Category: Economics

When Labor Market Regulations Increase, Firms Hire Fewer Workers

(p. B5) “It’s serial stagnation,” said Nicola Borri, a finance professor at Luiss, a university in Rome. “The economy doesn’t contract, it doesn’t grow. Italy is a country that is weak, that is old, where there is no investment in new ideas.”

. . .

Thirty-five miles east of Naples, in the town of Avellino, Sabino Basso has halted plans to hire 30 more people at the olive oil bottling plant started by his great-grandfather.

Mr. Basso’s company buys olive oil from growers in Italy, Spain and Greece, exporting 80 percent of its wares to countries around the globe — especially the United States, where Walmart is a major customer. He had planned to increase marketing and online sales.

But then Five Star tightened legal requirements for companies that hire workers on temporary contracts, effectively limiting stints to one year. The change was aimed at forcing businesses to hire permanent workers.

Mr. Basso was aghast. All but five of his 100 workers are permanent, he said. The others are apprentices, a status that has allowed him to hire using temporary contracts.

“In order to understand if I want to keep people their whole lives, I have to test them,” he said. The new rules did not allow him sufficient time. “I just stopped hiring.”

For the full story, see:

Peter S. Goodman. “History, Views and ‘Serial Stagnation’.” The New York Times (Saturday, Aug. 10, 2019): B1 & B5.

(Note: ellipsis added.)

(Note: the online version of the story has the date Aug. 9, 2019, and has the title “Italy’s Biggest Economic Problem? It’s Still Italy.”)

A.I. Needs Human Beings to Collect Right Data and Write Sound Algorithms

(p. A1) SEATTLE — The company called One Concern has all the characteristics of a buzzy and promising Silicon Valley start-up: young founders from Stanford, tens of millions of dollars in venture capital and a board with prominent names.

Its particular niche is disaster response. And it markets a way to use artificial intelligence to address one of the most vexing issues facing emergency responders in disasters: figuring out where people need help in time to save them.

. . .

But when T.J. McDonald, who works for Seattle’s office of emergency management, reviewed a simulated earthquake on the company’s damage prediction platform, he spotted problems. A popular big-box store was grayed out on the web-based map, meaning there was no analysis of the conditions there, and shoppers and workers who might be in danger would not receive immediate help if rescuers relied on One Concern’s results.

“If that Costco collapses in the middle of the day, there’s going to be a lot of people who are hurt,” he said.

The error? The simulation, the company acknowledged, missed many commercial areas because damage calculations relied largely on residential census data.

For the full story, see:

Sheri Fink. “A Tech Answer To Disaster Aid Is Falling Short.” The New York Times (Saturday, Aug. 10, 2019): A1 & A14.

(Note: ellipsis added.)

(Note: the online version of the story has the date Aug. 9, 2019, and has the title “This High-Tech Solution to Disaster Response May Be Too Good to Be True.”)

Evidence That Patents Do Not Holdup Innovation

(p. A17) The trade war has highlighted the competitive advantage of reliable patent rights in driving innovation, prompting a bipartisan effort in Congress to strengthen patents.

. . .

Yet the FTC doesn’t seem to have received the message. It continues to push regulatory policies and undertake enforcement actions based on the story that bad actors licensing their patents somehow are stopping companies from making new innovative products and are harming consumers with higher prices. This idea that “patent holdup” raises prices and stifles innovation is based entirely on an academic theory first proposed in the Texas Law Review in 2007 by professors Mark Lemley and Carl Shapiro.

In contrast to the theory, extensive empirical research since 2007 has failed to find any of the predicted harms of stifled innovation or higher prices, and has in fact found the opposite. “An Empirical Examination of Patent Holdup,” published in 2015, found that industries like smartphone design with patents on foundational technologies have the fastest quality-adjusted price reductions in consumer products. A 2016 George Mason Law Review study also found consistent reductions in consumer prices, increased research-and-development spending, and incredibly fast technological innovation driven by patent licensing of key technologies in the smartphone industry.

For the full commentary, see:

Adam Mossoff. “The FTC Joins Huawei on a Misguided Troll Hunt; The commission’s lawsuit against Qualcomm threatens to undermine American innovation.” The Wall Street Journal (Saturday, Jan. 27, 2019): A17.

(Note: ellipsis added.)

(Note: the online version of the commentary has the same date and title as the print version.)

The 2016 George Mason Law Review study, mentioned above, is:

Mallinson, Keith. “Don’t Fix What Isn’t Broken: The Extraordinary Record of Innovation and Success in the Cellular Industry under Existing Licensing Practices.” George Mason Law Review 23, no. 4 (Summer 2016): 967-1006.

The 2015 paper mentioned above, is:

Galetovic, Alexander, Stephen Haber, and Ross Levine. “An Empirical Examination of Patent Holdup.” Journal of Competition Law and Economics 11, no. 3 (Sept. 2015): 549-78.

A related 2017 paper, is:

Galetovic, Alexander, and Stephen Haber. “The Fallacies of Patent-Holdup Theory.” Journal of Competition Law and Economics 13, no. 1 (March 2017): 1-44.

