How Industry’s Assault on Science Threatens Your Health.  In the interview, Michaels notes two reasons why a new book was needed: (1) under the current administration, regulatory agencies are now being headed by the “same product-defense scientists whom . .  [he wrote] about 10 years ago” and (2) the product-defense approach of ten years ago “has now become so common across all industries.”  I’ll read it when it comes out. 

(26 November 2019)Meet the Leftish Economist With a New Story About CapitalismThe New York Times

——–Mariana Mazzucato is an economist based at University College London.  She is trying to change “the way society thinks about economic value.  While many of her colleagues have been scolding capitalism lately, she has been reimagining its basic premises.  Where does growth come from?  What is the source of innovations?  How can the state and private sector work together to create the dynamic economies we want?  She asks questions about capitalism we long ago stopped asking.  Her answers might rise to the most difficult challenges of our time.”

********As the article notes, Mazzucato, whose Ph.D. is from the New School for Social Research, is the author of two books on modern political economic theory: The Entrepreneurial State and The Value of Everything.  She was awarded the 2019 Not the Nobel Prize for “reimagining the role of the state and value in economics.”  Mazzucato’s ideas have found expression in the ideas of Elizabeth Warren, Alexandria Ocasio-Cortez, and Marco Rubio.

May you have a good week!  

Bruce

396 (20 November 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

(12 December 2010)The Efficiency DilemmaThe New Yorker

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

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

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

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

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

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

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

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

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

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

(13 November 2019)The Zombie Storefronts of AmericaThe Atlantic

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

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

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

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

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

May you have a good week!  

Bruce

395 (13 November 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

(4 November 2019)The Talk Market: How Stories and Psychology Shape Our Economic LivesHidden Brain on NPR

********This 37-minute podcast has Hidden Brain host Shankar Vedantam interviewing Nobel Laureate Robert J. Shiller in the context of the publication of Narrative Economics. Shiller relates “the role stories play in our economic lives—not just the purchases we make as individuals, but the fate of entire economic systems.”  Shiller makes the case for the power of narratives, especially as spread through person-to-person and via the media. 

            An example of Shiller’s use of narrative is provided in “How Lying and Mistrust Could Hurt the American EconomyThe New York Times.  Shiller notes that “There is substantial evidence that if an atmosphere filled with lies or presumed lies spreads throughout a society, the effect might reduce economic growth rates.  Years of incremental damage would result in a substantially lower level of economic well-being than would otherwise have existed.  The central reason is basic: An atmosphere generated by a steady flow and variety of lies is like a dark cloud over the facts.  Businesses can’t plan effectively when they don’t know who or what can be trusted.”

            What then can we make out of the recent book by Andrew Marantz Antisocial: Online Extremists, Techno-Utopians, and the Hijacking of the American Conversation?  Terry Gross of “Fresh Air” interviewed Marantz who touched upon many types of deception used to great effect during the 2016 presidential election.  It is clear that the people Marantz interviewed and wrote about have mastered the skill of how to disseminate disinformation.  Presumably their activities act to create mistrust of institutions and one another.  Gross’s 36-minute interview is sobering.

(7 November 2019) Taxing the Ultra-Wealthy Forces Democrats to Get CreativeBloomberg.com

********This article discusses an array of considerations relating to the wealth taxes being touted by Democratic presidential candidates, from constitutionality to avoidability.  Bloomberg’s Bottom Line is “The very wealthy may never have to sell the majority of their assets, which makes them harder to tax.  One way to change that: Put a levy on their unrealized gains.”  The article “What if America introduces a wealth tax?The Economist explores constitutionality, avoidability  and other considerations, like wealth valuation, in its exploration of the wealth tax.  As it notes, “In 1990, 12 rich countries levied . . . [wealth taxes].  By 2017 only four did: France, Switzerland, Spain and Norway.  France has since mostly scrapped its levy, fearing that it made the country unfriendly to investors.”  The Washington Post argues, however, that the proposed wealth taxes for the U.S. are different than those that failed in Europe.  To learn more, read “Wealth taxes often failed in Europe.  They wouldn’t here.”  All this makes it clear that it isn’t enough to discuss the notion of ‘wealth tax’—its precise form matters.

            Estate taxes are one way for states—or the federal government—to increase tax receipts from the very wealthy.  Of course, at the state level, the very wealthy have the ability to move from states with estate taxes to states without estate taxes (and they do).  However, a recent study showed that “estate taxes raised more money for states that had them than they lost in income tax revenue when billionaires left.”  These points and more are discussed in “Estate Tax Can Pay Off for States, Even if the Superrich FleeThe New York Times.

