Tuesday, July 2, 2019

USDA move to KC could benefit Franklin County

by Levi A. Russell
Originally published by the Ottawa Herald on June 26, 2019

Big changes are coming to the USDA and to the Kansas City metro area. Last week, Secretary of Agriculture Perdue announced that two major arms of the U.S. Department of Agriculture, the Economic Research Service (ERS) and the National Institute for Food and Agriculture (NIFA), would be moving to the Kansas City area this summer. What does this mean for the KC metro’s economy? What about Franklin County farmers?

To answer the first question, we have to look at what we know about the move. Roughly 600 employees will be relocating from Washington D.C. to the Kansas City area, though we don’t know which side of the state line they will call their new home. The General Services Administration has put out a call for proposals for buildings in the area and, of the 6 buildings that fit their specifications, the closest to Ottawa is the Sprint office building in Overland Park.

Certainly the broader Kansas City area will benefit from the additional jobs, larger tax base, and economic activity from support services provided to these new-to-Kansas-City federal workers. Additionally, the federal government estimates that there will be a $300 million in federal government budget savings over the next 15 years due to lower building rent and other advantages from the relocation.

NIFA allocates grant funding for the bulk of the grant programs the USDA provides each year. Due primarily to our world-class Land Grant University in Manhattan, Kansas receives tens of millions of dollars each year in research funds from NIFA for a range of research efforts including crop and animal agriculture, agricultural economics, natural resources, food science, health, and education. I don’t think NIFA’s location change will mean much for Franklin County agriculture; grant funds will flow into and out of NIFA just as they did when the employees were housed in D.C.

However, I think there’s a possibility that Franklin County agriculture will benefit from ERS’s move to Kansas City. ERS is an in-house research division within the USDA. It houses a gaggle of economists who are trained in analysis of markets, rural economies, farm management, food and nutrition assistance, food safety, international trade, and other issues related to agriculture.

What I’m about to say is not intended to be a jab at ERS employees. I’m sure all of them are fine people, and the ones I’ve met over my short career as an agricultural economist were sharp, knowledgeable people who really want to help U.S. agriculture succeed. However, I think it’s possible that living and working in D.C. has a stifling effect on one’s broader perspective of agriculture. There’s nothing wrong with boutique organic stores and high-overhead-cost hydroponics operations, but these niche businesses don’t represent the backbone of agriculture.

I’ve written in this column before about Franklin County agriculture. We have a lot of cattle, corn, and beans around here. I think it will be good for the economists at ERS to be a little bit closer to the agricultural producers who feed our nation and the world. It just might broaden their perspective and increase their focus. If it does, Franklin County producers will benefit from more effective government policy driven by the analysis of the fine folks at ERS. I hope all our new neighbors working at the USDA will feel welcome in northeast Kansas.

Thursday, June 20, 2019

A Theatrical Marvel

Marvel hit a home run with their newest release of Avengers: Endgame.  It made nearly one million dollars more than their previous highest-grossing movie, Avengers: Infinity War, in the opening weekend.  This is impressive considering speculation about Disney increasing their movie releases from one or two a year to a whopping three a year since 2017.  While it is too soon to suggest that the law of diminishing marginal returns is taking effect on solo character movies, where the first is valued highly but that value decreases with each additional movie, it is clear that the collaboration movies like Avengers: Endgame, are seeing huge successes from this risk. 

Now that Disney has bought out Fox, hopefully they will be able to work some of their magic on the X-Men series.  Dark Phoenix came to theaters on June 6th, with a disappointing opening weekend.  Fox released the first X-Men movie back in July of 2000.  Since then, they have released twelve movies.  Fox definitely had the jump on the superhero scene compared to the Avenger series which began in 2008 with The Incredible Hulk and Iron Man.  Yet Disney has now released twenty-two movies and has had more consistent success.  Many of our favorite heroes and actors are from X-Men, like Hugh Jackman playing Wolverine.  And the storylines all originated with Marvel.  It raises the question, why was Disney able to do consistently better than Fox? 

One idea is the use of story lines on solo character movies.  Disney released five solo character movies before the first collaboration movie, Avengers, came out in 2012.  They had built up the characters in their own movies before bringing them together, causing people to already know and like (or in some cases dislike) those characters beforehand.  Disney also dropped key pieces of information into each movie in preparation for a larger storyline.  This caused a lot of binge watching for movie fans before big releases like Avengers: Endgame.  Alamo Drafthouse and AMC were just a few of many theaters who put on a sixty-hour movie marathon featuring all 22 movies. These marathons started on Tuesday afternoon and finished with the release of Avengers: Endgame on Thursday night.  Their ability to fill seats despite taking place during the week shows the true marvel of this franchise. 

Fox, it seems, went in the opposite direction of Disney.  They released five collaboration movies before they released their first solo character movie in 2013.  The idea may have been that X-Men is a team-based series, but when you look at the top five movies in the franchise, you would notice that three of them are character solo movies including Logan, Deadpool and Deadpool 2.  There are many fans who do enjoy the characters, hopefully Disney will be able to make them each shine before giving it another go around. 

Fox has not been able to pull off an overarching storyline for the series.  For Avengers: Endgame, each of the previous movies (we will let Incredible Hulk off the hook a bit for this one) came to play an important role in the finale.  It seems like Fox chose to stick with a consistent Professor Xavier versus Magento story line, and the solo character movies did not come into play at all.  Disney has a long way to go with bringing X-Men back into the light, but it seems like they have learned a lot from their successes, and yes, some failures, during their run with the Avengers franchise. 

Wednesday, June 5, 2019

What's wrong with economic freedom in Guatemala?

I am excited to be traveling to Guatemala with my wife and son in August! My wife helps run a non-profit called Education and More there where the organization contracts with local indigenous women to produce products that use the hand-woven fabric that has been made for centuries there. Generational poverty is an issue there where subsistence living is the norm. The proceeds from sales in the United States and donations fund a fair wage to the women in addition to private schooling for their children through high school and even college for those who go. It is a fabulous organization and please visit https://www.educationandmore.org/ to learn more and donate if you want to support what they do.

The Gwartney Institute investigates reasons why some countries are poor and others are rich. It turns out that Economic Freedom is highly negatively correlated with poverty. Countries with a high degree of economic freedom have less poverty. The Fraser Institute publishes the Economic Freedom of the World (EFW) Index each year, its lead author is Dr. Jim Gwartney for which our Institute was named. I was shocked to learn that the most recent ranking of Guatemala was 23rd in the world for economic freedom, tied with Finland! Income per person adjusted for purchasing power parity in Finland was $43,700 in Finland during this time while it was only $8,000 in Guatemala (it was $57,900 in the USA). The average income for countries in the top 25% of the EFW index is $42,500 and the average for the bottom 25% was $6,500.
This did not make sense to me, so I began to investigate why Guatemala is so poor relative to its high EFW ranking. I found a plausible reason for the discrepancy by diving deeper into the way the EFW index value is calculated and then reconciling it with Guatemala’s area scores. There are five primary areas of the EFW index; 1) size of government, 2) legal system and property rights, 3) sound money, 4) freedom to trade internationally, and 5) regulation. Within each of these five areas, data is collected from many objective external sources and then each area receives a score out of 10. A simple average is used to compute the overall score (click here for details). The beauty of this formula is that a single number now objectively reflects the compilation of 42 variables for every country with data available. However, this is precisely what causes some countries to be ranked higher than what seems they should.

