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Posts Tagged ‘economics

“If we were capable of thinking of everything, we would still be living in Eden, rent-free with all-you-can-eat buffets and infinitely better daytime TV programming”*…

 

buffet

 

Few things epitomize America more than the all-you-can-eat buffet.

For a small fee, you’re granted unencumbered access to a wonderland of gluttony. It is a place where saucy meatballs and egg rolls share the same plate without prejudice, where a tub of chocolate pudding finds a home on the salad bar, where variety and quantity reign supreme.

“The buffet is a celebration of excess,” says Chef Matthew Britt, an assistant professor at the Johnson & Wales College of Culinary Arts. “It exists for those who want it all.”

But one has to wonder: How does an industry that encourages its customers to maximize consumption stay in business?

To find out, we spoke with industry experts, chefs, and buffet owners. As it turns out, it’s harder to “beat” the buffet than you might think…

Is it possible to out-eat the price you pay for a buffet?  How do these places make money?  The dollars and cents behind the meat and potatoes: “The economics of all-you-can-eat buffets.”

* Dean Koontz

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As we pile it high, we might recall that it was on this date in 1883 that A. Ashwell, of Herne Hill in South London, received a patent for the “vacant/engaged” door bolt for lavatory doors… presumably a relief to the folks who had been using the public restrooms that had been introduced in London in 1852.

lock source

 

Written by LW

February 17, 2020 at 1:01 am

“He who receives an idea from me, receives instruction himself without lessening mine”*…

 

IP Badge

 

Article I Section 8 | Clause 8 of the U.S. Constitution provides that “[The Congress shall have power] To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”  And so that family of protections/rights in the intangible things that we now know as “intellectual property” was enshrined at our nation’s birth.  But has that affordance gotten out of hand?  More specifically, is the concept of “intellectual property” itself a problem?

The grand term ‘intellectual property’ covers a lot of ground: the software that runs our lives, the movies we watch, the songs we listen to. But also the credit-scoring algorithms that determine the contours of our futures, the chemical structure and manufacturing processes for life-saving pharmaceutical drugs, even the golden arches of McDonald’s and terms such as ‘Google’. All are supposedly ‘intellectual property’. We are urged, whether by stern warnings on the packaging of our Blu-ray discs or by sonorous pronouncements from media company CEOs, to cease and desist from making unwanted, illegal or improper uses of such ‘property’, not to be ‘pirates’, to show the proper respect for the rights of those who own these things. But what kind of property is this? And why do we refer to such a menagerie with one inclusive term?

The phrase ‘intellectual property’ was first used in a legal decision in 1845 and acquired formal heft in 1967 with the establishment of the World Intellectual Property Organization (WIPO), a specialised agency of the United Nations that represents and protects the commercial interests of holders of copyrights, patents, trademarks and trade secrets. The ubiquitous use of ‘intellectual property’ began in the digital era of production, reproduction and distribution of cultural and technical artifacts. As a new political economy appeared, so did a new commercial and legal rhetoric. ‘Intellectual property’, a central term in that new discourse, is a culturally damaging and easily weaponised notion. Its use should be resisted…

Samir Chopra (@EyeOnThePitch) argues that copyrights, patents and trademarks are all important, but the term ‘intellectual property’ is nonsensical and pernicious: “End intellectual property.”

[Image above: source]

* “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”                    — Thomas Jefferson

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As we share and share alike, we might recall that it was on this date in 1937 that Wallace Carothers, a chemist at DuPont, was granted U.S. Patent #2071250A for “Monocomponent artificial filaments or the like of synthetic polymers; [and the] Manufacture thereof from homopolycondensation products”– or as we know the product in question, nylon.

Nylon was the first commercially successful synthetic thermoplastic polymer.  It’s first commercial use was in a nylon-bristled toothbrush in 1938, followed more famously by its use in women’s stockings or “nylons” which were shown at the 1939 New York World’s Fair and first sold commercially in 1940.  During World War II, almost all nylon production was diverted to the military for use in parachutes and parachute cord. But these wartime uses of nylon (and other DuPont-patented plastics) greatly increased the market for the new materials– and thus, for DuPont’s patents– in the post-war era.

