• Environmental Dilemmas

    The Problem With Demand For Strawberries

    Apr 23 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Environment, Government, Households, Labor, Lifestyle, Macroeconomic Measurement, Regulation, Thinking Economically • 21 Views

    Our Wednesday Environment Focus

    Every morning, with my yogurt, I enjoy a strawberry-grape smoothie and then later, writing this blog, I munch on almonds. And, like me, other baby boomers are buying more strawberries and raspberries, almonds and pistachios.

    The problem is that strawberries are a “thirsty” crop. In California’s Pajara Valley, strawberry fields have pretty much replaced apple orchards. Per acre, apples only use one half an acre-foot of water while strawberries require 2 acre-feet. At 325,851 gallons, an acre foot is a lot of water.

    You can see the how the supply has increased for “water-intensive crops:”

    Nuts and berries need more water

    It is especially tough to have demand rise for “thirsty” crops at the same time that many California farmers are coping with drought conditions. A California farmer can irrigate through contracts with federal and state water projects, wells, and yes, rain. Those contracts, though, are providing a lower water allotment because of the inadequate supply. As an alternative some are digging deeper wells. But wells can cost $500,000 to $1 million and then need electricity that can be pricey. The last possibility, rain, has been sparse although at the end of last month, growers enjoyed some relief.

    Combine rising demand for water guzzling berries and nuts with less water on the supply side and you get higher prices:

    Rising Prices for California Fruits and Nuts

    Widely quoted in the media (NY TImes, WSJ), one researcher from Arizona State predicts the drought will cause the following price increases. Interestingly, for avocados, SF Gate, a California newspaper, explicitly disagreed with the study. Citing ”the alternate bearing tendency of avocado trees,” they reminded us that price fluctuates because one year they produce more and the next, less.

    • Avocados likely to go up 17 to 35 cents to as much as $1.60 each.
    • Berries likely to rise 21 to 43 cents to as much as $3.46 per clamshell container.
    • Broccoli likely to go up 20 to 40 cents to a possible $2.18 per pound.
    • Grapes likely to rise 26 to 50 cents to a possible $2.93 per pound.
    • Lettuce likely to rise 31 to 62 cents to as much as $2.44 per head.
    • Packaged salad likely to go up 17 to 34 cents to a possible $3.03 per bag.
    • Peppers likely to go up 18 to 35 cents to a possible $2.48 per pound.
    • Tomatoes likely to rise 22 to 45 cents to a possible $2.84 per pound.

    Then, we have the environmental factor. Farmers believe that state regulations protecting salmon, smelt and natural habitats have made the water shortages worse. According to one melon grower, “The fish are more important than our farms.”

    Our bottom line? When consumers eat healthier food, growers have a drought, and habitats are protected, the results create environmental dilemmas.

    Sources and Resources: Detailed and interesting, the NY Times article on the California drought and “thirsty” crops was excellent. As a complement, this NPR discussion of the California drought, the Arizona State research on food prices (source of above list) and the SF Gate’s avocado column provided a more complete picture.

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  • iOS 7.1.1

    Apr 23 • The Pulse • 20 Views

    Apple just released a new software update,  iOS 7.1.1. Hot or not?

    1

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  • Earth Day

    Apr 22 • The Pulse • 21 Views

    Earth Day, which occurs annually and is dedicated to protecting the environment, is today. Hot or not?

    2

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  • brown bag lunch

    How to Defend or Oppose Thomas Piketty

    Apr 22 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Financial Markets, Households, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 24 Views

    Summarizing Thomas Piketty’s voluminous research in his new book, Capital in the Twenty-First Century,” the NY Times said that looking back, we have overstated the beneficence of capitalism and looking forward, gross income inequality is our destiny unless policies radically change. Reading several other Piketty responses, I longed for further consideration of the tradeoffs his approach and conclusions involve.

    First, Piketty’s statistical tradeoff:

    Trying to convey the irrefutable character of Dr. Piketty’s research, The NY Times said, “His findings, aided by the power of modern computers, are based on centuries of statistics on wealth accumulation and economic growth in advanced industrial countries.”
    However, even with a mountain of statistics, still we have to decide on which numbers to focus. Then, the numbers we select force us to eliminate others that would lead to different conclusions.

