\”In February 2018, following three 24- hour strikes at companies including Daimler, Siemens, and Airbus, Europe’s largest industrial labor union, IG Metall, in an agreement with employers, secured for each German metal worker the right to work less than the standard weekly hours of 35 and as few as 28 hours a week, if a worker so chooses. Those who work fewer hours will be paid only for hours worked, so they will see their weekly earnings fall below those who work longer.
\”This arrangement comes into effect in January 2019 and will be revisited and perhaps revised in two years when the agreement comes to an end. Some newspaper reports claim that the union turned down a 6.8 percent pay increase to achieve its goal of obtaining for workers a wider choice in their working hours. For their part, employers won the right to offer more workers longer 40-hour contracts. Workers are not required to accept longer hours. In short, both employers and employees have secured greater flexibility in their choice of working hours. This change in work schedules in Germany has been preceded by experiments with shorter hours in Sweden and with calls from workers in Britain for a standard four-day working week.
\”German workers already work substantially fewer hours than the typical American worker. Their standard workweek is 35 hours and their vacations are weeks longer than those of American workers. By law, full-time German employees are currently entitled to a minimum of four weeks of paid vacation in addition to a number of public holidays, the precise number varying from one state to another; there is no such legal right for American employees. Consequently, one estimate from the Organisation for Economic Co-operation and Development (OECD) is that the average annual hours of work of the typical German worker are about 400 hours fewer than those of the American worker — or about 10 weeks shorter based on a 40-hour workweek.\”
What do German employers get out of this deal? They get flexibility, in the sense that if some workers want to work longer hours, the firm can hire them to do so. Furthermore, Pencavel argues that for many workers, labor exhibits diminishing marginal productivity over the work-week: that is, the 25th hour worked in a week is on average more productive than the 35th or the 45th hour worked. Thus, employers will be getting the more productive hours from workers, for the same hourly pay.
Does a drive for lower hours have any resonance in the US economy? Pencavel points out that in the US labor market, weekly hours worked dropped sharply in the decades leading up to 1930 or so, but since then, the decline has largely stopped. (And for the record, American unions in certain induistries remained quite powerful in the 1950s and 1960s, and they might well have succeeded in pushing for lower weekly hours if it had been a priority for them.)
Here\’s a different figure, not from Pencavel\’s brief, showing average weekly hours for production and nonsupervisory workers in all industries, not just manufacturing. This average includes part-timers. This shows an ongoing drop over time, although it may have levelled out around the year 2000. Specifically: \”Average weekly hours relate to the average hours per worker for which pay was received and is different from standard or scheduled hours. Factors such as unpaid absenteeism, labor turnover, part-time work, and stoppages cause average weekly hours to be lower than scheduled hours of work for an establishment. … Average weekly hours are the total weekly hours divided by the employees paid for those hours.\”
It\’s an interesting Labor Day question as to how many US workers would we willing to make the tradeoff of lower hours for less total income (assuming they would not see diminished job security as a result). From a US context, one interesting pattern is that lower-wage workers used to be the ones who on average worked the longest hours, but now it\’s higher-wage workers. Pencavel writes:
\”One study reports that the fraction of [US] men who usually work 50 or more weekly hours increased between 1979 and 2006 — the increase greatest for college graduates and salaried workers: The fraction of men in the top hourly earnings quintile who usually work 50 or more hours increased from 15 percent in 1979 to 27 percent in 2006. Whereas a century ago, the lowest-paid workers worked the longest hours, today the longest hours are worked by the top 10 percentile of earners. This conforms to the perception that, in some sectors, a culture of long working hours has emerged where an individual’s long hours are a rite of passage into the upper echelons of a company’s hierarchy. Insofar as it is those at the top of the earnings distribution who set society’s agenda, will we hear more agitation for a shorter workweek and more flexible work schedules over the next decade?\”
Here are some illustrations. The top figure shows national R&D spending in absolute terms (that is, not as a percentage of GDP). The US leads the way, but China is now in second place, well ahead of the EU G3 (France, Germany, and the United Kingdom). And Korea is catching up to Japan.
