Economics – Page 162 – artdiamondblog.com

Ending U.S. Sugar Import Quotas Would Create 20,000 U.S. Jobs in Food Manufacturing

“Erin Calvo-Bacci, the owner of a candy shop, the Chocolate Truffle, in Reading, Mass., lamented the cost of American sugar.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A14) READING, Mass. — Inside the Chocolate Truffle candy shop in this Boston suburb are chocolate pizzas, chocolate buffalo wings, even a chocolate wingtip shoe. The owner, Erin Calvo-Bacci, would like to expand her business close to home, but is instead thinking of moving her operations to Canada, where the sugar essential for her products costs far less.

“We are committed to offering locally made affordable products, but the cost of sugar is driving manufacturers out of the country,” Ms. Calvo-Bacci said, echoing other American candy producers, like the maker of Dum Dum lollipops, that are moving jobs to Mexico to take advantage of the lower sugar prices there.
Candy makers say the culprit is the federal sugar program, a combination of import restrictions, production quotas and loan programs dating to the 1930s, all designed to keep the price of American sugar well above that of the world market. Now the program is at the center of an intensifying battle as the House and Senate open formal negotiations this week on a long-delayed farm bill.
The price for one type of sugar, wholesale refined beet sugar, averaged 43.4 cents per pound at Midwest markets last year, the Agriculture Department reported, compared with 26.5 cents per pound for the world refined sugar price.
. . .
. . . sugar producers, bolstered by lawmakers from sugar-beet-producing states like Minnesota and sugarcane states like Florida, have spent an estimated $20 million since 2011 to block efforts to change the program. . . . Small candy makers, bakers and others who have lobbied Congress for lower prices say that taking on the sugar lobby is like taking on Goliath.
“We were no match for the sugar people,” said Judy Hilliard McCarthy, an owner of Hilliard’s House of Candy, a candy maker just outside Boston. Ms. McCarthy said she had made several trips to Washington to lobby on behalf of the industry.
Government and academic studies support claims by candy makers that the sugar program has had an impact on the industry. A widely cited 2006 study by the Commerce Department and a 2011 Iowa State University study found that the price supports had led to job losses among candy makers.
In particular, the Commerce Department study found that three candy-making jobs were lost for each job growing or processing sugar that was saved by higher prices. The Iowa State study found that eliminating price supports and quotas for sugar would create about 20,000 jobs for American food processors, bakeries and candy makers.

For the full story, see:
RON NIXON. “Candy Makers, Pinched by Inflated Sugar Prices in the U.S., Look Abroad.” The New York Times (Thurs., October 31, 2013): A14.
(Note: ellipses added.)
(Note: the online version of the article has the date October 30, 2013, and has the title “American Candy Makers, Pinched by Inflated Sugar Prices, Look Abroad.”)

The latest version of the John Beghin Iowa State report, mentioned above, is:
Beghin, John C., and Amani Elobeid. “The Impact of the U.S. Sugar Program Redux.” Working Paper No. 13010. Iowa State University, Department of Economics, Staff General Research Papers, May 2013.

“Sugar was poured to make a confection for Hilliard’s House of Candy, just outside Boston, whose owner has lobbied officials.” Source of caption and photo: online version of the NYT article quoted and cited above.

“Carnegie Watched, Listened, Learned” from Scott’s Process Innovations

(p. 65) Later in life, Scott would be better known for his political skills, but he was, like his mentor Thomson, a master of cost accounting. Together, the two men steadily cut unit costs and increased revenues by investing in capital improvements–new and larger locomotives, better braking systems, improved tracks, new bridges. Instead of running several smaller trains along the same route, they ran fewer but longer trains with larger locomotives and freight cars. To minimize delays–a major factor in escalating costs–they erected their own telegraph lines, built a second track and extended sidings alongside the first one, and kept roadways, tunnels, bridges, and crossings in good repair.
Carnegie watched, listened, learned. Nothing was lost on the young man. With an exceptional memory and a head for figures, he made the most of his apprenticeship and within a brief time was acting more as Scott’s deputy than his assistant. Tom Scott had proven to be so good at his job that when Pennsylvania Railroad vice president William Foster died unexpectedly of an infected carbuncle, Scott was named his successor.

