Category: Economics

Lack of “Air-Conditioning Can Be Deadly”

(p. A10) The number of air-conditioners worldwide is predicted to soar from 1.6 billion units today to 5.6 billion units by midcentury, according to a report issued Tuesday by the International Energy Agency.
. . .
While 90 percent of American households have air-conditioning, “When we look in fact at the hot countries in the world, in Africa, Asia, Latin America and the Middle East, where about 2.8 billion people live, only about 8 percent of the population owns an air-conditioner,” said Fatih Birol, executive director of the energy agency.
As incomes in those countries rise, however, more people are installing air-conditioners in their homes. The energy agency predicts much of the growth in air-conditioning will occur in India, China and Indonesia.
Some of the spread is simply being driven by a desire for comfort in parts of the world that have always been hot.
. . .
And when it gets hot, forgoing air-conditioning can be deadly. The heat wave that plagued Chicago in 1995 killed more than 700 people, while the 2003 European heat wave and 2010 Russian heat wave killed tens of thousands each.

For the full story, see:
Kendra Pierre-Louis. “World Tries to Stay Cool, but It Could Warm Earth.” The New York Times (Friday, May 18, 2018): A10.
(Note: ellipses added.)
(Note: the online version of the story has the date May 15, 2018, and has the title “The World Wants Air-Conditioning. That Could Warm the World.”)

Jeff Bezos Is “Exploring Strange New Worlds”

(p. A15) Jeff Bezos is the world’s richest person. Amazon is on a tear–sales grew 43% last quarter–and may soon pass Apple as the world’s most valuable company. Amazon has ruptured retail, floated in the cloud, and even made superhero TV shows like “The Tick.” But what makes Mr. Bezos tick?
. . .
. . . , Mr. Bezos is now channeling pioneers, be they Columbus or James T. Kirk, exploring strange new worlds. His strategy is that he doesn’t let business models get in his way while exploring on the edge.
. . .
I’m convinced the real secret to Mr. Bezos’s success is that he hates PowerPoint slides. He insists instead on six-page narratives at meetings. Stories codify exploration. Here’s one: Put Alexa in every doctor’s office to listen and correctly fill in medical records automatically from the transcripts, freeing doctors to actually care for patients! Business model to come (but pretty obvious).

For the full commentary, see:
Andy Kessler. ” INSIDE VIEW; Columbus Discovers the Amazon.” The Wall Street Journal (Monday, May 7, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 6, 2018.)

“Politicians Use Economics the Way a Drunk Uses a Lamppost”

(p. A13) Mr. Blinder cites what he calls the Lamppost Theory: “Politicians use economics the way a drunk uses a lamppost–for support, not for illumination.”

For the full review, see:
Matthew Rees. “BOOKSHELF; What They Don’t Teach in Econ 101.” The Wall Street Journal (Wednesday, April 17, 2018): A13.
(Note: italics in original.)
(Note: the online version of the review has the date April 18, 2018, and has the title “BOOKSHELF; ‘Advice and Dissent’ Review: What They Don’t Teach in Econ 101.”)

The book under review, is:
Blinder, Alan S. Advice and Dissent: Why America Suffers When Economics and Politics Collide. New York: Basic Books, 2018.

Paying Consumers for Their Data

(p. B4) WASHINGTON–For every link you click, every photo you post, every word you search, somebody markets the data to advertisers seeking to target you. Consumer data is a valuable commodity, and that is one reason Google, Facebook and others let you use their platforms at no cost.
An Australian app maker called Unlockd thinks it has a better idea: The consumer should get a cut of this mobile-data business, in the form of rewards or other incentives. Other newcomers and smaller firms are taking a similar tack. Should this approach take off, some see it becoming a viable alternative to the ad model driving big platforms like Alphabet Inc.’s Google.

For the full story, see:
McKinnon, John D. “Startup Wants to Reward Your Clicking.” The Wall Street Journal (Thursday, May 10, 2018): B4.

(Note: the online version of the story has the date May 9, 2018, and has the title “Startup Takes on Google With a New Approach: Rewards for Users.”)