The bottom figure shows total patents. The article reports:
\”An examination of international patent families—using a patent-count measure that includes only applications to at least two distinct patent offices, in order to exclude low-value patents—shows that China and Korea each patent about 20,000 inventions a year. Although this is still substantially below patenting in Japan and the United States (about 60,000 each), patenting activity in China and Korea is comparable to the average of France, Germany, and the United Kingdom. A deeper investigation into the types of patents by economic sector reveals that the rise of patenting in China and Korea is particularly pronounced in the electrical and optical equipment sectors and, in Korea, for machinery equipment as well.\”
Another way to gain some insight as to whether the patents from China and Korea are low-value or high-value is to look at how new patents from say, the US or Japan, cite earlier patents from, say, China or Korea. he red lines show patent citations within regions. he blue lines show patent citations between regions. he thickness of the lines is scaled to the number of patents. So in 1995, for example, the Korea/China area looks very small, both in number of patents cited within and outside the region. By 2014, it looks like a more-or-less equal partner in patent citations with the US, the EU, and Japan.
The article also includes a brief discussion of whether this shift should be viewed as a good thing from the perspective of the US economy. For example, does a rise of innovation in China and Korea in some way discourage innovation in the US economy? Or hurt the US economy in some other way? The authors take what I think is ultimately the correct position, which is that world economic output and US economic output are better off with more new ideas, growing incomes, and larger markets. But new ideas and markets can be a source of economic stress and worker dislocation, too.
Problem: Many places of planet Earth are so hot, at least during significant portions of the year, that it has adverse effects on human health and productivity.
Solution: Air conditioning!
Problem: The dramatic expansion of expansion of air conditioning all around the world raises demand for electricity. Generating electricity is often done with fossil fuels, which (especially in emerging markets where emissions standards are often more lax) can generate conventional air pollutants, and which in all markets add to carbon dioxide in the atmosphere. In addition, common methods of air conditioning also use refrigerants , which are also powerful greenhouse gases if/when they escape into the atmosphere.
Solution: ???
This scenario sets the stage for \”The Future of Cooling: Opportunities for energy-efficient air conditioning,\” a report published by the International Energy Agency (an autonomous international agency with 29 countries as members, May 2018, free registration may be needed to access report). Here are some figures and comments that caught my eye.
Here\’s the rise in the stock (right-hand axis in millions of units) and capacity (left-hand axis in gigawatts) of air conditioning around the world. Either way, it\’s roughly a tripling in the last quarter-century.
Here\’s a sense of how the magnitude of energy consumption going to air conditioning and how it has expanded. The blue line is 1990; the yellow line is 2016. In China, electricity going to air conditioning was almost zero in 1990, but it\’s rapidly catching up to US levels.
The report notes:
\”Of the 1.6 billion ACs in use throughout the world at the end of 2016, over half were in just two countries: China, which has 570 million units, and the United States, where there are 375 million …. Other countries with more than 20 million units include Japan, with 150 million, Korea (60 million), Brazil and India (both nearly 30 million). The remaining ACs are mostly in the European Union, where there are nearly 100 million units, and the Middle East (around 50 million units). Nearly 70% of all the ACs globally is in residential buildings. Household ownership of ACs varies enormously across countries, from around 4% in India and less than 10% in Europe, to over 90% in the United States and Japan, and close to 100% in a few Middle Eastern countries. In China, nearly 60% of households now have at least one AC ….
China has seen by far the biggest – and fastest – increase in energy use for space cooling since 1990, with a surge in sales of ACs … Cooling used a mere 6.6 TWh in 1990; by 2016, it consumed 450 TWh, a staggering 68-fold increase. And growth is showing no signs of slowing; it amounted to more than 10% in 2016, the fastest rate since 2009. China’s total energy use for space cooling – and in particular ACs – is fast approaching that of the United States and is likely to surpass it soon given China’s considerable population, though average energy use for cooling per person in China is still less than 20% of that in the United States. Demand in other emerging economies, notably India, is also growing very rapidly, having risen 15-fold since 1990.\”
Demand seems likely to continue rising quickly for a number of reasons: economic growth in emerging markets like India and Brazil, as well as China; greater use of AC in countries where incomes are already relatively high, like countries of western Europe; rising global population; a global shift to a larger share of population living in urban areas; and the demand for air conditiong from rising numbers of elderly around the world, whose health is especially vulnerable to episodes of high heat.
One statistic from the report is that the US uses more electricity for cooling than the 4.4 billion people living in all of Africa, Latin America, the Middle East and Asia (excluding China). Or for another comparison, the US uses more electricity for cooling than the by the 1.2 billion people in Africa use for everything.
Restraining the growth of future demands for electricity that would be used for cooling can make a big difference, because demand for cooling is often what determines the peak-load demand for electricity. If you can reduce the peak, you can literally build fewer electricity-generating facilities.