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

“Western Union Bullied the Makers of Public Policy into Serving Private Capital”

Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) Until now there has been no full-scale, modern company history. Joshua D. Wolff’s “Western Union and the Creation of the American Corporate Order, 1845-1893” ably fills the bill, offering an exhaustive and yet fascinating account.
. . .
If people today remember anything about Western Union, it is that its coast-to-coast line put the Pony Express out of business and that its leaders didn’t see the telephone coming. Mr. Wolff tells us that neither claim is exactly true. It was Hiram Sibley, Western Union’s first president, who went out on his own, when his board balked, to form a separate company and build the transcontinental telegraph in 1861; he made his fortune by eventually selling it to Western Union. And the company was very aware of Alexander Graham Bell’s invention, patented in 1876, but history had supposedly shown that it wasn’t necessary to control a patent to win the technology war. The company’s third president, William Orton, was sure that Bell and his “toy” would not get the better of Western Union: “We would come along and take it away from him.” They didn’t.
. . .
Mr. Wolff contends that the company’s practices set the template for today’s “corporate triumphalism,” not least in the way Western Union bullied the makers of public policy into serving private capital. Perhaps, but telecom competition today is so ferocious and differently arranged from that of the late 19th century that a “triumphant” company today may be toast tomorrow–think of BlackBerry–and can’t purchase help with anything like Western’s Union’s brazenness and scope. Western Union had friends in Congress, the regulatory bureaucracy and the press. Members of the company’s board of directors chaired both the 1872 Republican and Democratic national conventions. It seemed that, whatever the battles in business, politics, technology or the courts, the company’s shareholders won.

For the full review, see:
STUART FERGUSON. “Bookshelf; The Octopus of the Wires.” The Wall Street Journal (Mon., Dec. 23, 2013): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date Dec. 22, 2013, and has the title “BOOKSHELF; Book Review: ‘Western Union and the Creation of the American Corporate Order, 1845-1893,’ by Joshua D. Wolff.”)

Book under review:
Wolff, Joshua D. Western Union and the Creation of the American Corporate Order, 1845-1893. New York: Cambridge University Press, 2013.

Over-Regulated Tech Entrepreneurs Seek Their Own Country

The embed above is provided by YouTube where the video clip is posted under the title “Balaji Srinivasan at Startup School 2013.”

(p. B4) At a startup conference in the San Francisco Bay area last month, a brash and brilliant young entrepreneur named Balaji Srinivasan took the stage to lay out a case for Silicon Valley’s independence.

According to Mr. Srinivasan, who co-founded a successful genetics startup and is now a popular lecturer at Stanford University, the tech industry is under siege from Wall Street, Washington and Hollywood, which he says he believes are harboring resentment toward Silicon Valley’s efforts to usurp their cultural and economic power.
On its surface, Mr. Srinivasan’s talk,called “Silicon Valley’s Ultimate Exit,”sounded like a battle cry of the libertarian, anti-regulatory sensibility long espoused by some of the tech industry’s leading thinkers. After arguing that the rest of the country wants to put a stop to the Valley’s rise, Mr. Srinivasan floated a plan for techies to build an “opt-in society, outside the U.S., run by technology.”
His idea seemed a more expansive version of Google Chief Executive Larry Page’s call for setting aside “a piece of the world” to try out controversial new technologies, and investor Peter Thiel’s “Seastead” movement, which aims to launch tech-utopian island nations.

For the full commentary, see:
FARHAD MANJOO. “HIGH DEFINITION; The Valley’s Ugly Complex.” The Wall Street Journal (Mon., Nov. 4, 2013): B4.
(Note: the online version of the commentary has the date Nov. 3, 2013, and has the title “HIGH DEFINITION; Silicon Valley Has an Arrogance Problem.”)