China’s “Double Whammy for Prospective Entrepreneurs”

(p. B12) China’s past attempts to stoke indigenous innovation have a checkered history. A flood of cheap capital and high, state-set solar power rates in the mid-2000s secured China’s place as the world’s number one solar cell manufacturer. But it also led to enormous overcapacity, which sank prices and pushed debt burdens higher, making investment in real R&D more difficult. For investors, China’s solar champions have been a losing proposition–American depositary receipts of top firms such as JinkoSolar are worth less than half of their peak in 2010. Robotics, a key element of Beijing’s “Made in China 2025” plan to dominate high-tech manufacturing, is exhibiting similar tendencies.
The state-centric nature of China’s financial system–and its weak intellectual property protection–represents a double whammy for prospective entrepreneurs. Small private-sector firms often only have access to capital through expensive shadow banking channels, and face the risk that some better connected, state-backed firm will make off with their designs–with very little recourse.

For the full story, see:
Nour Malas and Paul Overberg. “‘Chinese Innovation Won’t Come Easily Without U.S. Tech.” The Wall Street Journal (Tuesday, March 23, 2018): B12.
(Note: the online version of the story has the date March 22, 2018, and has the title “Can China’s Red Capital Really Innovate?”)

San Francisco Suffers Net Loss of People as Tech Booms

(p. A3) San Francisco is such a boomtown that people are leaving in droves.
In 2016 and 2017, more people moved out of the San Francisco-Oakland-Hayward metropolitan area–an urban core of 4.7 million people in a broader region known as the Bay Area–than moved into it from other parts of California or the U.S., according to U.S. census data.
In the year that ended July 1, the region showed a net loss of nearly 24,000 residents to the rest of the country, roughly double the loss of the previous year and a sharp reversal from net annual gains of about 15,000 as recently as 2013-14.
Economists said the outflow is being driven by the high cost of housing in the area, where the average home value in several counties surpasses $1 million.

For the full story, see:
Nour Malas and Paul Overberg. “‘San Francisco’s Boom Leads to an Exodus.” The Wall Street Journal (Friday, March 23, 2018): A3.
(Note: the online version of the story has the date March 22, 2018, and has the title “San Francisco Has a People Problem.”)

More Firms Educate In-House

(p. B5) . . . Atlanta-based aluminum-products maker Novelis started a school within the company to impart lessons pulled from the factory floor with a faculty and nine “deans” to oversee it.
Federal policy for decades has pushed more people to go to four-year colleges, promoting a college-preparatory high-school curriculum and easing access to student loans. But technology is changing faster than colleges can keep up and employers say too many schools aren’t teaching students the skills they need–or even basic critical thinking.
With the labor market the tightest it has been in a generation, this misalignment is causing big–and expensive–headaches for employers. So companies are increasingly taking matters into their own hands. Major employers like CVS Health Corp., Novelis, International Business Machines Corp., Aon PLC and JPMorgan Chase & Co. are hiring workers because of what they can do, or what the company believes they can teach them, instead of the degrees they hold.

For the full story, see:
Douglas Belkin. “‘Education Is Moving to the Factory Floor.” The Wall Street Journal (Friday, March 23, 2018): B5.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 22, 2018.)

California Regulation Adds $9,500 to Average Home Cost

(p. A1) The California Energy Commission voted 5-0 to approve a mandate that residential buildings up to three stories high, including single-family homes and condos, be built with solar installations starting in 2020.
The commission estimates that the move, along with other (p. A2) energy-efficiency requirements, would add $9,500 to the average cost of building a home in California. The state is already one of the most expensive housing markets in the country, with a median price of nearly $565,000 for a single-family home, according to the California Association of Realtors.

For the full story, see:
Erin Ailworth. “Solar Panel Mandate Jolts Housing Industry.” The Wall Street Journal (Thursday, May 10, 2018): A1-A2.

(Note: the online version of the story was updated May 9, 2018, and has the title “California Takes Big Step to Require Solar on New Homes.”)

