Thursday, February 23, 2017

Is it okay to propose to your sweetheart with a diamond that was made in some drab office park?

See Forget the ring: Lab-grown diamonds are a scientist’s best friend by Sarah Kaplan of The Washington Post. It provides not just some of the economics of the industry but also some insights on the techniques of the process and the scientific uses of these lab created diamonds.

One of my classes this week read a chapter about cartels in the book The Economics of Public Issues. It included a short discussion about De Beers and what has happened to their monopoly power in the diamond market. It declined over time as more countries started mining diamonds (they once had a 90% market share and it is now 31%). They also faced anti-trust issues for the ways they tried to control the market (see additional link at the end).

But now lab-grown diamonds are starting to have an impact as well. Here are excerpts from the The Washington Post article:
"At a drab office park in a Washington suburb, in an unmarked building's windowless lab, Yarden Tsach is growing diamonds.

Not rhinestones or cubic zirconia. Diamonds. Real ones. In a matter of eight weeks, inside a gas-filled chamber, he replicates a process that usually takes billions of years in the bowels of the planet. Carbon atom by carbon atom, he creates nature's hardest, most brilliant and — if decades of advertisements are to be believed — most romantic stone."

"Until the middle of the past century, all of the world's diamonds originated more than 1 billion years ago in the Earth's hot, dark interior. Tremendous temperatures and pressures forced the carbon atoms there to link up in a flawless, three-dimensional lattice that would prove incredibly strong and equally effective at bending and bouncing light. The result was a crystal — a gem in the rough that, once cut and polished, would dazzle with unmatched radiance.

Yet getting those stones up to the surface has required an enormous — and sometimes bloody — effort. The environmental impact of diamond mines is so sprawling that it can be seen from space. The humanitarian cost of some gems is also staggering: children forced to work in mines, “blood diamonds” sold to finance wars. The Kimberley Process, which certifies diamonds as “conflict free,” was established in 2003 to stem the flow of these stones into the global market."

"Traditional diamond producers say only a small fraction of diamonds are suspect these days because of steps they've taken to ensure that mines are socially and environmentally responsible. They push back against the appeal of lab-grown stones, suggesting the man-made versions aren't on par with those dug out of the ground. The most recent ad campaign from the Diamond Producers Association, which features hipster couples frolicking amid gorgeous nature scenes, is called “Real is Rare.”

Their argument is unspoken but clear: No one should propose to a sweetheart with a gem that was made in some drab office park."

"Scientists have been creating diamonds since the 1950s, mimicking the conditions deep within the Earth by heating carbon to extreme temperatures while squeezing it in a hydraulic press. But it took them several decades more to cultivate large gem-quality stones. These were still not as large or as clear as the best traditional diamonds, and most were colored yellow or brown from the nitrogen required to stabilize the growing process. Still, the traditional diamond companies were on edge.
“Unless they can be detected,” a Belgian diamond dealer told Wired in 2003, “these stones will bankrupt the industry.”

Today, nearly a dozen companies worldwide produce diamonds that are all but indistinguishable from mined stones"

"Sales of lab-grown stones make up about 1 percent of the global commercial diamond market, but a 2016 report from investment firm Morgan Stanley suggested that proportion could jump to 7.5 percent by the end of the decade. In one unlikely scenario, analysts said, lab diamonds might become so ubiquitous that the entire traditional market collapses.

After all, that market depends on sentiment and scarcity. The combination is what made De Beers's famous “a diamond is forever” campaign so potent. It turned diamonds into the ultimate symbol of eternal love, stones that were to be treasured and never — perish the thought — resold. The genius strategy has helped to ensure diamond companies control supply.

But lab-grown jewels shatter the illusion. They can be made on demand, in a matter of weeks, and they cost an estimated 10 percent to 40 percent less than a gem that comes out of the ground. Technology being what it is, it's likely they'll get even cheaper."