A country that is weak in ‘Area 2 -legal system and property rights’ may not be very free at all. Is anarchy true freedom? No, freedom is not the absence of government. Individual freedom can only be achieved with proper constraints on other people’s behavior to do no harm to others. Indeed, “do whatever you want as long as you don’t hurt someone else” is a philosophy that contributes to individual freedom. While the simple average of the areas gives us a transparent way to calculate the overall EFW, I would argue that Guatemala presents a case that shows how important Area 2 is for low income countries. It shows how the EFW index can be used to determine policy recommendations to raise people out of poverty.

The other area of the index that makes Guatemala rank higher than it should is ‘Area 1 -size of government’. The index suggests to me that the government sector is too small, specifically the sub-areas of Government Consumption and Transfers and Subsidies are too low relative to other countries in the top 25%. As a free-market economist, I find this a bit difficult to write.

However, I think it makes sense given that Guatemala has the best score for both of those sub-areas of all countries in the top 25% which means they spend the least amount of money relative to country income. Those sub-areas simply look at the fraction of government spending to Gross Domestic Product. It looks to me that Guatemalan government needs to do more work on ‘legal system and property rights’ and this likely means more government spending in that area. There is an optimal level of government spending to maintain a healthy rule of law. If spending is too low, vital functions of the government are underfunded. By looking at the outcomes in Guatemala, they are apparently not doing enough to get the wealth-creating engine of capitalism going strongly.

I did a little modification to the sub-areas to see where Guatemala would rank if it was doing the average level of government spending done by countries in the top 25%. By replacing just these two numbers, Guatemala’s EFW overall score falls to 7.28 which drops its ranking to 54 (the 2nd quartile) which is sandwiched between the Slovak Republic and Italy. Since the average income in the 2nd quartile is $20,200, I am not sure it has dropped enough. The average income in the 3rd quartile is $14,300! 

That’s enough of the numbers, I don’t want your head to spin. The measurement of economic freedom is a complex topic but the general results we find from research using the EFW index paints a clear picture that economic freedom is key to getting the social outcomes we all desire. Where economic freedom is strongest, there is less poverty, better access to drinking water, longer life expectancy, lower infant mortality, better gender equity –the list goes on and on and is compelling. I hope that my visit to Guatemala will further inform me of other policy recommendations that can lead to more human flourishing there.

Thursday, May 30, 2019

China Tariff Battle Impacts Ottawa Kansas

by Levi A. Russell
This originally appeared as a column at the Ottawa Herald

When we read about the many aspects of the current trade war with China, it’s difficult to see how big international policy decisions affect us here in Ottawa. This week I’d like to discuss recent events in the trade war with China and how they might affect us. To do that, let’s take a big picture look at the trade war. Though there are many weapons in a trade war, tariffs are the primary weapon of choice for the Trump administration in its war with China. A tariff is a tax on an import, but as we will see, it’s a complicated tax.

Earlier this month, the U.S. Trade Representative imposed a 25% tariff on $200 billion worth of Chinese goods imported to the U.S. The 25% tariff is paid explicitly by importers of Chinese goods, but other parties are implicitly affected by the tax. In economics, we say that the incidence of the tax falls on the aforementioned importers, Chinese exporters, and U.S. consumers. The importer passes on some or all of the tariff in the form of higher prices for U.S. consumers. This higher price pushes down the quantity that consumers want to buy, resulting in lower revenue for Chinese exporters.

The tariffs will be applied to over 5,000 different products; some are consumer goods (i.e. goods we buy and consume directly) and others are intermediate goods, which are used by U.S. manufacturers to make other products. Some examples of goods that will be taxed under this tariff are grain, candies, pasta, beverages, minerals, ores, slag, ash, mineral oils, inorganic chemicals used in manufacturing, fertilizers, soaps, plastics, rubber, wood, fabric, stone, ceramics, flax, cotton, wool, aluminum, furniture, clocks, ships and boats, electronics, and many other goods. We can expect that the prices of many of the consumer goods listed here will increase here in the U.S. and the prices of other goods made from the intermediate goods will also rise to some extent (though not likely a full 25%).

A few days after the U.S. Trade Representative announced the 25% tariff, China retaliated with a promise to increase tariffs on $60 billion worth of goods exported to China. These tariffs will directly impact importers in China, but will also affect industries in the U.S. that export to China, as well as Chinese consumers. The broad categories of goods that will fall under these higher tariffs are food products, building materials, furniture, bedding, footwear, clocks, light fixtures, musical instruments, parts for locomotives, boats and yachts, electronics, and chemicals.

Here in Ottawa, the U.S. tariffs will likely have a bigger impact than the Chinese tariffs. Like the rest of the country, we will likely see a rise in the prices of many consumer goods. Some of the manufacturing and construction businesses in Ottawa will likely see an increase in their costs, especially if they buy raw materials or intermediate products directly from China. They will either have to pay higher prices for these inputs or find other sources either in the U.S. or another country.

Even though I am an economist, I will not try to tell you all of this is bad. The expected reductions in employment and GDP in the U.S. are mild, though they will likely be felt to a greater degree in specific areas of the country. These economic costs might be worth it if they result in policy changes that are favorable to U.S. interests. For all its improvements in the past few decades since it slaughtered tens of millions of its own people, China is still a Communist country. They still send Christians and Muslims to “re-education camps,” micromanage their citizens’ lives with an authoritarian social credit system, and support North Korea, which actively tortures its own people. China has repeatedly stolen our intellectual property and is increasing its spying efforts in the U.S.

The use of the term “trade war” is apt. The tariff battles may impact the economy in the short run, but winning the war is the goal. It’s up to us and our elected officials to determine whether the economic costs are worth the strategic and security-related benefits.