(8 November 2019)A Candy Land-Inspired Journey Through the Books to Boost Your CareerBloomberg.com

********A colorful tour of nine books that have valuable things to say about various stages of a career.  Two books that stood out for me were Pivot, by Jenny Blake, which appears under the heading Career-Killing Chasm, and Age-Proof, by Jean Chatzky and Michael Roizen, which appears under the heading Peaceful Peak.  Many of these books are classic contributions.  Blake was the former career guru at Google.  She notes that “If change is the only constant, then it’s time to get better at it.”

(9 November 2019) [SR]A $45,000 Loan for a $27,000 Ride: More Borrowers Are Going Underwater on Car LoansThe Wall Street Journal

——–“Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value.  this phenomenon—referred to as negative equity, or being underwater—can leave car owners trapped.  some 33% of people who traded in cars to buy new ones in the first nine months of 2019 had negative equity, compared with 28% five years ago and 19% a decade ago . . . Those borrowers owed about $5,000 on average after they traded in their cars, before taking on new loans.  Five years ago the average was about $4,000.  Rising car prices have exacerbated an affordability gap that is increasingly getting filled with auto debt.  Easy lending standards are perpetuating the cycle, with lenders routinely making car loans with low or no down payments that can last seven years or longer.”

********This article is a reminder that the next recession, whether great or not, will likely manifest in an area other than housing.  This is a bit like the adage “generals always fight the last war.”  What should we be looking at?  Auto indebtedness?  Or?

(11 November 2019)A Surprising Finding on Paid Leave: ‘This Is Not the Way We Teach This’The New York Times

——–“One of the biggest arguments for paid leave for new parents has been an economic one: Research has repeatedly shown that women with paid time off after childbirth are more likely to keep working.  But a new study, the largest to be done in the United States, found the opposite.  In California, which in 2004 became the first state to offer paid family leave, new mothers who took it that year ended up working less and earning less a decade later.  They averaged $24,000 in cumulative lost wages, it found.”

********The paper title, with Abstract, can be found here.  The article goes on to point out that “Keeping women in the labor force isn’t the only goal of paid leave policies.  Another is enabling parents to spend time with your children—and on that, the paper indicates that California’s policy was a success.  Children benefit from breastfeeding, bonding, consistent caregiving and hands-on parental involvement—things that are easier for parents to provide with paid leave.” 

(12 November 2019) [SR]Boomers Want to Stay Home.  Senior Housing Now Faces a Budding GlutThe Wall Street Journal

——–“The rise of technologies that help the elderly stay in their homes threatens to upend one of commercial real estate’s biggest bets: Aging baby boomers will leave their residences in droves for senior housing. . . . Venture capital and other firms are expected to invest about $1 billion this year in . . . so-called ‘aging in place’ technologies, according to 4Gen Ventures, a new venture-capital firm focusing on such startups.  That is about double the amount spent three years ago.”  Aging-in-place technologies mark “a challenge to the numerous real-estate developers who have been rushing to build senior housing to accommodate the roughly 72 million Americans born between 1946 and 1964 . . . In about one decade, boomers will start reaching their mid-80s, the typical move-in age for senior housing.”  It appears that builders of senior housing have not anticipated this change, giving rise to surplus housing in some areas.

********I was surprised, but perhaps I shouldn’t have been, to learn that “the average age that people enter senior housing has been rising . . . It is about 84 or 85 years today, compared with 82 one decade ago.”  As the article indicates, improving health is one of the likely reasons for entering senior housing later in life.  One of the reasons people enter senior housing, aside from health issues, is the ability to connect with others and escape the loneliness that other housing situations may have.  Technology is not likely to solve the loneliness problem, as Cindy Baier, the chief executive of Brookdale Senior Living Inc. notes.  Robots, such as those used in Japan, are likely to be a poor substitute for human interaction.

May you have a good week!  