Here is the additional link:

De Beers – Rulers of the Diamond Industry:The Rise and Fall of a Monopoly by William Yu of The University of California at Berkeley

Thursday, February 16, 2017

San Antonio cracks top 25 on U.S. News and World Report's "Best Places to Live"

Click here to read the article. Excerpts:
"San Antonio is considered the 23rd best place to live in the United States, according to U.S. News and World Report.

The Alamo City cracked the top 25 in the magazine's 2017 edition of its Best Places to Live in the U.S. list, which ranks major metro areas on a number of factors including unemployment, annual household income, cost of living, education, health care and migration.

The magazine said the nation's seventh-largest city is "as comfortable as an old pair of jeans. It offers big-city amenities and world-renowned attractions coupled with a relaxed and inviting atmosphere." It also said that San Antonio residents benefit from living in a destination city in that they have year-round access to attractions such as Six Flags Fiesta Texas and SeaWorld San Antonio, while also being complimentary of its arts and culture, citing the Majestic Theater, the Tobin Center for the Performing Arts and the McNay Art Museum, along with the Alamo and the rest of the historic Spanish missions. The report on San Antonio also noted that the missions have been designated a World Heritage Site by UNESCO."

"Here are the top 10 cities on this year's list:
  1. Austin
  2. Denver
  3. San Jose, California
  4. Washington, D.C.
  5. Fayetteville, Arkansas
  6. Seattle
  7. Raleigh-Durham, North Carolina
  8. Boston
  9. Des Moines, Iowa
  10. Salt Lake City"
I'm usually skeptical of any "best places" lists because if those places are so great, more people will move there, driving up the cost of living. Then it might not be such a great place.

Suppose that San Francisco is 6 times better to live in than Omaha, Nebraska (as of 2015). That is about how many times higher the median home price is in San Francisco. There is definitely more to do and more great sights in San Francisco, but it costs alot more to live there.

If SF were so great, everyone would leave Omaha and head to SF. But they don't. This is where  the "Indifference Principle"comes in.

If people really believe that SF is better many of them go there, but things won't be very fun due to the crowds (which reminds me of something that Yogi Berra said about a restaurant: "nobody goes there anymore, it's too crowded").

Prices of everything will be bid up. This also illustrates what economist Steven Landsburg calls the "Indifference Principle." "Except when people have unusual tastes or unusual talents, all activities must be equally desirable."

This applies to SF. Once everyone sees it as a good deal or great place, they start going there. Only people with unusual tastes will really enjoy it. That is, you will have to like what that SF has to offer alot more than the average person or the crowds and congestion and high prices will erode your enjoyment. It won't be any better than anywhere else to live. Other places will be just as desirable.

If home prices were only twice as high in SF, then lots of people will move there because it is such a great place. But then that drives up the home prices and eventually there is no advantage to moving to SF. All of its extra benefits are eaten up in higher costs of living. 

Friday, February 10, 2017

A Special Valentine's Message On Romantic Love

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. 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 Ghana. You might need to be a WSJ subscriber to read the whole article.

Here is a new article from yesterday's San Antonio Express-News (2-13-2011). Romance in bloom at workplace: Survey indicates 59% have taken the risk-filled leap. It seems like many people admit to having a romance at work and/or meeting their spouse at work. So what starts out as economic activity leads to some other needs being met.

Now the economic definition of romantic love.

 Abstract: "Romantic love is characterized by a preoccupation with a deliberately restricted set of perceived characteristics in the love object which are viewed as means to some ideal ends. In the process of selecting the set of perceived characteristics and the process of determining the ideal ends, there is also a systematic failure to assess the accuracy of the perceived characteristics and the feasibility of achieving the ideal ends given the selected set of means and other pre-existing ends.

The study of romantic love can provide insight into the general process of introducing novelty into a system of interacting variables. Novelty, however, is functional only in an open system characterized by uncertainty where the variables have not all been functionally looped and system slacks are readily available to accommodate new things. In a closed system where all the objective functions and variables must be compatible to achieve stability and viability, adjustments in the value of some variables through romantic idealization may be dysfunctional if they represent merely residual responses to the creative combination of the variables in the open sub-system."