The IEA report goes through detailed scenarios for future demand and how it could be reduced by various policies. I\’ll leave that level of detail to the report. I\’ll just say here that the steps aren\’t magic.
Continually ratchet up the efficiency of AC units. They have become about 50% more efficient in last 25 years, but an AC unit will typically last 10 years or more, so greater efficiency now has a future payoff. Apparently, one study found that \”a 30% improvement in global AC performance by 2030 would reduce peak load by the equivalent of as much as 710 mid-sized coal power plants.\” Design homes and commercial buildings so that they don\’t need as much cooling: shades above windows, natural venting, roofs designed to reflect solar heat, and so on. Investigate methods of cooling that don\’t use as much electricity or refrigerants. Some of the lesser-known examples discussed are \”district cooling networks,\” which \”supply chilled water produced in a central plant to buildings and industrial sites through a network of insulated pipes,\” and \”solar cooling\” technologies that use a heat pump or a sorption chiller (and yes, these technologies get a bit of explanation in the report). .
On a hot day, air conditioning, and refrigeration more broadly, feels to me like a wish come true granted by a passing genie. But in all the stories, the magic of genies comes with a price. As we spread the magic of air conditioning, it\’s time to give some thought to reducing its energy costs.
Homage: I ran across a mention of this report in a leader and an article in The Economist magazine (August 25, 2018). The articles offer some back-of-the-envelope calculations.
\”What is the single most effective way to reduce greenhouse-gas emissions? Go vegetarian? Replant the Amazon? Cycle to work? None of the above. The answer is: make air-conditioners radically better. On one calculation, replacing refrigerants that damage the atmosphere would reduce total greenhouse gases by the equivalent of 90bn tonnes of CO2 by 2050. Making the units more energy-efficient could double that. By contrast, if half the world’s population were to give up meat, it would save 66bn tonnes of CO2. Replanting two-thirds of degraded tropical forests would save 61bn tonnes. A one-third increase in global bicycle journeys would save just 2.3bn tonnes. Air-conditioning is one of the world’s great overlooked industries. …
\”In 2017, the Lawrence Berkeley National Laboratory in California, a research centre, calculated the extra carbon emissions that could be saved if air-conditioners were better. If HFCs were phased out and all units were as efficient as the best ones, the world could be spared around 1,000 average-sized (500MW capacity) power stations by 2030. There would be many more air-conditioning units, but each would use less energy. In India, this would save three times as much in carbon emissions as the prime minister’s much-vaunted plan to install 100 gigawatts of solar capacity by 2022. In China, it would save as much as eight Three Gorges dams (the largest dam in the world).\”
One model of the process of writing is that you just take what\’s in our head and put into written words. The process is how Samuel Taylor Coleridge described the writing of his famous poem \”Kubla Khan\” (\”In Xanadu did Kubla Khan/ A stately pleasure dome decree …\”). In Coleridge\’s telling, he was reading a book that mentioned Kubla Khan and dropped off to sleep (probably under the influence of opium) and woke up with the poem fully formed in his mind. He started writing it down, frantically, until he was interrupted by a visitor and the rest of the poem vanished from his mind.
I\’ve known writers who have the essay almost fully formed in their mind, and it just pours out on to the page. It\’s happened for me a few times. But most writing for me, and I suspect for others, starts from a place of less clarity. There\’s an idea, to be sure, and some support for the idea. But as you try to put the ideas into concrete words, you become aware of a lack of precision in what you are saying, of a failure to capture what you really mean to say, of holes and inconsistencies in the argument, of places where the argument is not persuasive or connected or fluent. I sometimes find this hard to convey to students: Writing isn\’t (usually) about transcribing thoughts, but instead is intertwined with a process of developing insights that are more accurate and complete.
The great author Flannery O\’Connor once wrote in a note to her agent: \”I have to write to discover what I am doing. Like the old lady, I don\’t know so well what I think until I see what I say; then I have to say it over again.\”
(The letter was written to her literary agent on January 21, 21, 1948, while she was in the process of writing Wise Blood. It\’s reprinted on p. 5 in The Habit of Being: Letters of Flannery O\’Connor.)
But O\’Connor\’s comment raises an obvious question. She wrote \”like the old lady.\” Who is \”the old lady?\”
Her reference seems to trade back to a comment from E.M. Forster in his 1927 book \”Aspects of the Novel,\” (1927). Forster is discussing a 1925 novel by Andre Gide called Les Faux-monnayeurs, or The Counterfeiters. Here\’s the passage from p. 151 of Forster\’s book.
