Monday, December 21, 2020

On his 250th birth anniversary, remembering Beethoven the astute businessman

The musical genius also had a flair for commerce, it turns out 

By Luis Dias writing for Scroll.in magazine. Beethoven turned 250 this past December 16. Even Art can never be completely divorced from economics. Excerpts

"Once Beethoven had poured his creative energy to the fullest into a composition, he regarded it as commercial property, deserving the best possible price on the most favourable terms. Of the hundreds of his letters that have survived, a major chunk deals with the mundane business of getting published: pitching a work, complaining about poor terms, bargaining, and correcting proofs. This is hardly surprising; he is perhaps the first composer whose income depended so much on being published, even more so after his crippling deafness gradually put an end to his career as a performer and to some extent as a teacher as well.

But Beethoven rose to the occasion as quite an astute businessman, regarding publishing and all it entailed as par for the course. He wished to excel in it just as much as in his creativity.

Upon completing a work, Beethoven would offer it to one or more publishers. But before that he needed a copyist, someone who could legibly decipher his scrawl across the manuscript pages so that a publisher could make sense of them. One copyist, Wenzel Schlemmer, undertook that unenviable task for some twenty years.

Once a publisher accepted a work, the real pain of proofreading of invariably faulty engravings and endless corrections would ensue. In one instance, Beethoven found eight mistakes in one published work, corrected them and sent them to another publisher under the heading ‘Edition très correcte’. But in a further comedy of errors, that heading itself was misspelt.

Royalties were unheard of then; the publisher bought a work for a flat fee and would then hope to sell as many copies as possible. It was important to sell as quickly as possible because piracy was a very real threat. As there was no copyright, any successful composer’s hit work was highly susceptible to piracy. The pirate could even be the copyist, who could clandestinely make another copy, spirit it out to another publisher, sometimes even before the legitimate one. The threat was so serious that Mozart had his copyists work only in his apartments, under his watchful eye.

Beethoven railed and ranted when he encountered pirated versions of his music. Since he didn’t have the finance for lawsuits, which could end up nowhere – piracy, plagiarism and forgery were regarded as reprehensible, but not against the law – he resorted to sending spluttering, threatening letters to errant publishers and getting public notices published in newspapers. To be pirated was almost a back-handed index of one’s popularity and success.

As payments for compositions were small (for instance, Beethoven settled for 100 florins for his First Symphony, a shockingly low price), a composer had to churn out a lot of music. This gives us a new perspective on the prodigious output of composers of that era: it was driven not just by creative juices but by the need to put food on the table. Ironically, short piano works would fetch a better price than, say, a symphony, concerto or bigger works, for purely commercial reasons.

 One way (that Haydn usedprofitably) of squeezing as much money out of a work was to give it to two or more publishers in different countries, each one having limited but mutually exclusive territory, so that one could be legitimately paid for the same work more than once. Beethoven followed suit, but then found that if he wanted to prevent pirates preying on his music, he would have to get a work published simultaneously in each country, no easy task in his time of snail-mail and travel.

Another ploy Beethoven resorted to was to offer a piece to the person who commissioned it and pocketing the fee. He would then defer publication but give that patron exclusive rights to the work in manuscript for a given time (usually six months, as he did with Prince Lobkowitz for his Third Symphony). Once that period was over, he could plug and sell it afresh."

"On the “tiresome business” of publishing, Beethoven grumbled in a letter to the publisher Hofmeister: “There ought to be in the world a market for art, where the artist would only have to bring his works and take as much money as he needed. But, as it is, an artist has to be to a certain extent a businessman as well.” True then, true today."

Sunday, December 20, 2020

Why being kind to others is good for your health (and that can include donating money)

By Marta Zaraska writing for the BBC. She is the author of "Growing Young: How Friendship, Optimism and Kindness Can Help You Live to 100."

Adam Smith said when people act selfishly they are led, as if by an invisible hand, to make society better off. So what if you try to help others because you know it will make you better off? Are being kind (altruistic) or selfish?

Excerpts from the article:

"Science reveals that altruistic behaviours, from formal volunteering and monetary donations to random acts of everyday kindness, promote wellbeing and longevity.

Studies show, for instance, that volunteering correlates with a 24% lower risk of early death – about the same as eating six or more servings of fruits and vegetables each day, according to some studies. What’s more, volunteers have a lower risk of high blood glucose, and a lower risk of the inflammation levels connected to heart disease. They also spend 38% fewer nights in hospitals than people who shy from involvement in charities. 

And these health-boosting impacts of volunteering appear to be found in all corners of the world, from Spain and Egypt to Uganda and Jamaica, according to one study based on the data from the Gallup World Poll.

