Category: Economics

Private Firms Build Costly Complex Cable Infrastructure

(p. B1) Nearly 750,000 miles of cable already connect the continents to support our insatiable demand for communication and entertainment. Companies have typically pooled their resources to collaborate on undersea cable projects, like a freeway for them all to share.
But now Google is going its own way, in a first-of-its-kind project connecting the United States to Chile, home to the company’s largest data center in Latin America.
. . .
(p. B7) Inside the ship, workers spool the cable into cavernous tanks. One person walks the cable swiftly in a circle, as if laying out a massive garden hose, while others lie down to hold it in place to ensure it doesn’t snag or knot. Even with teams working around the clock, it takes about four weeks before the ship is loaded up with enough cable to hit the open sea.
The first trans-Atlantic cable was completed in 1858 to connect the United States and Britain. Queen Victoria commemorated the occasion with a message to President James Buchanan that took 16 hours to transmit.
While new wireless and satellite technologies have been invented in the decades since, cables remain the fastest, most efficient and least expensive way to send information across the ocean. And it is still far from cheap: Google would not disclose the cost of its project to Chile, but experts say subsea projects cost up to $350 million, depending on the length of the cable.
. . .
Poor weather is inevitable. Swells reach up to 20 feet, occasionally requiring the ship captain to order the subsea cable to be cut so the ship can seek safer waters. When conditions improve, the ship returns, retrieving the cut cable that has been left attached to a floating buoy, then splicing it back together before continuing.
Work on board is slow and plodding. The ship, at sea for months at a time, moves about six miles per hour, as the cables are pulled from the giant basins out through openings at the back of the ship.
. . .
“It really is management of a very complex multidimensional chess board,” said Ms. Stowell of Google, who wears an undersea cable as a necklace.
Demand for undersea cables will only grow as more businesses rely on cloud computing services. And technology expected around the corner, like more powerful artificial intelligence and driverless cars, will all require fast data speeds as well. Areas that didn’t have internet are now getting access, with the United Nations reporting that for the first time more than half the global population is now online.
“This is a huge part of the infrastructure that’s making that happen,” said Debbie Brask, the vice president at SubCom, who is managing the Google project. “All of that data is going in the undersea cables.”

For the full story, see:
ADAM SATARIANO. “Underwater Freeways for Your Puppy Posts.” The New York Times (Tuesday, MARCH 12, 2019): B1 & B6-B7.
(Note: ellipses added.)
(Note: the online version of the story has the date MARCH 10, 2019, and has the title “How the Internet Travels Across Oceans.”)

Universal Basic Income Increases Taxes and Does Not Increase Work Among Unemployed

(p. 13) HELSINKI, Finland — A basic income made recipients happier than they were on unemployment benefits, a two-year government experiment in Finland has found. But it did not, as proponents had hoped, make them more likely to work.
. . .
The basic income has been controversial, however, with leaders of the main Finnish political parties keen to streamline the benefits system but wary of offering “money for nothing,” especially ahead of parliamentary elections due in April [2019].
. . .
The higher taxes that the Organization for Economic Cooperation and Development says would be needed to pay for basic income schemes might also be off-putting for voters.
In a review of the Finnish scheme last year, the organization warned that implementing it nationally and cost-neutrally for the state would imply significant income redistribution, especially toward couples from single people, and increase poverty.
The researchers have acknowledged that the Finnish pilot was less than realistic because it did not include any tax clawback once participants found work and reached a certain income level.
Swiss voters rejected a similar scheme in 2016.

For the full story, see:
Reuters. “Experiment Explores Income, Jobs and Happiness.” The New York Times, First Section (Sunday, Feb. 10, 2019): 13.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date Feb. 9, 2019, and has the title “Finland’s Basic Income Trial Boosts Happiness, but Not Employment.”)

Vernon Smith Offers Advance Praise for Openness to Creative Destruction

Read this book and discover what matters most in economics–ideas and knowledge-how summarized in the word “innovation.” But to fuel innovation resources have to be released from their old incumbent uses and flow into the new. That is the destruction that creates.

Vernon Smith, Nobel Prize in Economics, received in 2002.

