Category: Economics

Can Incremental Oil Innovations Preserve Combustion Engines?

(p. A10) Big oil companies and giant auto makers are teaming up to preserve the internal combustion engine, as tough regulation and electric vehicles put the car industry’s century-old technology at risk. Their secret weapon: high-tech engine oil.
Exxon Mobil Corp., BP PLC, Royal Dutch Shell PLC and other oil companies are spending millions of dollars a year in concert with auto makers such as Ford Motor Co. and Fiat Chrysler Automobiles NV to create the next generation of super-slick engine lubricants. They are betting that the new, thinner oils will help them squeeze even more efficiency out of traditional car engines, allowing them to comply with stricter environmental rules and remain relevant as new technologies such as zero-emission electric vehicles gain traction.

For the full story, see:
Sarah Kent and Chester Dawson. “Combustion Engines Catch New Spark.” The Wall Street Journal (Mon., NOV. 20, 2017): A10.
(Note: the online version of the story has the date NOV. 18, 2017, and has the title “Big Oil and Auto Makers Throw a Lifeline to the Combustion Engine.”)

Google Did Evil in Firing Damore

(p. C2) I was fired by Google this past Monday [Aug. 7, 2017] for a document that I wrote and circulated internally raising questions about cultural taboos and how they cloud our thinking about gender diversity at the company and in the wider tech sector. I suggested that at least some of the male-female disparity in tech could be attributed to biological differences (and, yes, I said that bias against women was a factor too). Google Chief Executive Sundar Pichai declared that portions of my statement violated the company’s code of conduct and “cross the line by advancing harmful gender stereotypes in our workplace.”
My 10-page document set out what I considered a reasoned, well-researched, good-faith argument, but as I wrote, the viewpoint I was putting forward is generally suppressed at Google because of the company’s “ideological echo chamber.” My firing neatly confirms that point. How did Google, the company that hires the smartest people in the world, become so ideologically driven and intolerant of scientific debate and reasoned argument?
. . .
For many, including myself, working at Google is a major part of their identity, almost like a cult with its own leaders and saints, all believed to righteously uphold the sacred motto of “Don’t be evil.”

For the full story, see:

James Damore. “Why I Was Fired by Google.” The Wall Street Journal (Sat., Aug. 12, 2017): C2.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date Aug. 11, 2017.)

Knowledge Transforms a Weed into a Resource

(p. A10) ZADAR, Croatia — For generations, residents of Zadar, an idyllic town on the Adriatic coast of Croatia, used the dry, stringy stems and yellow blossoms of a common variety of a wild daisy as kindling, mostly to singe the hair off pigs destined for the spit.
But about five years ago, cosmetics manufacturers and the essential oils industry started using a rare extract from the flower — known as the curry plant for its spicy aroma — as a critical ingredient in high-end creams, ointments and tinctures, sold for their purported rejuvenating powers.
So let the pigs shave themselves, local residents decided, turning their attention to gathering bushels of the once widely ignored weed, in hopes of creating a new local industry to add to an economy based on construction, fruit farming, olive oil and a touch of tourism.

For the full story, see:
JOSEPH OROVIC. “ZADAR JOURNAL; Croatian Farmers’ Hopes of New Life Rest on a Weed Called Immortelle.” The New York Times (Fri., NOV. 24, 2017): A10.
(Note: the online version of the story has the date NOV. 23, 2017, and has the title “ZADAR; JOURNAL; Can a Wild Daisy Rejuvenate Croatia’s Farming Economy?”)

Price “Gouging” Encourages Demanders to Conserve and Suppliers to Supply

(p. A17) . . . price hikes are a response to scarcity, and signals that reveal the true severity of scarcity are critical during storms and other crises. Price hikes let consumers know that fuel is scarcer than it was. Price hikes prompt consumers to use fuel more judiciously, buying less gasoline than they would at a lower price. They take fewer unnecessary trips, diminishing pressure on supplies. Price hikes also create a financial incentive for suppliers from outside the area to move their product into high-demand zones. As supplies return to normal, so do prices.
. . .
Year’s revelers in New York City welcomed 2015, Uber’s surge-pricing algorithm stopped working for nearly 30 minutes. Without the guarantee of extra pay, drivers had little incentive to brave New Year’s traffic. Requests spiked 300%, wait times doubled, and the rate of completed trips fell 80%. People who really needed Ubers–and would have been willing to pay surge pricing–couldn’t get a ride.
. . .
Price increases are an important means of encouraging as many people as possible to cope as well and as creatively as possible with natural disasters. True, the rising price of goods like gasoline can create problems for consumers, particularly the poor. But these drawbacks are negligible compared to the life-threatening shortages that can result when ill-informed public outrage keeps prices artificially low. Even a poor person is better off being able to buy a bottle of water for $10 when the alternative is to have $10 and go thirsty.

