Category: Economics

Wal-Mart Nimbly Evades Bank Industry Efforts to Restrict Competition

(p. B3) Here comes Wal-Bank.
After years of thwarted efforts to break into banking, Walmart is making its biggest foray yet into everyday financial services.
Walmart, the nation’s largest retailer, is teaming up with Green Dot, known for its prepaid payment cards, to supply checking accounts to almost anyone over 18 who passes an ID check.
. . .
. . . the new Walmart initiative will be the first full-blown, off-the-shelf checking account. To help attract customers, Walmart and Green Dot will forgo a screening system many banks use to vet potential customers and rely instead on a proprietary system. The model is expected to allow almost any consumer who passes an identification check to open an account in minutes, according to Green Dot.
In the past, Walmart has tried to secure a federal bank charter to become a deposit-taking bank, but abandoned that effort in 2007 in the face of opposition from the banking industry. Since then, the retailer has assembled an array of services that could be offered without a charter, as well as partnerships with financial service companies like Green Dot.

For the full story, see:
HIROKO TABUCHI and JESSICA SILVER-GREENBERG. “Finding a Door Into Banking, Walmart Prepares to Offer Checking Accounts.” The New York Times (Weds., SEPT. 24, 2014): B3.
(Note: ellipses added.)
(Note: the online version of the story has the date SEPT. 23, 2014, and has the title “Walmart Prepares to Offer Low-Cost Checking Accounts.”)

China May Have Higher Incomes, But India Has Freedom and Hope

(p. A11) The author remains generally optimistic about India’s prospects. Economic reforms that began in 1991 have quickened growth. On average, GDP has grown nearly 7% a year since then. Thanks to a media revolution that began in the 1990s and has exploded over the past decade, a state-owned monopoly over television news has given way to upward of 450 raucous channels that make Fox News look staid by comparison. The author argues that together these two trends have sparked a kind of virtuous cycle: Better-educated and better-fed Indians are demanding more from their politicians. A take-no-prisoners media will keep them on their toes.
. . .
Educated Indians can’t stop complaining about the politicians who lead them. Yet, echoing the historian Ramachandra Guha, Mr. Denyer argues that India’s main success since its independence in 1947 has been political rather than economic. It has strengthened its democratic institutions and nurtured religious and cultural pluralism. Despite the fact that the average Indian earned $1,500 last year, less than a fourth of the average Chinese, it is in New Delhi, not Beijing, that you can afford to call the president (or prime minister) a blithering idiot without worrying about a midnight knock on the door.

For the full review, see:
SADANAND DHUME. “BOOKSHELF; Book Review: ‘Rogue Elephant’ by Simon Denyer; The average Indian earns less than the average Chinese. But it’s in New Delhi–not Beijing–where you can call the prime minister an idiot without worrying about a knock on the door.” The Wall Street Journal (Mon., July 28, 2014): A11.
(Note: ellipsis added.)
(Note: the online version of the review has the date July 27, 2014, and has the title “BOOKSHELF; Book Review: ‘Rogue Elephant’ by Simon Denyer; The average Indian earns less than the average Chinese. But it’s in New Delhi–not Beijing–where you can call the prime minister an idiot without worrying about a knock on the door.”)

The book being reviewed is:
Denyer, Simon. Rogue Elephant: Harnessing the Power of India’s Unruly Democracy. New York: Bloomsbury Press, 2014.

American Poor Are Richer Now than in the Past

PriceChangesBySectorGraph2014-10-07.jpgSource of graph: online version of the NYT article quoted and cited below.

(p. A1) WASHINGTON — Is a family with a car in the driveway, a flat-screen television and a computer with an Internet connection poor?

Americans — even many of the poorest — enjoy a level of material abundance unthinkable just a generation or two ago.
. . .
(p. B2) Two broad trends account for much of the change in poor families’ consumption over the past generation: federal programs and falling prices.
Since the 1960s, both Republican and Democratic administrations have expanded programs like food stamps and the earned-income tax credit. In 1967, government programs reduced one major poverty rate by about 1 percentage point. In 2012, they reduced the rate by nearly 13 percentage points.
As a result, the differences in what poor and middle-class families consume on a day-to-day basis are much smaller than the differences in what they earn.
“There’s just a whole lot more assistance per low-income person than there ever has been,” said Robert Rector, a senior research fellow at the conservative Heritage Foundation. “That is propping up the living standards to a considerable degree,” he said, citing a number of statistics on housing, nutrition and other categories.
. . .
. . . another form of progress has led to what some economists call the “Walmart effect”: falling prices for a huge array of manufactured goods.
Since the 1980s, for instance, the real price of a midrange color television has plummeted about tenfold, and televisions today are crisper, bigger, lighter and often Internet-connected. Similarly, the effective price of clothing, bicycles, small appliances, processed foods — virtually anything produced in a factory — has followed a downward trajectory. The result is that Americans can buy much more stuff at bargain prices.

