Automated Warehouses

Speaking of automation, you might be interested in this article at Supply Chain from a few years back on the top 10 automated warehouses. Most of the automated warehouses in their list aren’t.

The reality is that there aren’t a lot of fully automated warehouses.

I don’t have the figures in front of me to support the claim but my guess is that the cost of land is driving the move to warehouse automation as much as employee compensation if not more so. I know of a lot of very large warehouses with just one picker already.

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House, Senate Democrats Introduce Bill Limiting President’s First Strike Capability

House and Senate Democrats have introduced bills in their respective houses of Congress requiring that the president obtain Congressional approval before launching a nuclear first strike:

Rep. Ted W. Lieu and Sen. Edward J. Markey, both Democrats, introduced legislation on Tuesday that would forbid the president from launching a nuclear strike without first having Congress declare war.

The bill expresses clear doubts in President Donald Trump’s judgment, with the lawmakers saying in a joint release “the crucial issue of nuclear ‘first use’ is more urgent than ever now that President Donald Trump has the power to launch a nuclear war at a moment’s notice.”

This measure appears to be a blind men and the elephant sort of thing if not an instance of Miles’s law. Some see it as an attempting at delegitimizing the president. I see it as Congress reasserting its prerogatives and mitigating the risks in the Trump presidency.

I haven’t looked at the actual text of the bills but I think it should be stripped of any president-specific language and passed.

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About Manufacturing Jobs

The summary of what has happened to manufacturing jobs in the United States over the past decade is that between 2008 and 2010 two million manufacturing jobs just vanished. Since 2010 we’ve recovered one million of those jobs. When you factor in the increase in population over the last six years, that isn’t much.

The explanations for that provided at Cerasis, from which the graph above was taken, are: technology, globalization, environmental concerns, and reclassification, which I find interesting:

With the rise of the digital age, more companies have entered an era of product-less or factory-less manufacturing. Ultimately, this means companies produce items that do not require physical space. This includes nearly every digital application available on your smart phone, tablet, or laptop. To further this point, some manufacturers may not have a factory-space, which removes them from being counted within the manufacturing industry. Apple has experienced this phenomenon first-hand following large sales of new technologies in the US, which were manufactured in China. Ultimately, the majority of the work on Apple technologies has been completed here in the US. These technical jobs, such as engineers, designers, computer-code analysts, and robotics experts, may not fall into the category of manufacturing, but their efforts are required for outside manufacturing to take place. This results in a confounding arena where US manufacturing jobs are hidden under other categories of the US Jobs Report.

Take the May 8th Report at slightly less than actual value. Consider how the overall job growth continued in a positive slope over the course of the past three years, speaking aside from slight growth and drop cycles experienced between 2009 and 2012—immediately following the housing market crash. The report shows that the manufacturing industry, while not making huge improvements from last month, continues to be adding more jobs than losing jobs over the course of the past month. Additionally, some manufacturing industries, such as oil and gas production, appear to have added significantly more jobs, but these jobs are the result of worker strikes coming to an end. With these factors playing into the overall analysis of the manufacturing industry, US manufacturing jobs appear obsolescent. However, you need to know where to look before making a decision of whether manufacturing is growing or slowing in the modern world. And, as we said in this post about why it is OK that US manufacturing jobs won’t ever get back to peak levels of past decades, in the end, it’s about output and the job multiplier effect manufacturing tends to have.

I think the conclusion is probably correct but I think there’s more to it. At the time I thought that the companies’ behavior couldn’t be explained by lost sales, technology, or globalization and I still believe that. I wrote incessantly about it at the time.

It might be that the companies just panicked but that doesn’t explain what happened in the aftermath of the Great Recession. I think that some companies exploited the panic during the recession to accomplish other goals. I’m open to explanations of what those goals were.

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Is Outsourcing Immoral?

At The Federalist Rachel Lu leaps to the defense of U. S. companies that outsource, arguing that it’s not immoral:

Outsourcing causes real pain. Suffering people understandably want someone to blame. But even though demagogues will periodically succeed in capturing those emotions, honest people must continue to make the case for a free and fair economy. We have to help people understand that this, far more than border walls or industrial sweetheart deals, can secure a prosperous future for our children and grandchildren.

The human equation matters. Layoffs are painful and demoralizing, and we should do what we can to help people adjust. Creative destruction has always been difficult, but our lonely, atomized society may make it especially painful for some.

There isn’t a good alternative. Outsourcing is not an injustice; neither is it a scam. It’s just a challenging feature of a changing world. If we want American workers to find dignified, meaningful work, we must dismantle our new president’s shameful campaign to demonize honest employers.

Sadly, to my eye her argument appears to be more about economic efficiency than about morality. Basically, I think it depends. An employer that outsources the work formerly performed by employees and uses the proceeds to cut prices, invest and expand operations, or pay dividends to stock holders may be acting morally. An employer that pockets the proceeds probably isn’t. Even corporate managers have responsibilities to other stakeholders, their communities, and to their country. Economic decision-making takes place within a moral framework. An employer who prefers slaves to employees because slaves can’t complain about unjust treatment is acting immorally.

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Gulliver and the Lilliputians

At the American Interest Walter Russell Mead lists the “eight great powers” of 2017. Those he lists in descending order are the United States, China, Japan, Russia, Germany, India, Iran, and Israel. If I were to put those countries and some of their vital statistics like GDP, population, and land area into a table some distinctions would emerge but they’re so obvious I’ll leave it to the interested reader to do that for him or herself.

