Thursday, June 22, 2017

Can Family Motivate Workers Who Have Boring Jobs?

See How to Make It Through a Boring Day Job: New research suggests that, rather than being distracted, employees most committed to family are more motivated and productive by Kelsey Gee of the WSJ. Excerpts:
"Employees who feel their work helps support their families are more productive and energized about their jobs, even when they stand to gain little for themselves."

"workers who reported the most energy and processed the largest number coupons, despite disliking the work itself, were those who felt strong commitment to family, which could include spouses, children, parents, cousins or other kin. Those women processed about 10% more coupons a week than employees who reported less family-driven motivation."

"“from an identity perspective, when employees perform well, they reinforce their self-concepts as responsible breadwinners and good role models.”"

"much of a person’s most intense commitment to their job can come from their desire to support their loved ones"
See  also What really motivates us which argues that intrinsic motivation matters more than money. But I always wonder about that. Does that mean we don't need to pay doctors high salaries to get people to go to medical school?

Wednesday, June 21, 2017

Don’t blame Kansas woes on trickle-down

My article in today's edition of The San Antonio Express-News.

Re: “Kansas a lesson in trickle-down economics,” Eugene Robinson, Other Views, Thursday:

Eugene Robinson says that cutting taxes never works. But there is plenty of evidence to the contrary.

After tax cuts in Kansas, “Growth rates lagged behind those in neighboring states and the nation as a whole,” wrote Robinson.

But Kansas is just one state, and this was over only a brief period (the tax cuts were enacted in 2012). Let’s look at some other evidence Robinson did not include.

A 2009 paper co-authored by Harvard economics professor Andrei Shleifer found effective corporate tax rates “have a large adverse impact on aggregate investment, FDI (foreign direct investment), and entrepreneurial activity,” and “a 10 percentage point increase in the 1st year effective corporate tax rate reduces the aggregate investment to GDP ratio by about 2 percentage (points) and the official entry rate (of new businesses) by 1.4 percentage points.”

Chris Edwards of the Cato Institute recently reported that Canada has a 15 percent corporate tax rate, down from 38 percent in the 1980s. Yet revenue from corporate taxes are now a higher percentage of GDP. Something similar happened in the United Kingdom.

Michael Barone of the Wall Street Journal reported in January that between 2010 and 2016, “Fully 40 percent of the nation’s population growth occurred in the nine states with no income taxes” (these states only make up 21 percent of the total U.S. population). And this “was fueled largely by net domestic migration.”

In the Wall Street Journal last December, Edward Lazear, Stanford professor and former chair of the President’s Council of Economic Advisers, wrote that when it comes to per-capita gross domestic product, “There is no other G7 country that comes close to the U.S. Most are about 70 percent as rich on a per-capita basis.” One of the reasons is the U.S. remains a low-tax country compared with other G-7 countries. “The OECD (Organization for Economic Cooperation and Development) reports that the ratio of total taxes to GDP is just over 25 percent in the U.S.”

In an online article by economist James Gwartney, Nobel Prize-winning economist Edward Prescott found “differences in tax rates between France and the United States explained nearly all of the 30 percent shortfall of labor inputs in France compared with the United States.”

Gwartney also reports the tax cuts of the 1920s and 1960s sparked strong economic growth and the 1981 tax cut led to more revenue collected from those in the upper tax brackets.

Brian Riedl in the National Review recently reported the economy expanded 36 percent from 1982-89 after the Reagan tax cuts, far above the 16 percent over the seven years since the end of the recession under President Barack Obama.

Never used by tax-cut advocates or supply-side economists, the term “trickle down” was simply used to ridicule the tax cutters and may go back to Will Rogers’ criticism of Herbert Hoover during the Great Depression. The funny thing is that a large tax increase was passed in 1931, and during the 1932 election, Franklin Roosevelt attacked Hoover as a big spender.

Getting back to Kansas, the Wall Street Journal reported that although its economy did not perform as expected after the tax cuts, that is partly due to weakness in agriculture and energy, two important sectors of its economy. And its unemployment rate is 3.7 percent, below the national average. Hardly a nightmare, as Robinson calls it.

Tuesday, June 20, 2017

Tax lingo for dummies

Article by Chris Baecker. It was printed in The San Antonio Express-News about a month ago. He manages fixed assets for Pioneer Energy Services and is an adjunct lecturer at Northwest Vista College (San Antonio College, where I teach is part of the same school system). Very interesting article with alot of food for thought. Excerpts:
"The U.S. has a progressive income tax structure, with seven rates ranging from 10 percent to 39.6 percent. The more you earn in wages and salary, the greater the percentage you pay in taxes.

