For most of the pandemic, food/bev businesses worked hard to hang on and last through this period. Not Starbucks. They did the opposite. As soon as they could, it seems they shut down their locations. Locations that had barely been open a few years were shuttered. Even this location above, on Eglinton Avenue just east of Yonge in Toronto closed up despite a steady flow of customers even during the pandemic.
Apparently at the start of the pandemic their goal was to close 400 stores over 18 months. I would not be surprised if more than that closed.
I wonder what the fallout for all this will be? One thing for sure, the idea of getting Starbucks as a tenant will likely lose its lustre when they do come back and want to expand. Then again, given that people are reluctant to go back to the office, that expansion could take some time.
It makes some strong points. It’s true, younger people aren’t as keen to own things. (Heck, this is also true of older people who get fed up with the accumulation of things). And companies are keen to lease things. Add that up and you will see less and less owning.
From an IT perspective, I’ve been through this before. For a long time IBM had a very strong business in leasing technology. That gradually went away and more and more companies bought their technology. Then server farms came followed by the cloud, and now we are effectively seeing companies lease more IT again. Will it switch back again?
I think so. Eventually the cons outweigh the pros, be it for leasing or owning. People will move to leasing because it saves them money in the short term. Then eventually it gets more costly and the restrictions on the leases push them to own things again. Until the costs of owning add up and they switch back to leasing.
So yes, people will be moving to leasing for some time. Then they will switch back to owning more stuff. Of this I am confident.
America Never Learns the Limits of Bootstrapping – a good piece on the limits of social safety nets built using private initiatives. My belief is that social safety nets should come both from governments and individuals, and that we should be looking into how our society is set up to provide a wide range benefits for everyone. For example, unemployment insurance is good, but free or low cost education to allow people to improve themselves and others is important also. We need more initiatives to improve people’s lives.
One thing that happened during the pandemic is that big cities like New York vacated to some degree. When they did, there was talk about how in the future more people would continue to work from home, and if they did, they might go to smaller and more affordable cities, like Des Moines, Iowa. Indeed, places like Des Moines has been recruiting people.
The problem these cities have, though, is that they are missing part of the puzzle. People in big cities like NYC and San Francisco live there for a lot of reasons. One of those is the freedom and rights that come with living there. The respect those places have for progressive values are a big draw. Unfortunately, as this really good piece shows, Iowa (and likely other conservative cities and states) can’t and won’t provide that any time soon.
After reading that piece, I thought: yeah, even if the majority of people can still work from home, the mass exodus from Brooklyn to Des Moines is not going to be happening. Some will, for sure. But when the pandemic is over, people are going to head back to the major cities. They have more to offer than affordability.
It seemed impossible at the time. Then the pandemic came, and governments in the US and Canada essentially did just that.
What I fear is going to happen is economic conservatives are going to rush in and start yelling “Deficits are Bad!!!” and all the Establishment will nod and a new wave of austerity will come in. What I hope is that better economists will come to the fore and push and see how close we can get to UBI, given what we learned so far.
Much depends on what happens in the next six to twelve months.
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The chart shows the percentage of wealth owned by the top 10% since 1300. There are only two times it takes a major drop: during the Black Death in the 14th century and during World War II in the 20th century.
If true, it means that wealth concentration will continue unless another major catastrophe occurs (pandemic? global warming?).
There is lots to debate in all this. The numbers themselves are debatable (i.e. just how accurate and representative are they?) As well, there is an argument to be made that it doesn’t matter how inequally distributed wealth is if generally life for the 90% is good. But the Vox piece argues that such inequality leads to political instability and other problem, and that a good life for the majority isn’t enough.
Read the piece and consider it for yourself.
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In some ways, that question is ridiculous. Ramsey and his ideas are embedded in so many fields of thought, from mathematics to economics to philosophy. However, I had never heard of him before. Or I should say, I had heard of him, but I never thought of him the way I thought of Russell or Wittgenstein or other contemporaries he had.