Bruce

394 (6 November 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

(30 October 2019) [SR]Recipe Behind Coca-Cola’s Milk Success: Less Sugar, More ProteinThe Wall Street Journal

——–“For decades, conventional dairies tried to attract customers by making milk faster and cheaper.  But an unexpected competitor changed the market by favoring trends over tradition. . . . In 2014, Coca-Cola Col. partnered with Select Milk Producers Inc., a dairy wholesaler, to launch Fairlife ultrafiltered milk with 50% more protein and 50% less sugar than regular milk.  The product now represents 3% of the dairy-milk market . . . In comparison, after nearly 30 years in the business, Horizon, the largest organic-milk brand, represents 3.7% of the market . . . In part, Fairlife has succeeded by capitalizing on the latest food trends: Fat is back.  Sugar is out.  Protein is in.”  According to John Crawford, what analyzes the dairy industry for Information Resources, “Fairlife’s rapid growth is unheard of in the mike category . . . and what it’s been able to do, others would like to replicate.”  Ultrafiltered Fairlife and Organic Valley Ultra “sell for $7.88 to $10 a gallon . . . more than double the price of traditional milk.”   

********In the last four years milk sales “fell by 330 million gallons” and 60 million gallons of that decline were due to an increase in “plant-based milk sales.”  The other 270 million gallons seem to have been competed away by water.  Paul Zieminsky of Dairy Management Inc. notes: “We’re losing over 50% to bottled water . . . No. 2 is ready-to-drink coffee.”  These changes are coming at a time when, according to Eric Rimm of Harvard’s T.H. Chang School of Public Health, “There’s not a lot of people who are protein-deficient.”  Columnist Jo Craven McGinty ends her article, noting, “the products may be popular.  But the makers are simply milking the latest fad.”

(31 October 2019)In Napa Valley, Winemaker Fight Climate Change on All FrontsThe New York Times

********This is the fourth and final installment of wine columnist Eric Asimov on wine and climate change.  Links to the other articles can be found here.  The article provides a glimpse of some of the things that individual winemakers—“notorious individualists”—are doing to “combat climate change” in “the absence of government greenhouse-gas regulations or other mandatory environmental rules.”  John Williams of Frog’s Leap Winery notes that in order to “compel Napa [California] winemakers to change methods that have brought . . . great success” it is necessary “to show people that it’s in their self-interest . . . [their] enlightened self-interest.”

(2 November 2019)The East India Company Invented Corporate LobbyingJSTOR Daily

——–“It’s become a commonplace for corporate lobbyists to write bills passed in state legislatures.  The influence of corporate lobbyists in the U.S. Congress may be more subtle, but the combined power of lobbyists, many of them former politicians, is a major driver of the influence of corporate power in American government today.  There is a historical precedent to contemporary American corporate lobbying in the British East India Company.”  The joint-stock company, “chartered in 1600, went on to conquer India in the eighteenth century.”  William Dalrymple, in his book The Anarchy: The East India Company, Corporate Violence, and the Pillage of an Empire, argues that “the Company’s looting of India” was “the supreme act of corporate violence in world history.”  The Company “couldn’t have done it without the help of the British state—or without the invention of corporate lobbying.”

********You can learn more about The Anarchy here; a laudatory review of the book appears in The New York Times.  It should come as no surprise that organizations have, throughout time, sought to affect the nature of the environment in which they operate.  The corporate form of governance has provided for increased resources to bring about change and decreased risk while bringing it about.  If would seem, though, that the British East India Company operated at a level that was unprecedented.

(2 November 2019) [SR]The Making of the World’s Greatest InvestorThe Wall Street Journal

——–In early summer 1978, Jim Simons “ditched a distinguished mathematics career to try his hand trading currencies.  Forty years old, with a slight paunch and long, graying hair, the former professor hungered for serious wealth.  But this wry, chain-smoking teacher had never take a finance class, didn’t know much about trading, and no clue how to estimate earnings or predict the economy.”  But his believe that the ups and downs of financial market had “structure” ultimately led him to adopt an algorithmic approach to trading that made him the most successful investor of his era, earning for his clients from 1988 to 2018 an average annual return after fees of 39%; from 1969 to 2000 George Soros earned an average return of 32% and from 1965 to 2018 Warren Buffet earned 21%.  As a result, “Simons amassed a $23 billion fortune” leading the way to the quantitative approach of investing.

********This article was written by Gregory Zuckerman, the author of The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution.  The article points to the importance of identifying patterns in daily trading and focusing on the short run, so that the Medallion Fund that he ran could operate much like a casino, “handling so many daily bets they’d only need to profit from a bit more than half of their wagers.”