Vernon Smith’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

How the Poor, Hungry, and Determined Can Persevere and Succeed

(p. B1) “I believe tech can be a road to the middle class for large numbers of Americans,” said Mr. Hsu, a co-founder and the chief executive of Pursuit, a nonprofit social venture. “But there’s real skepticism about that among people who see the winners in technology as a small network of the privileged.”
He is using Pursuit, housed in a former zipper factory in Long Island City, the Queens neighborhood where Amazon had intended to locate, to try to prove those skeptics wrong.
The venture is a small yet innovative player in a growing number of nonprofits developing new models for work force training.
(p. B5) Their overarching goal is upward mobility for low-income Americans and the two-thirds of workers without four-year college degrees.
Pursuit, according to its donors and to work force experts, stands out for the size of the income gains of its graduates and its experiment with a kind of bond to finance growth. It is a program worth watching, they say, and beginning to attract attention nationally.
About 85 percent of Pursuit’s 300 graduates have landed well-paying tech jobs within a year. They work as software engineers both at major corporations like JPMorgan Chase and at start-ups like Oscar Health. They earn $85,000 a year on average, compared with $18,000 before the Pursuit program.
. . .
Max Rosado heard about the Pursuit program from a friend. Intrigued, he filled out an online form, and made it through a written test in math and logic, interviews and a weekend workshop with simple coding drills, joining the 10-month program in 2016.
At Pursuit, Mr. Rosado, who has a two-year community college degree in liberal arts, got an intensive immersion in programming languages, concepts and projects. But the curriculum also covered so-called soft skills like making presentations, working in teams and writing résumés and thank-you notes.
Today, Mr. Rosado, 30, is an engineer at GrubHub, the meal delivery service, working on its smartphone software. In his previous jobs, in back office and sales associate roles in stores, he earned $15,000 to $20,000 a year. He makes nearly $100,000 now, he said.
. . .
Pursuit screens applicants for many characteristics, but those mainly fall into two categories: problem-solving skills and perseverance. The program, Mr. Hsu said, looks for people who are hungry and determined, willing to put in the time and effort to become a software developer, but also able to adapt to new and unfamiliar environments.

For the full story, see:
Lohr, Steve. “A Way Out of Poverty and Into an $85,000 Tech Job.” The New York Times (Saturday, March 16, 2019): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the story has the date March 15, 2019, and has the title “Income Before: $18,000. After: $85,000. Does Tiny Nonprofit Hold a Key to the Middle Class?”)

Firms Moving from Silicon Valley to Texas

(p. A3) SAN FRANCISCO–California’s economy is adding jobs far faster than affordable places to live, forcing some employers to leave the state as they expand.
. . .
Karen Holian, 44 years old, joined the startup Lottery.com when it was founded here in 2015. Though a San Francisco native, Ms. Holian, a marketing manager, was excited when the company last year moved to Austin, Texas, because she could finally plan to buy a home.
“In San Francisco, that never seemed like a possibility,” she said. A mother of two, she is for now renting a four-bedroom house for $2,000 a month, a third of what a comparable place costs in her hometown.
Lottery.com CEO Tony DiMatteo said that as the company grew, he found it difficult to persuade current and prospective employees to move to the area. “We can give them a much better bang for their buck if we’re not in San Francisco,” he said.
. . .
Carl Guardino, chief executive of the Silicon Valley Leadership Group, said CEOs tell him “that any new job that doesn’t absolutely need to be in the Bay Area is located outside of the Bay Area.” The public-policy advisory group counts some 360 companies, including Silicon Valley’s largest, as members.
. . .
Texas has drawn more companies leaving California over the past decade than any other state, according to research by Joe Vranich, a relocation consultant who encourages businesses to leave California.
Housing costs are “a major selling point for us,” said Mike Rosa, senior vice president of economic development for the Dallas Regional Chamber. “It’s a factor in just about every [relocation] search we see.”

For the full story, see:
Nour Malas. “Firms Quit California Over Costs.” The Wall Street Journal (Tuesday, March 20, 2019): A3.
(Note: ellipses, and bracketed year, added; bracketed word, in original.)
(Note: the online version of the story has the date March 19, 2019, and has the title “California Has the Jobs but Not Enough Homes.” The sentence quoting Karen Holian appeared in the online, but not the print, version.)