As a result, one-fifth of American households pay roughly two-thirds of federal income taxes. We’re already in “disproportionate” territory. Logic dictates, therefore, that those who pay more would experience a greater absolute “benefit” from an “across-the-board” cut in income taxes.

Moreover, the concept of “across-the-board” income tax cuts is itself erroneous when almost half of all Americans pay no net income tax. Either they have no taxable income, or it’s canceled out by all the deductions, exemptions, credits and other loopholes."

"“Tax cuts pay for themselves.”

Indulging the notion for argument’s sake, it’s hard to tell for sure whether tax cuts “pay for themselves.” The Congressional Budget Office doesn’t even try, preferring the use of static scoring to predict the effects; a tax cut of $1 necessarily means a loss of revenue for Uncle Sam of $1.

However, it’s safe to say that most of us do not take increased disposable income and simply stuff it under the mattress. By virtue of that fact alone, it contributes to increased economic activity.

Many of us go shopping. My uncle stuffed most all his career raises into savings, which banks typically turn around and lend to those who have an immediate use for it.

And then there are folks like a couple friends of mine.

In the last couple years, they have either expanded an existing business or opened other businesses. That requires buying new capital equipment, wiring a new building for electricity, water, etc., and hiring new staff, some of whom will pay income taxes."

"“Taxes are the price we pay to live in a civilized society.”

Supreme Court Justice Oliver Wendell Holmes Jr. coined that phrase in a 1927 court case about business insurance premiums. Before it was bandied about as a rationalization for the size of our government, “civilized society” had a simpler meaning: to protect the private property that fosters widespread prosperity; to provide police forces and a court system to settle disputes; and to carry out other government services.

Is it really “civilized” for someone to commandeer the earnings of her neighbor to pay for her pet project? The person coerced is really paying for the requisitioner’s haughtiness and lack of initiative."

Friday, June 16, 2017

OPEC Stumbles in Face of Oil Glut (example of how hard it is for cartels to achieve their objectives)

Production cuts aren’t drawing oil out of storage and are helping U.S. shale producers

By Summer Said, Georgi Kantchev and Neanda Salvaterra of the WSJ.

Cartels seek to raise price by having all of its members cut output. By acting as one company, a monopoly, they actually increase profits for all members. But there are incentives for members to cheat and try to sell more oil than their quota. This drives down the price. But producers who are not part of the cartel, like U.S. companies have more of an incentive to produce oil, which then drives the price back down.
"OPEC is running smack into a wall of crude-oil storage.

The global oil glut is proving immune to the limits set by the Organization of the Petroleum Exporting Countries and its big-producer allies like Russia, fueling the idea that output caps withholding almost 2% of world crude supply were a miscalculation.

Both Brent, the international benchmark, and West Texas Intermediate, the U.S. price setter, fell almost 4% to their lowest levels of 2017 on Wednesday after the release of fresh data about inventories. Overall, prices are down over 17% since the beginning of the year.

In the U.S., the Energy Information Administration said Wednesday that crude stockpiles fell last week by 1.7 million barrels, less than the 2.6 million drop forecast by a Wall Street Journal survey. At the same time, gasoline inventories rose by 2.1 million barrels, compared with the survey’s expectation of a 700,000 decline, underlining worries about the oversupply extending to crude oil’s products.

Oil stockpiles in the Organization for Economic Cooperation and Development—a club of 35 countries with industrialized economies—rose by 18.6 million barrels in April and were higher than they were when OPEC agreed to its cut late last year, said the International Energy Agency, a Paris-based group that advises governments on energy trends.

“There’s still so much crude in storage," said Doug King, chief investment officer at RCMA Asset Management and manager of that firm’s $200 million Merchant Commodity hedge fund. “OPEC needs much deeper cuts to draw inventory.”

Adding to oil traders’ angst: U.S. oil production has come roaring back to life. The IEA said U.S. crude supply will grow almost 5% on average this year, and nearly 8% in 2018, potentially vaulting American producers ahead of Saudi Arabia in daily output."
About OPEC's cuts
"Bjarne Schieldrop, chief commodities analyst at SEB Markets, the Nordic bank, said “It would stimulate production in the U.S. too much and this is basically what we are seeing."

"Eugen Weinberg, an oil analyst at Commerzbank, said OPEC needed to end its production cut. “The only option that OPEC has for the next five years is to let the market go”"

"OPEC representatives ... pointed to a problem of rising production from Libya and Nigeria, which were exempted from obligations."