My feeling is they have expanded past the point it is sustainable, and now they are going to have to adjust. Hopefully they can adjust: they are a good company and they could be as big as IKEA or H&M. Or they could go bankrupt. The next few years will show which direction they go.
We don’t talk much about poverty anymore. We talk about the middle class a lot. We don’t talk about the upper class or the rich anymore: instead we talk about them in terms of percentage points. And we don’t talk about the poor as much as we talk about those who are homeless. But there are still poor people in our society, and one member of that group wrote about it here: Falling.
He has a home, he was middleclass, and now he is poor. The story is sad but not exceptional.
I don’t know why we don’t talk about the poor so much any more. Perhaps we see poverty as shameful, not for the people who are poor, but shameful for people who don’t see themselves as poor. I don’t know. I think we do need to talk about it and the spectrum of financial status, and I think we need to work towards a fairer and more equitable society. First, we need to look and talk about it more clearly.
There is no mystery about Barack Obama’s greatest presidential achievement: He stopped the Great Recession from becoming the second Great Depression.
Obama did many important things, Obamacare being the obvious. As someone who had seen many failed attempts at achieving this, to see him team with Pelosi and others to achieve this was astounding.
That said, there would have been nothing accomplished by Obama if the US spiralled into a second Great Depression, dragging down the world economy with it. I continue to see criticism of the actions taken by his team then, especially among progressives. They argue that more should have been done. You can google “Obama terrible” and find pieces like this.
Time will tell, but so far Obama is holding up as anything but terrible. I predict he will rise in Presidential standing in the future. Meanwhile, the world is in much better shape due to the actions he took in the early stages of his presidency to avert worldwide economic disaster.
I realize it is relative and that there are people and organizations that have difficulty accessing capital. But I believe overall there is an abundance of capital. I believe that is why you see a lot of the behaviours you see in the world, from negative interest rates to bogus unicorns like We and Uber and Lyft to high housing valuations to no inflation.
If you are concerned about cities being affordable, I recommend the piece on Vienna. Affordable cities is going to be one of the big challenges of the 21st century. We need good ideas to deal with this.
The reason I think it stops working is because I see wage growth stagnating in many places. But I also see productivity stagnating too, and I think there is a relationship between that. There is some elasticity there that allows wage growth to stagnate but in return productivity growth stagnates too.
In Walmart’s case, the elasticity is gone: if they can’t get truckers, they lose business. It’s simple. But for businesses without such hard and fast metrics, you might just continue to see slack productivity and slack wage growth.
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I’ve read a number of articles talking about the demise of New York due to rising rents and gentrification. After reading them, tt’s easy to feel hopeless about New York and cities in general. Which is why I was glad to read this: New York City Reveals the Future of American Retail – The Atlantic. It’s true, there are big changes in New York, just like there are big changes in other cities. And it’s true that many beloved retail stores are disappearing in cities everywhere. But it’s untrue that vacancy rates are shooting up and it’s untrue that it’s only big chains taking over. While retail stores threatened by Amazon are closing, places like restaurants and fitness locations are filling the gap.
You can argue that a city needs more than this new world of cafes and restaurants and gyms. The article points out to ways cities can encourage that. Specifically:
According to Jeremiah Moss, specific policies caused the disappearance of old New York—like tax breaks for big businesses, which have been a hallmark of city governance since the Ed Koch days (and up through HQ2). Moss says that several new policies could fix the problem. First, he is an advocate of the Small Business Jobs Survival Act, which would make it easier for small retailers to extend their lease in neighborhoods with rising rents. Second, he favors zoning laws that would limit the density of chain stores. He and others have also called for “vacancy taxes” that punish landlords who sit on empty storefronts for months at a time. All of these policies could help small businesses push back against the blandification of New York and the broader country.
Cities thrive when there is a mix of establishments servicing the wants and needs of its occupants. After reading this article, I think cities, New York and elswhere, are doing well and have a viable path to get better.
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Looking at that, I have to think that the phones are getting more expensive, but likely they have always been that way. (And note, this doesn’t account for inflation or the improved quality of the phones, including greater storage.)