For the full story, see:
ANNIE LOWREY. “Changed Life of the Poor: Better Off, but Far Behind.” The New York Times (Mon., May 1, 2014): A1 & B2 (sic).
(Note: ellipses added.)
(Note: the online version of the story has the date APRIL 30, 2014, and has the title “Changed Life of the Poor: Better Off, but Far Behind.”)

The Invention of the Vacuum Tube as a Revolutionary Event

(p. A11) Mr. Bryce’s engrossing survey has two purposes. The first is to refute pessimists who claim that technology-driven economic growth will burn through the planet’s resources and lead to catastrophe. “We are living in a world equipped with physical-science capabilities that stagger the imagination,” he writes. “If we want to bring more people out of poverty, we must embrace [technological innovation], not reject it.” The book’s other purpose is to persuade climate-change fundamentalists that they are standing on the wrong side of history. Instead of saving the planet by going backward to Don Quixote’s windmills, they need to take a progressive approach to technology itself, he says, striving to make nuclear power safer, for instance, and using the hydrocarbon revolution sparked by fracking and deep-offshore exploration to bridge the way to the future.
. . .
Mr. Bryce focuses in particular on the vacuum tube, designed in 1906 by Lee de Forest, the man also credited with inventing the radio.
The discovery of the vacuum tube, Mr. Bryce says, was a revolutionary event. By trapping the energy generated from the free flow of electrons and directing it to boost a small AC current into a much larger one, de Forest created electric amplification–which the transistor and integrated circuit would multiply exponentially.

For the full review, see:
ARTHUR HERMAN. “BOOKSHELF; How to Defuse the Power Elite; To compel the switch from fossil fuels to wind and solar power is to consign billions of people to a life of poverty and darkness.” The Wall Street Journal (Thurs., May 22, 2014): A11.
(Note: ellipsis added.)
(Note: the online version of the review has the date May 21, 2014, and has the title “BOOKSHELF; Book Review: ‘Smaller Faster Lighter Denser Cheaper’ by Robert Bryce; To compel the switch from fossil fuels to wind and solar power is to consign billions of people to a life of poverty and darkness.”)

The book being reviewed is:
Bryce, Robert. Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong. New York: PublicAffairs, 2014.

Nevada Government Lets Tesla Sell Directly to Consumers

(p. A13) . . . in addition to rubber-stamping the agreement that waived Tesla’s property, sales and business taxes for a decade or more–while throwing in discount power rates–the Nevada legislature also approved a bill last week that would exempt the auto maker from franchising regulations outlawing the company’s retail approach. The state’s auto dealers, who only weeks ago threatened to sue over the matter, shifted gears and endorsed the legislation.
“My car dealers want to assist in any way they can,” John Sande of the Nevada Franchise Auto Dealers Association told the Reno Gazette Journal. “Nevada law does not allow Tesla to come in and sell directly to the consumer, so we are going to have to come in and change it so they can sell directly to the consumer.”
No doubt the dealers balanced the pros and cons of agitating for their own self-interest against overwhelming political support for the deal and the spending potential of thousands of new, well-paid workers who may prefer a Ford or Chevy pickup over a $70,000 Tesla Model S. But the fact that Nevada legislators so quickly jettisoned a key provision of the state’s dealership-franchise provisions speaks volumes about how essential these statutes really are to the well-being of their constituents.
There is no rational reason Tesla–or any other automobile manufacturer–should be restricted from selling new cars directly to those who seek to buy them.

For the full commentary, see:
JOHN KERR. “OPINION; Tesla Breaks the Auto Dealer Cartel; Nevada lets the electric car maker sell directly to consumers. Too bad everyone else still can’t.” The Wall Street Journal (Weds., Sept. 17, 2014): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Sept. 16, 2014.)

Apprenticeships as an Alternative to Education Credentials

(p. R3) College degrees and internships don’t produce the same quality of worker as intensive, on-the-job apprenticeships, says Brad Neese, director of Apprenticeship Carolina, a program of the South Carolina Technical College System. Employers are seeing “a real lack of applicability in terms of skill level” from college graduates, Mr. Neese says. “Interns do grunt work, generally.” In contrast, he says, “an apprenticeship is a real job.”
. . .
“The apprenticeship model helps us show people there’s a career path within this company,” says Robby Hill, owner of HillSouth, a Florence, S.C., technology consulting firm taking advantage of South Carolina’s on-the-job training program. New employees see the opportunities ahead, along with a clearly delineated ladder of skill acquisition and salary increases, says Mr. Hill, whose 22-person firm offers apprenticeships for IT and administrative-support employees. The company also asks employees to sign noncompete agreements as they get accredited for new skills.