“Another distinguished critic has agreed with Gide – that old lady in the anecdote who has accused her nieces of being illogical. For some time she could not be brought to understand what logic was, and when she grasped its true nature she was not so much angry as contemptuous. “Logic! Good gracious! What rubbish!” she exclaimed. “How can I tell you what I think till I see what I say?” Her nieces, educated young women, thought that she was passée; she was really more up-to date than they were.”
Although the phrasing of this idea by Gide, Forster, and O\’Connor is especially pithy, the idea that you need to write in order to find out what you really think has come up before. For example, there\’s a throwaway line in the 1852 novel by William Makepeace Thackeray, The History of Henry Esmond: \”[T]here are a thousand thoughts lying within a man that he does not know till he takes up the pen to write …\”
Other than the Gide/Forster/O\’Connor version of this insight, my favorite version is from the Montaigne\’s essay \”On the Education of Children,\” written around 1579-1580.
\”I hear some making excuses for not being able to express themselves, and pretending to have their heads full of many fine things, but to be unable to bring them out for lack of eloquence. That is all bluff. Do you know what I think these things are? They are shadows that come to them of some shapeless conceptions, which they cannot untangle and clear up within, and consequently cannot set forth without: they do not understand themselves yet. And just watch them stammer on the point of giving birth; you will conclude that they are laboring not for delivery, but for conception, and that they are only trying to lick into shape this unfinished matter.\”
I published this post five years today, but because I\’ve seen the same myth repeated a few times in the last few weeks, it seemed worth running it again as the Labor Day holiday looms ahead. _________
Why do students have summer vacation? One common answer is that it\’s a holdover from when America was more rural and needed children to help out on the farm, but even just a small amount of introspection suggests that answer is wrong. Even if you know very little about the practical side of farming, think for just a moment about what are probably the most time-sensitive and busiest periods for a farmer: spring planting and fall harvest. Not summer!
I\’m not claiming to have made any great discovery here that summer vacation didn\’t start as result of following some typical pattern of agricultural production. Mess around on the web a bit, and you\’ll find more accurate historical descriptions of how summer vacation got started (for example, here\’s one from a 2008 issue of TIME magazine and here\’s one from the Washington Post last spring). My discussion here draws heavily on a 2002 book by Kenneth M. Gold, a professor of education at the City University of New York, called School\’s In: The History of Summer Vacation in American Public Schools.
Gold points out that back in the early 19th century, US schools followed two main patterns. Rural schools typically had two terms: a winter term and a summer one, with spring and fall available for children to help with planting and harvesting. The school terms in rural schools were relatively short: 2-3 months each. In contrast, in urban areas early in the first half of the 19th century, it was fairly common for school districts to have 240 days or more of school per year, often in the form of four quarters spread over the year, each separated by a week of official vacation. However, whatever the length of the school term, actual school attendance was often not compulsory.
In the second half of the 19th century, school reformers who wanted to standardize the school year found themselves wanting to length the rural school year and to shorten the urban school year, ultimately ending up by the early 20th century with the modern school year of about 180 days. Indeed, Gold cites an 1892 report by the U.S. Commissioner of Education William Torrey Harris which sharply criticized \”the steady reduction that our schools have suffered\” as urban schools had reduced their school days down toward 200 per year over the preceding decades.
With these changes, why did summer vacation arise as a standard pattern during the second half of the 19th century, when it had not been common in either rural or urban areas before that? At various points, Gold notes a number of contributing factors.
1) Summer sessions of schools in the first half of the 19th century were often viewed as inferior by educators at that time. It\’s not clear that the summer sessions were inferior: for example, attendance didn\’t seem to drop off much. But the summer sessions were more often taught by young women, rather than by male schoolteachers.