Occasionally Apple will make a cheaper phone like the 5C or the SE that are essentially remixes of older models. Or they will continue to support a wider range of phones, like continuing to sell the 7, the 8, and now the X. But it seems the high end was never inexpensive and likely never will be.
the reasons to hire older workers for fast food places is also true for other work as well.
the notion of retirement needs to be rethought. People are living lives well past traditional retirement ages, and some people retire involuntarily decades before they die. Additionally, many of them cannot afford to not work all that time. Having work and an income in their later years makes sense.
Good work is uplifting. If you can find good work as you get older, you can find a way to make your later years more worthwhile.
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Research has found that children living in poverty are at increased risk of difficulties with self-regulation and executive function, such as inattention, impulsivity, defiance and poor peer relationships. It takes generations until society fully heals from periods of deep instability. A study in the early 2010s showed that Germans were more worried about inflation than about developing a life-threatening disease such as cancer; hyperinflation in the country ended almost 100 years ago.
Not only does it touch people individually, but you could make the case that it gets embedded into the culture. Germans are still worrying about inflation! Indeed, I remember my mom telling me how the Great Depression affected her mother to the point that she adopted behaviors she could never shake, not matter how much she had in the future.
Economics can seem dry, especially when people focus on numbers. But those numbers paper over how people are really affected. What is the emotional impact of high (or low) unemployment? What do we see happening in the culture when housing becomes unaffordable or work impossible to get. The numbers are an essential part of the story but they are also just the start of the story.
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Based on many affluent cities currently, the answer is “no”. But there are exceptions we can learn from like Vienna. As this piece shows, Vienna’s Affordable Housing Paradise | HuffPost, it’s possible even in affluent cities and countries to have affordable housing under the right conditions.
Well worth reading that if you are feeling it is impossible to have affordable housing these days.
Creative endeavours: These include creative writing, entrepreneurship, and scientific discovery. These can be highly paid and rewarding jobs. There is no better time to be an entrepreneur with an insight than today, because you can use technology to leverage your invention.
Social interactions: Robots do not have the kinds of emotional intelligence that humans have. Motivated people who are sensitive to the needs of others make great managers, leaders, salespeople, negotiators, caretakers, nurses, and teachers. Consider, for example, the idea of a robot giving a half-time pep talk to a high school football team. That would not be inspiring. Recent research makes clear that social skills are increasingly in demand.
Physical dexterity and mobility: If you have ever seen a robot try to pick up a pencil you see how clumsy and slow they are, compared to a human child. Humans have millennia of experience hiking mountains, swimming lakes, and dancing—practice that gives them extraordinary agility and physical dexterity.
Read the entire article; there’s much more in it than that. But if your job has some element of those three qualities, chances are robots won’t be replacing you soon.
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If you are not familiar with this idea, consider this graph:
The higher the red line is, the greater inequality is. Throughout the last 2000+ years, inequality has been reduced only by terrible events like plague and war.
For a time post World War II, inequality was declining in much of the world. Then, around the 1980s, it started to increase and continues to do so. Now we have a race on. Population declines should occur over the next 100 years, leading to greater equality. To counter that, we have greater automation occurring which may boost inequality as those with the means to control the automation make much of the income and increase their wealth. Will this inequality lead to events that once again levels off the distribution of wealth and income? Or will we reach a balance somehow?
I highly recommend the article. Rising inequality will be one of the great strains on the 21st century, and this article helps to provide some context on the subject.
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There are still problems in preventing hunger and famine, but decreasing farmland should not be adding to that. Good! Now to decrease conflicts and ensure everyone has access to good, cheap, nutritious food.
(image via pexels.com)
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Posted onOctober 9, 2017|Comments Off on An introduction to Richard Thaler, winner of this year’s Nobel Prize for Economics
Often times it is hard to appreciate the work of Nobel Prize winners, including those in Economics. Thaler is not one of those people. His work is very approachable for laypeople, and the benefits of his work is obvious.
Here’s one example, of how his work led to better results for people in terms of pensions.