Wednesday, May 22, 2019

Market Solutions: Infrastructure Problems

Jacob C. Maichel 
It is hard to deny that healthy transportation infrastructure and support systems are paramount to economic growth and success. Unfortunately American roads and highways systems are crumbling more and more by the day and no matter how much the government spends the trend does not seem to shift. A study by the American Society of Civil Engineers determined that 32% of urban roads are in extremely poor condition, with Kansas having the 5th worst roads in the United States1! What can we do to fix our continually deteriorating roads? 
The right answer is not continuing to pour billions of federal dollars into infrastructure projects, atleast without private partnerships. The Trump administration in their 2018 budget proposal meetings began to increase federal spending on infrastructure by $200 billion which continued to undermine the power of American decentralization3. Federal spending and regulation will continue to hamper private responses to these problems if there is not a significant shift in federal policy.  
One of the first barriers is effect that the heavy red tape of regulation is having on development as a whole. Not too long ago in 1970 mandated reviews by the National Environmental Protection Act took an average of 2.2 years while today we are looking at around 6.6 years on the low end2! In the same timeframe we have seen environmental laws raise from only 26 to 70 in total when it comes to infrastructure development3. I am all for the environment but I am also for progress. Instead of the government pouring money into infrastructure perhaps they could spend it elsewhere to bolster environmental protections and cut back regulations allowing states or private industry take over. This way projects could be determined by supply and demand and the most pressing concerns can be addressed first by the people that use the systems, rather than bureaucracy! 
A major factor that prevents someone else from taking the reins from the federal government is the distortion caused by subsidies which reduces other projects return on investment. American investment banks and large pension funds seek to invest in infrastructure projects but often turn to foreign development particularly in Canada, Asia, and Latin America2. Instead of a top down approach the power should be given to states and allow private public partnerships. This is currently difficult to do as any project that receives any federal funds must return all the grant money if it decides to go private. States have also learned to become willingly helpless as they just hold out until roads become so bad the federal government has to pay for the repairs themselves. 
The fact of the matter is that private or local governments are able to do projects exceedingly more efficient. Federal projects have a long track record of having pork barrel spending tied to projects, usually a product of political favors completely removed from the people the project is meant to serve3. Not only have private projects both in and outside of the US been completed cheaper and faster they also remove all the risk from the taxpayer and shift it to the investors backing the project. These projects also create new revenue for the federal government instead of sucking out an ever growing amount of money.  
Something that should very seriously be considered is allowing all 50 states to collect toll revenue from interstate systems and use it to maintain the roads. This has worked incredibly well for India’s toll road which is one of the busiest systems in the world2. Allowing states to tap into this capital to modernize and maintain roads would be a very welcomed shift by anyone who uses these roads on their daily commutes. If the states also had the ability to team up with local innovators they could completely transform the way infrastructure is managed. Economies of scale can help private investors to offset large investments while trying to earn a return, incentivizing efficient allocation of resources.  
The fact remains that the more power is given to the private sector and smaller localized governments the better the results are. If the federal government was able to produce cheaper high quality infrastructure it would make sense for them to control all the means of production… which has failed in every socialist country in the history of humankind. State and local governments should be encouraged to collaborate with the same people they served rather than penalized for taking part in building up their communities. Page Break 

  1. Chris Edwards, “Privatization,” https://www.downsizinggovernment.org, Cato Institute, July 12, 2016.

Wednesday, May 8, 2019

Market Solutions: Transport Safety

By Jacob C. Maichel

Anyone who has flown within the last two decades understands how frustrating the process can be. Arriving hours earlier than takeoff to combat the setbacks that could prevent you from making your flight is frustrating. It seems the security model provided by the government has no alternative, but what if private industry had more freedom to do screenings? Surely companies with an incentive to outperform their rivals would be a more efficient solution than the Transportation Security Administration (TSA).

Previous to one of the most devastating acts of terrorism, 9/11, the majority of airport security was handled by private companies. The issue with the previous model was that the Federal Aviation Administration (FAA) oversaw the private companies. Before 9/11 the majority of the rules set in place by the FAA were to protect against plane malfunctions or natural disasters, as they had little desire to be a law enforcement agency1. After the attacks congress unanimously approved a fully federal screening system which created the TSA in 2001. By 2002 the TSA was based in the Department of Homeland Security and boasted the 4th largest budget in the building. A fully federal system was actually opposed by then president George W. Bush and the House of Representatives, who both pushed for private security with strict federal oversight.

There is a small program called the Screening Partnership Program (SPP) that meets much resistance from the TSA. The SPP program allows for airports to opt in for private screeners rather than the traditional TSA approach and currently 22 airports take advantage of this. One of the largest adopters of this is the San Francisco airport. A study by the House Transportation and Infrastructure Committee revealed in 2011 that screening inside of San Francisco International was 65% more efficient than federal screening at Los Angeles. Some of the factors that are attributed to this dominance is less employee turnover which leads to better workers, and more flexible staffing measures such as scheduling.

San Francisco really exhibited the benefits of being private during the recent government shutdown. During the shutdown TSA employees calling in sick increased 272%, while none of the 22 privatized airports had any delays. Being private also allows for more focus to be on the security of the consumer. In 2015 there was a test by the inspector general where 67/70 weapons made it past TSA screening points. If this happened to a private service provider the airline could simply switch to new security. For private screeners being effective is the only way to stay in the airports, as where TSA is guaranteed.

One of the most glaring flaws in this structure to me is that the TSA is self regulating. TSA has the task to give themselves their own rules which creates a conflict of interest. The TSA gets to choose what is and is not allowed on airplanes, what technology and screening procedures are used, all while being the same organization who implement the searches! With private screeners we could hold each company accountable, decrease operating costs, and most importantly increase security! While federal oversight is unquestionably important in aviation the security itself could be handled much better by the private sector. 

Monday, April 29, 2019

Market Solutions - Disaster Response

By Jacob C. Maichel

Economists such as Adam Smith, Friedrich Hayek, and Milton Friedman have proclaimed the pitfalls of central planning, but their message has not been heard with regard to disaster management. One of the most glaring shortcomings can be seen in The Federal Management Agency (FEMA). FEMA is the government organization tasked with coordinating and leading disaster relief efforts. While this sounds good, the relief programs operated by the government are often disasters themselves. We have seen time and time again where the private sector responds more effectively than the government. 

One of the first things to point out is the significant waste both monetarily and in relief supplies. After Katrina, we saw case after case of fraud that resulted in over $2 billion in taxpayer money being wasted in false claims. Examples such as a Texas hotel owner collecting $232,000 in bills for phantom victims or 1,100 prisoners receiving more than $10 million in rental and disaster relief highlight taxpayer money being taken from those who needed it. In 2018 we witnessed extreme mismanagement of aid that was intended for the victims of hurricane Maria in Puerto Rico. It was revealed there were government parking lots with food rotting in the boxes, which themselves were covered with rat feces. FEMA 91,000 tons of ice intended for disaster victims to the wrong state! The situation became so hopeless that Puerto Rican officials asked for aid to be exclusively in the form of money and personnel.

Most importantly the free market provides care for victims significantly better than the government does. Louisiana understands this better than most. In 2005 over 1,500 residents tragically perished in hurricane Katrina, many waiting on government alleviation from the flood waters or needed supplies. In 2016 when floods threatened Louisiana it’s people responded much different. Local efforts saved lives far before any government assistance ever arrived. Facebook groups sprang up to coordinate supply deliveries and rescue efforts. The “Cajun Navy” was created by people using private boats to rescue those in their communities. Phone applications with walkie talkie and GPS functions were utilized to help those who were in need.

Not only has FEMA been considerably less successful than private efforts, the organization significantly hampers non government relief assistance. During disasters it is commonplace to see miles of retail truck convoys carrying precious life-saving supplies stopped by FEMA as to not interfere with their government strategies. During Katrina buses belonging to private businesses who were relocating displaced victims were requisitioned and instead used to deliver people to the New Orleans Convention Centre. Many more deaths were caused by this as the convention center lacked many basic needs yet people were continually placed there by FEMA efforts. When left unhindered local businesses actions have been significantly more successful in getting much needed supplies into communities. When hurricane Sandy struck it hit 295 Walmart stores, 250 were open the next day. Local churches and charities are always the first ones of the ground to help the victims of catastrophe and support their communities.

