Category: Economics

Sri Lanka Encourages Poachers to Kill Elephants

In my micro principles class each semester, I recount the argument in a text by Baumol and Blinder, that if governments want to save elephants, they would not crush or burn their ivory, they would supply it to the market, reducing the price, and hence reducing the incentives for poachers to kill elephants.

(p. A4) COLOMBO, Sri Lanka — A group of saffron-robed monks chanted as officials crushed more than 300 elephant tusks in a seaside ceremony on Tuesday [January 26, 2016], as the new government of President Maithripala Sirisena sought to differentiate itself from its predecessor by sending a powerful message of intolerance for elephant poaching.
. . .
The ceremonial crushing of the 359 tusks began with two minutes of silence, after which the group of Buddhist monks chanted prayers for a “rebirth without suffering” for the elephants killed. In a show of religious solidarity, Hindu, Christian and Muslim leaders joined the monks in their prayers.
After the ceremony, the crushed ivory was transported to a factory in Puttalam, a district in the island’s northwest, for incineration, government officials said.

For the full story, see:
DHARISHA BASTIANS and GEETA ANAND. “Sri Lanka Destroys an Illegal Ivory Cache.” The New York Times (Weds., January 27, 2016): A4.
(Note: ellipsis added.)
(Note: the online version of the story has the date JAN. 26, 2016, and has the title “Sri Lanka Destroys Illegal Elephant Tusks.”)

Environmentalists Deprive the Poor of Cool Comfort

(p. A1) DELHI — A thrill goes down Lane 12, C Block, Kamalpur every time another working-class family brings home its first air-conditioner. Switched on for a few hours, usually to cool a room where the whole family sleeps, it transforms life in this suffocating concrete labyrinth where the heat reached 117 degrees in May.
“You wake up totally fresh,” exulted Kaushilya Devi, a housewife, whose husband bought a unit in May. “I wouldn’t say we are middle class,” she said. “But we are closer.”
But 3,700 miles away, in Kigali, Rwanda, negotiators from more than 170 countries gathered this week to complete an accord that would phase out the use of heat-trapping hydrofluorocarbons, or HFCs, worldwide, and with them the cheapest air-conditioners that are just coming within reach of people like Ms. Devi.
. . .
(p. A8) Sandhya Chauhan and her family live in two musty, windowless subterranean rooms, which turn stifling on summer nights, leaving six sweat-soaked adults to fidget, toss and pace until morning. They have lived there for 20 years, unable to find other lodging on the household’s combined earnings of around 30,000 rupees a month, or less than $450.
But it was never as awful as this May, when temperatures crept so high that Ms. Chauhan’s friends speculated that the earth was colliding with the sun. After a doctor warned Mrs. Chauhan that heat exhaustion was affecting their oldest son’s health, her husband bought an air-conditioner on credit. Though they are hardly middle class — “we have never let this thought cross our minds,” Mrs. Chauhan said — the purchase has changed the way they see themselves.
“My children sleep in peace,” she said. “There was a sense of happiness from inside. There was a sense that father has done a great job.”
Among the changes that have come with increasing wealth, Ms. Devi said, is the confidence to spend on the family’s comfort, rather than squirreling every bit of savings away.
“Education is teaching people to take care of themselves,” she said. “Now that we are used to air-conditioners, we will never go back.”

For the full story, see:
ELLEN BARRY and CORAL DAVENPORT. “A Climate Deal Could Push Air-Conditioning Out of India’s Reach.” The New York Times (Thurs., October 13, 2016): A1 & A8.
(Note: ellipsis added.)
(Note: the online version of the story has the date OCT. 12, 2016, and has the title “Emerging Climate Accord Could Push A/C Out of Sweltering India’s Reach.” The online version of the article says that the New York edition had the headline “Accord May Push Air-Conditioning Out of India’s Reach” and appeared on p. A12. In my paper, which is probably the midwest edition, the title was as cited in the main citation above, and appeared on pp. A1 and A8.)