Farm Land Reverts to Forest as Farmers Move to Cities

“NEW GROWTH; Marta Ortega de Wing once raised pigs in Chilibre, Panama, on land now reverting to nature, a trend dimming the view of primeval forests as sacred.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) CHILIBRE, Panama — The land where Marta Ortega de Wing raised hundreds of pigs until 10 years ago is being overtaken by galloping jungle — palms, lizards and ants.

Instead of farming, she now shops at the supermarket and her grown children and grandchildren live in places like Panama City and New York.
Here, and in other tropical countries around the world, small holdings like Ms. Ortega de Wing’s — and much larger swaths of farmland — are reverting to nature, as people abandon their land and move to the cities in search of better livings.
These new “secondary” forests are emerging in Latin America, Asia and other tropical regions at such a fast pace that the trend has set off a serious debate about whether saving primeval rain forest — an iconic environmental cause — may be less urgent than once thought. By one estimate, for every acre of rain forest cut down each year, more than 50 acres of new forest are growing in the tropics on land that was once farmed, logged or ravaged by natural disaster.
“There is far more forest here than there was 30 years ago,” said Ms. Ortega de Wing, 64, who remembers fields of mango trees and banana plants.
The new forests, the scientists argue, could blunt the effects of rain forest destruction by absorbing carbon dioxide, the leading heat-trapping gas linked to global warming, one crucial role that rain forests play. They could also, to a lesser extent, provide habitat for endangered species.

For the full story, see:
ELISABETH ROSENTHAL. “New Jungles Prompt a Debate on Saving Primeval Rain Forests.” The New York Times (Fri., January 30, 2009): A1 & A10.
(Note: ellipses added.)
(Note: the online version of the article has the date January 29, 2009 and has the title “New Jungles Prompt a Debate on Rain Forests.”)

After First “Debilitating” Federal Funding, Morse Funded Telegraph Privately

(p. 37) The first telegraph line had been completed . . . , in 1844, when Samuel F. B. Morse, with $30,000 in federal funding, connected Washington to Baltimore. Morse and his partners had expected to get funding to build additional lines from the federal government, but their experience securing their first $30,000 had been so debilitating that they gave up entirely on the public sector and turned to private capital to fund their new telegraph lines. Henry O’Rielly secured the franchise and agreed to raise the capital to string telegraph poles from east to west. His plan was to extend one line from Buffalo to Chicago, the other across the Alleghenies from Philadelphia through Pittsburgh, to St. Louis, and then north to Chicago, and south to New Orleans.
Although customers were scarce and the first telegraph lines were continually breaking (or being broken by bands of boys who took great joy in throwing stones at the glass insulators that glistened in the sunlight), O’Rielly and the handful of entrepreneurs who believed in the future of telegraphy raised sufficient capital to extend their lines mile by mile. By late 1846, they had also connected Boston to Washington, via New York City and Philadelphia; New York City to Buffalo, through Albany; and in late December, Philadelphia to Pittsburgh, via Lancaster and Harrisburg.

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: ellipsis added.)
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