Unfortunately FEMA even negatively impacts local efforts by disincentivizing charitable giving and creating free trade zones. Public aid creates the illusion that there is a diminished need to give to charities who act during disasters. The organizations that provide the most benefit are the same ones that FEMA hurts. Impact on local business should also be considered as well. FEMA creates free trade zones where normal market conditions vanish. Licenses and taxes which protect sellers and buyers are suspended and businesses have less motivation to provide needed goods and services. Business' motivation for helping may involve profit but being able to survive is priceless.

When FEMA leaves an area after a disaster, business’ drive for profit and free markets are largely responsible for rebuilding. Companies will sell raw materials to others begin to rebuild. Private businesses will repair homes and infrastructure while taking payment for this all while hiring displaced workers for these projects. It was in fact for profit app developers and Facebook that created the tools the Cajun Navy used in saving their own communities. Government responsibility in disaster should be to reopen infrastructure that supports trade and to continue securing property rights rather than be the hero that saves us. Historically we have been let down time and time again by FEMA’s efforts whereas the free market left to its own devices has helped communities come together and rise out of devastating situations.

Monday, April 22, 2019

Disney's Next Infinity Stone: Fox

by Jacyn Dawes

“With all six stones, I can simply snap my fingers, they would all cease to exist.”  Disney made a strong push forward into their growing media empire with its purchase of Fox in March 2019, one of the biggest media mergers to date.  This merger gives Disney access to movies and television shows including X-Men, Avatar, and the Simpsons.  Some might say that this deal completes Disney’s own set of six stones, like Thanos from their box office hit Avengers: Infinity Wars.  With their top six companies acquired including ABC Television Group, ESPN, Pixar, Lucasfilm, Marvel Entertainment, and now Fox.  Unfortunately, like the soul stone, acquiring Fox does come with a cost.  Blending two completely different corporate cultures may prove more difficult then on paper.  Fox has multiple top executives who get paid nearly 20% more then their Disney counterparts.  Deciding who will stay and in what position could lead to significant layoffs.  Disney will also need to consider this difference in their brands, as Disney focuses on wholesome, family-friendly shows and Fox is willing to dip into the R-rated Deadpool market.

But this cost will only buy Disney competitors time and will eventually cause major impacts on popular streaming networks like Netflix and Hulu, along with other forms of media.  With the purchase of Fox, Disney not only has more entertainment to offer but will also have a controlling stake in Hulu.  This may mean an end for Hulu as Disney promotes the launch date of their own streaming site in November 2019.  Netflix will also take a hit if Disney decides to pull their content.  Controlling the market has many levels to it and Disney does not need to buy everyone out. 

With their price being nearly half of Netflix, it will certainly help Disney play catch-up in the online streaming arena.  Predatory pricing is not uncommon with companies as large as Disney.  Walmart, Uber, and Amazon have all been suspected and even charged with predatory pricing.  In a country like the United States, the law tries to support the consumer and the undercutting of prices can appear positive on the surface.  But this may come back to haunt consumers as Disney knocks out competitors and will have more freedom to raise prices down the road.

To keep the threat at bay, antitrust regulators from around the word have required Disney to release ownership of Fox Sports, a stake in A+E Networks, and added stipulations to National Geographic and Nat Geo Wild channels.  It’s not only Hollywood and the United States who were worried about the growing Titan, other countries were responsible for these requirements as well.  We have fallen in love with Disney characters, but it is important to look at the effects this will likely have on the entertainment industry.  Consumers will have to wait and see what Disney’s Endgame might be.

Andreeva, N. (2018, Oct 8).  Disney-Fox TV Exec Structure: Big Titles Galore, Studio Merger Put Off Amid Challenges Blending Corporate Cultures.  Retrieved from https://deadline.com/2018/10/disney-fox-deal-tv-executives-analysis-culture-clash-1202473873/

Barnes, B. (2019, Mar 20).  Disney Moves from Behemoth to Colossus with Closing of Fox Deal.  Retrieved from https://www.nytimes.com/2019/03/20/business/media/walt-disney-21st-century-fox-deal.html

Bradley, B. (2019, Apr 13).  Cord Cutting News: Disney Releases Pricing, Release Date, Lineup.  Retrieved from https://www.komando.com/happening-now/561404/cord-cutting-news-disney-releases-pricing-release-date-lineup

Market Business News (n.d.).  What is Predatory Pricing? Definition and Examples.  Retrieved from https://marketbusinessnews.com/financial-glossary/predatory-pricing-definition-meaning/

VanDerWerff, T. (2019, Mar 20).  Here’s What Disney Owns After the Massive Disney/Fox Merger.  Retrieved from https://www.vox.com/culture/2019/3/20/18273477/disney-fox-merger-deal-details-marvel-x-men

Thursday, April 11, 2019

Are We Morally Permitted to Eat Animals?

The Gwartney Institute just held its most recent “Ottawa Minds and Unwined” and it was the first one I have been able to attend. The speaker for this event was a philosophy professor, Dr. Justin Clarke, and the title of his presentation was “Are we morally permitted to eat animals?” I was excited to hear Dr. Clarke’s take on an interesting topic and it offered a unique and refreshing perspective. I wrote this post based on the speech because I thought it was fantastic!

The speech began by laying a foundation describing assertions from Australian philosopher Peter Singer’s famous 1975 book Animal Liberation: A New Ethics for our Treatment of Animals. This work has become the basis of the modern animal liberation movement’s understanding of humanity's relationship with animals. Once Singer established animals are capable of suffering he takes a very utilitarian approach to minimize said suffering in animals and humans alike. Dr. Clarke outlined 4 premises and 2 conclusions:

Premise 1: All suffering is equal (morally)

Premise 2: Animal experimentation causes unnecessary suffering.

Conclusion 1:Animal experimentation should stop unless we would do the same experiments on humans.

Premise 3: Animal consumption causes unnecessary suffering.

Premise 4: We are morally required to feed ourselves in a way to minimize suffering.

Conclusion 2: We should be vegetarian or vegan.

Once these were explained, Dr. Clarke then began to give evidence to support premise 2 and 3 in particular. For premise 2, he pointed to a number of past and recent experiments that were extremely damaging to animals. Support for premise 3 comes from the atrocities that occur in so-called factory farming, suggesting we should eat in a way that minimizes animal suffering. The needless suffering inherent in meat diets suggests a moral hierarchy of diets:

Least suffering: Vegetarian/Vegan


Most suffering is carnivore

Dr. Clarke then dives farther in giving a in depth ranking of suffering caused by diet which goes;

Most preferable: Vegan


   Pescertarian (fish only)

   Principled Omnivore (looks into how the animals are raised, i.e. eats free range)

   Plebian Omnivore (does not care where meat comes from)

Least preferable: Carnivore 

Veganism surely causes less suffering to animals than a monster carnivorous diet, right? According to Dr. Clarke, that is incorrect! His list would actually go

Most preferable: Principled Omnivore




    Plebian Omnivore

Least Preferable: Carnivore

How can this be true? Dr. Clarke’s point was that we treat vegan and vegetarian diets as if they do not cause suffering, which is false. Evidence of this is shown by analyzing the per 100kg usable protein in pastured cattle production vs grain production. For cattle there are 2.2 deaths per 100kg, compared to 55 deaths for the same amount of protein in grain! Dr. Clarke pointed out the gruesome end these animals suffer in the grain production process.