220px-Wallace_Carothers,_in_the_lab

Carothers in his lab, stretching a sample of nylon fabric

source

 

Written by LW

February 16, 2020 at 1:01 am

“These fragments I have shored against my ruins”*…

 

population aging

 

The good news is that, as a product of economic, social, and scientific advancement around the world, life expectancy is increasing and birth rates are decreasing.  The other news…

The world is experiencing a seismic demographic shift—and no country is immune to the consequences…

By 2050, there will be 10 billion people on earth, compared to 7.7 billion today—and many of them will be living longer. As a result, the number of elderly people per 100 working-age people will nearly triple—from 20 in 1980, to 58 in 2060.

Populations are getting older in all OECD countries, yet there are clear differences in the pace of aging. For instance, Japan holds the title for having the oldest population, with ⅓ of its citizens already over the age of 65. By 2030, the country’s workforce is expected to fall by 8 million—leading to a major potential labor shortage… Globally, the working-age population will see a 10% decrease by 2060. It will fall the most drastically by 35% or more in Greece, Japan, Korea, Latvia, Lithuania, and Poland. On the other end of the scale, it will increase by more than 20% in Australia, Mexico, and Israel…

As countries prepare for the coming decades, workforce shortages are just one of the impacts of aging populations already being felt…

There are many other social and economic risks that we can come to expect as the global population continues to age:

  • The Squeezed Middle: With more people claiming pension benefits but less people paying income taxes, the shrinking workforce may be forced to pay higher taxes.
  • Rising Healthcare Costs: Longer lives do not necessarily mean healthier lives, with those over 65 more likely to have at least one chronic disease and require expensive, long-term care.
  • Economic Slowdown: Changing workforces may lead capital to flow away from rapidly aging countries to younger countries, shifting the global distribution of economic power.

The strain on pension systems is perhaps the most evident sign of a drastically aging population. Although the average retirement age is gradually increasing in many countries, people are saving insufficiently for their increased life span—resulting in an estimated $400 trillion deficit by 2050…

In many countries the old-age to working-age ratio will almost double in the next 40 years.  How should we prepare?  “The rising ratio.”

* T.S. Eliot, “The Waste Land”

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As we kick off the “Decade of Healthy Aging,” we might recall that it was on this date in 1931 that Dracula premiered in New York.  Directed by the great Tod Browning and famously starring Bela Lugosi (in what many consider still to be the definitive portrayal of the blood-thirsty Count), the film was based on the 1924 stage play Dracula by Hamilton Deane and John L. Balderston, which in turn is adapted from the 1897 novel Dracula by Bram Stoker.  The film was was both a critical and commercial success on its release, and has earned it’s way into the canon, having been selected by the Library of Congress for preservation in the National Film Registry as “culturally, historically, or aesthetically significant.”

220px-Dracula_-_1931_theatrical_poster source

 

 

Written by LW

February 12, 2020 at 1:01 am

“Commodities tend to zig when the equity markets zag”*…

 

Screen Shot 2020-01-13 at 11.11.12 AM

 

On the subject of things– things that matter, whether we are active investors or not– that we might (to our peril) take for granted…

There are plenty of expensive assets in the world today. The past decade of loose monetary policy and central bank money dumps have created the infamous “bubble in everything”. This is one reason we now have the bizarrely yo-yoing investment environment that we do, in which everything from risky stocks to safe gold is rising at the same time.

But one thing has remained reliably cheap — commodities. While the US equity market, which keeps ratcheting up to new highs, is almost as expensive as in the past 150 years, commodities are about as cheap relative to stocks as they’ve been in the past century.

Part of this is natural — and structural…

And yet, having watched the last big demand-driven oil spike in 2008, as well as the more financially driven price spike in 2011-12, which eventually came undone when central bankers pulled back on quantitative easing, I think it’s unwise to assume that we have entered a permanent bear market in commodities — at least not yet…

… if commodity prices did rise, there would be myriad ramifications. You would start to see the heads of petro states further emboldened, and populist nationalism increase globally — inflation in food and fuel prices hits the poor hardest, encouraging political volatility. That could, in turn, create new trade turmoil and the sort of disruption that the markets are currently discounting.

On the upside, though, demand for commodities is price elastic — once prices go too high, demand always falls. The cycle of replacing one source of energy with another has been playing out for hundreds of years, and continues. In an ideal world, the next commodities bubble, whenever it comes, could help us make what might be the final shift — away from fossil fuels and towards renewables.

The estimable Rana Foroohar explains there are many reasons for the US dollar to weaken, which would (among other drivers) cause commodity prices to rise: “Commodities may not stay cheap forever.”