Regulators Harass Saucy and Irreverent Buckyball Entrepreneur

“Craig Zucker, former head of Maxfield & Oberton, which made Buckyballs, sells Liberty Balls to raise a legal-defense fund against an unusual action by federal regulators.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) Over the last three weeks, more than 2,200 people have placed orders for $10-to-$40 sets of magnetic stacking balls, rising to the call of a saucy and irreverent social media campaign against a government regulatory agency.
. . .
It involves an effort by the federal Consumer Product Safety Commission to recall Buckyballs, sets of tiny, powerfully magnetic stacking balls that the magazines Rolling Stone and People once ranked on their hot products lists.
Last year, the commission declared the balls a swallowing hazard to young children and filed an administrative action against the company that made the product, demanding it recall all Buckyballs, and a related product called Buckycubes, and refund consumers their money. The company, Maxfield & Oberton Holdings, challenged the action, saying labels on the packaging clearly warned that the product was unsafe for children.
But the fuss now has less to do with safety. After Maxfield & Oberton went out of business last December, citing the financial toll of the recall battle, lawyers for the product safety agency took the highly unusual step of adding the chief executive of the dissolved firm, Craig Zucker, as a respondent in the recall action, arguing that he con-
(p. B6)trolled the company’s activities. Mr. Zucker and his lawyers say the move could ultimately make him personally responsible for the estimated recall costs of $57 million.
While the “responsible corporate officer” doctrine (also known as the Park doctrine) has been used frequently in criminal cases, allowing for prosecutions of individual company officers in cases asserting corporate wrongdoing, experts say its use is virtually unheard-of in an administrative action where no violations of law or regulations are claimed.
. . .
Three well-known business organizations — the National Association of Manufacturers, the National Retail Federation and the Retail Industry Leaders Association — banded together this summer to file a brief urging the administrative law judge reviewing the recall case to drop Mr. Zucker as a respondent.
The groups argue that holding an individual responsible for a widespread, expensive recall sets a disturbing example and runs counter to the business desire for limited liability. They contend that such risk would have a detrimental effect on entrepreneurism and openness in dealing with regulatory bodies.
. . .
Conservative legal groups like Cause of Action, a nonprofit that targets what it considers governmental overreach, have been watching the proceedings with interest and weighing taking some action.
“This really punishes entrepreneurship and establishes a bad precedent for businesses working to create products for consumers,” said Daniel Z. Epstein, the group’s executive director. “It undermines the business community’s ability to rely upon the corporate form.”

For the full story, see:
HILARY STOUT. “In Regulators’ Sights; Magnetic-Toy Recall Gives Rise to Wider Legal Campaign.” The New York Times (Fri., November 1, 2013): B1 & B6.
(Note: ellipses added.)
(Note: the online version of the article has the date October 31, 2013, and has the title “Buckyball Recall Stirs a Wider Legal Campaign.”)

Carnegies Liked Pittsburgh Area’s Growing Economy and Flexible Labor Market

(p. 32) For all its Old World charms, Dunfermline too had had its epidemics, its scavenging rodents, muddy streets, and clean water shortages. The reason why the Hogans and the Aitkins and the Carnegies and thousands like them had come to the United States in general, and the Pittsburgh area in particular, had less to do with health, hygiene, or the physical environment than with an abundance of well-paid jobs. In this respect, Pittsburgh and Allegheny City were everything that Dunfermline was not: their markets for manufactured goods were expanding rapidly, their economies were diversified, and there were no craft restrictions on the employment of skilled artisans.

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

Amazon’s User Reviews Increase Rationality of Consumer Choices

Source of book image: http://2.bp.blogspot.com/-dNUZ_u-GWSk/UpqE0zmFQQI/AAAAAAAAAko/Z8uisfEjgRc/s1600/Absolute+Value+cover.png

(p. 3) You are no longer the sucker you used to be.

So suggests continuing research from the Stanford Graduate School of Business into the challenges marketers face in reaching consumers in the digital age. As you might suspect, the research shows that a wealth of online product information and user reviews is causing a fundamental shift in how consumers make decisions.
As consumers rely more on one another, the power of marketers is being undermined, said Itamar Simonson, a Stanford marketing professor and the lead researcher.
. . .
To get the full impact of the findings, you first have to know the conclusions of a similar experiment decades ago by Dr. Simonson, . . . . . . .
The researchers found that when study subjects had only two choices, most chose the less expensive camera with fewer features. But when given three choices, most chose the middle one. Dr. Simonson called it “the compromise effect” — the idea that consumers will gravitate to the middle of the options presented to them.
. . .
Flash forward to the new experiment. It was similar to the first, except that consumers could have a glimpse at Amazon. That made a huge difference. When given three camera options, consumers didn’t gravitate en masse to the midprice version. Rather, the least expensive one kept its share and the middle one lost more to the most expensive one.
“The compromise effect was gone,” said Dr. Simonson, or, rather, he nearly exclaimed the absence of the effect, underscoring his surprise at the findings. They are to be published next month in “Absolute Value,” a book by Dr. Simonson and Emanuel Rosen.
Today, products are being evaluated more on their “absolute value, their quality,” Dr. Simonson said. Brand names mean less.