Of course, it could be that people who are in better health to begin with are simply more likely to be in a position to pick up volunteering. If you are suffering from severe arthritis, for example, the chances are you won’t be keen to sign up to work at a soup kitchen.

“There is research suggesting that people who are in better health are more likely to volunteer, but because scientists are very well aware of that, in our studies we statistically control for that,” says Sara Konrath, a psychologist and philanthropy researcher at Indiana University.

Even when scientists remove the effects of pre-existing health, the impacts of volunteering on wellbeing still remain strong. What’s more, several randomised lab experiments shed light on the biological mechanisms through which helping others can boost our health.

In one such experiment, high school students in Canada were either assigned to tutor elementary school children for two months, or put on a waitlist. Four months later, after the tutoring was well over, the differences between the two groups of teenagers were clearly visible in their blood. Compared to those on the waitlist, high-schoolers who were actively tutoring the younger children had lower levels of cholesterol, as well as lower inflammatory markers such as interleukin 6 in their blood – which apart of being a powerful predictor of cardiovascular health, also plays an important role in viral infections."

"But it’s not just the effects of formal volunteering that show up in the blood either – random acts of kindness do as well. In one study in California, participants who were assigned to conduct simple acts of kindness, such as buying coffee for a stranger, had lower activity of leukocyte genes that are related to inflammation. That’s a good thing, since chronic inflammation has been linked to conditions such as rheumatoid arthritis, cancer, heart disease, and diabetes.

And if you put people into a functional magnetic resonance imaging (fMRI) scanner, and tell them to act altruistically, you may see changes in how their brains react to pain. In one recent experiment, volunteers had to make various decisions, including whether to donate money, while their hands were subjected to mild electric shocks. The results were clear – the brains of those who made a donation lit up less in response to pain. And the more they considered their actions as helpful, the more pain-resistant they became. Similarly, donating blood appears to hurt less than having your blood drawn for a test, even though in the first scenario the needle may be twice as thick.

There are countless other examples of the positive health effects of both kindness and monetary donations. For instance, grandparents who regularly babysit their grandchildren have a mortality risk that is up to 37% lower than those who don’t provide such childcare. That’s a larger effect than may be achieved from regular exercise, according one meta-analysis of studies. This assumes the grandparents are not stepping into the parents’ shoes completely (although, admittedly, caring for grandkids often does involve a lot of physical activity, especially when we are talking about toddlers).

On the other hand, spending money on others rather than for your own pleasure can lead to better hearing, improved sleep and lower blood pressure, with the effects as large as those of starting new hypertension medication.

Meanwhile, writing a cheque for a charity can be a good strategy for boosting your muscle power. In one experiment that tested handgrip strength, participants who made a donation to Unicef could squeeze a hand exerciser for 20 seconds longer than those who had not given away their money."

For Tristen Inagaki, neuroscientist at San Diego State University, there is nothing surprising in the fact that kindness and altruism should impact our physical wellbeing. “Humans are extremely social, we have better health when we are interconnected, and part of being interconnected is giving,” she says.

Inagaki studies our caregiving system – a network of brain regions tied to both helping behaviours and health. This system likely evolved to facilitate parenting of our infants, unusually helpless by mammalian standards, and later probably got co-opted to helping other people, too. Part of the system is made up from the reward regions of the brain, such as the septal area and ventral striatum – the very same ones that light up when you get three cherries in a row on a slot machine. By wiring parenting to the reward system, nature has tried to assure we don’t run away from our screaming, needy babies. Neuroimagining studies by Inagaki and her colleagues show that these brain areas also light up when we give support to other loved ones.

Besides making caregiving rewarding, evolution also linked it with reduced stress. When we act kindly, or even simply reflect on our past kindness, the activity of our brain’s fear centre, the amygdala, goes down. Again this could be linked to raising children.

It may seem counterintuitive that childcare might be stress-reducing – ask any new parent and they’ll likely tell you that caring for babies isn’t exactly a trip to the spa. But research shows that when animals hear the whimpers of infants of the same species, the activity of their amygdalae tempers down, and the same thing happens to parents when they are shown the photo of their own child. Inagaki explains that the activity of the brain’s fear centre has to go down if we are to be truly useful to others. “If you were completely overwhelmed by their stress, you probably couldn’t even approach them to help them in the first place,” she says.

All this has direct consequences for health. The caregiving system – the amygdala and the reward areas – are networked with our sympathetic nervous system, which is involved in regulating our blood pressure and inflammatory responding, Inagaki explains. This is why turning your caregiving on can improve your cardiovascular health, and help you live longer. 

Adolescents who volunteer their time have been found to have lower levels of two markers of inflammation – interleukin 6 and C-reactive protein."

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”

Related Posts:

Texas A & M economists study cheating (and how much might not depend on being rich or poor)

Adam Smith vs. Bart Simpson 

Do you have to be selfish to make more money?