* legendary investor Jim Rogers

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As we contemplate cycles, we might rejoice that it was on this date in 1605 that El Ingenioso Hidalgo Don Quijote de la Mancha ( or The Ingenious Hidalgo Don Quixote of La Mancha— aka Don Quixote), the masterwork of Miguel de Cervantes (and of the Spanish Golden Age) was first published.

Original title page

 

Written by LW

January 16, 2020 at 1:01 am

“So distribution should undo excess, and each man have enough”*…

 

current-global-inequality-in-standard-of-living

 

What makes a person healthy, wealthy, and wise? The UN’s Human Development Index (HDI) measures this by one’s life expectancy, average income, and years of education.

However, the value of each metric varies greatly depending on where you live. Today’s data visualization from Max Roser at Our World in Data summarizes five basic dimensions of development across countries—and how our average standards of living have evolved since 1800…

While there’s absolutely no room for complacency, the details are encouraging: “How the Global Inequality Gap Has Changed In 200 Years.”

* Shakespeare, King Lear (Act 4, Scene 1)

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As we mind the gap, we might recall that it was on this date in 1968 that Science published Garrett Hardin‘s influential essay, “The Tragedy of the Commons.”  Hardin was building on an argument from an 1833 pamphlet by economist William Forster Lloyd which included a hypothetical example of over-use of a common resource– cattle herders sharing a common parcel of land on which they are each entitled to let their cows graze, as was the custom in English villages.  Lloyd postulated that if a herder put more than his allotted number of cattle on the common, overgrazing could result.  For each additional animal, a herder could receive additional benefits, while the whole group shared the resulting damage to the commons.  If all herders made this individually rational economic decision, the common could be depleted or even destroyed, to the detriment of all.  Hardin generalized this example to all natural resources in arguing that population should be controlled: that left to their own devices, humans would deplete all natural resources, leading to a Malthusian collapse.

Elinor Ostrum received the Nobel Prize in Economics in 2009 for her work demonstrating that humans can, in fact, share– and in so doing, be effective stewards of commonly-“held” natural resources.

3859.cover source

 

“A man is worked upon by what he works on”*…

 

Jobs

 

Further to last week’s “The most perfect political community is one in which the middle class is in control, and outnumbers both of the other classes”*

The numbers tell one story. Unemployment in the US is the lowest it’s been in 50 years. More Americans have jobs than ever before. Wage growth keeps climbing.

People tell a different story. Long job hunts. Trouble finding work with decent pay. A lack of predictable hours.

These accounts are hard to square with the record-long economic expansion and robust labor market described in headline statistics. Put another way, when you compare the lived reality with the data and it’s clear something big is getting lost in translation. But a team of researchers thinks they may have uncovered the Rosetta Stone of the US labor market.

They recently unveiled the US Private Sector Job Quality Index (or JQI for short), a new monthly indicator that aims to track the quality of jobs instead of just the quantity. The JQI measures the ratio of what the researchers call “high-quality” versus “low-quality” jobs, based on whether the work offer more or less than the average income.

A reading of 100 means that there are equal numbers of the two groups, while anything less implies relatively lower-quality jobs. Here’s what it looks like:

Job Quality

So, what is this newfangled thing telling us? Right now the JQI is just shy of 81, which implies that there are 81 high-quality jobs for every 100 low-quality ones. While that’s a slight improvement from early 2012—the JQI’s 30-year nadir—it’s still way down from 2006, the eve of the housing market crash, when the economy regularly supported about 90 good jobs per 100 lousy ones.

Or, in plainer English, the US labor market is nowhere near fully recovered from the Great Recession. In fact, the long-term trend in the balance of jobs paints a more ominous picture…

Quality vs. quantity: more at “The great American labor paradox: Plentiful jobs, most of them bad.”

Resonantly, see also: “Job loss predictions over rising minimum wages haven’t come true.”  The higher minimum wages in question are still below the average that separates high- and low-quality jobs; but they are a step in the direction of narrowing the gap.

* “A man is worked upon by what he works on. He may carve out his circumstances, but his circumstances will carve him out as well.”  – Frederick Douglass

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As we “Get a Job,” we might recall that it was on this date in 1956 that serendipity yielded one of the coolest collectibles ever: rockabilly legend Carl “Blue Suede Shoes” Perkins was recording at Sam Phillips’ Sun Records in Memphis; Perkin’s buddy Johnny Cash, a Sun artist and a country star by virtue of his recent hits “I Walk The Line” and “Folsom Prison Blues,” was hanging out in the booth; and soon-to-be-famous Jerry Lee Lewis was playing piano (for a $15 dollar session fee– “Whole Lotta Shakin’ Goin’ On” was set for release a few weeks later).