For the full story, see:
LAUREN WEBER. “JOURNAL REPORTS: LEADERSHIP IN HR; Here’s One Way to Solve the Skills Gap. Apprenticeships Can Help Give Companies the Employees They Need. So Why Aren’t There More of Them.” The Wall Street Journal (Mon., April 28, 2014): R3.
(Note: ellipsis added.)
(Note: the online version of the story has the date April 27, 2014, and has the title “JOURNAL REPORTS: LEADERSHIP; Apprenticeships Help Close the Skills Gap. So Why Are They in Decline? Some States Try Extending the Practice to More Professions.”)

French Socialist Wants to Encourage Entrepreneurs by Reducing Regulations

MacronFrenchSocialist2014-10-07.jpg “Emmanuel Macron, France’s new economy minister, has been a major force behind a recent shift by President François Hollande toward a more centrist economic policy.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) . . . , what is important, Mr. Macron said, as a late train from the nearby Gare de Lyon rumbled beneath his window, is that France continue to streamline and modernize the welfare state.

“For me being a Socialist today is about defending the unemployed, but also defending businessmen who want to create a company, and those who need jobs,” he said. “We have to shift the social model from a lot of formal protections toward loosening bottlenecks in the economy.”

For the full story, see:
LIZ ALDERMAN. “France’s 36-Year-Old Economy minister Is Face of the New Socialism.” The New York Times (Tues., OCT. 7, 2014): B3.
(Note: ellipsis added.)
(Note: the online version of the story has the date OCT. 6, 2014, and has the title “Emmanuel Macron, Face of France’s New Socialism.”)

We Feel Safer When We Have More Personal Control

(p. C3) So how should we approach risk? The numbers can help, especially if we simplify them. For acute risks, a good measure is the MicroMort, devised by Stanford’s Ronald A. Howard in the 1970s. One MicroMort (1 MM) is equal to a one-in-a-million chance of death.
. . .
In truth, “Don’t do that, it’s dangerous!” is about much more than the numbers. We must also reflect on the full basis for our preferences–such as, to take one small psychological characteristic among many, what we value in life, as well as what we fear.
. . .
In fact, the numbers tend to have the effect of highlighting the psychological factors. Take traveling. For 1 MM, you can drive 240 miles in the U.S., fly 7,500 miles in a commercial aircraft or fly just 12 miles in a light aircraft. We tend to feel safer if we feel more personal control, but we have no control whatsoever in a passenger jet, the safest of all (notwithstanding last week’s terrible tragedy). You could take that as evidence of human irrationality. We take it as evidence that human motives matter more than the pure odds allow.

For the full commentary, see:
MICHAEL BLASTLAND and DAVID SPIEGELHALTER. “Risk Is Never a Strict Numbers Game; We tell children to shun ecstasy but don’t fret about horseback riding–and other foibles of our view of danger.” The Wall Street Journal (Sat., July 19, 2014): C3.
(Note: ellipses in original.)
(Note: the online version of the commentary has the date July 18, 2014.)

The passages quoted above were from a commentary adapted from the book:
Blastland, Michael, and David Spiegelhalter. The Norm Chronicles: Stories and Numbers About Danger and Death. New York: Basic Books, 2014.

Boring Jobs Cause Stress and Lower Productivity

(p. B4) A study published this year in the journal Experimental Brain Research found that measurements of people’s heart rates, hormonal levels and other factors while watching a boring movie — men hanging laundry — showed greater signs of stress than those watching a sad movie.
“We tend to think of boredom as someone lazy, as a couch potato,” said James Danckert, a professor of neuroscience at the University of Waterloo in Ontario, Canada, and a co-author of the paper. “It’s actually when someone is motivated to engage with their environment and all attempts to do so fail. It’s aggressively dissatisfying.”
It’s not just the amount of work, Professor Spector said, also but the type.   . . .
“You can be very busy and a have a lot to do and still be bored,” he said. The job — whether a white-collar managerial position or blue-collar assembly line role — also needs to be stimulating.
. . .
In a 2011 paper based on the doctoral dissertation of his student Kari Bruursema, Professor Spector and his co-authors found that the stress of boredom can lead to counterproductive work behavior, like calling in sick, taking long breaks, spending time on the Internet for nonwork-related reasons, gossiping about colleagues, playing practical jokes or even stealing. While most workers engage in some of these activities at times, the bored employee does it far more frequently, he said.

