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Category Archives: Economics and Business
The other shoe drops, and then another
Expect to read more of this bad news in the future: DCist reports that Olsson’s Books and Records has converted its bankruptcy filing to Chapter 7 and closed all of its remaining stores, while Washington City Paper’s parent company has also sought bankruptcy protection.
Cash for Clunkers
Alan Blinder proposes an economic stimulus measure that’s good for the environment as well: subsidized repurchases of aging, inefficient cars and trucks, targeted to the low-income households that need the money the most.
…a fourth possible goal. By pulling millions of old cars off the road, Cash for Clunkers would stimulate the demand for new cars as people trade up. It need hardly be pointed out that our ailing auto industry, like our ailing economy, could use a shot in the arm right now. Scrapping two million or more clunkers a year should help.
In proportion
Gasoline prices in the United States continue to be a bargain compared to the rest of the industrialized world, as a short article by Bill Marsh (accompanied by a chart) points out, part of the Times‘s collection of stories this Sunday about consumer energy costs. Back when we were kids, and gas was less than half a buck per gallon, it was explained to us that prices in Europe were much higher (and efficient cars more popular) because of higher taxes. Prices have risen a lot since then, but I was mildly shocked to learn that U.S. taxes haven’t kept pace. Of the current national average pump price of $4.00 a gallon, only 49 cents (12.3%) is taxes. By comparison, Canadians pay $5.09 per gallon and $1.26 (24.8%) in taxes; in France, the comparable price is $8.78, of which more than half, $5.06, is taxes.
Missing middle
James Surowiecki sounds a contrary note in the chorus of appreciation for microfinance:
What poor countries need most, then, is not more microbusinesses. They need more small-to-medium-sized enterprises, the kind that are bigger than a fruit stand but smaller than a Fortune 1000 corporation. In high-income countries, these companies create more than sixty per cent of all jobs, but in the developing world they’re relatively rare, thanks to a lack of institutions able to provide them with the capital they need. It’s easy for really big companies in poor countries to tap the markets for funding, and now, because of microfinance, it’s possible for really small enterprises to get money, too. But the companies in between find it hard.
He cites a paper by Karol Boudreaux and Tyler Cowen, “The Micromagic of Microcredit.” Boudreaux and Cowen speak more highly of microcredit, but still their praise is muted. They point out that microcredit benefits more women than men (3:1, according to one U.N. statistic) and that often the loans go for a blend of consumption and investment, like school fees for a child. Perhaps paradoxically, livestock can be a better store of wealth for poor people than cash. Whatever its weaknesses, institutional microcredit is a better deal for the world’s poor than the alternative, freelancing moneylenders (what we call “loan sharks” in this country).
Microcredit is making people’s lives better around the world. But for the most part, it is not pulling them out of poverty. It is hard to find entrepreneurs who start with these tiny loans and graduate to run commercial empires…. The more modest truth is that microcredit may help some people, perhaps earning $2 a day, to earn something like $2.50 a day. That may not sound dramatic, but when you are earning $2 a day it is a big step forward.
So my hundred bucks a year to FINCA isn’t going to solve all the problems of the world, hunh? Not surprising.
Adding it up
I hope to be able shortly to post in a little more depth about New Jersey’s Natural Capital valuation project, which was reported on by Janet Babin today for Marketplace. Since the days of Soviet command economies and the joke of Leontief’s input-output tableaux, through the imputation of the value of services (which dominate goods in the post-industrial economy), down through today’s valuation of privately-held companies, the assignment of a dollar figure to a transaction or an asset when no money is changing hands at a market-clearing price is a dodgy proposition. So a healthy skepticism is in order when it comes to assigning dollar values for the services provided by an ecosystem. Nevertheless, I am encouraged by New Jersey’s efforts to do just that.
Protecting the environment is a public service provided by government (along with other entities), and it requires the expenditure of money and effort to do it. So environment protection competes, if you will, for the scarce resources available to government, which is beset by demands for all sorts of other services (some of them worthwhile, some of them hopelessly foolish, some of them mere plundering). Putting a dollar figure on the value of undeveloped land, even one that is wrong by an order of magnitude, helps legislators and policymakers compare apples to apples and make better-informed decisions.
There is a tendency among certain members of the environmental community to treat the environment as a treasure without price, and in the extreme, that’s true. (It should be noted that defenders of human life and liberty, be they terrorism hawks or right-to-lifers, tend to argue similarly.) But I’m beginning to think that this is a fruitless way to reason about natural resource conservation.
Philanthropic graffiti
Charles Isherwood visits the Shakespeare Theatre Company’s newly-opened Harman Hall and is bemused by the tagging of every possible amenity in the place with the name of a corporate benefactor. For pity’s sake, the elevators and the coat check room have an underwriter.
Whatever happened to Anonymous?
…what became of those wealthy philanthropists who used to support arts organizations and other not-for-profit and charitable institutions without requiring that their names be slapped somewhere — anywhere, it sometimes seems — on a building?
He then turns to a favorable development at the University of Wisconsin-Madison. A group of anonymous donors contributed $85 million so that the business school would not bear a brand name. At least for the next 20 years.
Meanwhile, since I was graduated in 1977, my alma mater has sold the naming rights to its liberal arts, engineering, medical, and business schools like a cash-strapped city scrounging for ways to pay for its new baseball stadium.
Squeezing the melons
Adelaide and Sarah summon the names of a few defunct retailers in “Marry the Man Today.” Adelaide’s intro begins:
At Wanamaker’s and Saks and Klein’s,
A lesson I’ve been taught:
You can’t get alterations
On a dress you haven’t bought.