Big Firms Can Benefit Consumers

(p. A15) Mr. Wu writes with elegance, conviction, knowledge–and certitude. But he goes over the top in his effort to slay the dragon of the so-called Chicago School of antitrust analysis, which finds its clearest expression in the late Robert Bork’s influential 1978 book, “The Antitrust Paradox.” Bork and the Chicago School insist that “consumer welfare” should be the sole standard for antitrust law. Nothing else matters.
. . .
The deeper source of philosophical disagreement, however, lies in Mr. Wu’s self-proclaimed “neo-Brandeisian” attack on Bork’s underlying worldview. First, Mr. Wu claims that Bork’s consumer-welfare theory shows too little solicitude toward the small businessman, who can be steamrolled by larger businesses with greater economic power. Second, Mr. Wu claims that Bork’s thesis ignores the perverse influence that dominant firms exercise on the overall political system.
Against both challenges, Bork’s position holds up reasonably well. As to the first, the protection of the small businessman comes at a high price. It forces consumers to do business with small firms that may well have a local geographical monopoly, which would be undercut by a larger firm offering better goods at lower prices.
. . .
Similarly, both Brandeis and Mr. Wu have an oversimplified vision of political markets, for economic dominance need not translate into political dominance. Companies like Google and Facebook today enjoy dominant positions with their search engines or social-media platforms, but they face massive political opposition, not only from regulatory authorities but also from skilled political operatives–activist groups, litigation centers, unions, trade associations–who can make their lives a public-relations nightmare.
. . .
Finally, Mr. Wu’s Brandeis fixation blinds him to the distinctive features of modern antitrust litigation, which must contend with often complicated economic arrangements and effects. When American Express tried to prevent its merchants from steering their customers to credit-card companies that charge lower fees to retailers, it was hit with an antitrust lawsuit. But the Supreme Court this year upheld the policy, claiming that it didn’t result in an abuse of market power but was pro-competitive because of indirect effects that improved the benefits to Amex card holders. With his over-concern with bigness per se, Brandeis had nothing to say about these novel issues, and neither, alas, does Mr. Wu.

For the full review, see:
Richard A. Epstein. “BOOKSHELF; Revisiting the Gilded Age; Are Google, Facebook, Apple and Amazon akin to the dominant “trusts” of the late 19th century–and thus deserving of antitrust action?” The Wall Street Journal (Monday, Dec. 3, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the review has the date Dec. 2, 2018, and has the title “BOOKSHELF; ‘The Curse of Bigness’ Review: Revisiting the Gilded Age; Are Google, Facebook, Apple and Amazon akin to the dominant “trusts” of the late 19th century–and thus deserving of antitrust action?”)

The book under review, is:
Wu, Tim. The Curse of Bigness: Antitrust in the New Gilded Age. New York: Columbia Global Reports, 2018.

The Bork book mentioned in the review, is:
Bork, Robert H. The Antitrust Paradox: A Policy at War with Itself. New York: The Free Press, 1993 [first published 1978].

Tight Labor Market Gives a Chance to Outsiders

(p. 7) Traditionally male industries have made a comeback. The three fastest-growing sectors since December 2016 have been the three that are most male-dominated: mining, construction, and transportation and utilities. Yet in the same period women’s employment has increased more. It turns out that women are moving into these male-dominated fields, as well as a few others.
. . .
The faster employment growth for women was concentrated in sectors that are at least two-thirds male. In these sectors, women’s employment rose 5.0 percent, versus 3.0 percent for men. Women’s employment grew more than 10 percent in construction, mining, and transportation and utilities.
. . .
“In a tight labor market, firms give workers a chance they would not otherwise consider,” said Lawrence Katz, a labor economist at Harvard. “But the tight labor market could facilitate longer-term change if it demonstrates to firms that they should be more open to women in previously male-dominated areas.”
This growth in women’s employment in male-dominated industries is not just about desk jobs. Within male-dominated industries, the fastest growth for women has been at the building site and on the factory floor, rather than in the accounting office.

For the full commentary, see:
Jed Kolko and Claire Cain Miller. “As Labor Market Tightens, Gender Lines Blur.” The New York Times, SundayBusiness Section (Sunday, Dec. 16, 2018): 7.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 14, 2018, and has the title “As Labor Market Tightens, Women Are Moving Into Male-Dominated Jobs.”)