Youtube is a great source of videos on Thaler. If you want to get started understanding what is behind his thinking, you can start there.
In addition, the New York Times covers his award winning here and it is another good introduction. Finally, here is a piece in the Times that Thaler wrote himself, on the power of Nudges. If you do anything, read that.
Good to see him win.
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Posted onOctober 3, 2017|Comments Off on How technology can enhance work and not simply eliminate it
This piece: What it’s like to be a modern engraver, the most automated job in the United States — Quartz, reminded me once again that the best use of technology is to augment the people doing the work, and not simply take away the work. Must reading for anyone who’s believes that the best way to use AI and other advanced tech is to eliminate jobs. My believe is that the best way to use AI and other advanced tech is to make jobs better, both for the employee, the employer, and the customer. The businesses that will succeed will have that belief as well.
(Image from this piece on how humans and robots can work together.)
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Mail will be delivered twice a week (Tuesday and Thursday) to central mail delivery/pickup locations on each floor.”
What gets lost in alot of discussions of robots, AI, etc., taking all the jobs is that the drivers for the decisions is not technology but economics. If there is no economical need for robots and other technology, then that technology will not just appear. There is nothing inevitable about technology, and any specific technology is temporary.
Of course there will be more use of robots and AI and other technology to replace the work people may currently do. The key to finding work will be to continually improvise and improve on the tasks one has to do to remain employed. That’s something humans do well, and technology will struggle with for some time in the future, AI hype not withstanding.
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Posted onJuly 29, 2017|Comments Off on Wages, Nash equilibrium, and the productivity paradox: a small theory of my own
Economists write a lot about the mystery of why productivity is not increasing, with pieces such as this. There’s even a section on it in Wikipedia.
My own theory is that limited wage increases is also limiting the benefits of productivity aids. How I think this works is so:
Employers wont raise wages for employees.
Employers deploy technology that should result in productivity gains.
Employees take the technology deployed and use them to decrease their efforts.
The employer sees some productivity gains and assumes that is the limit for the technology deployed.
Look at this chart:
In much of the world economy, all the job growth is in the services sector (green line), not the manufacturing sector (red line). Achieving productivity gains in the manufacturing sector is more straightforward: replace people with robots and you are done. It’s not as straightforward as that in the services sector. In some services sector jobs, it is not possible to decrease effort without it being visible. But in many services sector jobs, it is. If employees cannot improve their lives by making more money, they may decide to do so by working less and working right up to the point where they don’t lose their job.
If you look at employment as a game, then we currently have a Nash equilibrium where the employees know that they won’t get paid more working for the same company, because that is the best strategy for the company. Therefore the best strategy for the employee is to minimize their effort without getting fired and while showing little if any productivity gains.
That’s to me is key reason why I think we have the productivity paradox.
I would add that the reason this is a paradox is because no one wants to admit that this is happening. It seems like a failure on both the employers and the employees side. The employee wants to be seen as a good worker and the employer doesn’t want to admit it could be paying more. Instead technology is brought in to solve an organizational problem, which is something technology cannot do.
Posted onMay 22, 2017|Comments Off on Capital and slavery in America
It is striking to see what percentage of American capital attributed to slavery in the 18th and 19th centuries (the striped section in the chart above). In the late 18th century only agricultural land counted for more, and there slavery contributed to that too.
The American Civil War and the emancipation of those bound in slavery destroyed all that capital, and that was great and necessary. While it is wrong to consider slavery only in terms of money, it is impossible to talk about slavery in the United States without considering its relationship to the economy and capital. The capital that derived from slavery was massive.
In the U.K. the abolition of slavery resulted in the government providing capital back to the slave owners. It was a terrible omission that neither the U.K. nor the U.S. provided capital to the freed slaves. There are those, like Ta-Nehisi Coates, who argue that such capital in the form of reparation is due. Based on the chart above, a case could be made that it would be a tremendous amount of money.