    Two years ago, commenting on Dr. Piketty’s work with Emmanuel Saez on inequality, we said that, “Researchers disagree about how much middle class income grew from 1979-2007. Citing a 3 percent total, economists Thomas Piketty and Emmanuel Saez say there was virtually no growth. By contrast, a group of Cornell scholars says middle class income grew 36.7 percent.
    A 33.7 percent difference! How? Because the answers you get depend on what you ask.
    Piketty, Saez and the Cornell group had to decide whether they would ask questions about a tax unit, a household, or a family. The former two economists chose the tax unit while the latter selected the household. Then, the Cornell group considered whether to ask questions solely about returns from land, labor and capital or to include government transfers. And after that, questions about household size become relevant because people sharing a household–even if unrelated–benefit from each other’s income through shared spending.”
    For Piketty and Saez and the Cornell group, using their statistics, their conclusions were most likely accurate. Who is right? It all depends on your statistical tradeoffs.

    Next, capitalism’s incentives and tradeoffs…

    I just read Nobel Laureate Thomas Sargent’s 2007 Commencement Address at UC Berkeley and thought these excerpts were relevant. Only 335 words, his talk was mostly composed of “a list of valuable lessons that our beautiful subject teaches.” 

    1. “Many things that are desirable are not feasible.”

    2. “Individuals and communities face trade-offs.”

    3. “Other people have more information about their abilities, their efforts, and their preferences than you do.”

    4. “Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.”

    5. “There are tradeoffs between equality and efficiency.”

    6. “In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well-meaning outsiders to change things for better or worse.”

    And finally, our bottom line:

    There is no free lunch.

    Sources and Resources: An excellent pro-Piketty discussion of the man and his work, this NY Times article was the best I found; not quite as lengthy, this column conveyed an opposing opinion. And here, Business Insider quotes Thomas Sargent’s entire commencement address. Finally, here is our econlife post on Piketty and Saez.

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  • smiling woman board room men

    The Best Reason For Women to be on Corporate Boards

    Apr 21 • Behavioral Economics, Businesses, Developing Economies, Economic Debates, Economic Growth, Economic History, Gender gap, Government, International Trade and Finance, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 34 Views

    Our Monday Gender Issue:

    Last year, German Chancellor Angela Merkel, who had long opposed female quotas on corporate boards, capitulated. Ms. Merkel’s labor minister, a physician and mother of 6, held firm to demands that her boss accept quotas. Merkel finally agreed to a 30% minimum but not until 2020.

    Because of legislation in many European nations, more women are on corporate boards:

    Women on Corporate Boards in Europe

    From: GMI

    Here is how Europe compares to the rest of the world:

    Women on Corporate Boards

    From: GMI

    While the numbers look good, reality might not be quite as rosy. In 2003, for example, Norway mandated that publicly traded companies have 40% female representation on their boards. Lack of compliance would result in delisting or “forced dissolution” from the Oslo Stock Exchange. On corporate boards, the law worked. Beyond boards, though, its impact has been limited. As one woman, called a “golden skirt” because she sits on several boards, commented, “It hasn’t had the ripple effect.” Norway has not seen more women running large corporations.

    Not being able to use the “ripple effect” as the justification for female board members, we could point to studies that say more women boost the bottom line. Or, the reason to have boards that are 40% women is that women understand the women who shop. Or, diversity is good for a firm. But can we quantitatively prove any of these conclusions?

    On the other hand, neither can we quantitatively prove that having men on corporate boards is better for the bottom line.

    Consequently, because the male board presence tends to be self-perpetuating, don’t we need legislation to crack that glass ceiling? As a recent New Yorker article concluded, “This is about equality in our society and fairness for all women.”

    Your opinion?

    Sources and Resources: An article from the NY Times provided a solid factual perspective on Norway, the GMI report was perfect for statistics, and I especially liked the bias of the New Yorker piece. In addition, in its Monday gender issues focus, econlife has looked at women in the boardroom here and here.

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