Category Archives: economics

Back of the envelope math for internalizing costs.

Colleague sent me this article about renewable energy costs.

Check out this article from today’s New York Times, page B1!

Reminded me of this problem that has been bugging me for awhile…

It always bugs me how the entrenched interests hold up the cost piece when nuclear and oil have huge externalized costs.
For nuclear, the s government developed the technology (manhattan project) and GAVE it to the industry so they would produce plutonium as a by product of energy.  SOmethling 20+billion in today’s dollars.
Meanwhile, some portion of our US military budget is for protecting global oil supply.  It would be complicated, but imagine if some portion of it were factored into price at the pump.  US military budget was like $500 billion last year.  in 2013 we used 135 billion gallons of gasoline.  If 10% of us military is for oil supplies, then that is $50 billion, about $0.25 per gallon….
Ok, I am procrastinating…

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Filed under economic sociology, economics, sociology

Ideas for Questions and Themes for Arianna Huffington

Today, as part of the tech/no Forum series at Bucknell, we are hosting Arianna Huffington.  I had imagine I would do some deep research on her background, her role as founder of HuffingtonPost, her role as CEO of the merged AOL-Huffington company  her ideas on the relationship between media, democracy, and profit, the death (?) of the newspaper, and so on.

Well, that didn’t happen.

Instead, I’ll have to generate some from what I have in my head (as opposed to research-based).

If you are coming to the afternoon session, feel free to read these, use these, modify these, and so on.

Business and Technology

* Is the content-for-eyeballs formula of the Internet dying?  Are advertisers not willing to pay?

* Are we at the end of an innovation burst as the Internet and mobile platforms are merging?  Is the heady period of “social media” and its rapid expansion done?

* Who are HP’s or AOL’s competitors?

Media and Profit

* Is it the responsibility of the media company to provide what “customers” want or what they need?  Does a media/news company create its own demand and then project that onto the audience.  “See, they want _____________ (tits, blood, murders, horse-race politics)?” Continue reading

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Filed under Business, economics, Future of Technology, higher education, Information and Communication Technology, innovation, Media, Network Society, Politics, Power, Activism, Social Networks, sociology, technology, Technology history

