Phrase of the Day

I found exactly one phrase in this history of the “BRICS” (Brazil, Russia, India, China, South Africa) by Stephen Grenville at The Interpreter worthwhile: “analysis by acronym”. And that was in the slug. After that I didn’t find it particularly insightful. Consider this concluding passage:

O’Neill’s admonition to all emerging economies to “copy South Korea” is pretty useless as practical advice. More specific advice was readily available (for example from the original version of much-maligned Washington Consensus). Sensible fiscal and monetary settings, a general reliance on markets for allocation and price-setting, and openness to foreign trade and investment: this is enough to sustain rates of growth which, while not matching South Korea, will still ensure an ever-larger share of global trade and GDP, ever-more deserving of a bigger role in global governance.

The problem, of course, is that China didn’t have any of those things. I don’t think that either Mr. O’Neill or Mr. Grenville really appreciates China’s enormous size and the potential of an authoritarian government in a country of that size. China presently has enough excess productive capacity in steel, automobiles, solar cells, and dozens, maybe hundreds, of other products not merely to satisfy its own needs for the foreseeable future but to satisfy the entire world’s needs. No market economy would tolerate that sort of malinvestment.

And how is any country to “copy South Korea” when China already has the capacity to produce just about anything at as low a cost as you could possibly meet?

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Police vs. Crime

This is just a reminder as Chicago closes in on the most homicides in a single year adjusted for population in its history. There is no obvious relationship between the number of police officers per 100K population and the rate of violent crime in cities. Or property crime for that matter. Chicago has the highest ratio of police to citizens of any city in the U. S. St. Louis on the other hand has fewer police officers relative to population but is the homicide capitol of the U. S. You will search in vain for any relationship at all. There is also no relationship between compensation rates for police officers and crime of any sort.

This post was inspired by an article I read that implied that the “flash mob” robberies taking place in a number of cities including Chicago were related to lower levels of policing. The issue has been studied for years and the conclusion reached has been there’s no obvious relationship.

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Question About Omicron

I have a question about the omicron variant of SARS-CoV-2. Has anyone reported someone contracting COVID-19 from it seriously enough to be hospitalized, regardless of vaccination status? Also does contracting the omicron variant and recovering from it convey resistance or immunity to other variants?

Update

So far the most I have come up with is what’s in this Associated Press article:

U.S. health officials said Sunday that while the omicron variant of the coronavirus is rapidly spreading throughout the country, early indications suggest it may be less dangerous than delta, which continues to drive a surge of hospitalizations.

and

Even if omicron proves less dangerous than delta, it remains problematic, World Health Organization epidemiologist Dr. Maria Van Kerkhove told CBS’ “Face The Nation.”

“Even if we have a large number of cases that are mild, some of those individuals will need hospitalizations,” she said. “They will need to go into ICU and some people will die. … We don’t want to see that happen on top of an already difficult situation with delta circulating globally.”

It’s an empirical question not an a priori one. If it is, it is. If it isn’t, it isn’t. Basically, what I’m looking for is one report of the omicron variant having produced serious disease.

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The Puzzling Case of the Missing Schmear

What put me on the case was this post by Joe Gandelman on the New York cream cheese shortage:

Let out a challah: There’s a cream cheese shortage in NYC. Are we close to the day when there are bagels without cream cheese????

As an illustration of how serious the shortage is, I’ve read reports of desperate New Yorkers using Crisco on their bagels. The very thought is enough to chill the blood.

A little background on cream cheese. It’s a fairly simple product that has been around for about 150 years containing just milk, cream, and lactic acid. The stuff you generally buy in the grocery store adds various gelling agents (carob gum, guar gum, xanthan gum), salt, and various preserving agents to improve the product’s shelf life.

There’s a considerable difference between the cream cheese you buy in the store and the product used by bagel stores. They start with a basic cream cheese and mix it themselves.

There is no shortage of milk or cream, at least not according to the USDA. Demand for lactic acid has soared in recent years due to its use in bioplastics. We’re in the middle of a trade war with China over xanthan gum—basically, they’re dumping it on the U. S. market. We import xanthan gum from India and China. Carob gum is mostly imported from Europe and guar gum from India and Pakistan.

There is a shortage of lactic acid. The infographics here summarize our imports and exports of lactic acid. Chinese exports of lactic acid have declined sharply and its imports increased somewhat.