Want to be happy and successful? Try compassion

The Dalai Lama Says It Is Sometimes OK To Be Selfish

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

Saturday, December 19, 2020

The Best Herd Immunity Money Can Buy

Paying people to get the Covid-19 shot may be the way to overcome skepticism about the vaccine

Jason L. Riley of The WSJ. Excerpts:

". . . how do you convince enough people to get inoculated at a time when public trust in government institutions is at historic lows?

One way to go is using carrots instead of sticks. Telling people they can’t fly or send their kids to school may work in some cases, but there’s evidence that paying people to get vaccinated might be more effective. In a typical year, less than half of American adults bother to get flu shots. But a 2015 study conducted by economists at Swarthmore College found that offering people a $30 reward was enough to increase vaccination rates by 12 percentage points.

A growing number of high-profile economists have called for using such a model to address Covid. They include Paul Romer, a Nobel Prize winner; N. Greg Mankiw, chairman of the Council of Economic Advisers under George W. Bush ; and Steven Levitt of “Freakonomics” fame. A proposal floated in August by Robert Litan of the Brookings Institution would offer $1,000 to 275 million Americans, or roughly 80% of the population, to take the vaccine. The cost would be about $275 billion—a large number, but not in comparison to the trillions we’ve already spent battling Covid. Congress is currently contemplating yet another pandemic relief package with a price tag of at least $900 billion."

Friday, December 18, 2020

The EU forbids the use of gender to help calculate car insurance premiums, leading women to pay more and men to pay less

See The elusive equilibrium by Koen Smets. Excerpt:

"Insurers only care about the risk, and not about gender. If a particular category of people poses a higher or lower risk, all else being equal, than another one, they will seek to reflect that in the premium. When, as a society, we do not want to have inequity in the premiums, then we should accept that a unified premium might lead to a different disequilibrium and new inequities.

Motor insurance in Europe forms a very interesting case study. Traditionally, insurers charged women less, because they tend to be safer drivers, and hence make fewer and smaller claims. Unlike life expectancy, the factors determining the risk here are much more linked to individual choice and behaviour. Since 2012, an EU directive forbids insurers to use gender as an element in the calculation of the premium. So, in Q4 2011, men paid on average 17% more than the overall average premium, while women paid 20% less. In 2018, that difference with the overall average premium had shrunk to a 5% uplift for male drivers, and a 6% discount for female drivers. (The residual difference stems from the fact that men tend to drive more miles per year, in more powerful cars.) So, relatively speaking, the ‘gender equity’ intervention has increased the average premium for the lower-risk women by more than 17%, while it has cut it by just under 10% for the higher-risk men. Is this an improvement? It’s not so sure."

If men are less safe, insurers need them to charge men more. But the EU police has forced the companies to charge men too little and women too much. It probably brings some dangerous male drivers into the market while causing some females to drop out. Overall, driving is probably less safe.

I play a game in class that touches on insurance. Click here to see the Lessons From the Supply and Demand Game.

The insurance market has a problem, though. The customers don’t always tell their insurance company their bad habits (like smoking, riding a motor cycle without a helmut, etc.). So they don’t know how risky you are and therefore don’t know what price to charge you. So sometimes these markets are not efficient.

Related posts:

Lose the Fat to Lower Your Insurance Rates  
How Did Astronauts Of The 60s "Purchase" Life Insurance?
Should Overweight People Pay More For Health Insurance?
Should We Pay People To Adopt A Healthy Lifestyle? 

'Spy car' worries raised by new Allstate patent
Should your company or insurer reward you for meeting exercise goals?
How insurance companies are using technology to better assess how risky customers might be
The EU Says Insurers Can No Longer Discriminate On The Basis Of Gender   
Some History of Insurance

Thursday, December 17, 2020

Lower Costs Draw Tech Firms to Texas

See Texas’ Tax Advantage Is All About Individuals, Not Business Taxes: Companies moving from California likely won’t see their own tax bills shrink, but executives and employees could pay less. Excerpts:

"Moves by high-profile companies to Texas from California are likely to improve the personal finances of executives and offer employees more affordable housing—but make little difference to the firms’ tax bills.

Oracle Corp. ORCL +1.33% and Hewlett-Packard Enterprise Co. HPE +0.41% are the latest big corporations to announce moves to the Lone Star State. Elon Musk, the chief executive of Tesla Inc., is also moving to Texas, and the electric car company is expanding there.

The announcements have highlighted the vastly different tax and regulatory systems in the country’s two most populous states. California relies more on taxing personal income, particularly of high-income households, and operates a growing regulatory structure. Texas leans on more regressive property and sales taxes and boasts a more laissez-faire environment. The biggest difference: High-paid executives who move can see their state income-tax bills go from 13.3% to nothing.