For the full commentary, see:
Donald J. Boudreaux. “‘Price Gouging’ After a Disaster Is Good for the Public; If government prohibits suppliers from charging more, consumers hoard, exacerbating shortages.” The Wall Street Journal (Weds., OCT. 4, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date OCT. 3, 2017.)

Reinvesting Profits Enables the Scaling Up of Success

(p. A17) Muhammad Yunus has big goals: zero world poverty, zero unemployment and zero net carbon emissions.
. . .
Mr. Yunus has long been a hero of mine for his innovative faith in the resourcefulness of low-income people.
. . .
If you want to motivate support for social enterprise, a utopian promise of “A World of Three Zeros” makes for a better book title than “Helping 60 Albanian Farmers Grow Herbs.” And Mr. Yunus’s paean to entrepreneurship does indeed deliver inspiration about the power of human creativity. But problematic arguments remain, especially his imprecise criticisms of the current economic system and the implausibility of replacing the whole system with social entrepreneurship.
A major problem is one of scale. Mr. Yunus’s many social-enterprise examples are all on the same micro level as the 60 Albanian herb farmers. And while there’s nothing wrong with making a large number of small-scale efforts to help a great many people, it doesn’t qualify as a whole new system for the $76 trillion global economy. Mr. Yunus doesn’t confront the scaling problem. He could have noted, for instance, that successful social entrepreneurs, unlike successful private entrepreneurs, by definition don’t get the high profits to reinvest in scaling up successes.

For the full review, see:
William Easterly. “BOOKSHELF; How to Solve Global Poverty.” The Wall Street Journal (Sat., Oct. 3, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the review has the date Oct. 2, 2017.)

The book under review, is:
Yunus, Muhammad. A World of Three Zeros: The New Economics of Zero Poverty, Zero Unemployment, and Zero Net Carbon Emissions. New York: PublicAffairs, 2017.

Firms Compete in Product Market and Cooperate in Parts Market

(p. B1) When the iPhone X goes on sale next month, Apple Inc.’s rival, Samsung Electronics Co., has good reason to hope it is a roaring success.
The South Korean company’s giant components division stands to make $110 from for each top-of-the-line, $1,000 iPhone X that Apple sells.
The fact reflects a love-hate dynamic between the phone makers that is one of the more unusual relationships in business. While each company vies to get consumers to buy its gadgets, Samsung’s parts operation stands to make billions of dollars supplying screens and memory chips for the new iPhone–parts that Apple relies on for its most important product.

For the full story, see:
Timothy W. Martin and Tripp Mickle. “Samsung To Benefit If iPhone X Is a Success.” The Wall Street Journal (Tues., Oct. 3, 2017): B1 & B5.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date Oct. 2, 2017, and has the title “Why Apple Rival Samsung Also Wins If iPhone X Is a Hit.”)

FCC Spectrum Regulations Drive Innovators to Bankruptcy

(p. A17) In 2004 the FCC moved to relax L-Band rules, permitting deployment of a terrestrial mobile network. Satellite calls would continue, but few were being made, and sharing frequencies with cellular devices made eminent sense. By 2010, L-Band licensee LightSquared was ready to build a state-of-the-art 4G network, and the FCC announced that the 40 MHz bandwidth would become available. LightSquared quickly spent about $4 billion of its planned $14 billion infrastructure rollout. Americans would soon enjoy a fifth nationwide wireless choice.
But in 2012 the FCC yanked LightSquared’s licenses. Various interests, from commercial airlines to the Pentagon, complained that freeing up the L Band could cause interference with Global Positioning System devices, since they are tuned to adjacent frequencies. Yet cheap remedies–such as a gradual roll-out of new services while existing networks improved reception with better radio chips–were available. In reality, the costliest spectrum conflicts emanate from overprotecting old services at the expense of the new. With its licenses snatched away, LightSquared instantly plunged into bankruptcy.
. . .
. . . regulatory impediments continue to block progress. Years after the L-Band spectrum was slated for productive use in 4G, it lies fallow–now delaying upgrades to 5G.

For the full commentary, see:
Thomas W. Hazlett. “How Politics Stalls Wireless Innovation; The FCC unveiled its National Broadband Plan in 2010–but couldn’t stick to it.” The Wall Street Journal (Mon., Oct. 2, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Oct. 1, 2017.)