(5 November 2019)Muni Bonds Contain New Fine Print: Beware of Climate ChangeBloomberg.com

——–“Investment banks have begun quietly sounding alarm bells about climate change.  Their worries are showing up in the documents that accompany municipal bonds they underwrite.”  Risk disclosures for state and local government debt are increasingly including “language about climate change, hurricane risks, and risking seas.”  Bloomberg News “analyzed more than a dozen due diligence questionnaires prepared by banks or legal counsels and sent to governments in coastal Florida, and over 40 official statements for prospective bond investors.  About half of the  questionnaires and the majority of the statements included language on storm-related risks or climate change.”

********One wonders what the case in North Carolina would be (or any other coastal state).  It was surprising to read that “Climate risk isn’t necessarily showing up in muni bond pricing yet—communities that are more susceptible to these hazards do not seem to have to pay a penalty in the form of higher yields.”

(5 November 2019)Farm Country Feeds America.  But Just Try Buying Groceries There.The New York Times

——–Small farm  towns like Winchester, Illinois “that produce beef, corn and greens to feed the world are becoming America’s unlikeliest food deserts as traditional grocery stores are force out of business by fewer shoppers and competition from dollar-store chains.  Their exodus has left rural town worried about how they can hold on to families, businesses and their future if there is nowhere to buy even a banana.”  According to the USDA, about “5 million people in rural areas have to travel 10 miles or more to buy groceries.”  Although dollar-store chains “selling cheap food are entering hundreds of small towns, . . . their shelves are mostly stocked with frozen, refrigerated and packaged foods.”

********Food deserts, this article makes clear, is a broad phenomenon.  The irony is great, though, that many of these rural areas are large food producers themselves.  A somewhat related article appeared this week in Fast Company: “The first map of America’s food supply chain is mind boggling.”  The piece is very general but serves as a basis for wondering what the second map might contain.

(5 November 2019)Stocks Are Soaring Because Supplies Are LimitedBloomberg.com

********This article touches upon a variety of factors that may be contributing to the record high closures of some of the most-watched stock indices.  What struck me as especially noteworthy was this statement that “The number of publicly traded companies has dropped by about half in 20 years, from about 7,000 to about 3,500.  This means there is more money chasing fewer shares.  The boom in stock buybacks has likely reduced outstanding shares even more.” Although mergers certainly have contributed to this shrinkage in publicly traded firms, there are also very many firms that have been “taken private” via private equity investors.  It would be interesting to see what happened to those 3,500 firms that are no longer publicly traded.

            To learn more about the causes and meaning of the decrease in the number of publicly traded firm, a good source appears to be “Why We Shouldn’t Worry About the Declining Number of Public CompaniesHarvard Business Review.  It notes that there are three developments that can lead to the delisting of a firm: “1) bankruptcy, failure, or closure of listed firms, 2) delisting of firms going private or acquired, and 3) decrease in number of initial public offerings (IPOs).”

            Another article that follows on the “supplies are limited” theme also appears in Bloomberg.com: “How California Became America’s Housing Market Nightmare.”  As the article points out, housing supply been limited by “outdated zoning laws” and “a 40-year-old tax provision that benefits long-time homeowners at the expense of everyone else.”  According to David Garcia of the University of California, Berkeley, “there is no solution to the California housing crisis without the construction of millions of new houses.”

(5 November 2019)How Is a Wealth Tax Like a Cigarette Tax?The New York Times

********An interesting comparison of wealth taxes, now much in the news due to Democratic presidential candidates Bernie Sanders and Elizabeth Warren, and cigarette taxes.  With cigarette taxes, as columnist Neil Irwin notes, “discouraging the thing being taxed is at least partly the point.  Tobacco taxes are intended not just to raise money, but also to increase the prices of cigarettes so that fewer people smoke.”  The wealth taxes proposed by Sanders and Warren, he holds, “would, if enacted, deplete current fortunes and result in fewer such fortunes in the future.”  (Ceteris paribus, one might add.)  What struck me as especially interesting the likely consequence of the revenues raised from a wealth tax when considered as the funding source of expanded health care.  Irwin notes, when taxes like those on cigarettes “work as intended, the revenue they generate will tend to decline over time. . . . [So,] a president seeking to pay for a policy agenda with taxes on extreme wealth might want to think ahead to what should be done if those taxes result in a lot less extreme wealth to tax.”

May you have a good week!  