But corporate investors hoping for big tax and other savings may need to temper their enthusiasm. Business-tax considerations are likely to prove secondary at best, tax and economic-development experts say. They are dwarfed by the allure of more-affordable housing, lower cost of living and lighter regulatory burdens.

For companies, much of the difference between California and Texas boils down to ease and cost of hiring—not just now but down the road.

“A lot of it, honestly, is just long-term workforce availability,” said King White, chief executive of Site Selection Group, a consulting firm that helps companies decide where to open or move facilities.

Companies have also grown frustrated with the cost of attracting and keeping employees, as living expenses soar in Northern California especially, and as regulatory mandates expand. “The compounding effects of California’s economic and political environment is making it more difficult to run a business effectively,” Mr. White said."

"The Tax Foundation, a conservative-leaning Washington group, puts Texas 11th in its ranking of state business-tax climates, with California 49th. That is largely a function of individual taxes, some of which do fall on business income. The group ranks California ahead of Texas on corporate and property taxes."

"The bigger factor—outweighing any change in business taxes—is likely to be the lower cost of employing workers in the state. For most people, that calculation is more about housing costs, said Darien Shanske, a tax law professor at the University of California, Davis. Housing scarcity and land-use regulations are bigger drivers of payroll costs than taxes."

Related post

The Texas Economy Is The Time Magazine Cover Story This Week (from 2013)

Rents are relatively low in San Antonio

Wednesday, December 16, 2020

How Property Booms Eat Our Economic Future

Growing body of research looking at U.S. and Chinese real-estate markets suggests long booms may drag on productivity of the economy

By Mike Bird of The WSJ. Excerpt:

"New evidence comes from the Bank for International Settlements, with a paper by economist Sebastian Doerr showing that among U.S. listed companies, those with a higher share of real-estate assets are persistently less productive than their industry peers.

That alone wouldn’t be a problem as such. Some companies are always more productive than others. But rising real-estate prices make it easier for companies that own real estate to access funding because of their growing collateral, so multiyear booms in property prices compound the problem.

Looking at data covering the U.S. from 1993 to 2008, capital was reallocated toward productivity laggards over time, worsening the overall picture for the economy. For every 10% increase in real-estate prices, an industry would record a 0.6% relative decline in total-factor productivity due to the effect of skewed capital allocation."

Tuesday, December 15, 2020

Hand sanitizer and the law of increasing opportunity cost

This is based on a WSJ article from last March. Rapidly increasing production of a certain good in a short period of time leads to increasing opportunity costs as less capable resources have to be switched over (capital has to be re-tooled and workers retrained). All of that adds costs that were not there before. So it actually costs more to produce additional units, on average.

See One Company’s Hands-On Effort to Ramp Up Sanitizer Production: Inside the push at EO Products to quadruple its output—without raising prices by Sharon Terlep of The WSJ. Excerpts:

"EO Products, a Bay Area maker of bath and body products, has quadrupled production of its high-end hand sanitizer. It is running extra shifts, speeding up lines, hiring temporary workers and converting factory lines designed for other products to make hand sanitizer instead."

"At one point last month, one of the company’s suppliers ran out of the aluminum-like seals that go on hand-sanitizer gel bottles and are roughly the size of the tip of a pinkie finger. Federal regulations require stringent testing of any replacement seal, so there was no quick answer."

"Purell parent company Gojo Industries Inc. is rationing sales to stores to protect supply for hospitals and other businesses."

"the state of New York has prison inmates making sanitizer to bolster supply."

"U.S. hand-sanitizer sales were up more than 470% for the week ended March 7, compared with the year-earlier period."

"Neither hand sanitizer nor soap is among the most profitable products for the company, so the switch-over will drag on margins. But the company hasn’t raised prices and isn’t considering doing so. 

“Raising prices at this time would not be in alignment with our core values,” Mr. Feegel said. “All the business rules about profitability are off the table.”"

"the company had to cap online sales as some retailers have turned to the company’s website to restock store shelves."

"So many callers have special circumstances that Ms. Jones implemented a strict rule against making exceptions to ship products to customers. Staffers broke the rule once and sent a bottle from their office supplies to a caller in a particularly dire situation, she said."

"Ramping up demand for hand sanitizer, in particular, is challenging because it is regulated by the Food and Drug Administration as an over-the-counter product and must meet the agency’s safety and efficacy standards."

"All the company’s hand sanitizer is currently made at its own factory, but it plans to hire private-label manufacturers to make the products using its formula, specifications and rules around employee pay and sustainability."

