Monday , April 6 2020
Home / [email protected] (Cyril Morong)

Articles by [email protected] (Cyril Morong)

Historically, college students who graduate into a recession have settled for lower-paying jobs at less prestigious companies

3 days ago

For the Class of 2020, a Job-Eating Virus Recalls the Great Recession: With interviews postponed and internships canceled, graduates seeking work fear for the future by David Yaffe-Bellany and Jaclyn Peiser of The NY Times. Excerpts:
"A number of major companies, including Yelp and Disney,
have suspended their internship programs, a common route to a first job
for many graduating seniors. At some job fairs in early March, major
companies simply didn’t show up; now all those career events have been
canceled.""Historically, college students who graduate into a recession have
settled for lower-paying jobs at less prestigious companies than people
who finished college even a year earlier. Economists have found that the
impact of that bad luck can linger for as long as 10 or 15 years,

Read More »

HEB’s response is a masterclass in preparation and being ready to support your community

10 days ago

Every
Grocery Store Should Be Handling the Pandemic Like This Texas Chain:
Whole Foods, local grocery chains, and probably the federal government
could take a page from HEB’s emergency preparedness book by Hannah Smothers.
"Every person who grew up or even just briefly lived in Texas knows
two things, by heart: the pledge of allegiance to the state flag, and
that “no store does more than my HEB.” The beloved grocery store is
universally known (among Texans, and anyone who knows a Texan) for fresh
tortillas, smiley employees, and generally being the best place to buy
food in the state. But for the past three months, doing more has also
included perhaps the smoothest and swiftest response to the COVID-19
pandemic in the entire country. HEB’s list of coronavirus safety measures

Read More »

Awash in dirty plastic: We’ve got a big problem in our recycling market

March 4, 2020

By Michael Taylor of The San Antonio Express-News. Excerpts:
"plastic straws represent just 0.03 percent of American plastic waste
that ends up in the ocean, according to Rachel Meidl of Rice
University’s Baker Institute for Public Policy""the global market for recyclable commodities got a massive shock at the end of 2017, with the situation still evolving.China
announced a new program called “National Sword” in 2017 in which it
would not import 24 types of waste, including many mixed paper and
plastic products, starting in March 2018. A further list of 16 more
items, including many metals, will be banned from import by the end of
2019."
"The China bans allow for the importation of “clean”
plastics and metals, but it ceased the importation of what people in the
industry call

Read More »

How Odysseus Started The Industrial Revolution

February 27, 2020

Factory work may have been a commitment device to get everyone to work
hard. Odysseus tying himself to the mast was also a commitment device.
Dean Karlan, Yale economics professor explains how commitment devices
work:
"This idea of forcing one’s own future behavior dates back in our culture at least to Odysseus, who had his crew tie him to the ship’s mast so he wouldn’t be tempted by the sirens; and Cortes, who burned his ships to show his army that there would be no going back.Economists call this method of pushing your future self into some
behavior a “commitment device.” [Related: a Freakonomics podcast on the
topic is called "Save Me From Myself."] From my WSJ op-ed:
Most of us don’t have crews and soldiers at our disposal,
but many people still find ways to influence their

Read More »

Funds that market themselves as sustainable investments aren’t necessarily focused on companies that fight climate change, develop wind turbines or promote diverse boards

February 20, 2020

See Big Technology Stocks Dominate ESG Funds: The most commonly held S&P 500 stocks in actively managed sustainable equity funds last fall were giants including Microsoft, Alphabet and Apple by Akane Otani of The WSJ. Excerpts:
"Funds that market themselves as sustainable investments aren’t
necessarily focused on companies that fight climate change, develop wind
turbines or promote diverse boards.Instead, many of them look a lot like a portfolio of big technology stocks.The five most commonly held S&P 500 stocks in actively managed sustainable equity funds last fall were

Microsoft Corp.,

MSFT 0.89%

Alphabet Inc.,

GOOG 0.40%

Visa Inc.,

V 1.39%

Apple Inc.