Innovations Make Internal Combustion Engines Much More Efficient

(p. B4) . . . gas- and diesel-powered engines are not done yet. Just as electrified cars — whether hybrids or pure battery-powered models — seem headed for market dominance, Mazda announced a breakthrough in gasoline engines that could make them far more efficient. It is the latest plot twist in a century of improvements for internal combustion engines, a power source pronounced dead many times that has persisted nevertheless.
. . .
Mazda said it had made a big advance in a combustion method commonly known as homogeneous charge compression ignition, which would result in gasoline engines that are 20 to 30 percent more efficient than the company’s best existing engines. Researchers around the world have tried to crack this process for years, but it has never really left the laboratory.
Mazda, which now markets no hybrid vehicles, calls the engine Skyactiv-X and says it is scheduled for a 2019 introduction. In simplest terms, the big difference with the new engine is that under certain running conditions, the gasoline is ignited without the use of spark plugs. Instead, combustion is set off by the extreme heat in the cylinder that results from the piston inside the engine traveling upward and compressing air trapped inside, the same method diesel engines use. The efficiency gains come with the ability to operate using a very lean mixture — very little gas for the amount of air — that a typical spark-ignition engine cannot burn cleanly.

For the full story, see:
NORMAN MAYERSOHN. “Advances Mean Plenty of Life Left for Internal Combustion Engine.” The New York Times (Fri., August 18, 2017): B4.
(Note: ellipses added.)
(Note: the online version of the story has the date AUG. 17, 2017, and has the title “WHEELS; The Internal Combustion Engine Is Not Dead Yet.”)

NYC Fee for Plastic Bags Is “a Tax on the Poor and the Middle Class”

(p. A18) The ubiquitous, easily torn, often doubled-up plastic bags from the grocery store — hoarded by dog owners, despised by the environmentally concerned and occasionally caught in trees — will soon cost at least a nickel in New York City.
The City Council voted 28 to 20 on Thursday to require certain retailers to collect a fee on each carryout bag, paper or plastic, with some exceptions. Mayor Bill de Blasio has expressed support for the measure.
. . .
Mr. Bloomberg offered a proposal in 2008 for a 6-cent bag fee — 5 cents for stores; a penny for the city — before dropping it several months later amid strong opposition. At the time, one of the opponents on the Council was Simcha Felder, a Brooklyn Democrat who is now a state senator. Last month, Senator Felder introduced a bill that would prohibit the levying of local fees on bags; it passed a committee this week.
In discussing his opposition this week, Mr. Felder traced the 200-year history of how people have carried their groceries home, progressing from cloth bags to boxes to paper to plastic, and said that reusing bags presented a health hazard. He said he would hold a hearing on his bill in the city next month.
“That’s nothing less than a tax on the poor and the middle class — the most disadvantaged people,” he said.
Opposition to the measure has also come from the plastic bag industry — via its lobbying arm, the American Progressive Bag Alliance — as well as from those who, like Mr. Felder, said the fee amounted to a regressive tax, disproportionately affecting low-income and minority New Yorkers . . . .

For the full story, see:
J. DAVID GOODMAN. “Council Approves a Fee on Checkout Bags.” The New York Times (Fri., May 6, 2016): A18.
(Note: ellipsis added.)
(Note: the online version of the story has the date MAY 5, 2016, and has the title “5¢ Fee on Plastic Bags Is Approved by New York City Council.”)

Washington, D.C. Tax Rate Cuts Increased Economic Growth AND Tax Revenue

(p. B1) The capital’s financial affairs were in such disarray by the mid-1990s that they were taken over by a federal financial control board that operated until 2001. Yet in 2014 the council cut corporate and business taxes, reduced individual rates for everyone earning less than $1 million and broadened the tax base by eliminating many loopholes.
As a headline on the conservative website The Daily Caller put it, “Hell Freezes Over: DC Passes Tax Reform.”
In the ensuing years, economic growth and tax receipts have surged, enabling the city to accelerate cuts that were being phased in. The legislation was not revenue neutral, in the sense that broadening the tax base offset the reduction in rates. It was a tax cut. But in a development that would surely warm the hearts of pro-growth Republicans, the economic lift was so strong that tax receipts increased, and last (p. B3) year hit a record.