For the full story, see:
MATT RICHTEL. “APPLIED SCIENCE; There’s Power in All Those User Reviews.” The New York Times, SundayBusiness Section (Sun., December 8, 2013): 3.
(Note: ellipses added.)
(Note: the online version of the article has the date December 7, 2013.)

The new research is reported in:
Simonson, Itamar, and Emanuel Rosen. Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information. New York: HarperBusiness, 2014.

Functional Stupidity Management

(p. 1194) In this paper we question the one-sided thesis that contemporary organizations rely on the mobilization of cognitive capacities. We suggest that severe restrictions on these capacities in the form of what we call functional stupidity are an equally important if under-recognized part of organizational life. Functional stupidity refers to an absence of reflexivity, a refusal to use intellectual capacities in other than myopic ways, and avoidance of justifications. We argue that functional stupidity is prevalent in contexts dominated by economy in persuasion which emphasizes image and symbolic manipulation. This gives rise to forms of stupidity management that repress or marginalize doubt and block communicative action. In turn, this structures individuals’ internal conversations in ways that emphasize positive and coherent narratives and marginalize more negative or ambiguous ones. This can have productive outcomes such as providing a degree of certainty for individuals and organizations. But it can have corrosive consequences such as creating a sense of dissonance among individuals and the organization as a whole. The positive consequences can give rise to self-reinforcing stupidity. The negative consequences can spark dialogue, which may undermine functional stupidity.

Source of paper abstract:
Alvesson, Mats, and André Spicer. “A Stupidity-Based Theory of Organizations.” Journal of Management Studies 49, no. 7 (Nov. 2012): 1194-220.

Wind Power Increases Government Corruption

“Kathy Laclair of Churubusco, N.Y., dislikes the noise from the wind turbine blades and says their shadows give her vertigo.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) Lured by state subsidies and buoyed by high oil prices, the wind industry has arrived in force in upstate New York, promising to bring jobs, tax revenue and cutting-edge energy to the long-struggling region. But in town after town, some residents say, the companies have delivered something else: an epidemic of corruption and intimidation, as they rush to acquire enough land to make the wind farms a reality.

“It really is renewable energy gone wrong,” said the Franklin County district attorney, Derek P. Champagne, who began a criminal inquiry into the Burke Town Board last spring and was quickly inundated with complaints from all over the state about the (p. A16) wind companies.
. . .
. . . corruption is a major concern. In at least 12 counties, Mr. Champagne said, evidence has surfaced about possible conflicts of interest or improper influence.
In Prattsburgh, N.Y., a Finger Lakes community, the town supervisor cast the deciding vote allowing private land to be condemned to make way for a wind farm there, even after acknowledging that he had accepted real estate commissions on at least one land deal involving the farm’s developer.
A town official in Bellmont, near Burke, took a job with a wind company after helping shepherd through a zoning law to permit and regulate the towers, according to local residents. And in Brandon, N.Y., nearby, the town supervisor told Mr. Champagne that after a meeting during which he proposed a moratorium on wind towers, he had been invited to pick up a gift from the back seat of a wind company representative’s car.
When the supervisor, Michael R. Lawrence, looked inside, according to his complaint to Mr. Champagne, he saw two company polo shirts and a leather pouch that he suspected contained cash.
When Mr. Lawrence asked whether the pouch was part of the gift, the representative replied, “That’s up to you,” according to the complaint.

For the full story, see:
NICHOLAS CONFESSORE. “In Rural New York, Windmills Can Bring Whiff of Corruption.” The New York Times (Mon., August 18, 2008): A1 & A16.
(Note: ellipses added.)
(Note: the online version of the article has the date August 17, 2008.)

“To some upstate towns, wind power promises prosperity. Others fear noise, spoiled views and the corrupting of local officials.” Source of caption and photo: online version of the NYT article quoted and cited above.