Read More »

A Special Valentine’s Message On Romantic Love

February 12, 2020

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing.
The following quote gives you an idea of what it is all about:
"Kissing, it turns out, unleashes chemicals that ease stress hormones in
both sexes and encourage bonding in men, though not so much in women." I
guess economists call this "interdependent utility functions." Meaning
that what brings one person pleasure brings brings the other person
pleasure, and vice-versa.The other is Cocoa Prices Create Chocolate Dilemma. (that is from 2009)
The article opens with "Soaring cocoa prices are creating a Valentine’s
Day dilemma for chocolate makers. They don’t want to raise retail
prices when recession-weary consumers are trying to limit their
spending." The problem is crop diseases in Ivory Coast and

Read More »

Businesses intentionally display their social and environmental performance in addition to their financial performance to stakeholders

February 7, 2020

See It is all about the money when discussing ‘planet, people and profits’ by Prasad Padmanabhan. He is a professor of finance at St. Mary’s University.Adam Smith’s "invisible hand" suggests that if you follow your own self
interest, you will promote the interests of society. I have had some
posts on this issue of being selfish vs. being altruistic and if they
can actually be separated before. So those links are at the end.Adam Smith talked about the invisible hand and how profit seeking firms
would provide what the public wanted. But what about trying to make the
world a better place? What if companies do that because buyers demand it? Maybe if they didn’t they would not maximize profits. That is what Padmanabhan’s article is about.Here is an excerpt from The Wealth of Nations found

Read More »

Another Semester Has Started

January 24, 2020

Welcome to any new students. The entries usually have something to do
with a basic economic principle that is related to a recent news story.Here is something I wrote for The Ranger (the school paper of San Antonio College where I used to teach) back in 2011 titled "Why is college so hard?"Students might wonder why college, and SAC in particular, is hard. This
might sound trite, but I think the faculty at SAC want students to
achieve success in life and that means that classes have to be hard if
you are going to learn and understand the concepts which provide a
foundation for that success.I think my own experience as a
community college student over 30 years ago helps me understand this. My
teachers took their subjects seriously and maintained high academic
standards. They got me

Read More »

Why Your Uber Ride Can Cost as Much as a Plane Ticket

January 23, 2020

Ride hailing apps, promising cheap and easy travel, cannibalized New York’s taxi industry. What happens when they no longer feel like a bargain?By Ginia Bellafante of The NY Times. Someone living in Brooklyn paid $192 to get to LaGuardia airport for a "trip that typically ran about $35." Excerpts:
"prices always climb when demand is very high, and demand is always high during the holidays."
"A number of factors combined to produce
this new reality. Chief among them, according to James Parrott, an
economist who analyzes data on ride-hailing services both as an
independent academic and adviser to the city’s Taxi and Limousine Commission is the fact that Uber and Lyft had discounted prices in advance of each company’s initial public offering last year.

Rides
were artificially cheap.

Read More »

Fed Has Many Tools to Deter Recession, Former Chairman Bernanke Says

January 22, 2020

Quantitative easing, forward guidance could be equivalent to 3 percentage points of rate cuts, Mr. BernankeBy David Harrison of The WSJ. Excerpts:
"The Federal Reserve has ample tools for fighting a potential recession
even though its benchmark interest rate remains historically low, former
Fed Chairman

Ben Bernanke

said.""Under the current economic conditions, those methods, known as
“quantitative easing” and “forward guidance,” represent the equivalent
of up to 3 percentage points of cuts in Fed interest rates, he said."Economists say broad structural changes to the economy such as an
aging population or technological advances will hold down interest rates
for the foreseeable future.Right now, the Fed’s benchmark rate is in a range of 1.5% to 1.75%.By

Read More »

Cocoa Cartel Stirs Up Global Chocolate Market

January 21, 2020

Ivory Coast and Ghana, which combined produce more than 60% of the world’s cocoa, join forcesBy Alexandra Wexler of The WSJ. Excerpts:
"The West African nations of Ivory Coast and Ghana, which combined
produce more than 60% of the world’s cocoa, have banded together to form
their own chocolate-coated version of the Organization of the Petroleum
Exporting Countries.Like OPEC, whose control over crude oil output has largely
driven global oil prices since 1960, the decision by the world’s top two
cocoa producers to join forces is expected to raise the cost of candy
bars, ice cream and cake. The two-nation chocolate bloc has decided to charge an extra $400 per metric ton of cocoa, which is currently trading around $2,500 per metric ton. “COPEC,”
as some in government and industry have

Read More »

The Sahm rule and recessions

January 18, 2020

See Are We in a Recession? Experts Agree: Ask Claudia Sahm: Sahm rule is reassuring to economists looking for new ideas on stimulus when interest rates are already low by Kate Davidson of The WSJ. Excerpts:
"a Federal Reserve economist has come up with a simple rule based on
movements in unemployment to rapidly determine when a recession is under
way. In conjunction with that rule, Claudia Sahm has also proposed
policies to immediately soften the downturn without the political
hurdles that usually slow stimulus efforts.""In January 2008, Fed officials projected the flagging U.S. economy
would avoid a recession. Fed staff believed the probability of recession
within the next six months was 45%, according to a policy meeting
transcript.In fact, a recession had begun the previous