2) School reformers often argued that students needed substantial vacation for their health. Horace Mann wrote that overtaxing students would lead to \”a most pernicious influence on character and habits … not infrequently is health itself destroyed by overstimulating the mind.\” This concern over health seemed to have two parts. One was that schoolhouses were unhealthy in the summer: education reformers of the time reminded teachers to keep windows open, to sprinkle floors with water, and to build schools with an eye to good air ventilation. Mann wrote that \”the small size, ill arrangement, and foul air, of our schoolhouses, present serious obstacles to the health and growth of the bodies and minds of our children.\” The other concern over health was that overstudy would lead to ill-health, both mental and physical. An article in the Pennsylvania School Journal expressed concern that children \”were growing up puny, lank, pallid, emaciated, round-shouldered, thin-breasted all because they were kept at study too long. Indeed, there was an entire medical literature of the time that \”mental strain early in life\” led to lifelong \”impairment of medical and physical vigour.\”
Of course, these arguments were mainly deployed in urban areas as reasons for shortening the school year. In rural areas where the goal was to lengthen the school year, an opposite argument was deployed, that the brain was like a muscle that would develop with additional use.
3) Potential uses of a summer vacation for teachers and for students began to be discussed. For students, there were arguments over whether the brain was a muscle that should be exercised or relaxed during the summer. But there was also a widespread sense at the time, almost a social mythology, that summer should be a time for intense interaction with nature and outdoor play. For teachers, there was a sense that they also needed summer: as one writer put it, \”Teachers need a summer vacation more than bad boys need a whipping.\” There was a sense in both urban and rural areas that something like a 180-day school, with a summer vacation, would be the sort of job that would be attractive to talented individuals and well-paid enough to make teaching a full-time career. For teachers as well, there was a conflict as to whether they should spend summers working on lesson plans or relaxing, but the slow professionalization of teaching meant that more teachers were using the summer at least partially for work.
4) More broadly, Gold argues that the idea of a standard summer vacation as widely practiced by the start of the 20th century grew out of a tension in the ways that people thought about annual patterns itself in the late 19th century. On one side, time was viewed as an annual cycle, not just for agricultural purposes, but as a series of community practices and celebrations linked to the seasons. On the other side, time was starting to be industrial, in a way that seasons mattered much less and the smooth coordination of production effort mattered more. A standard school year with a summer vacation both coordinated society along the lines of time, while offering a respect for seasonality as well.
Most of the fuss about international trade focuses on goods and services that cross international borders. But a number of major US multinational companies–GM, Ford, Starbucks, Nike, and others–have both production facilities and large sales in China. For example, GM sells more cars in China than in the United States. Overall, US exports of goods and services to China in 2016 were $170 billion; but total revenues of US multinationals producing and selling in China that year was twice as high at $345 billion.
The US Bureau of Economic Analysis has just published \”2016 Data on Activities of U.S. Multinational Enterprises,\” (August 24, 2018). The focus is on \”majority-owned foreign affiliates\” of US companies. These operations split up the production process across international boundaries: some of the value-added in the US, some in the other country. The BEA report notes:
\”Worldwide current-dollar value added of U.S. MNEs decreased 1.5 percent to $5.2 trillion. Value added by U.S. parents, a measure of their direct contribution to U.S. gross domestic product, was nearly unchanged at $3.9 trillion, representing 24.2 percent of total U.S. private industry value added. MOFA value added decreased to $1.3 trillion. … U.S. parents accounted for 22.3 percent of total private industry employment in the United States. Employment by U.S. parents was largest in manufacturing and retail trade.\”
Here are a few graphs with some comparisons. The first figure shows that the US domestic amount of value-added for these US multinationals is much higher than the share of their foreign affiliates, as is the amount of investment spending on plant and equipment and on research and development. Most of the employment of these companies is US-based, too.
Unsurprisingly, most of these US multinationals are focused on other high-income countries. Of the $5.7 trillion total sales for these majority-owned foreign affiliaties in 2016, about half was from European affiliates, and another 10% from Canadian affiliates.
As noted before, sales of US majority-owned foreign affiliates in China were $345 billion in 2016. However, the value-added by those foreign affiliates was just $65 billion, meaning that the vast majority of the value-added for these sales was attributed to sources outside China. For example, a GM car assembled in China included both tangible parts and intangible engineering expertise from other countries outside China.
Total employment in China by these US majority owned foreign affiliates was 1.7 million in 2016. But before you start thinking that the US firms should have hired US workers instead for these jobs, total compensation for the Chinese employees was $29 billion, which works out to an annual salary of about $17,000 per year. That\’s good pay in China, but pretty close to minimum wage in the US economy. Taken together with the value-added numbers, it suggest that the US majority-owned foreign affiliates in China (as in other places) are helping to support higher-paid US jobs.
In a trade war crossfire, US multinational enterprises that produce in other countries are very exposed. They have a lot of money and effort invested in cracking open foreign markets and operating there. But given their location, they are vulnerable to foreign politicians who want to fire off a few trade war shots of their own.
