Friday, March 31, 2017

Pistons guard Kentavious Caldwell-Pope arrested on suspicion of DUI in Auburn Hills

On Wednesday, a player for the Detroit Pistons was pulled over for going 45 MPH in a 25.  After inspection, police found that he was over the legal limit of 0.08 BAC.  The crazy thing to me was that he played in the Pistons' game the NEXT DAY.   Not much else substance to the article, but I was just wondering why professional athletes and top ranking officials (politicians, CEOs, etc.), who should be held to a higher standard, are constantly let off the hook for legal issues such as DUIs, while common employees can lose their jobs over these issues.  I understand common employees are more expendable than the "celebrities", but it's a societal issue that really frustrates me.  Any other thoughts?

Robots have taken up to 670000 jobs

New research by economists Acemoglu and Restrepo gives specifics about the substitution of capital, in the form of robotics, for labor.  From the Washington Post:

Industrial robots alone have eliminated up to 670,000 American jobs between 1990 and 2007, according to new research from MIT’s Daron Acemoglu and Boston University’s Pascual Restrepo.
The number is stunning on the face of it, and many have interpreted the study as an indictment of technological change — a sign that “robots are winning the race for American jobs.” But the bigger takeaway is that the nation has been ill-equipped to deal with the upheaval caused by automation.
The researchers estimate that half of the job losses resulted from robots directly replacing workers. The rest of the jobs disappeared from elsewhere in the local community. It seems that after a factory sheds workers, that economic pain reverberates, triggering further unemployment at, say, the grocery store or the neighborhood car dealership.

In a way, this is surprising. Economists understand that automation has costs, but they have largely emphasized the benefits: Machines makes things cheaper, and they free up workers to do other jobs. For instance, 41 percent of Americans were farmers a century ago, but thanks to tractors and mechanical harvesters, only 2 percent work in the agriculture today. The rest of us now can now aspire to be programmers or anesthesiologists or DJs or drone pilots.

The latest study reveals that for manufacturing workers, the process of adjusting to technological change has been much slower and more painful than most experts thought. “We were looking at a span of 20 years, so in that timeframe, you would expect that manufacturing workers would be able to find other employment,” Restrepo said. Instead, not only did the factory jobs vanish, but other local jobs disappeared too. Acemoglu and Restrepo say that every industrial robot eliminated about three manufacturing positions, plus three more jobs from around town.

Now the robots are coming for my job and eventually for yours.  Is it an inevitable change?

Thursday, March 30, 2017

McDonald's Quarter Pounders to be made with fresh beef

Starting in mid-2018, McDonald's will begin to serve their popular "quarter pounder" hamburgers with fresh beef that will be prepared when ordered, as opposed to their old technique of cooking the beef and then holding frozen beef patties for use as needed. Chief Executive Steve Easterbrook believes the change is necessary to address the consumers' demands for fresher, simpler food. McDonald's is hoping that the shift to fresh beef is enticing enough to convince unsatisfied customers to give the fast food chain another chance. The move to fresh beef is expected to lift sales, although likely not to the degree associated with all-day breakfast after its debut in late 2015. Do you think more people will be heading to McDonald's after hearing about the switch to fresh beef or do you feel the switch to fresh beef isn't enough to convince people to give McDonald's another chance?

U.S. College Grads See Slim-to-Nothing Wage Gains Since Recession

The bachelor's degree — long a ticket to middle-class comfort — is losing its luster in the U.S. job market. Wages for college graduates across many majors have fallen since the 2007-09 recession.  However, the outlook for experienced graduates, aged 35 to 54, is brighter, with wages generally stable since the crisis. Among the factors at play are advances in technology and automation, which are not only taking away U.S. manufacturing jobs, but also having an impact on white collar workers.  A graduate's level degree is increasingly offering the bigger salary bump as the wage gap between graduate degree-holders and undergrads has been growing since the recession. Your major is only one determinant of future earnings potential, as the training experience from internships, debt levels, and soft skills also help shape salary and job prospects. I, for one, wish K offered a couple more classes in my intended field, but I do believe certain classes helped me gain the "soft skills" (discussion, interaction, sociability) that the article talks about.  What are your thoughts on the lack of wage gain for undergrads since the recession?

Do you think K has developed the "soft skills" in you to prepare you for the workforce? 

Would you want any change in the curriculum to leave you better off after graduation?