Related posts:

Flushing out the true cause of the global toilet paper shortage amid coronavirus pandemic 

Ventilators and the law of increasing opportunity cost

Here are some basic terms that economists use to discuss this issue:

Opportunity Cost-
The value of the best foregone alternative. There is no such thing as a free lunch. If we want to build one more skyscraper, we may have to give up one submarine, since there may not be enough steel to go around (steel is scarce!).

The law of increasing opportunity cost-
As more of a particular good is produced, the opportunity cost of its production rises. Why is the law of increasing opportunity cost true? Different resources are better suited to different productive activities. This is just about the same as saying people have different abilities, like some are more entrepreneurial and some are more bureaucratic.

Let’s assume that we have society with five workers who can make either of two goods, candles or shoes. Now the best candle maker will not necessarily be the best shoemaker and some candle makers will be better than others. This simply means that workers have different abilities.

In the real world, the best doctor would not be the best lawyer. Some plumbers are better than others.

In the table below, the number of candles OR shoes that each worker can make in a day is listed.

Worker
Candles
Shoes
I
7
3
II
6
4
III
5
5
IV
4
6
V
3
7

Again, the workers have different abilities, just as they do in the real world.

What are all of the combinations of candles and shoes that this society can make? If all the workers make candles, they can make 25 (just add up how much each worker can make). How many shoes? ZERO, since each worker spends all day in the candle factory (this is combination A in the table below).

If we want to make some shoes, the first worker we would tell to stop making candles, if we are rational and trying to get the best deal, would be worker V.  So we gain 7 shoes and lose 3 candles. That is why combination A is 22 and 7. Worker V no longer makes candles since they are making shoes. So the opportunity cost of making a shoe is some number of candles (and vice-versa).

The rest of the combinations that show what would happen if we kept moving workers out of candle making and into shoe making is in the table below.

Combination
Candles
Shoes
A
25
0
B
22
7
C
18
13
D
13
18
E
7
22
F
0
25

Now what happens to the opportunity cost as we move from combination A to combination B? Then combination B to combination C, and so on? The table below shows this:


Change
Candles Given Up
Shoes Gained
Candles per Shoe
A to B
3
7
0.429
B to C
4
6
0.667
C to D
5
5
1.000
D to E
6
4
1.500
E to F
7
3
2.333

By moving from point A to point B, we give up 3 candles to gain 7 shoes. The cost of each shoe in candles is .429 (3/7). Then we give up 4 candles to get 6 shoes, with each shoe costing .667 candles. The more shoes we try to produce, the more candles that have to be given up to get each shoe. So the opportunity cost of producing shoes rises.

This is called the law of increasing opportunity cost.

The law of increasing opportunity cost-As more of a particular good is produced, the opportunity cost of its production rises. (see how the numbers rise in the “Candles per Shoe” column in the table above)

Why is the law of increasing opportunity cost true? Different resources are better suited to different productive activities. This is just about the same as saying people have different abilities, which is what we see in the number of candles and shoes each worker can make.

Monday, December 14, 2020

Graduating in a Recession Can Be Rough

This relates to yesterday's post "The Class of 2020 Looks for Work." That post has links to other related posts.

By Alex Tabarrok of Marginal Revolution.

"Graduating in a recession can be rough. Wages start lower and advance more slowly. It’s hard to get hired at a top firm which means it takes longer to get on a rapid ascent career path. As Till von Wachter notes in a review of the long-term consequences of initial labor market conditions, failure to takeoff leads to choices which often makes things worse.

…initial labor market conditions persistently increases excessive alcohol consumption (Maclean 2015) and leads to higher obesity and more smoking and drinking in middle age (Cutler, Huang, and Lleras-Muney 2015)…College graduates entering during the 1980s recession experience higher incidence of heart attacks in middle age (Maclean 2013). Following all labor market entrants from these cohorts, Schwandt and von Wachter (2020) find that starting in their late 30s, unlucky entrants begin experiencing a gap in mortality compared to luckier peers that keeps increasing in their 40s, driven by higher rates of heart disease, liver disease, lung cancer, and drug overdoses.

…Marital patterns of unlucky cohorts are affected from the time they enter the labor market up into middle age, when these cohorts have fewer children (Currie and Schwandt 2014), are more likely to have experienced a divorce, and are more likely to live on their own (Schwandt and von Wachter 2020). Initial labor market conditions also have been found to have effects on attitudes towards economic success and the role of the government (Giuliano and Spilimbergo 2014) and to lead to increasingly lowering individuals’ self esteem (Maclean and Hill 2015).

Don Peck had a good popular survey of these effects in The Atlantic in 2010 that remains vital:

Andrew Oswald, an economist at the University of Warwick, in the U.K., and a pioneer in the field of happiness studies, says no other circumstance produces a larger decline in mental health and well-being than being involuntarily out of work for six months or more. It is the worst thing that can happen, he says, equivalent to the death of a spouse, and “a kind of bereavement” in its own right. Only a small fraction of the decline can be tied directly to losing a paycheck, Oswald says; most of it appears to be the result of a tarnished identity and a loss of self-worth. Unemployment leaves psychological scars that remain even after work is found again, and, because the happiness of husbands and the happiness of wives are usually closely related, the misery spreads throughout the home.