For the full commentary, see:

JAMES B. STEWART. ”For Tax Reform Lessons, Congress Needn’t Look Far Common Sense.” The New York Times (Fri., September 1, 2017): B1 & B3.
(Note: the online version of the commentary has the date AUG. 31, 2017.)

Farmers Buy Inputs Cheaper Online

(p. B4) Brandon Sinclair spent $26,000 on herbicides for his corn and soybean fields last year, roughly half what he says he used to pay at his local co-operative.
The savings came from a source many U.S. farmers have been slow to tap: the internet.
Farmers have long made pilgrimages to farm stores and co-operatives to purchase seeds, fertilizer and weed and pest killers. Now, with a commodity glut pressuring crop prices and pushing farm incomes to an eight-year low, farmers are scouring the web for better deals on the products they use to grow their crops.
The shift could upend a decades-old system built around small-town suppliers that also offer farming advice and sell services such as spraying for weeds. Mr. Sinclair says the math is simple: Using savings found online, the 31-year old Illinois farmer was able to spring for a helicopter to wrangle his herd of cattle. Now he is urging his neighbors to shop online, too.
“I’ve always been kind of a tech guru and a tight-ass,” Mr. Sinclair said.

For the full story, see:
Jesse Newman and Jacob Bunge. “U.S. Farmers Buy in Bulk Online.”The Wall Street Journal (Fri., Feb. 17, 2017): B4.
(Note: bracketed date added.)
(Note: the online version of the story has the date Feb. 16, 2017, and has the title “E-Commerce for Farmers: Shopping Online for $26,000 of Herbicides.”)

Musk “Could Be Completely Delusional”

(p. B2) Tesla Inc. on Tuesday [January 23, 2018] unleashed a bold pay package for Chief Executive Elon Musk that again ties his compensation entirely to key performance benchmarks. This time, the goals take the electric-car maker to cosmic heights, including an ultimate aim of hitting $650 billion in market value.
. . .
Mr. Musk could net billions of dollars by hitting only a few of the milestones. Tesla said in a proxy filing the 20.26 million stock options today would have a preliminary value of about $2.62 billion. But if Tesla were to reach the audacious market value of $650 billion–as much as Amazon.com Inc. is worth today–the company said Mr. Musk’s stock award would reap him as much as $55.8 billion fully vested.
That total, however, assumes the company’s shares outstanding won’t be diluted. Tesla has added tens of millions of shares over the past several years, so that total dollar figure is unlikely.
. . .
Mr. Musk is saying, “I want to set an audacious goal, and then if I achieve it, then pay me audaciously,” said John Challenger, a longtime expert in corporate compensation as chief executive of Challenger, Gray & Christmas. “He is in some ways capturing the spirit of Silicon Valley.”
. . .
Mr. Musk had previously committed the company to reaching a market cap of $700 billion, something he reiterated last year. “I could be completely delusional, but I think I see a clear path to that outcome,” he told analysts in May.

For the full story, see:
Higgins, Tim. “Tesla Primes Musk’s Pay for Blastoff.” The Wall Street Journal (Weds., January 24, 2018): B2.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date JAN. 23, 2018, and has the title “Elon Musk Could Net Billions by Hitting Tesla’s New Milestones.” Where the wording of the two versions differs, the passages quoted above follow the wording of the online version.)

