Category Archives: Economics and Business

Not looking good for the Arcade

Ted Rall offers one explanation for what happened (is happening) to Dayton, Ohio.

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Donations

Applying market-oriented techniques to allocate resources where there is no market: how can we get food bank donations to the charities that need them most? Sendhil Mullainathan summarizes a points-based approach.

Markets report such dispersed information in the form of prices. Feeding America, for example, was surprised to see pasta at one point trading for 116 times the price of fresh vegetables. That was revealing data. In hindsight, it made sense: Vegetables spoil rapidly, which is why food companies donated them freely; pasta, with its longer shelf life, was a rarer commodity, as far as donations go.

Posted in Economics and Business, Philanthropy | Comments Off on Donations

NEW

The Economist‘s recent leader in favor of a revised metric of economic well-being is rather refreshing, surprising. Among the steps that it recommends be taken to improve on the slavish following of GDP, the piece leads with improving the measurement of what is already measured. But then the editorial pushes into measuring quantities that have never been systematically considered before: income inequality, negative externalities (like pollution), depletion of natural capital, and perhaps most importantly, the role of unpaid services like homemaking and caregiving. There are still other aspects of welfare that should be accounted for (e.g, crime rates, time lost to long commutes), but if we were to formulate a new metric along the lines suggested, it would be a big step in the right direction,

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Messy

Stephanie Strom visits a big soybean/corn agricultural complex (spanning two states) and finds a old school farm practice that improves soil quality, reduces sediment runoff, and improves yields: cover crops.

Posted in Agriculture, Economics and Business | Comments Off on Messy

Letting go

In the first half of last year, The Guardian produced a very effective closed-end podcast about its reporting and advocacy concerning climate change. With no exaggeration, it can be called The Biggest Story in the World.

For me, the most important episodes consisted largely of interviews with Marc Morano, climate change heckler, and with Ben Van Beurden, CEO of Shell.

HowSound

The focus of the newspaper’s campaign was to persuade two large charitable foundations to divest from companies dependent on carbon-based fuel extraction—the big oil companies, in short.

Meanwhile, Joel Rose recently reported on stepped-up efforts by gun safety activists, asking pension funds and personal investors to drop gun-related stocks from their portfolios. Does divestment have an impact?

“Well, unfortunately, it does not have an effect,” says Paul Wazzan, an economist at the Berkeley Research Group in California. He has studied the divestment campaigns against companies that did business in South Africa in the 1980s and 1990s. Wazzan says there was no measurable effect on their stock prices.

“But it does generate a lot of press and interest,” Wazzan says. “And the political pressure starts to build and that did ultimately have an effect. It’s not what our paper was about, but I think the political pressure ultimately did have an effect on these companies.”

That kind of pressure is harder to measure than a stock price. But divestment supporters say it’s still worth a try.

Posted in Climate Change, Economics and Business, Public Policy and Politics | Comments Off on Letting go

Sweat

Lynn Nottage’s Sweat (commissioned and produced by the Oregon Shakespeare Festival) is a distillation of the frustrations and personal tragedies visited on the working class of Reading, Pennsylvania. The economic shocks of globalization generally and NAFTA specifically resound here on Route 422 as plant closings, lockouts, and busted pensions. Nottage dramatizes these Berks County stories with a strong ensemble of nine fully-realized characters, by turns striving, washed up, deluded, and occasionally successful. All of them, in one way or another, are trying to find a way to hold the line, be it against strikebreakers, addiction, or self-destructive violence. And through Nottage’s particulars she achieves a universal.

The main playing space is a local bar, designed by John Lee Beatty, meticulously tricked out with lamps advertising beer and a TV set playing news from the Bush-Gore campaign of 2000. It’s almost too good looking—one feels the need of a little grit and grime in the corners. It’s presided over by Jack Willis’s Stan, a veteran of both Vietnam and the shop floor; although partially disabled, he makes a worthy bartender, his voice a powerful deep bray of sardonic acceptance.