I found no evidence of a shortfall in labor or trucking issues contributing to the cream cheese shortage. Based on what I have found I would speculate that the problems with cream cheese are (in no particular order):

  • Product competition between wholesale and retail customers
  • Competition for lactic acid with non-food producers
  • Problems with West Coast ports
  • Environmental regulations and increased land values

But let’s consider two more basic questions. First, why are we adding anything besides milk, cream, and lactic acid to cream cheese? Adding the gelling agents and preservatives does not produce an improved product. Quite the contrary it produces a worse product. But it does enable food producers to lower costs (by reducing the amount of cream required) and it allows wholesalers and retailers to store the product longer. That doesn’t improve the product but it does reduce their costs.

I would add that there’s a sort of Gresham’s Law in food products—the bad drives out the good. It used to be much, much easier to buy cream cheese that was actually cream cheese. Increasingly, it’s becoming all but impossible.

Second and possibly more importantly why don’t we produce much, much more of what we consume? In the case of cream cheese it certainly isn’t labor costs—making cream cheese is not a labor intensive activity. I’m open to other suggestions but I suspect that ill-considered regulations, rising land values, tightening margins, and unfair foreign competition (subsidies, dumping, etc.) are major contributing factors.

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Considering Childcare

The editors of the Washington Post are very concerned about the condition of day-care and K-12 education:

Day cares say they are struggling to survive. Without enough teachers, they can’t serve as many students, especially infants and toddlers who require more supervision. In K-12 schools, teachers report having to pull double duty teaching their own classes and filling in for colleagues who are absent since there aren’t sufficient substitutes.

President Biden’s Build Back Better plan would make one of the largest investments in decades in the child-care industry and help increase pay for workers. But much of the funding, including for universal pre-K, expires after six years, making it unclear if it’s a permanent fix. And it wouldn’t solve the K-12 staffing issues.

Some states have made some clever attempts to try to help day-care staffing. Illinois recently offered a $1,000 bonus to day-care workers.

But the bottom line is it says something about America’s priorities when people get paid more to work at Target than with young kids.

It seems to me that there’s a relationship between the ills to which the editors draw attention and the minimal requirements for bus drivers, teachers aides, and day-care workers on the one hand and the press to increase teachers’ wages that has taken place over the last several decades. In the absence of a substantial increase in revenues, something that has proven elusive, when you increase the wages of one group of workers in a district over the market clearing price for such workers it will inevitably decrease the wages of the workers in the lower echelons of the district.

I recognize that the context of this editorial is “Build Back Better” bill and its childcare provisions. While I don’t have a problem with subsidizing childcare for those in serious need, I have reservations about extending such subsidies to people in the top quintile of income earners as appears to be the case. Isn’t there some point at which you are no longer helping those in need and instead are subsidizing lifestyles?

IMO the actual problem they are complaining about is the decline of wages per wage earner that has taken place over the last half century, something I attribute to shortsighted policy decisions over that period.

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Nature and Nurture

I’ve mentioned this subject before but anyone who is convinced that genetics is the sole determinant of achievement should consider the case of the burakumin of Japan. The burakumin (literally “village people”) are a hereditary class or caste in Japan of people who traditionally practiced occupations considered defiling in traditional Japanese culture, e.g. gravediggers, undertakers, slaughterhouse workers, executioners, and the like. Historically, they have been discriminated against and to some extent that discrimination continues right to the present day.

Japan is a remarkably homogeneous country. Other than the Ainu people of the north, the Ryukyuan people in the south, and a couple of million “foreigners”, mostly Chinese, Koreans, Filipinos, and Vietnamese, everyone in Japan is ethnically Japanese and the burakumin are no exception. They are not genetically distinguishable from other Japanese people.

Nonetheless the burakumin are widely considered to be lazy, slovenly, stupid, violent, and criminal. They do worse on standardized tests than other Japanese people.

The burakumin have been studied extensively, both by Japanese and Western scholars. One of the interesting things that has been determined is that expectations of individuals burakumin ancestry are quite low, both among the burakumin themselves as well as among other Japanese people. It is suspected those expectations have some influence on outcomes.

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What’s the Source of the Supply Chain Bottleneck?

And speaking of complicated topics, I’ve been researching the supply chain bottlenecks. It’s darned hard to propose solutions if you don’t know what problem you’re trying to solve.

I began my investigation by looking at the port processing statistics for U. S. ports on the West Coast, East Coast, and Gulf Coast. These statistics are measured in the eceentric Twenty-foot Equivalent Units (TEUs). So far I’ve considered the following ports:

and what I found was interesting. The Port of New York and New Jersey reflected what I expected: declines in April, May, June, and July 2020 with recovery thereafter. I was a bit surprised with Savannah and New Orleans. Savannah is processing the greatest volume of freight in its history while New Orleans actually has excess capacity.

Los Angeles and Long Beach, on the other hand, are processing less freight than they did in 2020 and substantially less than in 2019. As a first approximation I don’t think that any reasonable solution to the supply chain bottleneck problem can fail to consider why Los Angeles and Long Beach are having problems.