If you wanted to put the equivalent of $1 million or more in currency in a suitcase, what currencies might you use?
How many zeros can you fit on a currency note? Yugoslavia managed 11 zeros, but Zimbabwe went to 14 zeros. I don\’t know how many zeros Venezuela has on its currency these days.
Sometimes it takes three paper notes to buy a cup of coffee. Sometimes it takes two notes to buy a car.
There\’s even a quirky little classroom-friendly cartoon video appended to the article on \”The History of Paper Money.\”
If I want to try a different pizza joint, switching is easy. If I want to use a different social media platform, switching can be much harder. That\’s one reason why competition works better when buying pizza. How about if we required that social media companies make it straightforward to port our data and our digital identity to other providers? Joshua Gans discusses this idea in \”Enhancing Competition with Data and Identity Portability\” (Hamilton Project at the Brookings Institution, Policy Proposal 2018-10, June 2018).
As background, here are a couple of figure. Here are some examples of markets that are pretty highly concentrated, and where the data and identity that you have built up with your existing provider might in some ways be a hindrance if thinking about shifting to a different provider.
Here\’s some evidence on social media use in the US.
So what would this proposal do? Gans notes that a number of platforms already have data portability, in the sense that, if you wish, you can download your data from the archives of Google, Twitter, Facebook, or LinkedIn, and transfer that data to another platform. Call this \”standard portability.\” Gans writes:
\”Standard portability mitigates one type of switching cost associated with digital platforms—the cost associated with having to rebuild personal input data so as to maintain product quality at a new platform. While some major digital platforms have voluntarily implemented this type of portability, it would likely still prove useful for other platforms—including banks and credit card companies—if consumers had a right to data portability.
\”However, when switching costs are driven by network effects, standard data portability does nothing to address those concerns. For example, while a user can switch from one digital platform and take all of their posts and content to a new platform, they cannot port the posts that others have shared with them. In other words, they must remain on the incumbent platform to view those messages. This problem arises not just for past messages, but also for future messages. Users who switch platforms would not have the ability to receive new content from their previous network on the new platform. …
\”The solution I propose is that individual users have a right to their identity and its verification if they change digital platforms. What this would mean is that if users on a particular platform give permission to send messages to Person A, then, should Person A change digital platforms, she can opt to have all messages forwarded to her on the new network. Because users were already sending messages to a person with a verified identity, that identity should persist along with the permissions that establish from whom to receive messages and to whom to send them.\”
It\’s admittedly not clear how much difference data and identity portability would make to competition in industries where you are attached to the firm in part because it has your past data. Also, there would be complexities to work out technical, differences across types of platforms and uses, potential privacy issues when certain social media use is anonymous, and so on. Gans offers some discussion of these issues. But the basic goal is to reduce the chance that people are locked in to their current providers because you\’ve been with it so long that they are home for a lot of your past data and links. Instead, platform firms would need to compete on current service and new features, and new entrants would find it easier to get some footing.
Gans makes the interesting point that social media platforms, entertainment platforms, and other digical companies are all competing for your attention. Thus, if many people continue to use Facebook–but use it less often and for fewer purposes–Facebook as a business proposition would be diminished. He writes:
\”For instance, Facebook and other networks play roles in referring traffic to outside publishers and other media. If Facebook were to lose user attention, its role as a referrer would likely diminish as well. For instance, in 2017 Google accounted for 44 percent of referral traffic to publishers (up from 34 percent in 2016), while Facebook accounted for 26 percent (down from 40 percent in 2016) (Willens 2017). This suggests that the balance of social media market power might be more fluid than usage shares would indicate. More broadly, one could argue that social media is not the relevant market, but rather all these firms are competing for attention with other media, and as such, Netflix, broadcast TV, and any Internet sites are all competing for viewing time with these social media platforms.\”
\”Similarly, in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence, a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information resources that might consume it.\”
Gans also notes that while the specific proposal discussed here is about social media, the ideas of data and identity portability have many other applications. I mentioned above the idea of data portability of bank and credit card records. One can also imagine identity portability applying to data on health monitoring, or across all the ratings systems that different companies use for people to rate buyers to sellers, or across all the review systems that companies use to offer recommendations to potential future buyers.