Happy Belated Labor Day

x-posted at Biz Gov Soc

I have been meaning to comment on labor day, this past Monday all week. There is some kind of irony in Bucknell’s lack of observance of labor day. Do we not think learning and teaching are “work”? Of course some classes of employees are off, but not students nor faculty. I am not whining about wanting a day off, just wondering what the institution is say9ing, or not, in its scheduling choices. Bucknell aside, what are they key “issues” of the day, as C. Wright Mills would have us describe them? What is the state of working for a living in the ol’ US of A? The NY Times provided two interesting views on labor on the day in question. First, Robert Reich, professor (but Micheal Reagan thinks this is a disqualification to speak on matters of bread and butter), former Labor Secretary under Clinton, author, and very funny short man (one of his book titles was Let Me Be Short) tackles the two big issues of the day: the stagnant economy and rising inequality. Reich provides an interesting set of graphs to accompany his points. (Click to enlarge). First, the evidence: productivity is up, incomes are flt, and the wealthiest are wealthier at a faster rate than everyone else. Whether this is a problem or not can be divided into two pieces. First- are there negative effects to rising inequality? Second- can rising inequality understood not as a problem, but as the outcome of a more virtuous process? In this case, the process would be a well-functioning economy that allows individuals to find their own optimal point of rewards in the labor market relative to what they put into it (effort, capital). In other words, a free market will produce inequality as a result of liberating the engines of wealth-seeking. I’ll leave it to a reader to determine whether or not the inequality is a problem. The data are clear and it should be beyond debate that there is increasing inequality. His chart sums up the explanation of why. Wages stagnated starting around 1980, but the great “middle class” of America kept spending thereby creating enough demand to sustain economic growth for the producers of America (and the world). How did they do it? First,WOMEN. The women moved into the workforce in massive numbers. Whether it was to express their autonomy, enact a feminist vision of gender-equality, or to make the ends meet, the raw fact is they entered the economy. AS historians and sociologists have pointed out, this was really a re-entry into labor as the myth of the domestic, lesiure-oriented housewife was a historical anomaly. From hunter-gatherers to pioneer homesteads to early industrial work in homes, women did much, if not most, work. Second, taking on debt. Lots of it. At some point in the recent past, the average US household savings rate was negative. Negative! I remember when I heard this , it was like a punch to the stomach. You can’t sustain that. Blind faith in rising house prices and the slick sales pitches of elements of the mortgage industry played a big part in the bloating of debt. Anyway, that brings our story quite nicely up to the stories of the housing bubble, the role of Wall street in the bubble, and then AIG and the other Wall Street players at the center of the “great recession.” The other article, by Harvard Business school professors (woo hoo! Go Management Scholar), Teresa Amabile and Steven Kramer, shifts our focus from the buig picture to the small details of everyday work. At their conclusion, they offer this seemingly unobjectionable thought: “Work should ennoble, not kill, the human spirit.” This reminds me of another irony of labor day- shouldn’t we work on labor day? My grade school had school on MLK day so we could learn about him and the history of civil rights in our country. Anyway, digressions aside, what Amabile and Kramer found is disheartening: most professionals are disengaged, frustrated, and disatsified with work. They are unhappy. Using a HUGE amount of data (12,000 diary entries form 238 “professional” employees), they found that 33% were unhappy. What would make them happier? Is it some sort of Enron-like PRC with huge bonuses attached to the best reviewed? No. Is it little rewards and trophies? No. Is it more pay overall? No. Is it getting to lord over a prized working spot over co-workers? No. What is most motivating is making progress on meaningful work. So, Edward Freeman’s “responsibility hypothesis”– that people innately want to take responsibility for their work, finds some empirical evidence. Meanwhile, I am reminded of a clip from a food documentary I saw at our campus theatre the other day: Fresh. Chicken Farmers talk about how it is so hard to find people to “process” chickens (butcher) that they use work crews form a local prison to do it. Can manual labor be as meaningful as the professionals in Amabile and Krmaer’s study long for? Can butchering chickens be experienced as meaningful work? Or would simply paying more (and thereby reversing a little the flow of wealth Reich talks about) do more good? Do my students feel their academic assignments are meaningful work? Do I, as a professor-manager, provide the tools to enable them to be motivated by progress on meaningful work?

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Filed under economics, Political Economy, sociology

Grab-Bag

Here are a bunch of interesting links I have not had time to fully digest.

“Countdown to a Meltdown” an article from 2005 in which James Fallows of The Atlantic lays out how a third party candidate will win the presidency in 2016 after 8 years of ineffective Democratic presidency.  Interesting use of creativity and focusing on larger political and economic trends.

“Revenge of the Ratings Agencies” a NYT op-ed frames the Stnadard & Por’s downgrade as a political act not in terms of a D-R blame game, but as a threatened industry playing hardball.

The law called for exposing rating agencies to civil liability in securities lawsuits if their ratings were inaccurate. It also challenged the oligopoly’s dominance by calling for the Securities and Exchange Commission to explore the feasibility of having an independent organization select rating agencies for asset-backed securities, instead of having the bond issuers select and pay the agencies, as they now do.

“Serving Shareholders and Democracy” is a NYT editorial about how the SEC should force public firms to disclose to shareholders how and how much money they spend on politics.

Last week, a group of legal scholars sent a petition to the S.E.C. urging it to craft rules requiring companies to disclose to shareholders how they use corporate resources for political activities.

Here, the NYT reports on what seems like a very common-sense idea: have natural gas drillers post funds to a special emergency response fund to cover clean up in case of inevitable accidents.  I man need this for class.

Finally, London and riots.  I saw a link somewhere mentioning this academic paper by Ponticelli and Voth, from a research center (the CEPR) that looks at Europe 1919-2009 and finds that in general, cuts in government expenditures lead to more unrest like riots, strikes, and assassinations.  A free copy can be found here.  While this may seem self-evident, it is useful to have it confirmed empirically.  The results also suggest it is not due to cultural factors, demographics, or lots of “bad people.”  What I also noted is that more media coverage did not seem to matter.