Hundreds of Years of CO2 Emissions Could Be Stored Forever in Oman’s Rocks

(p. A10) IBRA, Oman — In the arid vastness of this corner of the Arabian Peninsula, out where goats and the occasional camel roam, rocks form the backdrop practically every way you look.
But the stark outcrops and craggy ridges are more than just scenery. Some of these rocks are hard at work, naturally reacting with carbon dioxide from the atmosphere and turning it into stone.
Veins of white carbonate minerals run through slabs of dark rock like fat marbling a steak. Carbonate surrounds pebbles and cobbles, turning ordinary gravel into natural mosaics.
Even pooled spring water that has bubbled up through the rocks reacts with CO2 to produce an ice-like crust of carbonate that, if broken, re-forms within days.
Scientists say that if this natural process, called carbon mineralization, could be harnessed, accelerated and applied inexpensively on a huge scale — admittedly some very big “ifs” — it could help fight climate change. Rocks could remove some of the billions of tons of heat-trapping carbon dioxide that humans have pumped into the air since the beginning of the Industrial Age.
And by turning that CO2 into stone, the rocks in Oman — or in a number of other places around the world that have similar geological formations — would ensure that the gas stayed out of the atmosphere forever.
“Solid carbonate minerals aren’t going anyplace,” said Peter B. Kelemen, a geologist at Columbia University’s Lamont-Doherty Earth Observatory who has been studying the rocks here for more than two decades.
Capturing and storing carbon dioxide is drawing increased interest. The Intergovernmental Panel on Climate Change says that deploying such technology is essential to efforts to rein in global warming.
. . .
The rocks are so extensive, Dr. Kelemen said, that if it was somehow possible to fully use them they could store hundreds of years of CO2 emissions. More realistically, he said, Oman could store at least a billion tons of CO2 annually. (Current yearly worldwide emissions are close to 40 billion tons.)

For the full story, see:

Henry Fountain. “How Oman’s Rocks Could Help Save the Planet.” The New York Times (Saturday, APRIL 28, 2018: A10-A11.
(Note: ellipsis added.)
(Note: the online version of the story has the date APRIL 26, 2018.)

Robots Free Humans for More and Better Jobs

(p. A8) For companies, choosing the appropriate tasks to automate is important. Auto maker BMW AG automated some of the physical labor at the Spartanburg plant in South Carolina while retaining tasks involving judgment and quality control for workers.
Robots fit black, soundproofing rubber tubes to the inner rim of car doors, a task once done entirely by hand, on the more than 5,000 or so car doors that pass through the production line each day. Human workers do final checks on the tube’s placement. The division of labor speeds up the process.
Since BMW introduced this and other automated processes over the past decade, it has more than doubled its annual car production at Spartanburg to more than 400,000. The workforce has risen from 4,200 workers to 10,000, and they handle vastly more complex autos–cars that once had 3,000 parts now have 15,000.
Being spared strenuous activities gives workers the time and energy to tackle more demanding and creative tasks, BMW said in a statement.
James Bessen, an economist who teaches at Boston University School of Law, said automation like that at the Spartanburg plant has enabled a huge increase in the quality and variety of products, which help spur consumer demand. BMW’s share of luxury-car sales in the U.S. has risen sharply, with over 300,000 cars sold last year compared with just over 120,000 in 1997, company figures show.
Tesla Inc., by contrast, has struggled with production of the Model 3 car at its Fremont, Calif., plant after its use of robots got out of balance. Undetected errors in parts built by robots caused bottlenecks in production, meaning it could build only 2,020 cars a week compared with the 5,000 it originally promised, according to the company.
Analysts at investment research firm Bernstein said Tesla automated welding, paint and body work processes, as other manufacturers have done, but also automated final assembly work, in which parts, seats and the engine are installed in the car’s painted shell. Errors in this work caused production bottlenecks. “Automation in final assembly doesn’t work,” said analyst Max Warburton.
“Yes, excessive automation at Tesla was a mistake…Humans are underrated,” wrote Tesla CEO Elon Musk in a tweet last month.
. . .
At an aggregate level, however, the jobs created by automation outnumber those that are being destroyed, according to analysis by the Massachusetts Institute of Technology’s David Autor and Utrecht University’s Anna Salomons.

For the full story, see:
William Wilkes. “Big Companies Fine-Tune The Robot Revolution.” The Wall Street Journal (Tuesday, May 15, 2018): A1 & A8.
(Note: ellipsis between paragraphs, added; ellipsis internal to paragraph, in original.)
(Note: the online version of the story has the date May 14, 2018, and has the title “How the World’s Biggest Companies Are Fine-Tuning the Robot Revolution.”)

More of James Bessen’s views on these issues, can be found in his discussion of ATMs in:
Bessen, James. Learning by Doing: The Real Connection between Innovation, Wages, and Wealth. New Haven, CT: Yale University Press, 2015.

The analysis by Autor and Salomons, mentioned above, appears in:
Autor, David, and Anna Salomons. “Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share.” In Brookings Papers on Economic Activity, Feb. 27, 2018.