The beekeeping industry matters more to economists than those who are not buzzing around the fields of economics may suspect. In the 1950s and 1960s, it was common for economists to use bees as a theoretical example of a situation where markets would not work well. The underlying argument was that it would be hard for beekeepers and growers to agree on how to price pollination services. This argument bit the dust, hard, when a practically minded economist pointed out in the 1970s that in fact, such agreements between beekeepers and growers had been commonplace for decades. I offered a quick overview of this this intellectual history in \”Do Markets Work for Bees?\” (July 10, 2014)
More recently, colony collapse disorder offered a new challenge for thinking about bees and markets. But it turns out that beekeepers have tried-and-true techniques for creating more hives: for example, by splitting an existing hive. There\’s a market for buying a starter-kit \”package\” of bees: about 12,000 worker bees, plus a queen, totals about three pounds and sells for $90. I describe how the number of bees has not diminished, despite higher die-offs from colony collapse disorder, in \”Fighting Colony Collapse Disorder: How Beekeepers Make More Bees\” (August 5, 2017)
I\’d say there are two particular challenges to the market for bees in recent years. One is the ongoing presence of colony collapse disorder, so that beekeepers have had to invest more in replacing hives that have died off. The other is the rise of almond crop in California. This crop needs pollination badly, and needs it pretty much all at the same time early in the season, so demand for bee pollination services has gone up. Moreover, bees who pollinate almonds apparently don\’t make decent honey during that time. This rise in pollination revenues means that beekeepers as a whole now make slightly more money from pollination than from honey–reversing a long-standing pattern.
As those who are constantly on the lookout for an example for an intro econ class will note, we\’re talking about a fall in supply of bees (from colony collapse disorder) and a rise in demand (from more pollination of almonds). One might expect a rise in price, but while the price for almond pollination has indeed risen, other pollination prices have not. As the report says near the end: \”Appropriate here is the adage: `High prices are the solution to their own problem.\’” In this case, higher price brought forth reactions from both beekeepers and bee-users. Also, any higher costs of pollination are relatively small in the context of the overall price of food, and so can be passed down the production chain to retail consumers with little adverse effect.
Here are some comments from the report:
On the number of honeybee colonies
\”Since 2006, annual winter losses of managed honey bee colonies have averaged 28.7 percent, approximately double the historical winter mortality rate of 15.0 percent. These elevated losses have raised concerns that agricultural and food supply chains will suffer disruptions as pollination services become more costly and less available. … Despite higher winter loss rates, the number of U.S. honey bee colonies has remained stable or risen between 1996 and 2016, depending on which of two data sources is considered. Winter loss rates have no negative correlation with yearly changes in the number of U.S. colonies at the national or State level, and loss rates have a positive correlation with the rate of colony additions, which may reflect strategies used by beekeepers to manage colonies.\”
Growing revenues for beekeepers from almond pollination services:
\”Between 1988 and 2016, real beekeeper revenue per colony more than doubled. This increase resulted primarily from a doubling of real honey prices over that time span, as well as dramatic growth in both almond acreage and almond pollination service fees. Industry data indicate that in 2016, pollination service income accounted for 41 percent of beekeeper revenue, whereas pollination services accounted for only 11 percent of revenue in 1988. In 2016, 82 percent of all pollination service revenue came from almond pollination, implying that almond fees accounted for one-third (82 percent of 41 percent) of total beekeeper revenue in that year.
\”The high share of almond service fees in pollination revenues can be attributed to the following: (1) almond fees are substantially higher than fees for other major crops, and (2) almond pollination accounts for 61 percent of all honey bee colonies rented and 52 percent of all crop acres that pay fees for pollination services. A primary driver of the increased share of pollination fee revenue over time is the dramatic expansion in almond acres—from 419,000 bearing acres in 1988 to 940,000 in 2016.