A couple of years earlier, Phillips had launched Elvis Presley with “It’s Alright Mama”; but in 1955, as Elvis’ career exploded, Phillips had sold his contract to RCA, and Elvis moved on.  But The King was back in Memphis that fateful day; he stopped by Sun to say hello… and an impromptu jam ensued.  Phillips had the presence of mind to order his engineer, Jack Clement, to roll tape– a tape that was promptly shelved, forgotten, and unheard for 20 years.  The recordings of what was arguably the first “supergroup” were found in 1976 and finally released in 1981… since when, they’ve been treasured by fans– a new crop of which has emerged with the success of the Broadway musical Million Dollar Quartet.

https://i2.wp.com/farm9.staticflickr.com/8200/8239430651_733906291d_o.jpg source

 

 

Written by LW

December 4, 2019 at 1:01 am

“The most perfect political community is one in which the middle class is in control, and outnumbers both of the other classes”*…

 

middle class

 

But is there a middle class?…

Every politician defends the middle class, but none of them knows quite what it is. In August, during a town hall, Joe Biden said, “We have to rebuild the middle class, and this time we bring everyone along.” In his telling, the middle class is part memory and part aspiration, less a demographic group than a morality tale of loss and redemption. It “isn’t a number,” Biden is fond of saying. “It’s a set of values.”

For many social scientists, though, the middle class is a matter of numbers. The Pew Research Center says that anyone who earns between a mere two-thirds of the median household income and twice that amount falls within it. By that definition, just under half of all American adults are middle class. Unlike in Britain, where the category is seen as more culturally refined, the American middle class includes blue-collar workers whose consumption patterns fit the bill; they can buy a home or put their kids through college. Biden defines the middle class even more expansively. To be middle class, he said in Iowa this summer, is to know “that your kid is safe going outside to play”—something most humans, if not most large primates, would agree they want. To be middle class is to be, well, normal.

Republicans, for their part, rarely promise to rebuild the middle class; they want, as President Trump has said, to make it “bigger and more prosperous than ever before.” But liberal politicians from Biden to Barack Obama to Elizabeth Warren often vow to restore the middle class to the former glory of the three decades after World War II—a time when, they say, prosperity was shared and class conflict neutralized.

Even then, however, there was a sense that the middle class was in crisis. In his 1956 best-seller, The Organization Man, William Whyte wrote of a middle class—an implicitly white middle class—trapped in suburbs and office jobs, shorn of the entrepreneurial individualism and wartime solidarity of earlier generations. In 1969, a New York Times reporter found in Italian-American Queens a community trapped between escalating grocery bills and the expanding “ghetto.” In 1977, the middle class was “struggling uphill,” the Chicago Tribune wrote. In 1992, it felt “betrayed” and “forgotten,” according to the Times. And since 2008, Times subscribers have read of a middle class that is “sagging,” “shrinking,” “sinking,” and “limping.” In short, the middle class, as our politicians imagine it, has never really existed [in a settled, continuous way]: It is always in decline, always on the brink of being rebuilt.

To imagine the middle class, then, is to invoke a myth. Politicians use it to bind Americans together in a shared hope that they can one day return to the lost idyll of the postwar period. In that sense, the concept is remarkably optimistic, if somewhat inconsistent. As Lawrence Samuel argues in The American Middle Class: A Cultural History, the term expresses two incompatible things: It suggests that the United States is a classless society in which most citizens belong to the same social sphere, even as it hints at a rarefied class above the middle that anyone can reach if they work hard enough to ascend the ladder of opportunity. These can’t both be true—if the United States were a classless society, there would be no need for upward mobility. The metaphor gives the lie to the myth. Every ladder, after all, has a top and a bottom—and it’s the bottom that bears all the weight…

Politicians– and business people and academics– are quick to reference “the middle class.”  John Patrick Leary (@johnpatleary) explores “What We Talk About When We Talk About the Middle Class.”

* Aristotle

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As we contemplate classification and its consequences, we might recall that it was on this date in 1792, during George Washington’s first term as president, that the first edition of The Farmers Almanac was published.  (It became The Old Farmers Almanac in 1832 to distinguish itself from similarly-titled competitors.)  Still going strong, it is the oldest continuously-published periodical in the U.S.

Almanac source

 

Written by LW

November 25, 2019 at 1:01 am

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