(Chart above taken from “Capital in the Twenty-First Century” by Thomas Piketty)
Since the start of the Great Recession, the target interest rate has gone from just over 5% to just over 0% and has more or less stayed that way for over half a decade. (See the chart). After a very long pause, the chairwoman of the Federal Reserve has begun the process of raising interest rates, a process that her predecessors have engaged in over recent decades as they put their own distinctive stamp on the economy. (See A History of Fed Leaders and Interest Rates – The New York Times). Some of them, like Paul Volcker, have been hugely successful in shaping the economy. Others, like Alan Greenspan, also have shaped the economy hugely, but I would add, unsuccessfully. So what should the FED do?
Paul Krugman has his take, here. Perhaps an extreme inflation target is the answer, just like Volcker’s extreme interest rates were the answer for their time. However, I don’t think they are symmetrical, and the goals of a higher inflation target would be dampened down by other forces. Furthermore, the FED and most other central banks seem only capable dealing with tamping down inflation and not so capable when dealing with unemployment.
The Chairwoman is signalling she will be raising rates soon. We should see what the effect is, and how the economy and President Trump and Congress responds. If the economy goes into a recession, that would say to me the FED is broken. If the economy does not go into a recession, I would say this means the FED still has a limited role in managing the economy. Let’s see.
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Should you become an entrepreneur if you are older? If you are an entrepreneur, should you hire older workers despite worrying they won’t be a good fit? This piece, Don’t Let Your ‘Senior Citizen’ Status Kill Your Entrepreneurial Spirit, makes the case that the answer to both questions is yes. Well worth reading if you have been asking yourself these questions.
And why is Colonel Sanders shown here? The article will explain.
In this piece, Are we killing Yonge Street? from NOW Toronto Magazine, there is a good discussion on what is happening to development on Yonge Street in Toronto. NOW reports that for a lot of development happening on Yonge Street, the facades of the existing building are kept and much of the development is happening behind it. The article argues that this is a bad thing, and they raise some good points.
What I think they don’t touch on are some of the alternatives. Toronto is fortunate in that there is development ongoing. For poor cities, the alternative is boarded up or demolished buildings and vacant neighborhoods. Instead, we have neighborhoods and buildings being improved. That’s good.
Another alternative is the old buildings being torn down and replaced with new storefronts and new buidlings. I think some of that is good, but I also think preservation of old buildings is also good.
When it comes to preservation and improvements of old buildings, I also think that some of them should be preserved outright. However, Toronto is a growing city, and in some cases, we need larger buildings. In that case, facadism is a good compromise.
Now whether or not facadism is effective or not depends on at least two things. The first is how well the new architecture uses the existing architecture. Done well, the marriage of the old and new building results in something that enhances the area and preserves the city while allowing it to grow. The second thing that determines if facadism is effective is how the new building affects the neighborhood. Here, I think, is the root of the problem. It’s not so much facadism as it is gentrification. Old buildings get preserved, but old stores do not. New developments can cause rents to rise, driving out the stores and organizations that made the neighborhood great. You get bank branches and big chain stores replacing old bookshops and cafes.
I hope the next phase of development tries to understand how to preserve not just the existing architecture, but the neighborhood as well. I realize that is a difficult task, but it is one worth trying to accomplish.
Posted onMay 22, 2016|Comments Off on Nate Silver and Paul Krugman on the importance of good models to understand and predict
This piece by Nate Silver, How I Acted Like A Pundit And Screwed Up On Donald Trump in FiveThirtyEight, is ostensibly about how he messed up in his predictions on the rise of Donald Trump. What I think is worth reading is how he goes about his work and what he learned from his mistakes. Specifically, it’s a great study on how important models are and how a good model works and what it can tell us.
Related, Paul Krugman talks about his model here: Economics and Self-Awareness in The New York Times. Like Silver, he uses models both to understand and predict. Obviously they are modelling different things, but in both cases good models are the basis of their thinking and the work they do.
It’s likely too much to ask now, but eventually anyone doing analysis and making predictions should have to disclose the models they are basing their decisions upon. The opinions of anyone not having such models are likely not worth much.
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