Value of Higher Education Is in the Signaling, Not the Learning

(p. A13) Mr. Caplan, an economist at George Mason University, argues that most of the value of education–especially higher education–comes from “signaling,” not from the content of learning. As a result, Americans are “overeducated,” and it’s time to stop spending so much money (both private and public) on schools.
. . .
After surveying the research on the “transfer of learning,” Mr. Caplan concludes: “Students learn only the material you specifically teach them . . . if you’re lucky.” Generally, they don’t know how to transfer their reasoning from one topic to a related one. As to informal reasoning–the ability to come up with arguments for or against a particular proposition–education’s effect, he says, has been “tiny.” He similarly dispenses with the claim that schools teach common values or civic education. As college attendance has skyrocketed, he notes, voter turnout has declined.

For the full review, see:
Naomi Schaefer Riley. “BOOKSHELF; Deciding Against the Paper Chase; High costs, indifferent teachers, hours devoted to subjects that have little to do with earning a living in the real world: Is it all worth it?” The Wall Street Journal (Tuesday, Jan. 16, 2018): A13.
(Note: ellipsis between paragraphs, added; ellipsis internal to second paragraph, in original.)
(Note: the online version of the review has the date Jan. 15, 2018, and has the title “BOOKSHELF; Review: Deciding Against the Paper Chase; High costs, indifferent teachers, hours devoted to subjects that have little to do with earning a living in the real world: Is it all worth it?”)

The book under review, is:
Caplan, Bryan. The Case Against Education: Why the Education System Is a Waste of Time and Money. Princeton, NJ: Princeton University Press, 2018.

Trump Tax Plan Induces Firms to Repatriate Hundreds of Billions

(p. A23) Apple’s announcement on Wednesday [January 17, 2018] that it will repatriate most of the estimated $274 billion that it holds in offshore earnings is great news for the United States. Uncle Sam will get a one-time $38 billion tax payment. The company promises to add 20,000 jobs to its U.S. work force, a 24 percent increase, and build a new campus. Another $5 billion will go toward a fund for advanced manufacturing in America.
C’mon. What’s with the long face?
In December this column warned that hysterical opposition to the Republican tax bill was a fool’s game for Democrats that could only help Donald Trump. Yes, there were things to dislike in the legislation, from both a liberal and a conservative perspective.
But it was not the moral and fiscal apocalypse its critics claimed. And its central achievement — a dramatic cut in corporate rates to 21 percent from 35 percent — was an economic no-brainer that many Democrats, including President Obama, had supported (albeit less steeply) just a few years ago.
Apple will not be the only multinational that will soon bring back gigantic profits to take advantage of new low repatriation rates. Microsoft holds $146 billion in overseas earnings, Pfizer $178 billion, General Electric $82 billion, Alphabet $78 billion, and Cisco $71 billion, according to estimates from the Zion Research Group. The total stash is about $3 trillion — by one measure nearly three times what it was just a decade ago.
Assume that just half of that money comes home to the United States. It’s still the equivalent of Canada’s entire gross domestic product. Not too shabby, especially considering all the hyperbolic predictions of economic doom that went with Trump’s election

For the full commentary, see:

Stephens, Bret. “Clueless Versus Trump.” The New York Times (Sat., January 20, 2018): A23.
(Note: bracketed date added.)
(Note: the online version of the commentary has the date JAN. 19, 2018.)