"Daniel Yergin, vice chairman of IHS Markit and a long-time oil market watcher, said OPEC wouldn’t abandon its production-cut agreement, which took almost a year to put together through 2016.

“When OPEC and the other producers agreed to this deal, they hoped that, as the old adage says, time heals all—and time will heal the inventory problem,” Mr. Yergin said. “They should now take a deep breath and realize this will take a lot more time.”"

"OPEC ... blamed U.S. shale for slowing its rebalancing efforts."

"In 2018, non-OPEC production is set to increase by 1.5 million barrels a day"
Click here to see historical gas prices. They fluctuate quite a bit, showing that OPEC cannot always maintain its hold on the market. (that only goes up through 2015. Gas prices went down almost 13% in 2016 compared to 2015, adjusted for inflation and so far this year they are up about 8% over last year).

The book The Economics of Public Issues by Roger LeRoy Miller, Daniel K. Benjamin and Douglass C. North has a chapter on cartels that discuss OPEC and why it cannot always meet its objectives. They point out the conditions necessary for cartels to work:

Thursday, June 15, 2017

CPS Energy uses behavioral science to reduce energy usage during peak times

See CPS draws on psychology to motivate customers to cut energy use in new program by Samantha Ehlinger of The San Antonio Express-News. But one thing the article does not discuss is how much higher prices would affect consumption during peak times and compare that to how well this program works. Excerpt:
"CPS Energy is using behavioral science techniques, and some high-tech data analysis, in a new program that taps on deeply rooted psychological drives to reduce energy usage during peak times.
The pilot program will be rolled out to up to 100,000 customers this summer and uses data culled from the company’s new smart meters to influence consumer behavior. The strategy itself is relatively simple: showing customers their energy consumption compared with their neighbors and letting their competitive instincts do the rest.

“Plucking on their competitive spirit, you can get them to reduce their energy use, anywhere between 1 and 3 percent over the course of a year,” said Neel Gulhar, a senior director of product strategy at Oracle Utilities. CPS has contracted with the company to run the program.

Oracle Utilities draws on behavioral science techniques to motivate the change. The most-used technique, according to Gulhar, is called “normative comparison.”

“This is where you compare the energy use of a household to households that are like them,” he said, later adding, “Time and time again, we find that if you use these different behavioral science techniques, you can actually change behavior.”

Competition is a deeply rooted instinct in human nature, a biological trait that evolved along with the basic need for survival, social psychologist Sander van der Linden at Cambridge University wrote in Psychology Today.

The program taps on that drive to win by sending out reports through email that analyze a customer’s behavior and compare it with others in the program. It’s “a little bit of a gamification thing,” said CPS Chief Operating Officer Cris Eugster. The program wouldn’t have been possible without more granular data from the utility’s new smart meters, which transmit data remotely and eliminate the need for a meter reader to record it each month, said Rick Luna, senior manager of product development at CPS.
The goal is to persuade customers to reduce their use during high-demand days, and the utility projects that it can save about 11 megawatts of energy usage, Luna said. One megawatt can power roughly 200 Texas homes during peak usage, according to the Electric Reliability Council of Texas."

Wednesday, June 14, 2017

Want to be happy and successful? Try compassion

By Jen Christensen of CNN.

Economists assume that people are selfish. It seems reasonable to also assume that selfish people want to be happy and successful. So it could be in the interest of selfish people to be compassionate. This might be a variation on the invisible hand of Adam Smith, the idea that it leads self-interested people to act for the good of society.

"The compassionate tend to have deeper connections with others and more friends. They are more forgiving and have a stronger sense of life purpose. Many studies have shown these results. Compassion also has direct personal benefit. The compassionate tend to be happier, healthier, more self-confident, less self-critical, and more resilient."
The article also discusses compassion exercises that change your brain.

Below is a related post I did in January called "The Dalai Lama Says It Is Sometimes OK To Be Selfish."

"This is mostly a post from November, 2013. But there was another article about something similar involving the Dalai Lama this week. So I have a bit about that at the end of this post.

And of course, Adam Smith said when people act selfishly they are led, as if by an invisible hand, to make society better off.

So when might it be OK to be selfish according to his holiness? When caring for others.

Wait, how can that be selfish? Or is this some kind of Zen riddle like what is the sound of one hand clapping? No, it's biology and evolution. See Lending a hand does a body good by Jessica Belasco, from the San Antonio Express-News, 10-25-2013.