The author was K. K. Fung of the Department of Economics, Memphis State University, Memphis. It was from a journal article in 1979. More info on it is at this link. The entire article, which is not too long, can be found at this link.

Then there was this related article: Love really is blind, U.S. study finds. Here is an exerpt:

"Love really is blind, at least when it comes to looking at others, U.S. researchers reported on Tuesday.

College students who reported they were in love were less likely to take careful notice of other attractive men or women, the team at the University of California Los Angeles and dating Web site eHarmony found.

"Feeling love for your romantic partner appears to make everybody else less attractive, and the emotion appears to work in very specific ways in enabling you to push thoughts of that tempting other out of your mind," said Gian Gonzaga of eHarmony, whose study is published in the journal Evolution and Human Behavior.

"It's almost like love puts blinders on people," added Martie Haselton, an associate professor of psychology and communication studies at UCLA."
More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Here’s what science says is the secret ingredient to making your love spark 

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

This is your brain on love   (brain scans and biology seem to confirm the economic definition given above)

Dollars & Sex: The Blog of Economist Marina Adshade

Do Women Really Value Income over Looks in a Mate? by Marina Adshade

Friday, February 03, 2017

The percentage of 25-54 year-olds employed was unchanged in January

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates college age people who might not be looking for work)

The percentage of 25-54 year-olds employed is 78.2% for January. It was also 78.2% in December. It is still below the 79.7% in December 2007 when the recession started. . Click here to see the BLS data. The unemployment rate was 4.8% in January. Click here to go to that data.

Here is the timeline graph of the percentage of 25-54 year-olds employed since 2007. Notice how we had been rising before 2016 but it seems to be flattening out.


Here it is going all the way back to 1948

Friday, January 27, 2017

The Dalai Lama Says It Is Sometimes OK To Be Selfish

This is mostly a post from November, 2013. But there was another article about something similar involving the Dalai Lama this week. So I have a bit about that at the end of this post.

And of course, Adam Smith said when people act selfishly they are led, as if by an invisible hand, to make society better off.

So when might it be OK to be selfish according to his holiness? When caring for others.

Wait, how can that be selfish? Or is this some kind of Zen riddle like what is the sound of one hand clapping? No, it's biology and evolution. See Lending a hand does a body good by Jessica Belasco, from the San Antonio Express-News, 10-25-2013.

She talked to Dr. James R. Doty, a neurosurgeon at the Stanford University School of Medicine and founder of Stanford's Center for Compassion and Altruism Research and Education. Excerpts:

"Practicing compassion — recognizing someone else is suffering and wanting to help relieve that suffering — just might be as important for health as exercise or a healthful diet, some scientists believe.

When we respond to another person's needs, our body responds in turn:

We become relaxed and calm.
Our blood pressure goes down.
Our stress level goes down.

Practicing compassion is associated with lengthened telomeres, the DNA that protects the ends of your chromosomes and is a marker of longevity.

To understand why humans are hard-wired for compassion, Doty said, just look at human evolution: Caring for others was essential to the survival of the species. Humans developed powerful neuropathways associated with nurturing and bonding with their offspring as motivation to care for them in a hostile environment; otherwise their genes could not be passed on. The same was true beyond the nuclear family when humans formed hunter/gatherer tribes.

A few hundred millennia later, our need for compassion remains strong. We may not be facing predators as our ancestors did, but frequent low-level stressors — work deadlines, traffic noise, our cellphone buzzing with texts — keep our fight-or-flight response continually engaged. That releases stress hormones, which raises the risk of disease.

When we're responding to others' needs, though, we engage the “parasympathetic nervous system,” relaxing us, Doty said. Stress hormones decrease, and the immune system is boosted. In fact, that occurs even if we just think about performing a good act for someone.

That's why intervening when someone needs help — whether in the form of a hug, reassurance, financial help or something else — has a powerful impact not just on the person being helped but on the helper.