A Resource Is a Weed You Have Figured Out How to Use

(p. A1) With its warts, a messy sap that can sicken livestock and a tendency to grow in tall, mangy clumps that crowd out other plants, milkweed doesn’t enjoy a history of immortalization in oil paint.

. . .

(p. A10) Some makers of winter clothing are touting the white wispy floss in milkweed pods as a plant-based insulating material. Some forecasters say milkweed could yield $800 an acre this year, which Vermont farmers say is better than they get for most commodities.

. . .

Jaunty enough for the city and practical enough for the weekend cabin, he says, the “refined Canadian parka” sells for $850, the same as Quartz’s duck-down jacket. He says down is still popular but milkweed attracts customers intrigued by a “plant-based” insulator. “We were shocked by the interest we got.”

. . .

Milkweed’s sartorial use harks at least to World War II, when overseas supplies of kapok, an insulating fiber, were cut off. As a wartime substitute, the U.S. rallied civilians to pick milkweed pods for life jackets, says Gerald Wykes, a historian at the Monroe County Museum in Michigan.

After the war, for the most part milkweed went “back to its roots” as a humble weed, he says, because the ornery plant proved challenging to tame as a crop that could be grown in rows and harvested mechanically. The handpicking that went on in the war “wasn’t terribly efficient,” he says, and the rising use of synthetics lessened interest in all natural fibers.

Recently, says Ms. Darby, farmers have improved machinery that is designed to gently pick off milkweed pods without damaging the whole plant.

And milkweed has recently sprouted back into favor in some quarters because of its role not just as a green stuffing option but also as the key source of food for caterpillars of the embattled monarch butterfly.

For the full story, see:

Jennifer Levitz. “This Winter’s Hot Fashion: Parkas Stuffed With Vermont Weeds.” The Wall Street Journal (Thursday, Sept. 28, 2017): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date Sept. 27, 2017, and has the same title as the print version.)

“Charging Scooters Is a Great Job for Independent-Minded Entrepreneurs”

(p. 1B) Downtown Omaha resident Rob Luhrs spends his early mornings and late nights hunting for scooters.

Luhrs, 41, is a “juicer” of Lime scooters (“Lime juicer” — get it?) who charges scooters and then sets them out again around town. He said he makes about $60 a day, seven days a week, doing the work. During the College World Series, he said, he was making between $80 and $90 a day.

Luhrs also is an instructor of Brazilian jiu-jitsu and a part-time real estate broker who works for a grocery delivery service. But he said he hopes to make charging scooters his primary source of income.

(p. 2B) “I want to work when I want to,” he said. “When I want to take a day off, I don’t want anybody complaining about it, and if I work extra hard, I want to get paid more. I can’t just go apply to somewhere and get that job.”

. . .

Luhrs said charging scooters is a great job for “independent-minded entrepreneurs.”

“For me personally, I’m willing to spend time during the day picking up scooters and make it a full-time gig,” he said. “I see other people out there, during the daytime, picking up scooters, so I know that they’re trying to make it a full-time gig, too.”

For the full story, see:

Adam Cole. “Lime ‘Juicer’ Doesn’t Feel Squeezed by Late Hours Charging Scooters.” Omaha World-Herald (Thursday, Jul 4, 2019): 1B-2B.

(Note: ellipsis added.)

(Note: the online version of the story has the date Jul 3, 2019, and has the title “Unorthodox working hours don’t steer Lime ‘juicer’ away from job charging scooters in Omaha.”)

Patenting a Better Vacuum Tube as Semiconductors Emerge

After his disappointing improved-vacuum-tube invention (see below), Kates did not give up. He went on to make important contributions in coordinating traffic lights to ease traffic flows.

(p. A9) When he demonstrated a computer tic-tac-toe game called Bertie the Brain in 1950, Josef Kates thought he was on the verge of making a fortune. The game, introduced at the Canadian National Exhibition, featured streamlined vacuum tubes invented by the Austrian-born Dr. Kates, who came to Canada in the 1940s as a refugee from Nazism. He hoped the tubes would revolutionize computing.

His timing was off. The rise of semiconductors was about to render vacuum tubes obsolete as computer components. “I got the patent, but the patent was useless,” he said in an oral history. “Okay, so on goes the world.”

For the full obituary, see:

James R. Hagerty. “Refugee Crunched Data to Unsnarl Traffic Jams.” The Wall Street Journal (Saturday, July 28, 2018): A9.

(Note: the online version of the obituary has the date July 27, 2018, and has the title “Josef Kates Found Ways to Unsnarl Traffic and Solve Business Problems With Computers.”)

75% “of All Wealth Is Created Anew in Each Generation”

(p. A17) Despite the liberal background of the author, however, “A Century of Wealth in America” offers comfort and support to those who favor less wealth taxation. A core element of Mr. Piketty’s indictment of contemporary wealth inequality was his claim that inheritance is the major source of wealth; he estimated that, given the slower economic growth that most economists anticipate in the future, inherited wealth would soon constitute 90% of wealth in economies such as that of the United States. But Mr. Wolff finds that, for modern America, wealth inheritance explains a much more modest share of private wealth: In 1989-2013, it was 23% on average. In other words, more than three-quarters of all wealth is created anew in each generation in the U.S. . . .