Wednesday, March 29, 2017 grabs $12 million to fix how colleges provide financial aid, a company that has created a clever new way for students to receive financial aid with the motivation of lowering the average debt per college graduate. The problem was that the $50 billion is being dished out among a smaller, self-selecting applicant pool because most students don’t even bother applying to some colleges or universities that would give them money — for the simple fact that they think those same colleges are too expensive to attend. So kids aren’t applying to college because they don’t think they can pay for it at the same time colleges are trying to find worthy candidates to receive financial aid. To fix this issue, the company’s approach is to have colleges and universities award “micro-scholarships” for academic and extracurricular achievements throughout high school rather than dishing out lump-sum awards after a student applies to their school. Students don’t have to pick and choose which school they want to receive the aid from, but can expect to receive a cumulative amount of $20,000 in financial aid and scholarships throughout their high school career. Since it was founded in 2012, has helped colleges award nearly $1 billion in student aid packages. Do you think this is an efficient way to handle the current student debt problem we are experiencing in America? Do you think this will eventually lead to the average student graduating with less debt in the future?

What Brexit will cost Britain: More debt, weaker growth and a final bill

Its officially official as the Prime Minister of the United Kingdom sent a letter to the EU confirming their leave from the EU, with two years to fully remove themselves.  Britain's exit from the EU obviously has major ramifications throughout Europe.   Economists project a major uphill climb for the UK as their leave from the EU as it will be a costly exit and will impact their economy for many years.  The Office of Budget responsibility projects slower economic growth post-Brexit compared to pre-Brexit, 2% and 2.2%, respectively. OBR also projects higher debt as the UK government will have borrow more as less taxes will be paid.  Brexit is likely to hit the the job market as companies, mostly banks, have already relocated jobs to protect their European operations. Unemployment is projected to increase from 2018-2020, and peak at 5.2% (currently at 4.7%).  What will the next two years look like for Britain and Europe?  How can British Parliament combat the challenges mentioned above to create a sustainable economic future? Also, just my curiosity, will London stay as the main financial center for euro trading even after the exit?

The opioid epidemic

A great blog piece at Bruegel (click here to see it) gives more data on the opioid crisis.  From the article:

According to the Centers for Disease Control and Prevention, 91 Americans die every day from an opioid overdose. From 2000 to 2015, more than half a million people died from drug overdoses. Overdoses from prescription opioids are a driving force: since 1999, the amount of prescription opioids sold in the U.S. nearly quadrupled, and deaths from prescription opioids – drugs like oxycodone, hydrocodone, and methadone – have more than quadrupled.

This epidemic may have led to Trump's successful presidential bid.  A Penn State researcher found that:

Trump over-performed the most in counties with the highest drug, alcohol and suicide mortality rates, and that much of this relationship is accounted for by economic distress and the proportion of working-class residents.

So where did the crisis come from? A piece in The Conversation (go here to read it) cites three major causes:
  1. Theodore Cicero and Matthew Ellis of Washington University in St. Louis write that the roots of the epidemic can be traced back to changes in pain management. When pain began to be treated as the “fifth vital sign,” prescriptions to treat it soared.
  2. Richard Gunderman of the University of Indiana argues we should not let pharmaceutical companies, particularly Purdue Pharma, off the hook. The company aggressively marketed OxyContin, Gunderman says, knowing that it could be easily abused. Prescriptions for the powerful – and highly addictive – drug for non-cancer pain soared from 670,000 in 1997 to 6.2 million by 2002.
  3. Jeannie DiClementi, of Indiana University-Purdue University Fort Wayne explains how the abuse of prescription pain drugs spread to abuse of heroin. It wasn’t a big leap, as the chemical structures are similar. 

     I see lots of market failures here.  What do you see?

Tuesday, March 28, 2017

Wells Fargo Reaches $110 Million Fake Account Settlement

Wells Fargo & Co. reached a $110 million settlement with customers nationwide over claims its employees set up fraudulent accounts to boost their own pay. In response to the Wells Fargo employees that may have opened more than 2 million deposit and credit-card accounts without customers’ permission, the bank eliminated a system of sales targets that regulators said encouraged workers to create fake accounts. The Office of the Comptroller of the Currency is even claiming that Wells Fargo has been engaging in an “extensive and pervasive pattern” of discriminatory and illegal lending practices for years. What are you opinions on this? Do you think it is possible that other banks are doing similar things?

Friday, March 24, 2017

Causes of the 2007 financial crisis

Go here to read a quick summary of some of the causes of the financial crisis.  Many of the systemic issues have not been eliminated.  Instead, global politics, and particularly American politics, have acted to shore up the existence of the these factor.  Unregulated shadow banking is even more dangerous today than in 2007-2008 (see here).  So why don't we regulate dangerous economic activities?