The victims of grain production are mice which are often discounted by many people but these animals sing to their young and have at least the same capacity for suffering as chickens.  Therefore, if it is true that all suffering is equal, principled omnivores cause the least amount of suffering (ahead of vegans!). Does that mean everyone should become a principled omnivore according to Dr. Clarke? No! This is because premise four is not true according to him.

Dr. Clarke himself makes four well drawn conclusions in his fantastic presentation. First is that suffering surely counts, but not equally. Next there are better and worse ways to eat. Third is that we are not morally all required to eat the best way but should be conscious of eating in better ways. Lastly, if all this is correct Dr. Clarke says we can “put down our pitchforks," although for some it may be more difficult than others.

Dr. Clarke’s speech is part of a recurring Gwartney Institute event held at UnWined at Studio 111 which brings in a new speaker the first Thursday every month. The presentations are about 20 minutes in length with questions and optional conversation after. Please join us next time when Professor Jaime Fuentes will be speaking about Bitcoin!

Thursday, April 4, 2019

The Importance of Trade to Local Economies

This post originally appeared in the Ottawa Herald.

In my last column, I made what I think was the best case for “buy local” and economics professor can make. Supporting your local community is a very important part of being a good citizen and a smart risk manager, but are there exceptions? Are there cases in which it might be sensible to support trade from other places? I think there are, and I’ll explain two cases in this column.

The first case is relatively straightforward: you can’t grow coconuts in Kansas. Unless you have a sophisticated network of firms operating in concert under multiple nations’ laws to bring about international trade (or a very strong barn swallow that recently flew south for the winter), you can’t buy coconuts here in Ottawa. The network that brings our soybeans to Japan and their cars back here is responsible for giving us a wide range of products we would not enjoy otherwise.

The second case takes a bit more thought. The production of many goods we enjoy couldn’t happen without investment in large-scale operations that may supply goods for consumers or other businesses over a large area. A simple example will help us get started.

Suppose you want to have pizza for supper. You might have all the ingredients you need at home and likely have an oven that will bake the crust nice and crispy. While this might work well for you, it might be nice if you could get someone else to make the pizza for you. Maybe you’re short on time or didn’t want to pay a lot of money for high-quality cheese at the grocery store. Maybe you’re just not a great pizza chef.

Another option would be to order the pizza from someone else. A pizza restaurant very likely has a large, expensive, specialized oven and a very large refrigerator filled with ingredients. These pieces of equipment allow the restaurant’s employees to efficiently make hundreds of pizzas per day; certainly more than the employees themselves could eat.

This large-scale production is great for all of us who enjoy pizza because it means the owners and employees can specialize in making pizzas and can buy ingredients at a lower cost per pound than the rest of us are able on our weekly trip to the store. The restaurant’s specialization and lower cost means the rest of us can enjoy tasty food on demand.

The comparison between household production and specialized production enabled by investment in fixed assets like commercial pizza ovens helps us understand the second exception to our buy local rule: sometimes the cost of production is too high for local production. Sometimes it’s so high it outweighs the benefits of local commerce I laid out in my last column.

Consider an example from our own backyard, Kalmar Ottawa. Kalmar Ottawa has been in business for over 60 years and has produced over 65,000 “terminal trucks” which are low-speed trucks used to move trailers around at shipping terminals. It is the leading producer of these trucks, which are all manufactured here in Ottawa and sold through dealers around the country.

Given the specialized knowledge and expensive machinery needed to manufacture these trucks, it wouldn’t be sensible to expect a shipping terminal to produce them on their own. It also wouldn’t make sense for there to be dozens of smaller manufacturing facilities all over the country making these trucks. No, we can all benefit when these trucks are made in one larger facility. It minimizes the cost of production and allows all the knowledge needed to be located in one place to maximize efficiency in production.

In addition to the benefits associated with the jobs and other commerce generated by Kalmar Ottawa, we also benefit indirectly from Kalmar Ottawa’s centralized production of their trucks. The coconuts we ship from the tropics get here a little more efficiently and at a little bit lower cost thanks to Kalmar Ottawa’s efficient business model. Whether those coconuts end up in a pina colada or a cream pie, I think we can all appreciate this exception to buying local.

Thursday, March 28, 2019

Economics of "Buy Local"

This post originally appeared in the Ottawa Herald.

On March 7th, the Gwartney Institute hosted a debate on the Ottawa University campus. I won’t name my opponent, but the two of us debated the following resolution: “Buy Local” is a Bad Idea. My opponent has no problem with shopping at local stores; our disagreement was about the economic soundness of preferring local stores even when they don’t deliver low prices or superior quality.

In the debate, I defended the following idea: It makes good economic sense to support local businesses if we consider the possible risks associated with not buying local. By “local businesses,” I don’t necessarily mean small sole proprietorships located exclusively within a town. From my view, supporting big box stores and franchises in your community is an integral part of a sensible version of “buy local.” After all, the managers, employees, and franchise owners are also part of your local community!

Here’s why: commerce builds community, and community brings security. We don’t have to look far to see communities that have declined economically to the point that they are struggling to maintain basic services. Hospitals are closing, schools are turning into nursing homes, and home values are dropping in areas that once supported thriving communities. Is there something we can do to prevent this decline?

Certainly there are instances in which the economic factors that contribute to the decline of a town or community within a larger city are inevitable. However, this is not always the case. The presence of entertainment and retail businesses in a locality is as important as organized events to fostering an atmosphere of community. It’s difficult to keep or attract new residents when these businesses leave.

So, shopping at local stores isn’t just something you do to avoid buying gas more frequently. It’s an important part of keeping your community together. Even if you might pay a somewhat higher price or face a slightly narrower selection, support of these businesses is very much in your own interest.

Consider this simple example. If you and a large percentage of the people in your community buy all your jewelry in a different city or online, the local jewelry store may not be able to stay in business. That may be fine, you think, if you were able to get a good deal on the jewelry you purchased. What happens, though, if a piece of your jewelry breaks? Now you either have to go out of your way to get it fixed or mail it off. Simply put, local businesses provide services that cannot be replicated.

Even more importantly, local businesses ensure the continued provision of large-scale services in your community such as hospitals and schools. This support of large-scale services goes beyond paying taxes. When commerce dwindles in a community, people leave. When people leave, medical and educational services must be consolidated because they aren’t financially viable on a small scale. These consequences are as evident in many rural areas as they are in big cities like Detroit.

A crucial part of building and maintaining community is local commerce. If you are financially able, don’t let short-term convenience get in the way of your willingness to contribute to your community’s long-term stability.

Friday, February 22, 2019

The Polar Vortex and a Broken Window

by Levi A. Russell, PhD

As I shoveled my driveway last week, I thought about all the other things I could have been doing. Winter storms can be rough and, as Greg Mast’s February 9th column points out, they require a lot of work that many of us don’t see. Lots of road salt, heavy equipment, and many hours of work late at night all come together to keep the roads as safe as possible. Still, there are worse weather events. Tornadoes, hurricanes, earthquakes, and landslides are often much worse than the cold weather we’ve experienced the last few weeks.

Our typical response to extreme weather events is a mixture of frustration at the cost of extra work and repairs and sympathy for those who are affected the most by such events. Thanks to members of my profession, we can add another: cautious joy.