Read More »

Fewer Jobless Americans Tap Unemployment Benefits

January 17, 2020

The U.S. work force’s reliance on unemployment insurance is dwindling amid tighter rules and a strong job marketBy Sarah Chaney of The Wall Street Journal.When I cover unemployment, I don’t spend much time on how the unemployment insurance system works. This article has some good information on it. Excerpts:
"Last year, 28% of jobless people received benefits, down from 37% in 2000—a period of similarly low unemployment.Among the main reasons, experts say: After the last recession
ended, state legislatures passed policies reducing unemployment benefits
and tightening eligibility requirements.Ten states cut the duration of benefits, five adopted stricter
work-search requirements and several trimmed the average weekly-benefit
amount""A strong labor market also means many jobless people

Read More »

What if companies can’t afford real models for their ads? Use AI generated fake pictures

January 15, 2020

See Dating apps need women. Advertisers need diversity. AI companies offer a solution: Fake people by Drew Harwell of Washington Post. Excerpts:
"Artificial
intelligence start-ups are selling images of computer-generated faces
that look like the real thing, offering companies a chance to create
imaginary models and “increase diversity” in their ads without needing
human beings.

One
firm is offering to sell diverse photos for marketing brochures and has
already signed up clients, including a dating app that intends to use
the images in a chatbot."

"Icons8, an Argentina-based design firm that sells digital illustrations and stock photos, launched its online business Generated.photos last month, offering “worry-free, diverse models on-demand using AI.”

The
site allows

Read More »

Rank-and-File Workers Get Bigger Raises

January 13, 2020

By Eric Morath and Jeffrey Sparshott of The WSJ. Excerpts:
"Pay for the bottom 25% of wage earners rose 4.5% in November from a
year earlier, according to the Federal Reserve Bank of Atlanta. Wages
for the top 25% of earners rose 2.9%. Similarly, the Atlanta Fed found
wages for low-skilled workers have accelerated since early 2018, and
last month matched the pace of high-skill workers for the first time
since 2010.“A strong labor market makes the bargaining power of
lower-paid workers more like the labor market higher-wage workers
experience during good times and bad,” Nick Bunker, economist with job
search site Indeed.com, said.""Average hourly earnings for production and nonsupervisory workers in the
private sector were up 3.7% in November from a year earlier—stronger
than the

Read More »

Private fire fighting

January 9, 2020

See While California Fires Rage, the Rich Hire Private Firefighters: A small but growing number of wealthy people are hiring their own teams by Ethan Varian of The NY Times.Fire fighting is often seen as being a "public good." A definition and discussion of that is given after excerpts from the article. If your local fire department is going to put out fires, it will do that for everyone. We can all get protected. If someone did not pay their bill, the FD would still have to come if their house was on fire and put it out so it does not spread to anyone else’s.So how could private fire fighting exist? Here are some excerpts from the article:
"Don Holter is an owner of Mt. Adams Wildfire, a private contractor in
the Sierra Nevada foothills near Sacramento. Most of his business comes
from

Read More »

Jobs and Inflation: The Great Trade-Off, Demystified: The relationship between inflation and unemployment is real, but far from simple

January 8, 2020

By Justin Lahart of The Wall Street Journal. This article discusses the Phillips curve. It is related to Monday’s post on full employment. The link to that post and many other previous posts (some with graphs) on this topic are listed after these excerpts from the Lahart article:
"in the years spanning 1861 to 1957 the unemployment rate and wage
inflation in the U.K. were negatively correlated—meaning that when one
went up, the other one tended to go down, and vice versa.That makes sense: When unemployment is low, workers can bargain for
bigger wage increases than they can when unemployment is high.American economists Paul Samuelson and

Robert Solow

seized on Mr. Phillips’s work, showing in a 1960 paper that it applied to the U.S. as well.""People’s inflation

Read More »

Will Recession Strike in 2020?

January 3, 2020

By Burton G. Malkiel and
Atanu Saha. Excerpts:
"The Conference Board, a nonprofit for economic research, tracks 11
predictive measures of future economic activity in its Index of Leading
Economic Indicators. The LEI purports to forecast the economy over the
coming three to six months. The individual components include data on
unemployment, the direction of the stock market, consumer and business
sentiment, and manufacturing activity. Unfortunately, the LEI is
somewhat unreliable as a forecaster and often misleading.We
examined the record of the LEI (and its components) over the eight
recessions and nine sudden market declines of 15% or more since 1960.
The good news is that the LEI and many of its components have had a
near-perfect record in anticipating recessions. The most

Read More »

Who’s highest‐paid in your state? (based on public employee salaries)

January 1, 2020

By Charlotte Gibson of ESPN. Excerpts:"Who’s the most powerful person in your state? Well, based on public
employee salaries, it’s likely a college coach (sorry, governors). A
whopping 28 college football coaches are the best-paid employees in
their states, along with 12 college hoops coaches who top the state
payrolls. Check out the map below to find your state’s top-earning
public official, plus the governor’s salary."So in 40 out of 50 states, it is a coach.