The commentary, quoted above, is related to the author’s book:
Hazlett, Thomas W. The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone. New Haven, CT: Yale University Press, 2017.

Musk Fires Under-Performing Workers to Speed Output of Mass-Market Electric Sedans

(p. B4) DETROIT — The electric-car maker Tesla fired hundreds of workers this week after a series of performance reviews conducted during the biggest expansion in the company’s history.
Tesla said Friday [Oct. 13, 2017] that the dismissals were not out of the ordinary, even though they came as the automaker tries to increase the production of its first mass-market vehicle, the Model 3 sedan.
The company has been criticized for the slow pace of its early production of the new model, which has generated hundreds of thousands of deposits from prospective buyers.
Tesla built about 25,000 vehicles in the three months that ended Sept. 30, but only 260 of those were Model 3s — considerably fewer than the 1,500 it had projected. The automaker has attributed the low production rate of the new car to unexpected bottlenecks in its manufacturing system.

For the full story, see:
BILL VLASIC. “Tesla Fires Hundreds of Workers.” The New York Times (Sat., OCT. 14, 2017): B4.
(Note: bracketed date added.)
(Note: the online version of the story has the date OCT. 13, 2017, and has the title “Tesla Fires Hundreds as It Tries to Speed Production of an Electric Sedan.”)

Rate of Inflation Is Still a “Mystery” to Economists

(p. A2) CLEVELAND–Federal Reserve Chairwoman Janet Yellen on Tuesday [Sept. 26, 2017] defended the central bank’s projection for a gradual path of rate increases over the next few years despite the past few months of unexpectedly low inflation.
. . .
Inflation, under the Fed’s preferred measure, has undershot the central bank’s 2% target for much of the past five years. Although Ms. Yellen said she expects inflation to gradually move up to the target, she acknowledged the uncertainty surrounding that prediction.
. . .
“How should policy be formulated in the face of such significant uncertainties? In my view, it strengthens the case for a gradual pace of adjustments,” Ms. Yellen told a National Association for Business Economics conference in Cleveland.
. . .
Still, the Fed’s understanding of inflation is “imperfect,” she said, calling the shortfall in inflation “a mystery.” “We recognize that something more persistent may be responsible for the current undershooting.”

For the full story, see:
David Harrison. “Yellen Firm on Rates; Inflation a ‘Mystery’.” The Wall Street Journal (Weds., Sept. 27, 2017): A2.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date Sept. 26, 2017, and has the title “Yellen Defends Fed Rate-Rise Plan Despite ‘Mystery’ of Low Inflation.”)

“The Tabula Rasa of the American Dream”

(p. 22) The four Keats siblings, John and George, sister Fanny, and a third brother, “star crossed” Tom, dead of tuberculosis at 19, were all well schooled in the World of Pains. The orphaned children of a shiftless stable hand, they survived on the miserly dole of a tea merchant appointed their guardian. “The lives of these orphans,” Gigante remarks, “do have the makings of fairy tale.” John trained in medicine before taking up the far riskier profession of poetry; reviews of his ambitious long poem “Endymion” were so harsh that Byron cruelly joked he was “snuffed out by an article.” George limped along as a clerk in various mercantile firms, dreaming of something more ­adventurous.
Gigante has had the clever idea of telling the stories of John and George as parallel lives, a dual biography of brothers.
. . .
In her view, George’s departure to America with his young wife, Georgiana, was “an imaginative leap across 4,000 miles onto the tabula rasa of the American dream.” And yet, nothing — nothing, that is, beyond his famous brother — distinguishes George from thousands of other immigrants who joined in the Western migration during the tough years following the French Revolution, when it became painfully clear that possibilities for advancement in class-stratified Great Britain were severely curtailed.
. . .
The land of opportunity was also the land of crushing disappointment. On his second trip to America, after blowing his inheritance on a dubious investment with his elegant friend and neighbor Audubon, and retreating from the bleak prairies to more civilized Louisville, George finally completed his sawmill. (He would have been wiser to invest in Audubon’s pictures of otters and buzzards than a crackpot steamboat scheme.) After a few years of profit, when he built a columned mansion equipped with slaves near the center of town, George lost it all again in the Panic of 1837.

For the full review, see:
CHRISTOPHER BENFEY. “Ode to Siblings.” The New York Times Book Review (Sunday, October 16, 2011): 22.
(Note: ellipses added.)
(Note: the online version of the review has the date OCT. 14, 2011, and has the title “A Keats Brother on the American Frontier.”)

The book under review, is:
Gigante, Denise. The Keats Brothers: The Life of John and George. Cambridge, MA: The Belknap Press of Harvard University Press, 2011.