Bruce

393 (30 October 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

(22 October 2019)A brilliant economist diagnoses the U.S. healthcare system—from beyond the graveThe Los Angeles Times

——–“When the economist Uwe Reinhardt died unexpectedly in November 2017, his colleagues and followers lamented the silencing of one of the most penetrating, objective and effective voices in the healthcare debate. . . . With the posthumous publication this month of his final work, a book entitled “Priced Out: The Economic and Ethical Costs of American Health Care,” Reinhardt’s reputation for cutting to the quick of the issues in U.S. healthcare reform is only enhanced.  The book should be required reading for anyone who professes to have an interest in the debate — economists, journalists, legislators, doctors and patients.”

            Reinhardt’s book raises a question that few have been willing to raise explicitly: “To what extent should the better-off members of society be their poorer and sick brothers’ and sisters’ keepers in health care?”  As he notes, “Every other developed country has long since pondered this fundamental question and concluded that healthcare is a social good that should be ‘available to all on roughly equal terms.’” 

********Reinhardt’s book seems to have grown out of a celebrated article that he co-authored published in 2003: “It’s The Prices, Stupid: Why The United States Is So Different From Other Countries.”  An updated of the article was published in 2019 by his co-authors: “It’s Still the Prices, Stupid: Why The US Spends So Much On Health Care, And A Tribute To Uwe Reinhardt.”  The 2003 article indicates that higher U.S. prices are largely due to “the private insurance sector, which played a much larger role in America than in other countries; the public sector, represented here [in the U.S.] mostly by Medicare and Medicaid, was roughly as cost-effective as public health programs elsewhere.”  The updated version “came to the same conclusion.”  In the book, Reinhardt attributes much of the price differences between the U.S. and other countries to “the insane administrative complexity of the American system, especially in the private sector.”  An example given reports that “the Duke University hospital system, which had 956 beds in 2017, employed 1,600 billing clerks.”

            A great example of “insane complexity,” provided by my son in a different context, is “Death Star Thinking and Government Reform,” by Jennifer Pahlka.  It shows how the concatenation of perfectly reasonable rules, considered one at a time, can easily result in unreasonable complexity for the system as a whole.  “Death Star Thinking” comes from the first Star Wars movie and is easily recognizable as the familiar term “Magic Bullet.”  To counter “Death Star Thinking,” Pahlka argues that the “interconnected, complex, self-adaptive systems” characteristic of government require creating “new conditions, new capabilities, and new sensibilities.” 

            Two articles related to “Death Star Thinking,” largely because they shed light on ignorance and faulty thinking patterns, are “Unknown Unknows: The Problem of Hypocognition” and “Different Kinds of Stupid.”  I became award of these interesting pieces via Ritholtz’s Reads.  In the former article the notion of hypercognition—a malady suffered by many experts—is introduced.  It is the over-application of “a familiar concept to circumstances where it does not belong.”  A lengthier exposition of hypocognition can be found here by downloading the relevant pdf. 

(22 October 2019)The New Economics: Data, Inequality, and PoliticsThe New Yorker

********This is a review of Unbound: How Inequality Constricts Our Economy and What We Can Do About It, by Heather Boushey.  Boushey “assimilates a great deal of recent economic research and argues that” what amounts to a paradigm shift is underway, moving from an emphasis on theory to policy-oriented work that embodies “data-driven discoveries.”  As columnist John Cassidy notes, “The book’s footnotes, which reference hundreds of different studies, are a treasure trove.”  Unbound has three parts: (I) How Inequality Obstructs; (II) How Inequality Subverts; and (III) How Inequality Distorts.  In exploring them she shows that “inequality of various kinds impedes economic development at the individual and aggregate levels.”  At 304 pages, this seems like a good companion for ethically-based arguments for reducing inequality.

            In light of the historical background provided by Unbound, this week’s (27 October 2019) edition of Economic Principals is a nice companion.  David Warsh writes “And Now, the ‘Methods Revolution’.”  In doing so he adds to the recent coverage of the 2019 Nobel Prize in economics, providing references that expand upon and are critical of randomized controlled trials, which were at the heart of the work of the latest Nobel laureates.  Nonetheless, Warsh holds that the 2019 Prize “is the first step in what will surely be a series of prizes to be given for new methods-driven results.  There will be many more.”  A nice complement to Warsh’s post is “Why Are Random Trials So Common in Anti-Poverty Work?JSTOR Daily, which builds upon “The Success of Randomized Controlled Trials: A Sociographical Study of the Rise of J-PAL to Scientific Excellence and Influence.”