For the full story, see:
ALINA TUGEND. “Shortcuts; The Contrarians on Stress: It Can Be Good for You.” The New York Times (Sat., OCT. 4, 2014): B4.
(Note: ellipsis added.)
(Note: the online version of the story has the date OCT. 3, 2014.)

The Experimental Brain Research study mentioned above, is:
Merrifield, Colleen, and James Danckert. “Characterizing the Psychophysiological Signature of Boredom.” Experimental Brain Research 232, no. 2 (Feb. 2014): 481-91.

The article mentioned above, that is co-authored by Spector, is:
Bruursema, Kari, Stacey R. Kessler, and Paul E. Spector. “Bored Employees Misbehaving: The Relationship between Boredom and Counterproductive Work Behaviour.” Work & Stress 25, no. 2 (April 2011): 93-107.

Mexicans Abandon Government Subsidized Housing Developments

(p. A5) ZUMPANGO, Mexico — In an enormous housing development on the edge of this scrappy commuter town, Lorena Serrano’s 11-foot-wide shoe box of a home is flanked by abandoned houses. The neighborhood has two schools, a few bodegas and a small community center that offers zumba classes.
There is very little else.
“There are no jobs, no cinema, no cantina,” said Ms. Serrano of the 8,000-home development, called La Trinidad. Her husband’s commute to the capital, Mexico City, about 35 miles south, takes two hours each way by bus and consumes a quarter of his salary, she said. “We’re in the middle of nowhere.”
Ms. Serrano, 39, is among more than five million Mexicans who, over the past decade, bought houses through a government program that made mortgages available to low-income buyers.
The program, initially hailed by some experts as the answer to Mexico’s chronic housing deficit, fueled a frenzy of construction and helped inspire similar efforts in Latin America and beyond, including Brazil’s “My House, My Life,” which aims to build at least 3 million homes by this year.
But the concrete sprawl around Mexico City and other big towns grew faster than demand. Commutes proved unbearable, and residents abandoned their homes.

For the full story, see:
VICTORIA BURNETT. “ZUMPANGO JOURNAL; They Built It. People Came. Now They Go.” The New York Times (Tues., SEPT. 9, 2014): A5.
(Note: the online version of the story has the date SEPT. 8, 2014.)

Labor Process Innovations Increased Productivity

(p. 6) . . . , Greg Clark, a professor of economics at the University of California, Davis, has gone so far as to argue that the Industrial Revolution was in part a self-control revolution. Many economists, beginning with Adam Smith, have argued that factories — an important innovation of the Industrial Revolution — blossomed because they allowed workers to specialize and be more productive.
Professor Clark argues that work rules truly differentiated the factory. People working at home could start and finish when they wanted, a very appealing sort of flexibility, but it had a major drawback, he said. People ended up doing less work that way.
Factories imposed discipline. They enforced strict work hours. There were rules for when you could go home and for when you had to show up at the beginning of your shift. If you arrived late you could be locked out for the day. For workers being paid piece rates, this certainly got them up and at work on time. You can even see something similar with the assembly line. Those operations dictate a certain pace of work. Like a running partner, an assembly line enforces a certain speed.
As Professor Clark provocatively puts it: “Workers effectively hired capitalists to make them work harder. They lacked the self-control to achieve higher earnings on their own.”
The data entry workers in our study, centuries later, might have agreed with that statement. In fact, 73 percent of them did agree to this statement: “It would be good if there were rules against being absent because it would help me come to work more often.”
Of course with newer forms of technology, showing up for work on time need not mean being physically at a given workplace. A study by the economists Nicholas Bloom, John Roberts and Zhichun Ying of Stanford and James Liang of Peking University looked at call center workers in China. In their experiment, some workers were randomly assigned to work at home, others worked in group call centers. The work habits of both groups were carefully monitored electronically, and the workers knew it. The researchers found that those working at home were 13 percent more productive than those in call centers. With modern technology, we now have so many ways to quantify, track and motivate productivity. We do not need to lock factory doors or even have a factory. Yet we have not yet begun to scratch the surface of motivating production in this way.

For the full commentary, see:
SENDHIL MULLAINATHAN. “Economic View; Looking at Productivity as a State of Mind.” The New York Times, SundayBusiness Section (Sun., SEPT. 28, 2014): 6.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date SEPT. 27, 2014.)

The article mentioned above by Clark is:
Clark, Gregory. “Factory Discipline.” Journal of Economic History 54, no. 1 (March 1994): 128-63.

The article mentioned above by Bloom, Liang, Roberts and Ying is:
Bloom, Nicholas, James Liang, John Roberts, and Zhichun Jenny Ying. “Does Working from Home Work? Evidence from a Chinese Experiment.” August 18, 2014.