Category: Economics

Chinese Economic Stimulus Creates Egg Bubble

(p. A1) HONG KONG — China is pouring hundreds of billions of dollars into its economy in a new effort to support growth. Some of it is going into roads and bridges and other big projects that will keep the economy humming.
And some of it is going into eggs.
China’s latest lending deluge has sent money sloshing into unexpected parts of the economy. That includes a financial market in Dalian where investors can place bets on the future productivity of the country’s hens.
Egg futures have surged by as much as one-third since March, the sort of move that would be justified if investors believed China’s chicken flocks were headed for an unfortunate fate.
But the market’s usual participants say the flocks are fine. In fact, the actual price of eggs in the country’s markets has fallen from a year ago, according to government statistics.
The reason for the unusual jump in egg futures, they say, is China’s tendency to experience investment bubbles when the government steps up spending and lending. China’s previous efforts to bolster growth unexpectedly sent money into real estate and the stock market — markets that had unexplained rises followed by striking drops.

For the full story, see:
NEIL GOUGH. “China’s Flood of Cash Roils Egg Futures.” The New York Times (Mon., MAY 2, 2016): A1 & B2 [sic].
(Note: ellipsis added.)
(Note: the online version of the story has the date MAY 1, 2016, and has the title “China Lending Inflates Real Estate, Stocks, Even Egg Futures.”)

Economic Growth Depends Mainly on Micro Policies and Serendipity

(p. A2) In the long run, . . . , potential growth is a job for microeconomic, not macroeconomic, policy. It requires countless, painstaking fixes: raising labor-force participation with training and safety-net programs that don’t discourage work; investment-friendly tax and regulatory policies to incentivize investments that take years to pay off, if ever; and trade deals that let firms market their products to the entire world. It will also take some serendipity as firms keep hunting for the next miracle technology. No one foresaw how the information revolution would revitalize productivity in the 1990s, and the next such breakthrough will probably surprise us as well.

For the full story, see:
GREG IP. “CAPITAL ACCOUNT; Rewriting Recent Economic History.” The Wall Street Journal (Mon., June 2, 2016): A2.
(Note: ellipsis added.)
(Note: the online version of the story has the date June 1, 2016, and has the title “CAPITAL ACCOUNT; Post-Recession Rethink: Growth Potential Dimmed Before Downturn.”)

Musk Unveils Bold Private Enterprise Plan to Colonize Mars

(p. B3) Entrepreneur Elon Musk unveiled his contrarian vision for sending humans to Mars in roughly the next decade, and ultimately setting up colonies there, relying on bold moves by private enterprise, instead of more-gradual steps previously proposed by Washington.
Mr. Musk–who in 14 years transformed his closely held rocket company, Space Exploration Technologies Corp., into a global presence–envisions hosts of giant, reusable rockets standing more than 300 feet tall eventually launching fleets of carbon-fiber spacecraft into orbit.
The boosters would return to Earth, blast off again into the heavens with “tanker” spaceships capable of refueling the initial vehicles, and then send those serviced spacecraft on their way to the Red Planet. The rockets would be twice as powerful as the Saturn 5 boosters that sent U.S. astronauts to the Moon. Each fully developed spacecraft likely would carry between 100 and 200 passengers, Mr. Musk said.

For the full story, see:
ANDY PASZTOR. “Musk Offers Vision of Mars Flights.” The Wall Street Journal (Weds., Sept. 28, 2016): B3.
(Note: ellipses added.)
(Note: the online version of the story has the date Sept. 27, 2016, and has the title “Elon Musk Outlines Plans for Missions to Mars.”)