"Money men
Notice any familiar names on this list of the 40 highest-paid coaches
at public colleges? You should — Nick Saban, Dabo Swinney and Jim
Harbaugh have been on it for years. But some others (hello, Dan Hurley)
crack the list for the first time.

Dabo Swinney, Clemson

$9.3M

John Calipari, Kentucky

Read More »

Concert promoters are using Airline-style dynamic pricing to increase revenue

December 31, 2019

See Why Concert Tickets Are So Expensive: Over the past decade, the average ticket price for the top 100 North American tours has increased 55% to $94.83 by Anne Steele of The WSJ.The concert venues and promoters are trying to raise prices on the seats that will have the highest demand. Airlines do this as demand increases for certain flights.I think that the demand for concert tickets might be (or might have been) less than one since they raised prices but revenue still went up (see the previous post).These higher prices might increase efficiency. If prices are too low, you will have to have some other rationing system. If the price is below where supply and demand intersect, then you get shortages. Maybe tickets go to who is ever first in line (even if that means buying them online).

Read More »

This Has Been the Best Year Ever

December 29, 2019

For humanity over all, life just keeps getting better.By Nicholas Kristof. Excerpts:
"2019 was probably the year in which children were least likely to die,
adults were least likely to be illiterate and people were least likely
to suffer excruciating and disfiguring diseases.Every single day in recent years, another 325,000 people got their first access to electricity. Each day, more than 200,000 got piped water for the first time. And some 650,000 went online for the first time, every single day.""Historically, almost half of all humans died in childhood. As recently as 1950, 27 percent of all children still died by age 15. Now that figure has dropped to about 4 percent.""A majority of Americans say in polls
that the share of the world population living in poverty is increasing —
yet

Read More »

Egg market seems to act just the way supply and demand predict

December 28, 2019

Egg Glut Deepens Problems in Farm Economy: Shares in top egg producer Cal-Maine Foods take a hit, as per-dozen prices decline by Micah Maidenberg and Kirk Maltais.This was from the WSJ on Sept. 30. Retailers passed their lower cost along to consumers and quantity increased. Excerpts:
"Jackson, Miss.-based Cal-Maine, the nation’s top egg producer, said
Monday that prices for its eggs fell 30% to about 92 cents a dozen in
its quarter that ended Aug. 31. The result cut Cal-Maine’s sales by 29%, year over year.""Retailers have been quick to pass the drop in egg prices on to customers, eager to make more sales of a consumer staple. A milk glut has also encouraged retailers to cut prices on that standby""Purchases at retail stores rose 2.2% for the year through Aug. 10 from the previous 12

Read More »

Awash in dirty plastic: We’ve got a big problem in our recycling market

December 28, 2019

By Michael Taylor of The San Antonio Express-News. Excerpts:
"plastic straws represent just 0.03 percent of American plastic waste
that ends up in the ocean, according to Rachel Meidl of Rice
University’s Baker Institute for Public Policy""the global market for recyclable commodities got a massive shock at the end of 2017, with the situation still evolving.China
announced a new program called “National Sword” in 2017 in which it
would not import 24 types of waste, including many mixed paper and
plastic products, starting in March 2018. A further list of 16 more
items, including many metals, will be banned from import by the end of
2019."
"The China bans allow for the importation of “clean”
plastics and metals, but it ceased the importation of what people in the
industry call

Read More »

U.K. Experience Suggests an Inverted Yield Curve Isn’t All Gloom and Doom

December 26, 2019

In the U.S., a drop in long-term yields below short-term rates typically portends a recession, but that relationship may be breaking downBy Anna Isaac of The WSJ. Excerpts:
"A widely watched U.S. recession signal has been blinking red for
months now. Yet the performance of that gauge, the yield curve, in
Britain suggests it is less worrisome than the American experience
indicates.This signal is a bond market phenomenon called an
inverted yield curve, which means long-term government bond yields are
below short-term interest rates. Since the 1970s, it has appeared before
every recession. But in Britain, the yield curve has inverted without a
recession, for reasons that might be at work in the U.S. bond market
today. Indeed, it might explain why other data, such as the stock