  • Sweat, by Lynn Nottage, directed by Kate Whoriskey, Arena Stage Kreeger Theater, Washington

In a note in the program book, Executive Producer Edgar Dobie calls out the importance of unions and collective bargaining to the artistic process.

Embracing a system of unions benefits both employees and employers; the production you are about to enjoy would not have been possible without several of the unions mentioned above, nor could it have transferred from the Oregon Shakespeare Festival to Arena in its original form. We are indebted to the men and women who are represented within these unions, as they hold us accountable to our commitment to fairness and prosperity.

Posted in Economics and Business, Reviews, Theater | Comments Off on Sweat

Predators

A great investigative series by Michael Pope for WAMU on car-title and consumer-finance-loan lenders in Virginia and their bait-and-switch tactics. To call these disreputable outfits bottom-feeders is an insult to catfish.

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GR0133004177

A rather damning analysis by Adam Davidson of the failure of the market to accurately price bonds issued by Greece—alas, a market failure perhaps induced by government intervention.

The original sin of the Greek crisis did not happen in Athens. It happened on those computer terminals, in Frankfurt and London and Shanghai and New York. Yes, the Greeks took the money. But if I offered you €7 billion at 5.3 percent interest, you would probably take the money, too. I would be the one who looked nuts. And if I didn’t even own that money — if I was just watching over it for someone else, as most large investors do — I might even go to jail.

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Reducing the Statistical Discrepancy

Macroeconomic statistics appear to me a mini-theme for the month. The Bureau of Economic Analysis has introduced a new measure, Gross Domestic Output. Matthew Yglesias has the explainer.

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Some icons

David Warsh pens a good piece, a longish read (with a surprise in it) about the twin careers of America’s best-known economists of the latter third of the 20th century, Paul Samuelson and Milton Friedman. They first overlapped at the University of Chicago in 1932.

three colors and blacksimple designMy textbook for Economics B01 (Macro) was the 9th edition of Samuelson’s Economics. The color scheme and overall design of that text retain their simple power. The book’s endpapers are something special: in the front, a line graph of per capita GNP* for the period 1870-1973 for the U.S., Germany, the U.K., the Soviet Union, Japan, and (creeping in at the very bottom) India; at the back, a family tree of schools of economic thought, from Aristotle through the Mercantilists down to the Socialists and post-Keynesians.

*Yes, that’s right: at the time, Gross National Product was the headline aggregate, not GDP (Gross Domestic Product). (What’s the difference?)

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Pondering

An op ed piece by Mark Lynas has been sitting in my clippings folder for several weeks. He makes the case for genetic engineering (GE) of food crops, with particular emphasis on its positive effects on yields in the developing world. While I can’t say that I’m entirely convinced, the column is persuasive — particularly when you consider that Lynas was once an activist against GMOs.

No one claims that biotech is a silver bullet. The technology of genetic modification can’t make the rains come on time or ensure that farmers in Africa have stronger land rights. But improved seed genetics can make a contribution in all sorts of ways: It can increase disease resistance and drought tolerance, which are especially important as climate change continues to bite; and it can help tackle hidden malnutritional problems like vitamin A deficiency.

At about the same time, Tania Lombrozo posted about the psychology of public acceptance of genetic engineering, or, as she put it rather bluntly in her lede,

Why do so many people oppose genetically modified organisms, or GMOs?

And, again, I’m not sure that her analysis applies to my skepticism, but the effect of the two writings leads me to consider why I am mildly opposed to expanding high tech agriculture. I think the core of my opposition lies in business models and practices, in the troubling consolidation that is taking place in the seed industry—not in subjective assessments of what constitutes a “natural” food. I look to the Union of Concerned Scientists, which offers this pro- and con- assessment:

We understand the potential benefits of the technology, and support continued advances in molecular biology, the underlying science. But we are critics of the business models and regulatory systems that have characterized early deployment of these technologies. GE has proved valuable in some areas (as in the contained use of engineered bacteria in pharmaceutical development), and some GE applications could turn out to play a useful role in food production.