Blockchain Is a Process Innovation That Will Make Financial Records More Reliable and Easier to Access

(p. A13) Until the mid-1990s, the internet was little more than an arcane set of technical standards used by academics. Few predicted the profound effect it would have on society. Today, blockchain–the technology behind the digital currency bitcoin–might seem like a trinket for computer geeks. But once widely adopted, it will transform the world.
Blockchain offers a way to track items or transactions using a shared digital “ledger.” Blocks of new transactions are added at the end of the chain, and encryption ensures that it remains unbroken–tamper-proof and error-free. This is significantly more efficient than the current methods for logging and sharing such information.
Consider the process of buying a house, a complex transaction involving banks, attorneys, title companies, insurers, regulators, tax agencies and inspectors. They all maintain separate records, and it’s costly to verify and record each step. That’s why the average closing takes roughly 50 days. Blockchain offers a solution: a trusted, immutable digital ledger, visible to all participants, that shows every element of the transaction.

For the full commentary, see:
GINNI ROMETTY. “How Blockchain Will Change Your Life.” The Wall Street Journal (Tues., Nov. 8, 2016): A13.
(Note: the online version of the commentary has the date Nov. 7, 2016, and has the title “KEYWORDS; Is Engine of Innovation in Danger of Stalling?”)

Coastal Damage Caused by Storm Surges at High Tide, Not by Tiny Rise in Sea Levels

(p. A11) When Teddy Roosevelt built his Sagamore Hill on Long Island, he did so a quarter mile from shore at an elevation of 115 feet not because he disdained proximity to the beach or was precociously worried about climate change. The federal government did not stand ready with taxpayer money to defray his risk.
Estimates vary, but sea levels may have risen two millimeters a year over the past century. Meanwhile, tidal cycles along the U.S. east coast range from 11 feet every day (in Boston) to two feet (parts of Florida).
On top of this, a “notable surge event” can produce a storm surge of seven to 23 feet, according to a federal list of 10 hurricanes over the past 70 years.
We should not exaggerate the degree to which homeowners are being asked to shoulder their own risks. Washington is doling out five-figure checks to Jersey homeowners to raise houses on pilings to reduce the federal government’s future rebuilding costs. But, to state the obvious, normal tidal variation plus storm surge is the danger to coastal property. Background sea-level rise is a non-factor. A FEMA study from several years ago found that fully a quarter of coastal dwellings are liable to be destroyed over a 50-year period.
Though it pleased New York Gov. Andrew Cuomo to pretend Superstorm Sandy in 2012 was caused by global warming, the storm wasn’t even a hurricane by the time it hit shore–it just happened to hit at peak tide. Sure, certain people in Florida and elsewhere like to conflate the two. It’s in their interests to do so.

For the full commentary, see:
HOLMAN W. JENKINS, JR. “Shoreline Gentry Are Fake Climate Victims.” The Wall Street Journal (Sat., Nov. 26, 2016): A11.

“We Shall Increasingly Have the Power to Make Life Good”

(p. B13) Derek Parfit, a British philosopher whose writing on personal identity, the nature of reasons and the objectivity of morality re-established ethics as a central concern for contemporary thinkers and set the terms for philosophic inquiry, died on Monday at his home in London.
. . .
The two volumes of “On What Matters,” published in 2011, dealt with the theory of reasons and morality, arguing for the existence of objective truth in ethics.
. . .
“With no other philosopher have I had such a clear sense of someone who had already thought of every objection I could make, of the best replies to them, of further objections that I might then make, and of replies to them too,” the philosopher Peter Singer wrote recently on the philosophy website Daily Nous.
. . .
In February [2017], Oxford University Press plans to publish a third volume of “On What Matters.” It consists in part of responses to criticism of his work by leading philosophers, which will appear in a companion volume, edited by Mr. Singer, titled “Does Anything Really Matter?”
. . .
On Daily Nous, Mr. Singer offered a snippet from Mr. Parfit’s new work:
“Life can be wonderful as well as terrible, and we shall increasingly have the power to make life good. Since human history may be only just beginning, we can expect that future humans, or supra-humans, may achieve some great goods that we cannot now even imagine.
“In Nietzsche’s words, there has never been such a new dawn and clear horizon, and such an open sea.”

For the full obituary, see:
WILLIAM GRIMES. “Derek Parfit, 74, Philosopher Who Explored Identity.” The New York Times (Thurs., JAN. 5, 2017): B13.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the obituary has the date JAN. 4, 2017, and has the title “Derek Parfit, Philosopher Who Explored Identity and Moral Choice, Dies at 74.”)