Luis Locay Offers Advance Praise for Openness to Creative Destruction

Openness to Creative Destruction is first and foremost a great read. Much of the book is devoted to skillfully chosen accounts of usually successful, but occasionally unsuccessful, entrepreneurs to illustrate the author’s arguments. At times these accounts made me feel like I was reading a series of short adventure stories. This use of examples to make the argument for the central role of the creative entrepreneur in generating innovation, and the benefits that can accrue to society from creative destruction, makes the book very accessible to the intelligent layman or beginning student, while its serious ideas will be of interest to professional economists and sophisticated policymakers. The theoretician of entrepreneurship or innovation will find it a one-stop source of real-world examples. I plan to make it required reading in my growth and industrial organization classes.

Luis Locay, Associate Professor of Economics, University of Miami.

Locay’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Last Blockbuster Store Flourishes

(p. B3) The second-to-last Blockbuster, a squat blue-and-yellow slab wedged next to a real estate agency in Western Australia, will stop renting videos on Thursday and shut down for good at the end of the month. Two stores in Alaska, part of the final group of Blockbuster outlets in the United States, closed in July.
That will make the Blockbuster in Bend, Ore., one of a kind: a corporate remnant, just off the highway, near a cannabis retailer and a pet cremation service.
. . .
Some Tower Records stores still thrive in Japan long after their parent company declared bankruptcy and closed all of its American stores. There is a Howard Johnson’s in Lake George, N.Y., that is the lone survivor of what was once the country’s largest restaurant chain.
Such holdouts have bucked the norm in the retail and restaurant industries, which have shed stores by the hundreds in recent years.
. . .
The Bend store became a Blockbuster franchise in 2000. It has about 4,000 active accounts and signs up a few fresh ones each day, Ms. Harding said. Some of the new customers are tourists who have traveled hours out of their way to stop in.
. . .
One possible explanation for the store’s long life: Bend is in a region that the city’s mayor, Sally Russell, describes as having “huge expanses with really small communities” that often do not have easy access to the high-speed internet necessary for content streaming.
Many residents of outlying areas stop at Blockbuster during their weekly trips to town to run errands, drawn in part by the store’s seven-day rental policy, Ms. Russell said, adding that the store’s last-in-the-world status could even give it a lift.
“It’s like with old vinyl, and how everyone wants to have turntables again,” she said. “We get to a place where something out of date comes back in — there’s definitely interest in keeping this almost-extinct way of enjoying movies alive.”

For the full story, see:
Tiffany Hsu. “A 9,000-Store Chain Has Closed 8,999. How Does That Work?” The New York Times (Thursday, March 7, 2019): B3.
(Note: ellipses added.)
(Note: the online version of the story has the date March 6, 2019, and has the title “The World’s Last Blockbuster Has No Plans to Close.”)

Those Who Don’t Like High-Tech Can Buy Low-Tech

(p. A1) Dan Dolar was ready to take a break from the distractions of his smartphone. So he bought another phone.
The 47-year-old IT worker, who lives in Manteca, Calif., now typically carries his new 3.8-inch Palm “companion device” around with him on weekends, leaving his bigger Samsung Galaxy Note 9 at home.
The new gadget helps when he’s “living that dad life,” he said, while reducing the potential distractions. Without his big smartphone, he said, “I’m not compelled to get that dopamine rush.”
Smartphone-fatigued consumers are renegotiating their relationships with their devices. A growing contingent is embracing a new crop of mini-(p. A13)malist phones, priced around $300 to $350, to wean themselves off premium models that keep them constantly connected.
Some are concerned that social media-usage is robbing them of interpersonal connections and making them less attentive. Others are annoyed by recent data privacy scandals at large internet and social-media companies–or they want the simple practicality of carrying a smaller phone.

For the full story, see:
Sarah Krouse. “One Solution for Smartphone Addicts–Another Phone.” The Wall Street Journal (Tuesday, March 12, 2019): A1 & A13.
(Note: the online version has the date March 11, 2019, and has the title “Smartphone Addicts’ New Tactic to Break Their Habit: Buy a Second Phone.”)