Thus far, however, GE applications in agriculture have only made the problems of industrial monocropping worse. Rather than supporting a more sustainable agriculture and food system with broad societal benefits, the technology has been employed in ways that reinforce problematic industrial approaches to agriculture. Policy decisions about the use of GE have too often been driven by biotech industry public relations campaigns, rather than by what science tells us about the most cost-effective ways to produce abundant food and preserve the health of our farmland.

“Public relations campaigns:” does anyone remember when DDT was going to save the world, and Rachel Carson was called a crank?

The Union’s policy recommendations, among other things, call for food labeling laws, “so that consumers can make informed decisions about supporting GE applications in agriculture,” and I am definitely behind that idea.

I would like to think that I can be convinced by reason and evidence, so I could change my mind. But for now, I’m hanging out in the gray area.

Posted in Agriculture, Economics and Business | Comments Off on Pondering

Bubble pudding

An excellent piece of investigative business reporting in this past Sunday’s Times from Mary Williams Walsh, concerning the creative accounting that many insurance companies have happened upon: “captive reinsurance” is a fancy name for hiding liabilities on a subsidiary’s balance sheet.

She uses the case of Accordia Life and Annuity, which allocated insurance liabilities to six subsidiary companies, capitalizing the subs with egregious mutual exchanges of IOUs. It’s not for nothing that one of the subs is named Tapioca View.

But the paradox of the story is that the state of Iowa (where Accordia is incorporated), which has the express goal of making Des Moines an insurance center, is also a leader in requiring transparency, thereby making it possible for journalists to expose the shaky dealings.

…before you blame Iowa for playing fast and loose with the legacy of [19th-century reformer] Elizur Wright, remember: Most states now allow captive reinsurance. So do the traditional offshore insurance havens like Bermuda. And most keep it secret. But Iowa has decided to stick its neck out and let people look at the deals, knowing full well that they might not like what they see.

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Quality, not quantity

The Economist’s Free Exchange blog interprets recent research which suggests that the economic effects of environmental regulation are not nearly as severe as those on the pro-business right would have it.

There are several possible explanations for the finding. One is that damage from environmental regulation is not great enough to change the overall productivity figures. A rule of thumb says a 10% change in the oil price is associated with a 0.2% change in GDP, so if green taxes push up energy prices by only a few cents, their macroeconomic impact might be modest. The effect on jobs, investment or trade, though, might be greater.

Another explanation may be that stricter environmental regulations do as much good as harm.

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Follow the yellow brick road

Definitely an oldie but a goodie: in a 1990 paper for Journal of Political Economy, Hugh Rockoff put together a marvelous reading of L. Frank Baum’s Wonderful Wizard of Oz (1900) as an allegory of the pros and cons of bimetallism as a progressive-era monetary policy (caveat lector: there are some scannos in this copy of the paper). (The Free Silver crowd argued for the [inflationary] return to silver coinage as a means to break out of the U.S.’s late-19th-century deflation.) Those of us familiar only with the 1939 film version might scoff, but when Rockoff reminds us that Baum gave Dorothy silver slippers to wear, not ruby, as she skipped along the golden road—well, the parallels begin to line up. My favorite is the explanation of Dorothy’s vanquishing the Wicked Witch of the West (William McKinley) with a bucket of water: in an era when dryland farmers of the Plains west of the 100th meridian claimed that just a little more rain would make their lands bloom, it all makes sense.

(Ah, it turns out that Rockoff was anticipated by Quentin Taylor and others.)

N. Gregory Mankiw, Principles of Economics, 7/e

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Shining

Mae Keane, most likely the last surviving “radium girl,” a victim of occupational radiation poisoning at her workplace with the Waterbury Clock Company, has passed away.

After a few months, she [left the company]. It was the summer of 1924. She was 18. Within two decades she had lost all her teeth.

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