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Filed under economics, Political Economy, Politics, Power, Activism, Protest

Libertarian confusion about organizations and non-profits

A post at orgtheory.net took me to this libertarian blog and site.

The author wondered why people would assume non-profits do more for a community than firms.

I forwarded this to some colleagues with similar interests and we may have run aground of some moderating policies as our comments do not seem to have been posted.  Hmmmmm.  I guess even free market of ideas people need some ground rules.

I’ll see if my comments go up later.

Basically, I pointed out that

1) The author seems to work for a non-profit.  So his stance of “who are those people” is ironic.

2) Non-profit versus profit is a meaningless distinction to make when discussin what they do or how they are perceived.

3) NPs that perform vital services are seen as more community-oriented because they ARE.  That does not mean that they are immune from critique.  Likewise, firms that push externalities onto communities or that use their political and economic power to suck up more value are seen as less community-minded because their actions ARE.

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Filed under blogging, economics, sociology, Uncategorized

Popular Economics Writing

Like most of us, I want to understand the economy and the political economy for my teaching and for my own sake.  I enjoy reading what we might call “popular” economics writing.  For example, I always try to check out James Surowiecki’s column in the New Yorker called the “Financial Page.”  Recently he wrote about the classic arguments about the source of unemployment: structural or cyclical factors (January 3,2100; page 23).  He pointed out how a blind allegiance to a vague ideology explains the persistence of belief in the idea that there must be something structural with unemployment this time.  In other words, the problem is that we do not have the “right kind” of workers for the available jobs.  Stimulus can do nothing since we just need to wait for people to retrain or leave the labor force, or die, I suppose.  If structural, then we just have to let labor markets “sort themselves out.”   The problem with the structural argument, as Surowiecki points out, is that there is scant evidence for it.  Payrolls are down and hiring stagnant across the board and not just in certain industries.  What are the industries with openings and not enough supply of workers?  None.

I have also picked up two books that I am making my way through.  One is “Crisis Economics” by Nouriel Roubini and Stephen Mihm.  I heard about him on the Planet Money podcast as one of the the economists who tried to sound the alarm bell on the housing bubble when no one was listening.  I am not sure that makes him clairvoyant all the time (of course!  He is an econmist!) but it seemed worth checking out.  I am only into the second chapter, but he already said something I have repeated so often in my classes: greed does not explain the bubbles nor their negative after effects.  My students almost universally will latch onto greed as the explanation and I see it as a key teaching need and challenge to get them off that well-worn groove.

There are two flaws in this kind of folk explanation.  First, greed can only be an explanation if you ignore the complexity of human systems and assume that what we observe as facts is due to the choices of a few people.  Given the complexity of human behavior and the way our actions are shaped by our history and context, one can not argue that it the recession is due to “some greedy people.”  This is the flaw of an under-socialized theory of human agency.  The second flaw is to grant the causal force of greed to the fact that some unspecified amount of people have just become more greedy.  As Roubini points out as well, why would wall street types become more greedy from 2002 to 2008?  Or from 1978 to 1998?  Aren’t they always very acquisitive and ambitious?  In fact, isn’t that exactly what my students admire and idolize about a career in finance?  There is no clear causal argument for why many more people would become greedy.  This line of folk reasoning makes invisible all of the inter-related organizational, institutional, and cultural forces that can interact to change the conditions of being “greedy” to make it either a controlled burn of energy or an uncontrolled conflagration. This is the second half of the under-socialized view (the term comes from the essay by Dennis Wrong) because it points out what needs to be added to have a more accurate theory of human agency.

In other words, greed ain’t enough to explain this shitstorm of economic problems.  To rely on this flawed reasoning leaves one to argue that the solution is for people to out of the blue just be “less greedy” and “more moral.”  To try to apply these solutions will only perpetuate an under-socialized view of human agency and any possibility for more effective action that addresses the conditions that enabled the recession.