Especially in middle-aged men, long accustomed to the routine of the office or factory, unemployment seems to produce a crippling disorientation. At a series of workshops for the unemployed that I attended around Philadelphia last fall, the participants were overwhelmingly male, and the men in particular described the erosion of their identities, the isolation of being jobless, and the indignities of downward mobility.

Of course, most people who graduate during a recession do just fine in the grand scheme of things.You could have graduated in Sierra Leone. But if you want to be on a rapid ascent career path remember that your first job is not your last job, look for opportunity, and be prepared to take a risk and switch jobs early. Stay off drugs and alcohol."

Sunday, December 13, 2020

The Class of 2020 Looks for Work

Months after graduating into one of the most challenging job markets in generations, many are still searching for that first gig. Few openings emerge in retail or marketing; there are bright spots in tech.

By Ellen Byron of The WSJ. Excerpts:

"This spring, when many were graduating from college, unemployment for 20- to 24-year-olds was above 20%, according to the Labor Department, compared with the low teens for all age groups."

"Not since the Great Depression have so many young adults lived with their parents. In July, 52% of young adults ages 18 to 29 years old resided with one or both of their parents, surpassing the previous peak in 1940, according to a Pew Research Center analysis of Census Bureau data."

"Employment prospects for the Class of 2020 vary greatly depending on the job sector graduates are in. Insurance, scientific research and information technology are hiring and young people in those sectors are finding work. Small to midsize computer-services companies said they expect to hire 70% more new graduates this academic year over the year earlier period, according to the Michigan State study, and scientific-research companies said that hiring will be up 20% over the same period.

Meanwhile, those seeking jobs in retail, travel and the leisure and hospitality industries are having a much tougher time. The Michigan State study found that advertising, marketing and public-relations companies say hiring will be down 15% this year."

"One increasingly popular option for members of the Class of 2020 who can afford it: putting off the job search by staying in school. Suzanne Ortega, president of the Council of Graduate Schools, says many of the approximately 500 colleges and universities who are members of her Washington, D.C.-based organization reported “healthy” increases in enrollment as early as this past summer."

Related posts:

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

Has The Recession Been Hard On College Graduates?

How Recessions Affect Young People

Saturday, December 12, 2020

The Economic Behavior Of Trees In Forrests

It seems like they produce and trade with each other, even across species. Are trees and the fungi being selfish or altruistic? Adam Smith and Thomas Malthus make an appearance.

See The Social Life of Forests: Trees appear to communicate and cooperate through subterranean networks of fungi. What are they sharing with one another? by Ferris Jabr of The NY Times. It highlights research by Suzanne Simard, a professor of forest ecology at the University of British Columbia. Excerpts:

"Underground, trees and fungi form partnerships known as mycorrhizas: Threadlike fungi envelop and fuse with tree roots, helping them extract water and nutrients like phosphorus and nitrogen in exchange for some of the carbon-rich sugars the trees make through photosynthesis. Research had demonstrated that mycorrhizas also connected plants to one another and that these associations might be ecologically important, but most scientists had studied them in greenhouses and laboratories, not in the wild."

"By analyzing the DNA in root tips and tracing the movement of molecules through underground conduits, Simard has discovered that fungal threads link nearly every tree in a forest — even trees of different species. Carbon, water, nutrients, alarm signals and hormones can pass from tree to tree through these subterranean circuits. Resources tend to flow from the oldest and biggest trees to the youngest and smallest. Chemical alarm signals generated by one tree prepare nearby trees for danger. Seedlings severed from the forest’s underground lifelines are much more likely to die than their networked counterparts. And if a tree is on the brink of death, it sometimes bequeaths a substantial share of its carbon to its neighbors."

"Since Darwin, biologists have emphasized the perspective of the individual. They have stressed the perpetual contest among discrete species, the struggle of each organism to survive and reproduce within a given population and, underlying it all, the single-minded ambitions of selfish genes. Now and then, however, some scientists have advocated, sometimes controversially, for a greater focus on cooperation over self-interest and on the emergent properties of living systems rather than their units."

"An old-growth forest is neither an assemblage of stoic organisms tolerating one another’s presence nor a merciless battle royale: It’s a vast, ancient and intricate society. There is conflict in a forest, but there is also negotiation, reciprocity and perhaps even selflessness. The trees, understory plants, fungi and microbes in a forest are so thoroughly connected, communicative and codependent that some scientists have described them as superorganisms. Recent research suggests that mycorrhizal networks also perfuse prairies, grasslands, chaparral and Arctic tundra — essentially everywhere there is life on land. Together, these symbiotic partners knit Earth’s soils into nearly contiguous living networks of unfathomable scale and complexity."