(24 October 2019)The Great Antitrust Awakening Can’t Be StoppedBloomberg Businessweek

********This article provides a brief summary of antitrust thinking and behavior from the publication of Robert Bork’s 1978 book The Antitrust Paradox, which enshrined the “consumer-welfare standard” as the basis for antitrust deliberation to Lina Khan’s 2017 paper “Amazon’s Antitrust Paradox,” which takes a much different view in light of changing technological circumstances.  Bipartisan consider among politicians about the uncompetitive nature of firms such as Facebook, Amazon, Apple, Netflix, and Google have proceeded apace.  Democrats, as exemplified by Senators Cory Booker and Elizabeth Warren have expressed their concerns.  “But it’s “not just Democrats . . . Josh Hawley, Missouri’s new Republican senator, is a harsh critic of the tech companies.  Other Republicans complain that Facebook and Google, in particular, are biased against conservative viewpoints and want to reduce their power over public discourse.”

            On the theme of the antitrust awakening, further evidence for it is provided by NYU finance professor Thomas Phillopon in his just-released book The Great Reversal: How America Gave Up on Free Markets.  He provides an overview of its argument in “The U.S. Only Pretends to Have Free MarketsThe Atlantic.  The article notes that the EU prices of a variety of widely used services have declined significantly for the EU relative to the U.S. “The irony is that the free-market ideas and business models that benefit European consumers today were inspired by American regulations circa 1990. Meanwhile, in industry after industry in the United States . . . incumbent companies have increased their market power by acquiring nascent competitors, heavily lobbying regulators, and lavishly spending on campaign contributions.”  Interestingly, “In Europe, greater integration among national economies turned out to be a force for greater competition within individual economies.  The very same politicians who disliked free markets at home agreed to promote the at the European level.  Why?  Because everyone understood that the single market required independent regulators as well as a commitment that individual countries would not subsidize their domestic champions.”

(25 October 2019)Freelancers fear California’s new gig worker law will wipe them outThe Los Angeles Times

——–The Dynamex decision of the California Supreme Court “tightened the rules for when a worker must be considered a company’s employee rather than an independent contractor.”  But California Assembly Bill AB 5, “a statute enacted this year that codified the Dynamex decision and expanded its reach,” has generated “angst among the freelancers in journalism.”  Now “Writers and photographers who submit more than 35 published works per year to a publisher must be treated as an employee of the publisher. . . . Although every employer located in California is subject to the law, freelancers fear that AB 5 will discourage more employers from out of state from hiring Californians to avoid the paperwork and legal liabilities implicit in the law.” 

            The free lancers “may have a point.  Gig economy ride-hailing firms such as Uber and Lyft—the most prominent targets of AB 5—have no choice but to employ California drivers if they want to participate in the lucrative California market. . . . That’s not true of the writing trade, which often can be pursued from anywhere.”  As San Diego writer David Swanson notes, “AB 5 simply makes it unattractive to hire writers from California.”

********A good example of a presumably unintended consequence of AB 5.  As the article notes, “AB 5 specifically exempts about a dozen work categories from its provisions, such as doctors, accountants, fisherman, stockbrokers and travel agents.”  But journalists were not excluded and now another challenge is being presented to an industry that is in decline.

(29 October 2019)America’s Middle  Class Is Addicted to a New Kind of CreditBloomberg.com

——–“The payday-loan business was in decline.  Regulators were circling, storefronts were vanishing and investors were abandoning the industry’s biggest companies en masse.  And yet today, just a few years later, many of the same subprime lenders that specialized in the debt are promoting an almost equally onerous type of credit . . . the online installment loan, a form of debt with much longer maturities but often the same sort of crippling, triple-digit interest rates.  If the payday loan’s target audience is the nation’s poor, then the installment loan is geared to all those working-class Americans who have seen their wages stagnate and unpaid bills pile up in the years since the Great Recession.”

********The article indicates that the imposition of limitations on payday lending was the impetus for the development of new financial products, i.e., payday loans were largely supplanted by online installment loans.  The article references The Unbanking of America: How the New Middle Class Survives, by Lisa Servon of the University of Pennsylvania.  Servon worked in a variety of financial institutions to learn how entrepreneurs are reacting to “the unbanking of America by designing systems likely to change how we bank and how we live our financial lives.”­

May you have a good week!  

Bruce

392 (23 October 2019)

Welcome!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription.