Read More »

Conflicting opinions from economists on the value of giving gifts

December 25, 2019

The battle seems to be over inefficiency (spending money on items others might not want) vs. the idea that if you spent money on someone it is a believable signal that they care about you or having a relationship with you. See Holiday shopping? Consider the most economically efficient gift of all: cash, and avoid the deadweight loss of Christmas by Mark J. Perry. Excerpt:
"2. In a 1993 American Economic Review article “The Deadweight Loss of Christmas,”
Yale economist Joel Waldfogel concluded that holiday gift-giving
destroys a significant portion of the retail value of the gifts given.
Reason? The best outcome that gift-givers can achieve is to duplicate
the choices that the gift-recipient would have made on his or her own
with the cash-equivalent of the gift. In reality, it’s

Read More »

Cuts by fed boost consumer spending

December 25, 2019

See Housing Highlights the Promises—and Limits—of the Fed’s ‘Insurance’ Rate Cuts: Sales have rebounded as mortgage rates declined, but trade uncertainty has damped the benefit of lower borrowing costs in other sectors by Nick Timiraos of the WSJ.The title I used was the one from the print edition.This is what we teach in principles, that lower interest rates increase aggregate demand. But I also wanted to post it along sides excerpts from another article in the same print edition of the WSJ which said that rates cuts were not as effective as they used to be (Oct. 29, 2019).Excerpts from the first article:
"An analysis by Morgan Stanley found consumer spending on
interest-sensitive durable goods such as cars and appliances rose at a
14.6% annualized pace over the six months through

Read More »

Threat of anti-trust investigation leads colleges to compete more for students

December 23, 2019

See Colleges Agree to Allow Increased Competition for Applicants: An agreement between college counselors and the Justice Department should free up colleges to woo early-decision applicants with financial aid by Erica L. Green of The NY Times.Financial aid amounts to basically charging
different students different prices based on their ability and
willingness to pay. Economists call this price discrimination. These changes might bring price competition in the form of more financial aid. One of my earlier posts linked below goes into this more.Excerpts from the article:
"The financial aid stranglehold on students who commit to colleges may be broken.
In a proposed agreement announced this month
to answer Justice Department antitrust accusations, the National
Association for College

Read More »

People sometimes pay for goods even when they don’t have to

December 22, 2019

See Retailers Ditch Cashiers and Trust Shoppers to Pay Before Leaving: Stores want to give customers an Amazon Go-like experience, without the cost of added security measures by Ilya Khrennikov and Jake Rudnitsky of Bloomberg.Economist (or perhaps neuro-economist) Paul Zak has written a book called Trust Factor: The Science of Creating High-Performance Companies. This does not get mentioned in the article, but it shows that trust is a factor economists study.Excerpts from the article:
"From Russia to Japan to the U.S., retailers are betting on the good side
of human nature. In exchange for being able to grab an item and walk
out, shoppers are relied on to be honest and pay — much like an unmanned
roadside produce stand. So far, theft rates are low, which means these
companies have hit

Read More »

ESG Funds Draw SEC Scrutiny (companies that pursue strategies to address environmental, social or governance challenges)

December 21, 2019

Wall Street’s growing foray into impact investing has regulators questioning investors’ ESG criteriaBy Juliet Chung and
Dave Michaels of The WSJ.I have done a number of posts on "socially responsible corporations." Will they make more money by "doing good" instead of just trying to maximize profits? Those are listed at the end.Adam Smith’s "invisible hand" suggests that if you follow your own self
interest, you will promote the interests of society. He even wrote:
"I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."
Now excerpts from the article:
"Many investment firms have been touting new products as socially
responsible.

Read More »

Ex-Bumble Bee CEO is latest catch in tuna price-fixing hunt

December 20, 2019

By Joel Rosenblatt and Eliza Ronalds-Hannon of Bloomberg. Excerpts:
"Former Bumble Bee Foods LLC Chief Executive Officer Chris Lischewski was
convicted in a price-fixing conspiracy, capping a years-long U.S.
investigation that shook the packaged seafood industry and pushed Bumble
Bee into bankruptcy last month."Lischewski was found guilty Tuesday by a federal jury in San
Francisco after just a few hours of deliberations in what experts say is
likely the final piece of the Justice Department probe. Prosecutors
alleged that he conspired with colleagues and executives at rival
companies on a “peace proposal” in order to boost prices and meet
earnings targets set by Bumble Bee’s 2010 sale to Lion Capital.
The former CEO faces up to 10 years in prison and a fine of $1 million,

Read More »