Even more surprising, inherited wealth is much more important in the lives of those who have relatively little wealth than it is in the lives of the super rich. For the top 1% of wealth holders from 1989 to 2013, inherited wealth accounted for only 17% of their assets. (The 1%, in this analysis, is an overwhelmingly self-made group.) By contrast, for those with assets of just $25,000-$50,000, inherited wealth accounted for 52% of their worth.

As a bizarre consequence of this pattern, African-Americans, who have low levels of net worth on average, are the social group for which inherited wealth represents the largest share of their net worth. Another odd implication is that inheritances tend to make overall wealth-holding more equal. Were inherited wealth to be completely abolished, the wealth of the poor would decline more than that of the rich. Inherited wealth is the great equalizer. Who knew?

. . .

. . . , Mr. Wolff calculates that the rich are not systematically generating higher returns on their assets than more modest wealth holders. The top 1% had a real return on net worth of around 3% over the 30 years from 1983 to 2013—the same return as the average wealth holder.

For the full review, see:

Gregory Clark. “BOOKSHELF; How the Richest Got That Way; In the U.S. more than three-quarters of all wealth is created anew in each generation, and the ‘1%’ is an overwhelmingly self-made group.” The Wall Street Journal (Tuesday, December 12, 2017): A17.

(Note: ellipses added.)

(Note: the online version of the review has the date Dec. 11, 2017, and has the title “BOOKSHELF; Review: How the Richest Got That Way; In the U.S. more than three-quarters of all wealth is created anew in each generation, and the ‘1%’ is an overwhelmingly self-made group.”)

The book under review is:

Wolff, Edward N. A Century of Wealth in America. Cambridge, MA: Belknap Press, 2017.

Entrepreneurs Pooled Savings to Found Garmin

(p. B16) Gary Burrell, who with a fellow engineer founded Garmin, the navigational device company whose products can direct pilots in fog, prevent hikers from getting lost and help insomniacs track their sleep, died on June 12 [2019] at his home in Spring Hill, Kan.

. . .

Mr. Burrell (pronounced burr-ELL) was vice president of engineering for King Radio, an avionics company that made navigational devices, when he recruited Dr. Min H. Kao from Magnavox, another defense contractor. Dr. Kao had been instrumental in developing a GPS receiver for aircraft.

At the time, the government was opening up its Global Positioning System for civilian use, and the two men saw possibilities. Continue reading “Entrepreneurs Pooled Savings to Found Garmin”

High Palladium Prices Incentivize More Mining and Search for Substitutes

(p. B13) Palladium prices are at their highest level in nearly two decades, as investors bet that rising global growth will buoy automobile production and stoke demand for the rare metal.

. . .

Longer term, the auto industry may consider switching to platinum in gasoline engines if the price of palladium continues to climb, some market participants said.

Shree Kargutkar, portfolio manager at Sprott Asset Management, said he thinks platinum provides a better long-term value alternative to palladium given palladium’s sharp rise.

Still, changes in the automotive industry don’t pose an immediate threat to the rally, he said. Those shifts and mining companies’ efforts to bring more areas of supply on line to capitalize on higher prices are likely to take years.

“We’re not at a point where the palladium bulls have something to worry about,” he said.

For the full story, see:

Ira Iosebashvili and Amrith Ramkumar. “Palladium Soars on Hopes for Growth.” The Wall Street Journal (Tuesday, Oct. 24, 2017): B13.

(Note: ellipsis added.)

(Note: the online version of the story has the date Oct. 23, 2017, and the title “Palladium Prices Soar in Sign of Global Growth and Auto Demand.” Where there are minor differences in wording, the passages quoted above follow the online version.)

Regulators Allowed New York City to Exploit Taxi Medallion Buyers

(p. A1) . . . The New York Times published a two-part investigation revealing that a handful of taxi industry leaders artificially inflated the price of a medallion — the coveted permit that allows a driver to own and operate a cab — and made hundreds of millions of dollars by issuing reckless loans to low-income buyers.

The investigation also found that regulators at every level of government ignored warning signs, and the city fed the frenzy by selling medallions and promoting them in ads as being “better than the stock market.”

The price of a medallion rose to more than $1 million before crashing in late 2014, which left borrowers with debt they had little hope of repaying. More than 950 medallion owners have filed for bankruptcy, (p. A20) and thousands more are struggling to stay afloat.

For the full story, see:

Niraj Chokshi. “New York’s Top Lawyer Begins Inquiry Into Reckless Taxi Loans.” The New York Times (Tuesday, MAY 21, 2019): A1 & A20.

(Note: ellipsis added.)

(Note: the online version of the story has the date MAY 20, 2019, and has the title “Inquiries Into Reckless Loans to Taxi Drivers Ordered by State Attorney General and Mayor.” Where the online version includes a few extra words, or slightly different wording, the quotes above follow the online version.)