On September 3, 2019 Binyamin Appelbaum’s The Economists’ Hour was released.  It was widely reviewed by mainstream media outlets, e.g., The Atlantic, The Washington Post, The New York Times, and The Economist.  David Warsh also discusses the book in Economic Principals.  And now I have read it and have a few words to share. 

The book takes its name from the title of chapter 7 of Thomas K. McGraw’s book Prophets of Regulation, which won the Pulitzer Prize in History for its examination of the significance of Charles Francis Adams, Louis D. Brandeis, James M. Landis, and Alfred E. Kahn for the evolution of regulation in the United States.  The years comprising “the hour” begin in 1969 and end in 2008, a period that begins with economists convincing President Nixon to end the draft and ends with the onset of the Great Recession.  Prior to “the hour,” economists were often little more than “back office” number crunchers whose views were little considered, much less respected, by politicians and policy makers.  During “the hour,” economists came to be viewed as people who had knowledge and perspectives that were worthy of consideration (and sometimes respect).

As the book argues, the perspectives were not infrequently those of what might be called free-market fundamentalists, although Appelbaum does not use this exact expression in the book.  In my teaching I defined an FMF as “someone who believes that markets, if left alone, always generate socially optimal outcomes.”  Certainly there were a lot of FMFs advising government during that time and Milton Friedman, unsurprisingly, plays a central role.  To round off the terminology, a crusading interventionist is “someone who believes that markets, if left alone, never generate socially optimal outcomes” and an economic pragmatist is “someone who believes that markets sometimes generate socially optimal outcomes and sometimes market do not generate socially optimal outcomes.” 

One surprise of the book is that there little attention given to James Buchanan in the book.  Given the prominence of Buchanan in Nancy McLean’s Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America, one would have expected him to play an important role.  Perhaps this is simply a case of book publication timelines.  Would Appelbaum’s narrative have changed if he had read McLean’s book (he doesn’t cite it)? 

I think the book tells a coherent story and it should be widely read.  Economists will feel the occasional barb, but that goes with the territory.  What the book made me reflect upon is the danger of applying ideas beyond their proper bounds, i.e., the conditions that make them valid, and the importance of humility.  Perhaps that is why the recent Nobel Prize in Economics on the use of experimental methods in economic development is so hopeful.  It seems to be pragmatic, with little ideological baggage, and aspires not so much to an answer for everything but to discovery on a smaller scale.

(14 October 2019)How Climate Change Impacts WineThe New York Times

********This is the first of four articles, by NYT wine critic Eric Asimov on winemaking and climate change.

——–“Wine, which is among the most sensitive and nuanced of agricultural products, demonstrates how climate change is transforming traditions and practices that may be centuries old. . . . Farmers have been on the front line, and grape growers especially have been noting profound changes in weather patterns since the 1990s.”  They have responded in a variety of ways, including: (1) growing grapes further north in the northern hemisphere and further south in the southern hemisphere; (2) expanding into higher elevations; (3) curtailing sunlight, i.e., growing grapes on slopes that are less exposed to the sun; (4) using different grapes; and (5) being mindful of weather that is less predictable.

********The second article in the series is “In Oregon Wine Country, One Farmer’s Battle to Save the Soil.”  It considers “chemical agriculture,” cultivation methods, and climate change at Hope Well Vineyard, in Oregon, where “regenerative agriculture” is practiced.

So how do the invisible forces figure in all this?  First, climate change is affecting product quality, and thus the market value of the products farmers produce (the invisible hand).  Second, there are long traditions associated with land and its fruits.  In Europe, wine and food have co-evolved over centuries, and regional cuisines have become established (the invisible handshake).  If regional wines change, how will the way people eat respond?  Third, climate change is not inevitable—it can be ameliorated by legal and political action (the invisible foot). 

The first article reminded me of the work of Alexander von Humboldt (1769-1859), which is so impressively related by Andrea Wulf in The Invention of Nature.  Humboldt developed his Naturgemälde, a sketch of the Andean mountain Chimborazo, which “showed different zones of plants, along with details of how they were linked to changes in altitude, temperature and so on.  All this information could then be linked to the other major mountains across the world . . . The Naturgemälde showed for the first time that nature was a global force with corresponding climate zones across continents” (pp. 88-89).  In our current age, we are seeing how the Naturgemälde is being transformed, with isotherms being moved to higher elevations and closer to the poles.  The article “The Pioneering Maps of Alexander von Humboldt” provides a concise and informative discussion of Humboldt’s impressive maps, how he used them, and how they are being used today.