\”For most crops other than almonds, the share of total costs attributable to pollination service fees is less than 5 percent at the farm level and less than 1 percent at the retail level. That small share, along with the relatively modest changes in pollination service fees for most crops, will tend to make the effect of increasing pollinator health problems on food prices very small for most crops. …
\”In recent years, inflation-adjusted almond pollination fees have more than doubled. To the extent that pollination fees for crops that do not compete with almonds for pollination services have increased at all, the increases have been far more modest. High pollination fees for almonds have induced commercial beekeepers to load their honey bees on flatbeds and trek to California from as far away as Florida and North Carolina. In recent years, 60 to 70 percent of all commercial honey bee colonies in the United States have been transported to California in February for the almond bloom.\”
For many crops, growers have some alternatives to honeybee pollination
\”While the honey bee pollinates a wide variety of crops, in certain applications, other pollinators are preferred. Notably, the alfalfa leafcutter bee (ALCB, Megachile rotundata) is used widely as a pollinator in commercial alfalfa seed production owing, in part, to its different physiology (Pitts-Singer and Cane, 2011). The alfalfa flower includes a trigger that a pollinator must trip to release its pollen. Compared to ALCB, honey bees are small and averse to the strike of the trigger mechanism. …
\”ALCB are sold in their pre-pupal stage, and the bees’ maturation and emergence as an adult insect are managed with temperature to coincide with the alfalfa bloom (Pitts-Singer and Cane, 2011). When sold in gallon quantities (roughly 10,000 live bees per gallon), typical stocking rates are 1 to 4 gallons per acre … While ALCB are raised domestically, in 2016, the United States imported $18.8 million worth from Canada, the sole import source. … Since 2012, ALCB imports have grown steadily in volume terms, suggesting that imported bees are not being recovered to use in subsequent years. If recent ALCB import values exceeding $18.8 million over each of the last 3 years represent single-use purchases of pollination services, then the alfalfa seed crop represents the second-largest user of paid pollination services by value after almonds. …
\”Honey bee dependency ratios range from 0.0 to 1.0. For almonds and lemons, the bee dependency ratio is 1.0, indicating that, in the complete absence of managed honey bees, yields for currently planted varieties of these crops would fall by 100 percent and no output would be produced. For strawberries and pumpkins, the dependency ratio is 0.10, indicating that these yields would fall by only 10 percent if all managed honey bees disappeared. In general, a higher bee dependency ratio suggests that farmers will be less able to substitute other methods of pollination for honey bees and that farmers growing honey bee-dependent crops will likely be less responsive to increases (or decreases) in the price of pollination services when making their colony rental decisions.\”
There\’s a lot of inelastic demand along the supply chain for pollination services
\”The farmer’s unresponsiveness to potential increases in pollination service fees enables beekeepers to pass along higher beekeeping management costs to farmers. Similarly, the retail food producers’ general unresponsiveness to wholesale food price increases enables wholesale producers to pass along higher costs of pollination services to retailers. In short, the same mechanisms that mitigate much of the impact of higher management costs on beekeepers also mitigate the impact of higher wholesale food production costs on food producers.\”
Markets for pollination services actually go back 100 years
\”Johnson (1973) suggests that the first recorded renting of colonies for pollination in North America was in 1910, while Lindquist (2016) states that the first bees were rented for pollination in New Jersey in 1909. Olmstead and Wooten (1987) indicate that plum and prune growers started renting hives for pollination services `beginning around World War I\’ and that their success led to the development of similar practices by growers of other fruits and nuts. Rucker and Thurman (2010) provide accounts of migratory beekeeping for the purpose of following the bloom and producing honey going back to the 1870s and suggest that there were commercial beekeepers who “were mobile, migratory, and large by the 1920s” (p. 9). They also provide several accounts of the provision of pollination services for pay in the 1920s, noting that many of the accounts are from California, and the extent to which the practice was widespread at that early date is unclear.\”
As I noted before, those looking for a supply and demand classroom illustration could do worse than spending some time with the bees.
There is a certain kind of environmentalist who seems unable to acknowledge any good news about the environment, because it might create complacency about remaining issues. I\’m not a fan of this approach. When successes are denied, credibility diminishes. And if there\’s never been an environmental success to celebrate, I\’m more likely to be discouraged about the future than energized. In that spirit, here are some figures from an Environment Protection Agency annual report, Our Nation\’s Air.
This figure shows the decline in what are often called the \”criteria\” air pollutants. The horizontal line shows the U.S. National Ambient Air Quality Standards. At a national level, all of the pollutants are below the dashed line. The percentages in the upper right corner of the figure show the decline in the concentration of each category of air pollution since 1990s.
In thinking about how to reduce pollution further, it\’s worth noting that different pollutants tend to come from different sources. For example, highway vehicles (green bar) are bigger producers of carbon monoxide and nitrogen oxides, while stationary fuel combustion (think power plants, blue bar) produce a large share of the particulates and sulfur dioxide, and industrial processes contribute most to emissions of volatile organic compounds (VOC) and ammonia (NH3).
It\’s worth noting that the overall decline in air pollution in the last half-century or so is happening at a time of rising US population, rising GDP, vehicle-miles traveled, and overall energy consumption.