The book by Parfit quoted above, is:
Parfit, Derek. On What Matters: Volume Three. Oxford, UK: Oxford University Press, forthcoming 2017.

Decrease in Number of Tech Startups Results in Less Job Creation

(p. A10) Since 2002, the number of technology startups has slowed, hurting job creation. In a 2014 study, economists Javier Miranda, John Haltiwanger and Ian Hathaway said the growth of tech startups accelerated to 113,000 in 2001 from 64,000 in 1992.
That number slumped to 79,000 in 2011 and hasn’t recovered, according to the economists’ calculations using updated data. The causes include global competition and increased domestic regulation, says Mr. Haltiwanger, an economics professor at the University of Maryland.

For the full story, see:
Jon Hilsenrath and Bob Davis. “‘America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs.” The Wall Street Journal (Thurs., Oct. 13, 2016): A1 & A10.
(Note: the online version of the story has the date Oct. 12, 2016, and has the title “‘America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs.”)

The Haltiwanger paper mentioned above, is:
Haltiwanger, John, Ian Hathaway, and Javier Miranda. “Declining Business Dynamism in the U.S. High-Technology Sector.” Feb. 2014.

Automation Raises Productivity, Consumer Spending, and Creates New Jobs

(p. B1) Since the 1970s, when automated teller machines arrived, the number of bank tellers in America has more than doubled. James Bessen, an economist who teaches at Boston University School of Law, points to that seeming paradox amid new concerns that automation is “stealing” human jobs. To the contrary, he says, jobs and automation often grow hand in hand.
Sometimes, of course, machines really do replace humans, as in agriculture and manufacturing, says Massachusetts Institute of Technology labor economist David Autor in a succinct and illuminating TED talk, which could have served as the headline for this column. Across an entire economy, however, Dr. Autor says that’s never happened.
. . .
(p. B4) . . . a long trail of empirical evidence shows that the increased productivity brought about by automation and invention ultimately leads to more wealth, cheaper goods, increased consumer spending power and ultimately, more jobs.
In the case of bank tellers, the spread of ATMs meant bank branches could be smaller, and therefore, cheaper. Banks opened more branches, and in total employed more tellers, Mr. Bessen says.

For the full commentary, see:
CHRISTOPHER MIMS. “KEYWORDS; Automation Actually Can Lead to More Job Creation.” The Wall Street Journal (Mon., Dec. 12, 2016): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 11, 2016, and has the title “KEYWORDS; Automation Can Actually Create More Jobs.”)

Bessen more fully presents his ATM example in his book:
Bessen, James. Learning by Doing: The Real Connection between Innovation, Wages, and Wealth. New Haven, CT: Yale University Press, 2015.

Flaws in Early Tech, Solved by Later and Better Tech

(p. A2) Mr. Mokyr says innovators gravitate to society’s greatest needs. In previous eras, it was cheap and rapid transport, reliable energy, and basic health care. Today, seven of the top 10 problems he says are most in need of innovative solutions are instances of bite-back. They include global warming, antibiotic resistance, obesity and information overload. Fixing these problems may weigh heavily on growth. Yet Mr. Mokyr argues past productivity was overstated because it didn’t include those costs.
Nonetheless, he’s an optimist. For every unintended consequence one innovation brings, another innovation will find the answer. Fluoridation cured tooth decay, and automotive engineers found alternatives to leaded gasoline. And distracted driving? Driverless cars may take care of that plague before long.

For the full commentary, see:
GREG IP. “CAPITAL ACCOUNT; When Tech Bites Back: The Cost of Innovation.” The New York Times (Thurs., Oct. 20, 2016): A2.
(Note: the online version of the commentaty has the date Oct. 19, 2016, and has the title “CAPITAL ACCOUNT; When Tech Bites Back: Innovation’s Dark Side.”)