"Mycorrhizal networks were abundant in North America’s forests. Most trees were generalists, forming symbioses with dozens to hundreds of fungal species. In one study of six Douglas fir stands measuring about 10,000 square feet each, almost all the trees were connected underground by no more than three degrees of separation; one especially large and old tree was linked to 47 other trees and projected to be connected to at least 250 more; and seedlings that had full access to the fungal network were 26 percent more likely to survive than those that did not.

Depending on the species involved, mycorrhizas supplied trees and other plants with up to 40 percent of the nitrogen they received from the environment and as much as 50 percent of the water they needed to survive. Below ground, trees traded between 10 and 40 percent of the carbon stored in their roots. When Douglas fir seedlings were stripped of their leaves and thus likely to die, they transferred stress signals and a substantial sum of carbon to nearby ponderosa pine, which subsequently accelerated their production of defensive enzymes. Simard also found that denuding a harvested forest of all trees, ferns, herbs and shrubs — a common forestry practice — did not always improve the survival and growth of newly planted trees. In some cases, it was harmful."

"Many were perplexed as to why trees of different species would help one another at their own expense — an extraordinary level of altruism that seemed to contradict the core tenets of Darwinian evolution."

"It’s now well accepted that resources travel among trees and other plants connected by mycorrhizal networks. Most ecologists also agree that the amount of carbon exchanged among trees is sufficient to benefit seedlings, as well as older trees that are injured, entirely shaded or severely stressed, but researchers still debate whether shuttled carbon makes a meaningful difference to healthy adult trees. On a more fundamental level, it remains unclear exactly why resources are exchanged among trees in the first place, especially when those trees are not closely related. 

In their autobiographies, Charles Darwin and Alfred Russel Wallace each credited Thomas Malthus as a key inspiration for their independent formulations of evolution by natural selection. Malthus’s 1798 essay on population helped the naturalists understand that all living creatures were locked into a ceaseless contest for limited natural resources. Darwin was also influenced by Adam Smith, who believed that societal order and efficiency could emerge from competition among inherently selfish individuals in a free market. Similarly, the planet’s dazzling diversity of species and their intricate relationships, Darwin would show, emerged from inevitable processes of competition and selection, rather than divine craftsmanship. “Darwin’s theory of evolution by natural selection is obviously 19th-century capitalism writ large,” wrote the evolutionary biologist Richard Lewontin.  

As Darwin well knew, however, ruthless competition was not the only way that organisms interacted. Ants and bees died to protect their colonies. Vampire bats regurgitated blood to prevent one another from starving. Vervet monkeys and prairie dogs cried out to warn their peers of predators, even when doing so put them at risk. At one point Darwin worried that such selflessness would be “fatal” to his theory. In subsequent centuries, as evolutionary biology and genetics matured, scientists converged on a resolution to this paradox: Behavior that appeared to be altruistic was often just another manifestation of selfish genes — a phenomenon known as kin selection. Members of tight-knit social groups typically share large portions of their DNA, so when one individual sacrifices for another, it is still indirectly spreading its own genes.

Kin selection cannot account for the apparent interspecies selflessness of trees, however — a practice that verges on socialism. Some scientists have proposed a familiar alternative explanation: Perhaps what appears to be generosity among trees is actually selfish manipulation by fungi. Descriptions of Simard’s work sometimes give the impression that mycorrhizal networks are inert conduits that exist primarily for the mutual benefit of trees, but the thousands of species of fungi that link trees are living creatures with their own drives and needs. If a plant relinquishes carbon to fungi on its roots, why would those fungi passively transmit the carbon to another plant rather than using it for their own purposes? Maybe they don’t. Perhaps the fungi exert some control: What looks like one tree donating food to another may be a result of fungi redistributing accumulated resources to promote themselves and their favorite partners.

“Where some scientists see a big cooperative collective, I see reciprocal exploitation,” said Toby Kiers, a professor of evolutionary biology at Vrije Universiteit Amsterdam. “Both parties may benefit, but they also constantly struggle to maximize their individual payoff.”"

"plants and symbiotic fungi reward and punish each other with what are essentially trade deals and embargoes, and that mycorrhizal networks can increase conflict among plants. In some experiments, fungi have withheld nutrients from stingy plants and strategically diverted phosphorous to resource-poor areas where they can demand high fees from desperate plants." 