With Cuts in Red Tape, Firms Invest More

(p. A1) WASHINGTON — A wave of optimism has swept over American business leaders, and it is beginning to translate into the sort of investment in new plants, equipment and factory upgrades that bolsters economic growth, spurs job creation — and may finally raise wages significantly.
While business leaders are eager for the tax cuts that take effect this year, the newfound confidence was initially inspired by the Trump administration’s regulatory pullback, not so much because deregulation is saving companies money but because the administration has instilled a faith in business executives that new regulations are not coming.
“It’s an overall sense that you’re not going to face any new regulatory fights,” said Granger MacDonald, a home builder in Kerrville, Tex. “We’re not spending more, which is the main thing. We’re not seeing any savings, but we’re not seeing any increases.”
. . .
(p. A10) Only a handful of the federal government’s reams of rules have actually been killed or slated for elimination since Mr. Trump took office. But the president has declared that rolling back regulations will be a defining theme of his presidency. On his 11th day in office, Mr. Trump signed an executive order “on reducing regulation and controlling regulatory costs,” including the stipulation that any new regulation must be offset by two regulations rolled back.
That intention and its rhetorical and regulatory follow-ons have executives at large and small companies celebrating. And with tax cuts coming and a generally improving economic outlook, both domestically and internationally, economists are revising growth forecasts upward for last year and this year.
. . .
. . . economists see a plausible connection between Mr. Trump’s determination to prune the federal rule book and the willingness of businesses to crank open their vaults. Measures of business confidence have climbed to record heights during Mr. Trump’s first year.
. . .
“We have spent the past dozen years or longer operating in environments that have had an increasing regulatory burden,” said Michael S. Burke, the chairman and chief executive of Aecom, a Los Angeles-based multinational consulting firm that specializes in infrastructure projects. “That burden has slowed down economic growth, it’s slowed down investment in infrastructure. And what we’ve seen over the last year is a big deregulatory environment.”
. . .
The White House sees its efforts as having their intended effect. Mr. Trump boasted about his deregulatory efforts last month at an event where he stood in front of a small mountain of printouts representing the nation’s regulatory burden and ceremonially cut a large piece of “red tape.”
The chairman of the White House Council of Economic Advisers, Kevin Hassett, said in an interview that the administration’s freeze on new regulations, in particular, appeared to have buoyed confidence. Though he cautioned that it could take years of research to pin down the magnitude of the effects, he said deregulation was “the most plausible story” to explain why economic growth in 2017 had outstripped most forecasts.
“Our view is, the ‘no new regulations’ piece has to be more powerful than we thought,” he said.

For the full story, see:
BINYAMIN APPELBAUM and JIM TANKERSLEY. “With Red Tape Losing Its Grip, Firms Ante Up.” The New York Times (Tues., January 2, 2018): A1 & A10.
(Note: ellipses added.)
(Note: the online version of the story has the date JAN. 1, 2018, and has the title “The Trump Effect: Business, Anticipating Less Regulation, Loosens Purse Strings.”)

Innovation Skeptics Fail to See Its Broad Benefits

(p. B11) Professor Juma died on Dec. 15 [2017] at his home in Cambridge, Mass. He was 64. His wife said the cause was cancer. At his death he was widely credited as having been an important force in ensuring that biotechnology would play a critical role in improving economic life in many developing countries, especially in sub-Saharan Africa.
“Calestous understood that people often resist the changes that come with innovation, and that overcoming this resistance can be very important in enabling societies to move ahead,” said Douglas W. Elmendorf, dean of the Kennedy School. “So he tried to understand why people resist innovation, and what can be done to make them feel comfortable with change.”
Professor Juma’s latest book, “Innovation and Its Enemies” (2016), described how technological change is often greeted with public skepticism. Beneath such opposition, he argued, is the belief that only a small segment of society will benefit from potential progress, while the much broader society bears the greatest risk.
. . .
Professor Juma could be lighthearted in the classroom or in public in order to make his points. With more than 100,000 followers on Twitter, he shared with them cartoons that teased skeptics of science and innovation. One of his last posts featured a game show called “Facts Don’t Matter.” In it, a contestant is told: “I’m sorry, Jeannie, your answer was correct, but Kevin shouted his incorrect answer over yours, so he gets the points.”

For the full obituary, see:
ADEEL HASSAN. “Calestous Juma, 64, Advocate of African Progress, Dies.” The New York Times (Tues., January 2, 2018): B11.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the obituary has the date JAN. 1, 2018, and has the title “Calestous Juma, 64, Dies; Sought Innovation in African Agriculture.”)

The most recent book by Juma, mentioned above, is:
Juma, Calestous. Innovation and Its Enemies: Why People Resist New Technologies. New York: Oxford University Press, 2016.