Venture Capitalists Expect Future Successful Entrepreneurs to Look Like Recent Successful Entrepreneurs

(p. 4) In recent months, the fund-raising atmosphere has cooled as venture capitalists react to the poor stock market performance of some public tech companies and question whether the recent fast pace of investment is sustainable. Venture capitalists are making fewer investments at lower valuations.
“There is this delusion that it’s easy to raise money in Silicon Valley,” said Sam Altman, president of Y Combinator, a mentorship and investment program for start-ups. “Raising money is incredibly hard.”
. . .
Venture capitalists, who hold the keys to success in Silicon Valley by providing start-up money, are even more likely to be white and male than tech company employees are. Theirs is an insular business. Most investors accept pitches only from entrepreneurs who come through an introduction, and they tend to finance people who have succeeded before, or who remind them of those who did.
According to a 2014 study published by the National Academy of Sciences, investors prefer pitches by men, particularly attractive men, to those by women, even when the content of the pitch is the same. In addition to studying the results of three entrepreneurial pitch competitions, the researchers conducted two experiments in which a representative sample of working adults heard identical pitches in male and female voices. Sixty-eight percent of people preferred to finance the company when it was pitched by a male voice, while 32 percent chose the female.
. . .
At the gender discrimination trial last year against Kleiner Perkins Caufield & Byers, which the venture capital firm won, female employees said they were excluded from a ski trip, denied credit for deals they brought to the firm, and told they both didn’t speak up enough and talked too much.
“I feel like it’s a lot more nuanced and sometimes it’s subconscious,” said Julia Hu, the founder and chief executive of Lark, which makes a health and weight-loss app. “V.C.s are pattern matchers, and they’re just used to seeing men like themselves.”
Many women convey confidence and leadership in a different way than men do, she said. As an Asian woman, she said, she was raised to be humble and quiet and felt uncomfortable promoting her skills. “To try to be who I thought they wanted me to be, which was another Mark Zuckerberg, was actually very difficult for me without feeling inauthentic.”

For the full story, see:
Miller, Claire Cain. “The Venture Capital Ceiling.” The New York Times, SundayBusiness Section (Sun., FEB. 28, 2016): 1 & 4-5.
(Note: ellipses added.)
(Note: the online version of the story has the date FEB. 27, 2016, and has the title “What It’s Really Like to Risk It All in Silicon Valley.”)

The National Academy of Sciences study mentioned above, is:
Wood Brooks, Alison, Laura Huang, Sarah Wood Kearney, and Fiona E. Murray. “Investors Prefer Entrepreneurial Ventures Pitched by Attractive Men.” Proceedings of the National Academy of Sciences of the United States of America 111, no. 12 (March 25, 2014): 4427-31.

Pope Francis Has “a Great Allergy to Economic Things”

(p. A7) ABOARD THE PAPAL AIRPLANE — Pope Francis has dedicated his papacy to the plight of the poor and delivered severe critiques of economic systems that benefit the rich. But flying back to Rome from his eight-day visit to Latin America, Francis admitted he had overlooked a group.
He has delivered few messages for the global middle class.
“Thank you,” he replied, after a German journalist, Ludwig Ring-Eifel, asked about the omission. “It’s a good correction, thanks. You are right. It’s an error of mine not to think about this.”
. . .
In fact, the pope expressed “a great allergy to economic things,” explaining that his father had been an accountant who often brought work home on weekends.
“I don’t understand it very well,” he said of economics, even though the issue of economic justice has become central to his papacy.
. . .
“Then, on the middle class, there are some words that I’ve said — but a little in passing,” he said, musing. “But talking about the common people, the simple people, the workers, that is a great value, no? But I think you’re telling me about something I need to do. I need to delve further into this.”

For the full story, see:
JIM YARDLEY. “In His Focus on Rich and Poor, Pope Admits to Overlooking the Middle Class.” The New York Times (Tues., JULY 14, 2015): A7.
(Note: ellipses added.)
(Note: the online version of the story has the date JULY 13, 2015, and has the title “Pope Francis Says He’s Overlooked the World’s Middle Class.”)