I will continue to investigate this issue and post on it from time to time but I don’t want to leave this topic before emphasizing one thing: the greatest factor in supply chain bottlenecks has been a naive and risky approach to sourcing. Naive because managers assumed that things would only get better never worse; risky because the pursuit of tiny improved margins without backup suppliers has led to a breakdown of the entire system.

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It’s Complicated

Returning to the issue we discussed yesterday raised by Fareed Zakaria, while I have no problem in principle with sending vaccines to other countries and think we should focus our attention on this hemisphere, I do take exception to his “blame America first” attitude and, more importantly, I think the issue is actually more complex than he makes it.

I already pointed out the “infrastructure” issue, i.e. the limited ability of many of these countries to store vaccines adequately once received but that’s not the only impediment. For example, whatever you think of “vaccine hesitancy” in the United States it is a significantly greater issue in African and Latin American countries than it is here see here, here, and here. It’s not entirely surprising. Many African and Latin American countries tend to be what are called “low trust” countries, i.e. they don’t trust each other, they don’t trust their own governments, and in particular they don’t trust us.

There is an additional complication. The premise of Mr. Zakaria’s piece is that the omicron variant originated in South Africa and spread from there to other places in Africa, Europe, and Asia. Did it? We just don’t know. I found this article at Science by Kai Kipperschmidt illuminating in that regard. The omicron variant is different in the extreme from other variants:

That raises the question of where Omicron’s predecessors lurked for more than a year. Scientists see essentially three possible explanations: The virus could have circulated and evolved in a population with little surveillance and sequencing. It could have gestated in a chronically infected COVID-19 patient. Or it might have evolved in a nonhuman species, from which it recently spilled back into people.

I think we should find that second alternative particularly disquieting suggesting as it does that modern medicine may actually have facilitated the mutation of a wildly divergent strain of the virus.

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Which “Rich Countries”?

In his Washington Post column Fareed Zakaria chides “rich countries” for not doing enough to inoculate the entire world against COVID-19, blaming the emergence of the omicron variant of the virus on that failure:

It’s estimated that 100 million of the doses stored by Western countries will expire and have to be thrown away by the end of the year if they are not used — and yet they sit stockpiled while the poorest 1.6 billion people in the world have only about 5 percent of the world’s vaccinations.

This is not a case of global institutions failing. There exists an effective mechanism to share and distribute the vaccines worldwide, COVAX, set up by a group of international health organizations. But rich countries have been stingy about actually making donations. The United States pledged the most — 1.2 billion doses — but so far has delivered just around 280 million. The European Union, Iceland and Norway have collectively pledged about 500 million doses and delivered about 112 million. China has recently increased its pledge to 850 million doses, up from 100 million, and has delivered about 89 million. As a result, 82 countries are at risk of falling short of the World Health Organization’s goal of vaccinating 40 percent of every country’s population by the end of the year, which means that the virus will keep replicating and mutating freely among billions of people. What is the chance that we will not see another variant in the next year?

To some extent I agree with him. Nearly a year ago I said that the U. S. should be sending vaccine to Mexico and the Central American countries as it became available. But I do have two problems with his complaint.

First, the problem isn’t “rich countries” so much as “rich countries other than the U. S.”. We’ve given twice as much vaccine to COVAX as Europe and by “Europe” I largely mean Germany. Germany and the U. S. have about the same vaccination rates so that’s no explanation for Germany’s failure. And China, true to form, has been much better at making pledges than at fulfilling them.

But it’s more complicated than that. The Pfizer and Moderna vaccines have storage requirements that make them impractical for use in the poorest countries in the world and the AstraZeneca and Janssen vaccines, which just require normal refrigeration, aren’t as effective as the Pfizer and Moderna. If we weren’t being berated for not delivering vaccines we’d be scolded for foisting off substandard vaccines on other countries.

Here’s my suggestion. President Biden should order one of the Navy’s hospital ships to be fitted to store the Pfizer and Moderna vaccines properly and make a tour of ports in Mexico and Central America, inoculating anyone who presents themselves (in an orderly fashion, of course). Of course, that would need to be cleared with the authorities in those countries. If they’re turned down, they could go to other countries.

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‘Tis the Season

It’s prediction season and I strongly suspect we will be deluged by them over the coming weeks. I found these “outrageous predictions” from Saxo Bank interesting.

Some of them I didn’t find outrageous at all, viz. “Policymakers kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest while rethinking the path to a low-carbon future.” I think that’s practically a foregone conclusion. On the other hand I’m pretty skeptical about this one: “US inflation reaches above 15% on wage-price spiral”.

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