If you’ve ever read Paul Krugman’s New York Times column after a natural disaster, you probably know what I’m referring to. Krugman and other Keynesian economists hold the view that, under the right circumstances, natural disasters can give a boost to the economy. As ridiculous as this should sound to us, let’s use the recent ice and snow as an example

This bitterly cold winter has certainly come with its share of expenses and costly repairs. Damaged vehicles from icy road hazards, frozen pipes, rust on cars from road salt, higher gas and electric bills, and many other possible inconveniences come with extreme weather. Though we all appreciate the providers of the crucial services that exist to fix the problems we have during cold winters, we are frustrated at the expenses associated with them. Most of us would have had other plans for that money before the storm hit.

Leave it to us economists to dream up a reason to be happy in such circumstances. According to Keynesian economics, if we were in a recession, the fact that we all have to spend more money maintaining roads and fixing our cars is a positive feature of the bitterly cold winter. It forces us to spend money, which they say gets us out of the hypothetical recession.

But this logic only considers what we actually see. In his essay “That Which is Seen, and That Which is Not Seen,” the 19th century economist Frederic Bastiat told a similar story about a boy throwing a rock through the window of a local merchant’s shop. A crowd gathers and, at first, considers punishing the boy. After thinking more, though, they decide that the boy did them all a favor. Now that the window is broken, the merchant has to pay the glazier to fix the window. The boy actually created economic activity, they think. The problem, of course, is that the merchant could have spent his money on something else and had a perfectly good window as well!

In the same way, if this winter hadn’t been so harsh, we all might have had money to spend on other things, without having to fix our cars, pay high gas bills, or salt the roads so heavily. We would have had a well-functioning car plus whatever else we might have purchased. Now that the weather turned so bad, we have to forego buying something else in order to fix the car.

This doesn’t mean that auto body professionals and heavy equipment operators are somehow bad for us or that it’s a waste of money to pay them. Things can go wrong and we need them when that happens. We shouldn’t, though, pretend that paying them is some kind of magic bullet that creates economic prosperity out of nothing. I really could have been doing something better with my time than shoveling my driveway.

Tuesday, February 19, 2019

Ottawa's Economy on the Upswing

by Levi A. Russell

Last week, John Hawks wrote a very interesting piece (“Area business on upward trend”) on business growth here in Ottawa. Hawks does a great job going through the on-the-ground specifics of recent business growth. I thought I’d dig into some government data on Franklin county to expand on his article. First I’ll talk a little bit about the employment situation in the county, then move to poverty rates and food stamps. Finally, I’ll talk about Franklin county residents’ credit ratings and home prices in the county. If you’d like to see the graphs I refer to below, please check out http://bit.ly/ottawaeconomy

I’ve addressed Ottawa’s employment situation fairly recently, and things are still humming along quite well. The unemployment rate is still at historic lows and the labor force continues the growth it has had the last couple of years. Growth in the labor force has tracked pretty consistently with overall population growth in the county. This, combined with the low unemployment rate, indicates that most people who are looking for a job are able to find one. Certainly this is a good thing and is consistent with Hawks’ informative piece from last week.

Two reliable indicators of poverty are poverty line statistics and the number of people enrolled in the Supplemental Nutrition Assistance Program (formerly called food stamps). I could only find data on the percentage of the population below the poverty line since 2012, so I can’t say much about the 2009 Recession’s effect on this statistic. In 2017, roughly 12.4 percent of Franklin county residents earned income below the federal poverty line. This is relatively low compared with the percentage of the population below the poverty line in recent years. Roughly 13.5 percent of the population was below the poverty line in 2014 and 2016.

The food stamp data is much more informative. I found food stamp data going back to the 1990s, which allows me to talk about the aftermath of the recession, 2012, and where we are today relative to that. From 2003 to 2006, roughly 7.5 percent of Franklin county residents received food stamps. This number began to tick up after 2006 and by the official end of the Great Recession in 2009, roughly 12 percent of the population received food stamps. It continued to rise until 2012, peaking at nearly 15 percent. Since then, things have improved dramatically and, as of 2016 (the latest data I could find) roughly 9 percent of Franklin residents receive food stamp benefits. Given the improvement in the local economy since then, especially the continued decline of the unemployment rate since 2016, it is likely that this number is even lower now.

So far I’ve discussed factors that contribute to short-term financial security. Income and employment are important, but they fluctuate over time. Families can receive food stamp benefits for a time and then leave the program when their financial situation improves. Home values are more significant indicators of longer-term financial security. For Franklin county residents an appreciation in their home value does several things: decrease their risk of bankruptcy, improve access to credit for times of financial stress, improve their financial situation after retirement, and other benefits.

Before the recession, home values in Franklin county peaked around the year 2007. As the recession drew near, home values fell, ultimately bottoming out about 15% below the 2007 peak in 2014. Since then, home values have been rising and have surpassed the previous 2007 peak. While some economic commentators are worried about rising interest rates quashing home value growth, continued increases in business formation and a stable job market will likely keep Franklin county in a good place to continue the growth we’ve enjoyed the last few years!

Please join Gwartney Institute and Ottawa University faculty for an engaging discussion on important issues at “Ottawa Minds and Wine!” Our first event is Thursday, February 7th at 5:15 PM at UnWined. We will have a brief 20 minute talk and will be around for discussion afterward.

Tuesday, February 12, 2019

Economics of the Federal Government Shutdown

by Levi A. Russell

As of this writing, the current federal government shutdown is one of the longest on record. This shutdown is directly the result of the Senate’s unwillingness to take up a budget passed last month in the House of Representatives. Indirectly, it is the result of an impasse between President Trump and congressional Democrats on the issue of $5 billion for the wall on the southern border.

What does the shutdown cost us? Is there irreversible damage to the economy? Is it worth it to create a shutdown to get the funding President Trump wants for the border wall or, from the other perspective, to keep the wall from being built?

The most recent estimate I could find of economic losses from a government shutdown is from a 2013 Office of Management and Budget report. The report indicates that the 16-day shutdown in October of 2013 reduced fourth quarter 2013 GDP growth by $2 to $6 billion. In the private and government sectors combined, 120,000 fewer jobs were created during the first two weeks of that October as a result. These sound like very large numbers, but the reduced GDP growth only amounted to 0.2% to 0.6% lost growth. In December of 2018, 312,000 jobs were created in the U.S. economy, which easily makes up for any lost job growth the shutdown may have caused. This suggests that there is not much in the way of irreversible damage to the U.S. economy as a result of even a long government shutdown.

The term “government shutdown” is bandied about in the media regularly, but it’s difficult to justify this term in my opinion. Most of the largest agencies in the federal government are still humming along, including social security, medicaid, medicare, food aid, food inspection, law enforcement, investigations, and veterans’ benefits. Some government employees in these agencies are currently working without pay, but they will receive back pay when the shutdown ends.

Other functions have partially or fully closed operations for the duration of the shutdown and furloughed employees. Those employees may or may not receive back pay. Agencies that have closed are the IRS (no tax refunds will be processed during the shutdown, but you still have to pay taxes), national parks and museums, the US Department of Agriculture’s rural home loan approval system, and other “non-essential” services that aren’t currently funded.