Saks Fifth Avenue (founded by Andrew Saks, and hence no apostrophe) is still with us, after the usual bewildering chain of ownership exchanges. I didn’t know that Saks had merged with Gimbel’s by 1923, but maintaining its distinct branding. Middlebrow Gimbel’s, of course, has passed on. When I was in graduate school, I bought a great sweater from the downtown Philadelphia store.
The Philadelphia institution founded by John Wanamaker, now merged into Hecht’s and then Macy’s, once had a million-square-foot flagship store in New York at 770 Broadway. Klein’s would be S. Klein, On the Square, also long gone from Union Square.
But the real poser comes in the first bridge:
ADELAIDE: Slowly introduce him to the better things, respectable, conservative, and clean.
SARAH: Reader’s Digest!
ADELAIDE: Guy Lombardo!
SARAH: Rogers Peet!
ADELAIDE: Golf!
SARAH: Galoshes!
ADELAIDE: Ovaltine!
As punctuated in the libretto, Rogers Peet sounds like the name of a self-help guru from the first half of the century, someone like Norman Vincent Peale, Émile Coué, or Dale Carnegie. But it turns out to designate the merger of the businesses of men’s clothiers Marvin N. Rogers and Charles Bostwick Peet. Rogers, Peet & Co. was a nineteenth-century retailing innovator, introducing tags that identified fabric content and price (no haggling!) and a money-back guarantee. The final Rogers, Peet store closed in the mid-1980s.
Thinking globally, eating locally
Via kottke.org: the question of whether eating locally is better for the environment isn’t quite settled, argues Sarah Murray, writing for the Financial Times (a publication, admittedly, with its own slant on things), in support of her recent book. She points to recent studies that indicate that shipped food performs as well as local food in terms of environmental impact.
Keep in mind that Murray is writing for a British publication, and food shipped into the U.K. needs must travel over water (often by efficient container ship) while food that travels within the U.S. and North America more likely came by truck. And her quoting a study by New Zealand’s Lincoln University that New Zealand lamb is more efficiently produced than its British equivalent, even after accounting for shipping, is disingenuous.
Nevertheless, Murray makes the good point that transportation may not be the most important environmental factor in the production of a lamb and boiled potato dinner. And
the environmental trade-offs can be perplexing. While water conservationists point out that pressurised sprayers and drip irrigation systems distribute water to crops more efficiently than traditional gravity-based methods, they require mechanical pumping and therefore consume more energy.
Along with the carbon dioxide emissions generated by agriculture come other, more potent, greenhouse gases. Animal manure, soil management and heavy use of synthetic nitrogen fertilisers in crop production all contribute to an increase in nitrous oxide emissions, which are up to 300 times more effective at heating the atmosphere than carbon dioxide.
On the other hand, whether a locally-produced piece of fruit, picked and carried a short distance to a farmers market, just plain tastes better than one engineered for long-distance travel, harvested green, wrapped in plastic, and shipped thousands of miles is a question that Murray doesn’t pick up in this article.
Crooked CA watch: 4
Disgraced former CEO Sanjay Kumar reported to a minimum-security federal prison to begin serving his 12-year sentence.
Dispersing the blue smoke
Timothy L. Keiningham et al. publish peer-reviewed research that questions whether the Net Promoter Score metric (promulgated by Fred Reichheld, Bain & Company, and Satmetrix Systems, Inc.) does a better job than other metrics of explaining business performance. Keiningham’s paper, “A Longitudinal Examination of Net Promoter and Firm Revenue Growth” says, from the abstract:
Using industries Reichheld cites as exemplars of Net Promoter, the research fails to replicate his assertions regarding the “clear superiority” of Net Promoter compared with other measures in those industries.
Stefan Kolle’s post includes an extended e-mail exchange with Keiningham, in which he is even more pointed in its criticism of Reichheld.
Form follows function
Phil Patton previews new designs for hybrid and electric cars. Toyota is showing a spiffy 2-door concept car called the X that features a lot of glass.
Market signals
Katherine Ellison looks at today’s carbon offset market. The upshot: offsets are helpful (though there are skeptics when it comes to forestry offsets), but you may not be getting what you pay for.
I returned to Stanford’s Schneider to ask what kinds of offsets he might buy. “It’s legitimate to put windmills in if you displace fossil-fuel power,” he said. “It’s legitimate to put coal emissions underground if you could figure out how to make that permanent. Financing a gas plant in India if they were going to put in coal would also be good.” The key with all of these is they reduce carbon emissions at their source.
Crooked CA watch: 3
Stephen Richards, former sales head of CA, has arranged to pay $29 million in restitution.
Bring it up again
A leader from the traditionally eco-skeptic Economist admits that recycling is “mostly worthwhile,” and proposes three steps to encourage the practice. Relying on mechanisms technological, political, and economic, the magazine recommends
- a single stream from the consumer, with automated conveyor belts at the processing facility to separate items;
- selling recycled waste to emerging markets; and
- monetary rewards to consumers based on how much they recycle.
I haven’t yet read the magazine’s current Technology Quarterly, which features recycling and other environmental issues; I’m interested in how the writers handle the question of streaming recyclables into the third world.
A wish list item: 1
I recorded Stuart Hart’s 1997 paper for Harvard Business Review, “Beyond Greening,” at the the studio yesterday, as part of a collection of articles on organization development. As is typical for papers in that publication, it’s a mousse of hard-nosed analysis whipped together with long-term vision and topped with blue-sky dreams, but the central point may turn out to be sound: the smart businessman will find a way to cash in by solving environmental problems instead of creating them. He has elaborated his position in the book-length Capitalism at the Crossroads. Hart is unique, in my limited reading, in that he treats poverty issues and environmental concerns as being of a piece.