(16 October 2019)How Amazon Has Transformed the Hasidic EconomyThe New York Times

——–Hasidic Jews “are a religious community known for clinging to 18th-century fashions and mores . . . But when it comes to doing business, . . .  [they] have become enamored with a distinctly 21st-century company: Amazon.  The ability to sell merchandise easily and relatively anonymously on Amazon has transformed the economies of Hasidic enclaves in Brooklyn, suburban New York and central New Jersey, communities where members prefer to keep to themselves and typically do not go to college, let alone graduate from business programs.  But Amazon allows Hasidim to start selling without much experience and without making the investments required by a brick-and-mortar store.  It permits Hasidic sellers to deal with the public invisibly—almost entirely by mail, by email or through package-delivery firms.”

********As the article continues, “if Amazon takes over the packing and shipping, according to some interpretations of Jewish law, owners can operate their businesses through the Sabbath and on holidays like Rosh Hashana and the Sukkot festival without violating the proscription against working on sacred days.”  Many more examples of the relationship between Amazon and the Hasidic life are presented.

(17 October 2019)Bank Regulators Present a Dire Warning of Financial Risks From Climate ChangeThe New York Times

——–“Home values could fall significantly.  Banks could stop lending to flood-prone communities.  Towns could lose the tax money they need to build sea walls and other protections.  These are a few of the warnings published on Thursday by the Federal Reserve Bank of San Francisco regarding the financial risks of climate change.  The collection of 18 papers by outside experts amounts to one of the most specific and dire accountings of the dangers posed to businesses and communities in the United States—a threat so significant that the nation’s central bank seems increasingly compelled to address it. . . . The research, conducted by 38 academics and practitioners from around the country . . . presents in precise language a dire picture of the risks of a changing climate, and warns that local governments don’t have the means to deal with them.”

********The research mentioned appears in the October 2019 issue of Community Development Innovation Review.  The article “Climagration and the Private Sector” struck me as especially interesting.  It notes that “As the effects of climate change grow more severe, millions of people in the United States and around the world will relocate away from hazards.  This climate-induced relocation, or ‘climagration,’ will have significant consequences for the private sector.”

This is a good time to call attention, once more, to the Task Force on Climate-related Financial Disclosures.  Its work is especially important given that Exxon is now on trial for allegedly misleading investors about risks associated with climate change, as reported here by NPR.  Although the article says that Exxon’s trial is “only the second climate change trial in the U.S.” there will surely be more.

(18 October 2019) [SR]The Rental Economy Is at Risk in a DownturnThe Wall Street Journal

——–“Americans don’t own stuff like they used to. . . . The shift away from ownership to what KKR’s Paula Campbell Roberts has called the asset-light consumer represents a reshaping of the economy, borne of a confluence of factors, including the scars left by the 2008 financial crisis and the advent of new technologies.  It is giving households increased flexibility in how they finance their lives, lowering the debt burden that often comes with ownership.  Investors are loving the rental economy too, paying up for businesses with steady cash flows  But the asset-light consumer’s behavior remains largely untested in a downturn—a risk risk—and could hold nasty surprises.”

********The article goes on to note that, “One reason more people are renting may be that, after the financial crisis, homes aren’t seen as such a safe investment.  In an economic downturn it can be easier for renters to lower their housing costs by moving into a lower-rent home or to move for job opportunities elsewhere.  Homeowners, stuck with mortgage payments, have it harder.  The flexibility comes at the cost of not building up home equity.”  This is an argument with generality, which applies to the purchase of any durable good verses purchasing its uses, i.e., renting.  The article concludes with a warning to rental businesses: “If times get tough, how many companies will find that the rental checks they were counting on aren’t in the mail?”  To learn more about ”asset-light consumers” by reading Paula Campbell Roberts’s article.

A related article, also in The Wall Street Journal, is [SR]What’s an Experience Worth?  The Math Is Tricky.”  Unsurprisingly, the article only contains anecdotes, no math.  Still it makes some good points about the relationship between buying things and buying experiences.  Although a one-week trip to the beach with friends is over in a week, those memories linger of the trip and the times shared persist.  Thus time-limited experiences, due to memory, have durability just like a durable good has durability.  My recollection is that the role of memory and relationships is not considered in the usual analysis of purchase vs. rental decisions.  It should be.  The article that is the foundation of this piece is “A wonderful life: experiential consumption and the pursuit of happiness,” which appeared in the Journal of Consumer Psychology.

May you have a good week!                                

Bruce