Certainly the shutdown has a negative impact on a segment of the population. Tens of thousands of federal employees have to work without pay for a period of time and others are laid off and won’t receive pay. As a former state employee, I have a little different point of view on this. Federal government jobs are typically well-paid and very secure. The richest counties in terms of household income surround our nation’s capital. In effect, federal employees trade higher pay and lower risk of being laid off or fired in general for higher political risk. Most of our jobs are dependent on our ability to add value to the company, owners’ and managers’ ability to keep the company in business, and our customers’ preferences; federal employees’ jobs avoid a lot of that risk but have to deal with political risk.

Ultimately, this shutdown is political in nature. It isn’t about large segments of the budget, the maximum allowable amount of debt the federal government can incur (debt ceiling), or a big piece of legislation like Obamacare (the cause of the 2013 shutdown). The $5 billion price tag on the border wall is a drop in the bucket when compared with the proposed $4+ trillion budget. Put another way, the fight over the border wall funding is less than 0.12% of the proposed budget. I won’t pretend to know the benefits or drawbacks of the existence of a stronger border wall, but the shutdown itself will only have lasting impact on a relatively small group of federal employees. Most of us won’t even notice it.

Thursday, February 7, 2019

Bitcoin 101

by Jacob Maichel

Bitcoin can be as confusing as it is fascinating. I thought it may be beneficial to those interested in Bitcoin to write an introduction to the technology to alleviate some confusion you might have.

Although Bitcoin is neither the first nor last crypto-currency it is without a doubt the most well known, while still being shrouded in secrets. Bitcoin was launched a few weeks after the Lehman Brothers collapse in 2008 by Satoshi Nakamoto, but no one is even sure who that is. Banking on Bitcoin, a documentary available on Netflix, expose the possible identities of Nakamoto.
Bitcoin came about during the Great Recession and responds to a call for decentralized banking. Online commerce relies so heavily on a trusted third party acting as a financial intermediary and that is absolved with the use of crypto.

Put simply, Bitcoin is an online accounting system that records the value of assets (coins) in an open ledger. The benefit of using a non-localized ledger is that it cannot be hacked. All transactions are kept on the “Blockchain”, which some think is the most transformative technology Bitcoin brought about. The Blockchain is the ledger itself and every transaction is saved to everyone’s computer on the network instantaneously. To help envision this imagine a spreadsheet that is duplicated on everyone’s computer on the network and is updated regularly. This technology has a number of advantages over traditional ledgers that are held only in one place, inside the company. Satoshi Nakamoto in Bitcoin: A Peer-to-Peer Electronic Cash System (often referred to as The White Paper)  describes his ingenious incentive strategy to reward Bitcoin “miners” for continually maintaining the servers and issuing new coins.

New coins are released into the blockchain every 10 minutes to be “mined” with a fixed amount of coins to ever be released. As time goes on coins will be released less frequently until the last coin released around 2140. The fixed amount of coins guarantee that there is no artificial inflation because no more currency can be put into the blockchain.

Bitcoin miners are paramount in the process as they set up computers to solve the complicated math problems required to unlock a coin. These miners are not college kids in dorms they are typically large scale operations, and many companies are setting up just to mine coins. After a certain number of coins are out the incentives for miners changes due to scarcity of new coins. They then transition to being rewarded by collecting processing fees on the Blockchain- which continually updates the ledger. The White Paper breaks this process down very clearly as the creator intended.

So what gives Bitcoin any value? A major reason it is so valuable is the peace of mind that comes along with the technology. The safety and anonymity it gives users is held in very high regard. With Bitcoin’s decentralized approach it ensures that your money is safe from the traditional downfalls of institutionalized banking.

I think cryptocurrency is a logical step in the future, and what it can be adapted to is limitless. Whether or not Bitcoin stays relevant is yet to be seen, but the power of the Blockchain technology is something that should not be overlooked!

Tuesday, February 5, 2019

2018 Farm Bill and Franklin County

by Levi A. Russell

On December 11, Congress released the 807-page Agriculture Improvement Act of 2018 from its conference committee, which passed with veto-proof majorities in both houses. The Act is the latest of a long line of legislation going back to the Great Depression commonly called the Farm Bill. This Farm Bill will define the U.S. Department of Agriculture’s activities from now until 2023 when it will expire and a new law will replace it. It replaces a law passed in 2014 that made major changes to agricultural policy. How does the 2018 Farm Bill affect Franklin county?

To answer this, we first need to ask: What does agriculture in Franklin county look like? For those of you who drive around our gravel roads regularly, it won’t surprise you that roughly one third of the land area of Franklin county is planted to corn and soybeans. These are the two major crops in this county and in much of eastern Kansas. Last year, over $54 million of corn and soybeans were planted in the county. While corn and soybeans are the primary crops in the county, farmers here also plant wheat and sorghum. Animal agriculture is also important in Franklin county. There are 44,500 cattle in the county, which means there are 1.7 cows, bulls, heifers, and steers for every person!

The 2018 Farm Bill and others like it in the past provide funding for three general program areas: agriculture, conservation, and nutrition assistance. Agricultural funding is primarily used to provide subsidies for crop insurance and income assistance to farmers when prices or yields are low, commonly referred to as the commodity title. Crop insurance for the primary crops in Franklin County hasn’t changed much in over a decade, but the 2014 Farm Bill made significant changes to the commodity title. These changes included a major shift in the program away from direct payments to farmers which occurred regardless of production conditions or prices to a risk-based commodity assistance program. Farmers were given the choice between two programs, one that focused on prices and the other that focused on total revenue for the crop. When prices or revenue fell below a certain level, payments were triggered.

The 2018 Farm Bill continues these commodity assistance programs with some notable exceptions. With the 2014 Farm Bill, farmers had to choose between the price program and the revenue program once and for all when they signed up in 2014. The new Bill allows farmers to choose again in 2019 for 2019 and 2020 and then choose annually between the two from 2021 to 2023. This change gives farmers more choice in the program and will allow them to choose the program that they believe will best mitigate the risks they will face that year. Farmers will also be able to update their yields on which the program payments are calculated. Both of these changes will likely result in more flexible support for agriculture in Franklin County over the next 5 years.

Another program within the commodity title is the commodity loan program. This is a very old component of the Farm Bill designed to provide additional assistance when prices are very, very low. The 2018 Farm Bill includes the first update to this program in 16 years, increasing loan rates (the base level of price support) by 12.8% for corn and 24% for soybeans.

There are two major changes to environmentally-focused programs in the 2018 Farm Bill. First, crop insurance has been changed to accommodate the use of cover crops. Cover crops are beneficial to soil health and help reduce erosion after the primary crops are harvested. Legislators hope that changing crop insurance to accommodate the use of cover crops will increase farmers’ adoption of this environmentally-beneficial practice.

The Conservation Reserve Program (CRP) is another long-standing component of the Farm Bill. This program allows farmers to take land out of crop production and receive “rental” payments from the government. These rental payments designed to incentivize the maintenance of habitat for wildlife. CRP contracts typically last 10 years.  The 2014 Farm Bill allowed up to 24 million acres to be put into CRP, but the 2018 Bill increases this to 27 million by 2023. I couldn’t find detailed data for Franklin County, but, currently, there are somewhere between 10,000 and 25,000 acres in CRP in the county.