"Some researchers have proposed that cooperation within or among species can evolve if it helps one population outcompete another — an altruistic forest community outlasting a selfish one, for example. The theory remains unpopular with most biologists, who regard natural selection above the level of the individual to be evolutionarily unstable and exceedingly rare. Recently, however, inspired by research on microbiomes, some scientists have argued that the traditional concept of an individual organism needs rethinking and that multicellular creatures and their symbiotic microbes should be regarded as cohesive units of natural selection. Even if the same exact set of microbial associates is not passed vertically from generation to generation, the functional relationships between an animal or plant species and its entourage of microorganisms persist — much like the mycorrhizal networks in an old-growth forest. Humans are not the only species that inherits the infrastructure of past communities."

[At a mycorrhizal network] "She handed me a thin strip of root the length of a pencil from which sprouted numerous rootlets still woolly with dirt. The rootlets branched into even thinner filaments. As I strained to see the fine details, I realized that the very tips of the smallest fibers looked as though they’d been capped with bits of wax. Those gummy white nodules, Simard explained, were mycorrhizal fungi that had colonized the pine’s roots. They were the hubs from which root and fungus cast their intertwined cables through the soil, opening channels for trade and communication, linking individual trees into federations. This was the very fabric of the forest — the foundation of some of the most populous and complex societies on Earth."

"Five hundred million years ago, as both plants and fungi continued oozing out of the sea and onto land, they encountered wide expanses of barren rock and impoverished soil. Plants could spin sunlight into sugar for energy, but they had trouble extracting mineral nutrients from the earth. Fungi were in the opposite predicament. Had they remained separate, their early attempts at colonization might have faltered or failed. Instead, these two castaways — members of entirely different kingdoms of life — formed an intimate partnership. Together they spread across the continents, transformed rock into rich soil and filled the atmosphere with oxygen.

Eventually, different types of plants and fungi evolved more specialized symbioses. Forests expanded and diversified, both above- and below ground. What one tree produced was no longer confined to itself and its symbiotic partners. Shuttled through buried networks of root and fungus, the water, food and information in a forest began traveling greater distances and in more complex patterns than ever before. Over the eons, through the compounded effects of symbiosis and coevolution, forests developed a kind of circulatory system. Trees and fungi were once small, unacquainted ocean expats, still slick with seawater, searching for new opportunities. Together, they became a collective life form of unprecedented might and magnanimity."

Friday, December 04, 2020

Conflicting opinions from economists on the value of giving gifts

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. A program on PBS recently stated that one of the more common gifts that King Henry the VIII got at Christmas was money.

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 highly certain that many gifts given will not perfectly match the recipient’s own personal tastes and preferences, or it might be the wrong size, color, or style.  

In those cases, the recipient will be worse off with the sub-optimal gift selected by the gift-giver than if the recipient was given cash and allowed to choose his or her own gift. Because many Christmas/holiday gifts are mismatched with the preferences of the recipients, Waldfogel concludes that holiday gift-giving generates a significant economic “deadweight loss” of between one-tenth and one-third of the retail value of the gifts purchased."

See Gift Giving Is Better for Society than Economists Think by Michael Thomas Tony and Anthony Gill. Excerpt:
"A newcomer often is welcomed into a household with a large feast containing more food than can be reasonably consumed. Engagement and wedding rings are expensive signals of a prospective spouse’s fidelity in good times and bad. Clubs, fraternities, and religious organizations often require individuals to go through rigorous rituals to prove their loyalty before gaining the benefits that full membership entails.

So it is with gift giving for holidays and other occasions. Giving gifts, even ones filled with the deadweight loss of mismatched preferences, indicates that one is willing to forego resources in the present in order to maintain a relationship in the future. When times get tough for you, I will assure you that I will be there to sacrifice again. Knowing that I am willing to sacrifice for you makes you more willing to want to continue engaging with me. Your reciprocal sacrifice helps solidify the mutual trust to make a relationship work effectively.

Societies around the world have ritualized these times of “burnt offerings” as a way of communicating trust and a desire to enter into, or remain in, a social network. We learn to gift within our families in the hope that such generosity will translate itself in the broader society.

Gifting: The Gift that Keeps on Giving


Prof. Waldfogel and other economists who rue the inefficiency of holiday gift giving only see the costs and benefits in static terms. The real benefits are dynamic and embedded in the deadweight losses, ironically. By continually showing, through gifts small and large, our willingness to sacrifice for one another we build a cultural fabric of trust and willingness to assist in times of need. Norms of sacrifice, trust, and graciousness are crucial for the functioning of broad-based markets over long periods of time. Our willingness to give and to reciprocate graciously when receiving is what makes us wealthier over time."
Related posts:

Is Christmas Gift Giving Inefficient?

Are Homemade Gifts Better Or More Special? 
 
What Anthropologist Melvin Konner Fails To See When He Criticizes Economists And Their Views On Gift Giving (2015)
 
- Dilbert by Scott Adams