She talked to Dr. James R. Doty, a neurosurgeon at the Stanford University School of Medicine and founder of Stanford's Center for Compassion and Altruism Research and Education. Excerpts:

"Practicing compassion — recognizing someone else is suffering and wanting to help relieve that suffering — just might be as important for health as exercise or a healthful diet, some scientists believe.

When we respond to another person's needs, our body responds in turn:

We become relaxed and calm.
Our blood pressure goes down.
Our stress level goes down.

Practicing compassion is associated with lengthened telomeres, the DNA that protects the ends of your chromosomes and is a marker of longevity.

To understand why humans are hard-wired for compassion, Doty said, just look at human evolution: Caring for others was essential to the survival of the species. Humans developed powerful neuropathways associated with nurturing and bonding with their offspring as motivation to care for them in a hostile environment; otherwise their genes could not be passed on. The same was true beyond the nuclear family when humans formed hunter/gatherer tribes.

A few hundred millennia later, our need for compassion remains strong. We may not be facing predators as our ancestors did, but frequent low-level stressors — work deadlines, traffic noise, our cellphone buzzing with texts — keep our fight-or-flight response continually engaged. That releases stress hormones, which raises the risk of disease.

When we're responding to others' needs, though, we engage the “parasympathetic nervous system,” relaxing us, Doty said. Stress hormones decrease, and the immune system is boosted. In fact, that occurs even if we just think about performing a good act for someone.

That's why intervening when someone needs help — whether in the form of a hug, reassurance, financial help or something else — has a powerful impact not just on the person being helped but on the helper.

Studies also have shown that volunteering, which is a way to practice compassion, helps increase longevity — but with an important exception. Study subjects who said they were volunteering to impress somebody or for some other benefit, not because they authentically wanted to help others, didn't enjoy the same benefit."
Adam Smith wrote a book called The Theory of Moral Sentiments. One point he made there was that we are able to sympathize with other people by trying imagine what they are going through (and I wonder if we need to be good storytellers to be able to do that). Neuroeconomist Paul Zak has been studying how the hormone oxytocin plays a role in making us feel good when we have empathy for others (beware: Zak is a big hugger). See an earlier post Adam Smith vs. Bart Simpson for more details.

There is an interesting book called Paleopoetics: The Evolution of the Preliterate Imagination. It relates storytelling to evolution.

Click here to go the Amazon listing. It is by Christopher Collins, professor emeritus of English at New York University. Here is the description:
"Christopher Collins introduces an exciting new field of research traversing evolutionary biology, anthropology, archaeology, cognitive psychology, linguistics, neuroscience, and literary study. Paleopoetics maps the selective processes that originally shaped the human genus millions of years ago and prepared the human brain to play, imagine, empathize, and engage in fictive thought as mediated by language. A manifestation of the "cognitive turn" in the humanities, Paleopoetics calls for a broader, more integrated interpretation of the reading experience, one that restores our connection to the ancient methods of thought production still resonating within us.

Speaking with authority on the scientific aspects of cognitive poetics, Collins proposes reading literature using cognitive skills that predate language and writing. These include the brain's capacity to perceive the visible world, store its images, and retrieve them later to form simulated mental events. Long before humans could share stories through speech, they perceived, remembered, and imagined their own inner narratives. Drawing on a wide range of evidence, Collins builds an evolutionary bridge between humans' development of sensorimotor skills and their achievement of linguistic cognition, bringing current scientific perspective to such issues as the structure of narrative, the distinction between metaphor and metonymy, the relation of rhetoric to poetics, the relevance of performance theory to reading, the difference between orality and writing, and the nature of play and imagination."
Click here to read a longer description by Collins himself.

Here is the new article from this week The Dalai Lama Explains Why Being Kind to Others is the Secret to Happiness. Excerpt:
"Have you ever wondered why it matters that you care for other people?

It seems commonsense that this is a good way to live life. But there are dominant philosophies today that suggest we need to maximize our own individual self-interest.

This comes from economic theories of capitalism that suggest when people look after their own self-interest, then society is better off.

The Dalai Lama explains why this doesn’t make sense in the beautiful passage below. As he says, it’s an obvious fact that your own sense of wellbeing can be provided through your relationships with others. So it’s best to start cultivating practices of kindness and compassion."
Then the article has a long statement from the Dalai Lama on this philosophy. But some economists might say that you can't run a successful business if you don't care about others and try to learn their wants and desires. Here is what Adam Smith said in The Wealth of Nations
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages”"