Nutrition assistance is always a contentious subject in Farm Bill debates among legislators. This component of the Bill typically represents about 75% of the total funding in the Bill and goes to support the Supplemental Nutrition Assistance Program (SNAP), formerly called food stamps. Though several controversial changes were proposed — for example, expanding and enhancing work requirements for participation in the program — none of them made it into the final bill. Funding for SNAP is expected to increase $98 million total over the 5 year life of this Bill.

Overall, the 2018 Farm Bill did not make dramatic changes to agricultural policy for 2019-2023. However, the changes that were made will likely improve the safety net for farmers, incentivize better environmental stewardship, and increase funding for one of the more efficient government food assistance programs.

Thursday, January 31, 2019

Free Range Parenting

by Jacyn Dawes

Kids today can find information about any subject at the touch of a button.  In some ways, this is freedom that previous generations could only dream of.  Due to the upswing in how much kids are using technology, people have begun to question whether that amount is healthy both mentally and physically for them.  But how much freedom do kids today actually have to put down their mobile devices and go out and play?

Lenore Skenazy, proudly labelled ‘America’s Worst Mom,’ has been asking this question since 2008 when she wrote a column called “Why I Let My 9-Year-Old Ride the Subway Alone.”  She received a lot of backlash from different new sources saying this was irresponsible for a parent to do.  The trend in helicopter parenting has only grown since the early 2000s.  This is largely due to the perception that crime is running rampant in the United States.

In fact, the Pew Research Center completed a study in 2016 showing that 57% of registered voters believed that crime had increased since 2008.  The FBI and BJS showed that the percentages in violent and property crimes have declined by double-digit percentages in that timeframe and have decreased by over 50% since the 1990s.  This raises the question: if crime has been decreasing consistently over the last few decades, why are parents more worried than ever?

Media has played an important role in the fear mongering.  Skenazy can attest to this.  After the story about her son riding the subway alone hit the news stand, it wasn’t long before Law and Order: Special Victims Unit put out an episode where two parents let their son ride the subway… alone.  He made it to school, but he didn’t make it home.

At first, one might think that this doesn’t necessarily mean it came from the worst-case scenario of Skenazy’s story.  But then she will show you the picture of the young actor who played the boy in the episode compared to the photo of her own son, and they are nearly identical.  While crime rates may have taken a dive, media has only increased stories of crime in the news and fictional portrayals as well.

It is no surprise that parents have become more protective over the years.  Skenazy puts this situation best when she states, “We have begun kidnapping our own kids.”  Not only have we become overprotective with our own children, but we are intruding more on what other parents decide is safe for their own kids.

Danielle Meitiv and her husband were charged three years ago with child neglect for letting their two kids walk home from a park without parental supervision.  This is just one of many examples for the necessity in Free-Range Parenting laws.  Utah was the first state to pass this law.  It defines what constitutes as child neglect, giving the parents back some of their rights over how to parent their own kids.  In turn, this will hopefully give more kids freedom to get off their phone and go out and play.

De la Cruz, D. (2018, Mar 29). Utah Passes ‘Free-Range’ Parenting Law. New York Times. Retrieved from https://www.nytimes.com/2018/03/29/well/family/utah-passes-free-range-parenting-law.html
Gramlich, J. (2019, Jan 3). 5 Facts about Crime in the US. Pew Research Center. Retrieved from http://www.pewresearch.org/fact-tank/2019/01/03/5-facts-about-crime-in-the-u-s/
Skenazy, L. (2018, Sept 23). The Case for Free Range Parenting.

Tuesday, January 29, 2019

Ottawa's Employment Situation

by Levi Russell
This article originally appeared in the Ottawa Herald.

At the end of each month, the Bureau of Labor Statistics releases a report detailing the number of jobs added to the U.S. economy during the previous month. The November report, released on the 7th of this month, was a bit of a disappointment. Economists had expected 198,000 additional jobs to be added in November, but the report indicated only 155,000 were added. One bright spot, the transportation sector, added 25,000 jobs nationwide.

The relatively good performance of the transportation sector made me think of all the new intermodal jobs being added in our area. This prompted me to look at Franklin County’s employment situation over the last few years. Franklin County’s labor force participation rate has been increasing steadily since the recovery from the 2009 recession. Labor force participation is the number of people in the labor force divided by the population aged 16 to 64. What does it mean to be “in the labor force?” Isn’t that just everyone with a job?

Not really. The labor force is defined as people who are working or actively seeking work. My wife Lana, who spends the majority of her waking hours as the primary caregiver of our children, is not in the labor force. Don’t get me wrong, she works very hard, but she would not part of the labor force. She just isn’t interested in working outside the home right now and so isn’t actively seeking work. Other people between the ages of 16 and 64 might leave the labor force when, after seeking work for a long time, simply give up and find another arrangement to provide for themselves.

So it’s good to see that, along with several years of population growth (with the exception of 2015), Franklin County’s labor force participation rate has increased. More people call Franklin County home, and a higher percentage of the total population of the county have been entering the labor force over the last several years. Another good sign for Franklin County’s economy is a very low unemployment rate. Currently, the unemployment here is at 3%, which is the lowest it has been since 2003. From the recession in 2009 to 2017, unemployment steadily declined here in Franklin County. Once the unemployment rate started approaching 3% in late 2017, unemployment has been relatively flat.

This isn’t necessarily a bad sign. There will always be some unemployment in a dynamic economy. People change jobs and might be unemployed for a short period between them. Some people’s skill sets become obsolete and they have to find training to get them into a new job. Looking at data on the unemployment history of Franklin County, it makes sense that unemployment leveled off here around 3%. This seems to be Franklin’s natural rate of unemployment.

But, similar to the labor force participation rate, the unemployment rate is complicated. People might enter or leave the labor force for good or bad reasons, and the unemployment rate may go up or down for good or bad reasons. The unemployment rate can go down — which sounds like a good thing in general — because some people give up looking for work and, by definition, leave the labor force! This may be a good thing, my wife is certainly happy being outside the labor force, but it may also represent people in very bad situations.

The takeaway point here is that you should always look beyond the headline unemployment number. Has the population grown? Has the labor force grown or shrunk? Has anyone looked into the reasons some people are either leaving or entering the labor force in greater numbers than before? Answers to these questions help us understand what is driving that headline unemployment number.

For example, if the population is growing and the labor force participation rate is growing because investors are creating many new jobs and people are able to get the skills to fill those jobs, the unemployment rate might actually tick up for a short period of time while people leave their current jobs, get trained, and move into better-paying jobs! We might think an increase in the unemployment rate is bad, but in this case it’s a small price to pay for a long-run benefit.

We might also see what appear to be negative effects on employment data when good things are happening. If innovation is driving the cost of the goods we buy every day lower — relative to the wages we earn — we may see people leave the labor force because their spouses can earn adequate income for the family. A decrease in labor force participation from a lack of opportunity over a long period of time is a bad thing, but people might also leave the labor force by choice.

In terms of overall employment, Ottawa is doing well and has been steadily improving since the end of the most recent recession. A larger percentage of the population are in the labor force and fewer people in the labor force are having trouble finding work. Next time I will discuss the economics of federal policy changes coming soon for agriculture, one of the county’s most important industries.