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Filed under economics, macroeconomics, Scholars, Uncategorized

Some Common Sense at Last about Banks- Volcker

This strikes me as the right approach.

Volcker Calls for Restricting Banks’ Risk, Trading Activity – WSJ.com
The comments reflect Mr. Volcker’s long-held view that banks should act more in line with their traditional role and not take extremely risky gambles, which could threaten the viability of commercial banks and expose the Federal Reserve and taxpayers to large risks.

People keep yapping on about how the financial systems is the “circulatory” system of the economy.  Fine.  Then by extension, the amount of risk we have been allowing into the commercial banking systems is akin to eating four hamburgers every day for every meal, and then doing amphetamines, adn then running a marathon while smoking and hoping it won’t give us a heart attack.

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Filed under Banking, economics

Labor Day Thoughts

This post is mostly for my students (and myself)  since the unyieldingess of the academic calendar means we are in class on labor day.

I know as a kid growing up with two professional, salaried parents, I had no concept of labor day aside from that three day weekend.  I wonder how many of my students have a similarly hazy and immaterial understanding of the “labor” part of labor day.

So, how is the state of our workforce?  Not good. 

Official unemployment is at 9.7%.

This number of course, due to how it is measured (those actively looking for work in last four weeks).  That doe snot include discouraged workers, those who are marginally attached (would work more), or who have dropped out of the labor force.  This NY Times article nicely adds a human face to those categories.

They were left out of the latest unemployment rate, as they are every month: millions of hidden casualties of the Great Recession who are not counted in the rate because they have stopped looking for work.

And it has pictures!

This discouraged worker carpenter fills his time by cutting grass with clippers.

This discouraged worker carpenter fills his time by cutting grass with clippers.

The Bureau of Labor Statistics (BLS) has a very broad category to capture these various situations people find themselves in.  In August, the u6 measure, as it is known, came in at 16. 8 million. That was a 6 million increase over the year prior.  At 155 million in the labor force, that is an unemployment rate of 10.8%.  Throw in the number of people dropping out of the labor force all together, and you can  add another % point to get to an unemployment rate of around 12%.

Over at CalculatedRisk, the following chart captures the way that unemployment is steeper (big drop) and longer (more time to recover) than most recent recessions.  In short, this is a whole new world and historical analogies are rough at best.

Click to enlarge.

Well, there are bound to be bumps when you unleash the creative, destructive forces of capitalism, some might say.  Overall, we do better if we take the long view.

This is not a jobless recovery, it is a  jobless economy.  The amount of job growth since 200o is essentially zero. This graph shows that the ten year change in private employment is almost zero.

Edit

UPDATE: Here is a small glimmer of good news.  While labor-managemment, or labor unions in general, are usually seen in pretty negative terms, I am happy to share this little list of organizations acorss sectors that are successful and rely on collaborative organizaed labor partnerships.

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Filed under Business, economic sociology, economics, Political Economy

What is wrong here

X-posted at my class blog.

“Retention bonuses” would seem to be bonuses by any other name.  Obviously, public and political scrutiny is at super high levels as we reel from the financial crisis.

This little nugget caught my eye about a joint venture between Citigroup and Morgan Stanley:

According to the newspaper [The WSJ], not all of the joint venture’s 20,000 brokers would get retention payments. It said a broker who brought in $1 million in revenue last year might expect to get $500,000 to $1 million, depending on how much he continues to produce.

Continue reading

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Filed under Banking, corporate governance, corruption, economics, Government, Political Economy

$819 Billion to show us that transparency is not enough — Authentic Organizations

$819 Billion to show us that transparency is not enough — Authentic Organizations
Rachel asserts that “accounting is really an exercise about setting our priorities and ensuring that we are acting on and accounting for those priorities. ” Thus, Rachel recommends that organizations be more transparent about their accounting (and distribution of resources), so that they can make their organizational values “crystal clear”.

Yes, I thought. The more data, the better we can see where an organization is focusing its resources. Then, we can draw conclusions about whether the organization is doing what it says it values.

Thanks CV.  Need to read this more carefully and x-post to Org theory blog for class.

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Filed under economics, Government