Studies also have shown that volunteering, which is a way to practice compassion, helps increase longevity — but with an important exception. Study subjects who said they were volunteering to impress somebody or for some other benefit, not because they authentically wanted to help others, didn't enjoy the same benefit."
Adam Smith wrote a book called The Theory of Moral Sentiments. One point he made there was that we are able to sympathize with other people by trying imagine what they are going through (and I wonder if we need to be good storytellers to be able to do that). Neuroeconomist Paul Zak has been studying how the hormone oxytocin plays a role in making us feel good when we have empathy for others (beware: Zak is a big hugger). See an earlier post Adam Smith vs. Bart Simpson for more details.

There is an interesting book called Paleopoetics: The Evolution of the Preliterate Imagination. It relates storytelling to evolution.

Click here to go the Amazon listing. It is by Christopher Collins, professor emeritus of English at New York University. Here is the description:
"Christopher Collins introduces an exciting new field of research traversing evolutionary biology, anthropology, archaeology, cognitive psychology, linguistics, neuroscience, and literary study. Paleopoetics maps the selective processes that originally shaped the human genus millions of years ago and prepared the human brain to play, imagine, empathize, and engage in fictive thought as mediated by language. A manifestation of the "cognitive turn" in the humanities, Paleopoetics calls for a broader, more integrated interpretation of the reading experience, one that restores our connection to the ancient methods of thought production still resonating within us.

Speaking with authority on the scientific aspects of cognitive poetics, Collins proposes reading literature using cognitive skills that predate language and writing. These include the brain's capacity to perceive the visible world, store its images, and retrieve them later to form simulated mental events. Long before humans could share stories through speech, they perceived, remembered, and imagined their own inner narratives. Drawing on a wide range of evidence, Collins builds an evolutionary bridge between humans' development of sensorimotor skills and their achievement of linguistic cognition, bringing current scientific perspective to such issues as the structure of narrative, the distinction between metaphor and metonymy, the relation of rhetoric to poetics, the relevance of performance theory to reading, the difference between orality and writing, and the nature of play and imagination."
Click here to read a longer description by Collins himself.

Here is the new article from this week The Dalai Lama Explains Why Being Kind to Others is the Secret to Happiness. Excerpt:
"Have you ever wondered why it matters that you care for other people?

It seems commonsense that this is a good way to live life. But there are dominant philosophies today that suggest we need to maximize our own individual self-interest.

This comes from economic theories of capitalism that suggest when people look after their own self-interest, then society is better off.

The Dalai Lama explains why this doesn’t make sense in the beautiful passage below. As he says, it’s an obvious fact that your own sense of wellbeing can be provided through your relationships with others. So it’s best to start cultivating practices of kindness and compassion."
Then the article has a long statement from the Dalai Lama on this philosophy. But some economists might say that you can't run a successful business if you don't care about others and try to learn their wants and desires. Here is what Adam Smith said in The Wealth of Nations
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages”

Thursday, January 19, 2017

My Spring Semester Has Started

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. If you want to learn more about me go to Why is college so hard? (you may have to be patient with this site but the article is not long)

If that link is not working try this one

Thursday, January 12, 2017

You Might Have To Swear To Keep That New Job You Just Got

See The Telltale Sign a New Hire Isn’t Fitting In​: Newcomers who stick around and thrive use language styles similar to those of co-workers, researchers say by Joann S. Lublin of the WSJ. Excerpts:
"A team of California researchers" reviewed "10.2 million internal messages" to find this out.

"individuals with low cultural fit had a four-times-higher risk of getting fired after three years.

Researchers scrutinized 64 categories of language style, including curses, expressions of positive emotion and the use of concrete imagery.

Salespeople at the tech firm frequently swore, for instance. New colleagues eager to fit in “had to swear a fair amount in their email,” recalled Sameer B. Srivastava, an assistant management professor at University of California-Berkeley’s Haas School of Business.

By contrast, the study reported, fired recruits “fail to accommodate their colleagues linguistically from the moment they join the organization.’’"