Among those “great powers” the United States stands alone in economic power, per capita income, wealth, social and political influence, military strength, and the ability to project power outside its region. It continue to be the sole global power and will do so for the foreseeable future.

To whatever extent Russia is a global power it holds that status by virtue of its nuclear arsenal alone; don’t expect it to reduce that below present levels. Russia faces hard times ahead but it will continue to be a regional power for the foreseeable future.

Germany and Japan are economic powers; they have little ability to project power beyond their own borders. China is similar but its size and growing economic influence puts it in a class of its own.

India is a puzzle. Its growing economy, military strength, size, and resources convey plenty of potential. Whether that potential will grow remains to be seen.

Iran is a “great power” by virtue of its military, ability to project power within its region, and its revolutionary fervor. It will remain a regional power for the foreseeable future but I strongly suspect that to whatever extent it’s a “great power” that will be temporary.

Israel is the outlier in the list. I know it has a vibrant economy and tough military. But it’s the size of a U. S. state with a population smaller than Cook County. Punching above its weight, indeed. I think it’s only a “great power” by reason of its great power patron. Perhaps I’m prejudiced.

Note that South America and Africa are conspicuous by their absence from that list. What of Brazil? Or Nigeria?

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The CBO’s Report on the Budget and Economic Outlook

The Congressional Budget Office has issued its report on the outlooks for the budget and the economy for 2017 and beyond:

In fiscal year 2016, for the first time since 2009, the federal budget deficit increased in relation to the nation’s economic output. CBO projects that over the next decade, if current laws remained generally unchanged, budget deficits would eventually follow an upward trajectory—the result of strong growth in spending for retirement and health care programs targeted to older people and rising interest payments on the government’s debt, accompanied by only modest growth in revenue collections. Those accumulating deficits would drive debt held by the public from its already high level up to its highest percentage of gross domestic product (GDP) since shortly after World War II.

The near term decline in the deficit is likely influenced by two things: a modest increase in revenues and the spending freeze the Congress put in place. That’s a brute force, meat axe approach to budget management and is almost certainly suboptimal.

Whether you think the deficit’s ratcheting up, not only in absolute terms but as a percentage of GDP, is a disaster depends on your point of view. There is no longer any reason to believe that GDP growth falls off a cliff when debt reaches 100% of GDP but the preponderance of the evidence still suggests that higher debt has an adverse impact on growth.

If decreasing the deficit were easy, it would have been done a long time ago. You can’t decrease it much using the evergreen formula of eliminating waste, fraud, and abuse. Additionally, so much spending is dedicated to sacred cows, e.g. defense, entitlements, interest on the debt, there just isn’t that much to cut without provoking massive political pushback.

The revenue side of the equation is equally difficult. Tax cuts mean less revenue. The notion that tax cuts pay for themselves flies in the face of facts. You can get additional revenues if growth is great enough but that is likely to require something beyond what can reasonably be foreseeen.

As was learned in 2009-2011 the U. S. economy is darned hard to stimulate. You can’t really do it through infrastructure spending (infrastructure defined as roads and bridges) because we’re already overbuilt and there are diminishing returns to scale. How much additional growth will the 153rd bridge across the Mississippi spur? How much growth will providing an interstate for every city with a population of 25,000 provide over what we have now?

Because of the way the federal income tax is presently structured, all cuts in the personal income tax are necessarily tax cuts for the rich. Unless you can convince the rich to buy American and invest all of the proceeds of their tax cuts here, tax cuts won’t stimulate the economy much, either. The only tax cut that might actually stimulate the economy would be a cut in the payroll tax. Democrats decided not to do that, presumably for political reasons.

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Privilege

The New York Times takes note of a recent journal article about the incidence of cervical cancer:

The death rate from cervical cancer in the United States is considerably higher than previously estimated and the disparity in death rates between black women and white women is significantly wider, according to a study published Monday in the journal Cancer.

The rate at which black American women are dying from the disease is comparable to that of women in many poor developing nations, researchers reported. What makes the findings especially disturbing, said experts not involved in the research, is that when screening guidelines and follow-up monitoring are pursued, cervical cancer is largely preventable.

I wonder if they controlled for income in the study?

The questions that arise from those findings are many. Do poor people receive healthcare that doesn’t conform to the standard of care? Or is it just black women? Do black women seek care less frequently or under different circumstances than white women do? When controlled for income, education, and area of the country are the results the same?

Are their doctors unaware of the standard of care? Are they less ethical? Are they just too busy? Does it make a difference whether their physicians are trained here or IMGs?

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The Right Stuff

I think that Jack Schafer’s prescription at Politico is right on the money

Extraordinary times like these call for normal measures: The meticulous, aggressive, and calm presentation of the news. One of our examples should be the Washington Post’s David Fahrenthold. Fahrenthold could have assessed the Trump candidacy by filling Twitter with angry comments or by setting himself on fire. Instead, as everybody knows, he excavated the self-dealing garbage dump that was the Trump Foundation as if he were an archeologist and published a series of patient stories that resulted in a penalty against the foundation and its planned closure.

Joining the protesters or sulking in their tents is not the right strategy. That will only discredit the press. The right thing to do is their jobs.

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Fat China

You might want to check out this article at Forbes on China’s problem with obesity.

I continue to think that obesity is multi-factorial, a problem with many causes. I am skeptical of the simple thermodynamic theory of obesity (“eat less, exercise more and you’ll lose weight”). I think that some of the components are diet and exercise to be sure but I also think that stress, environment, genetics, and congenital factors play roles. I also think there’s a possibility that obesity is a symptom of a communicable disease.

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What You Can Expect from a Currency Trader

There’s an interesting profile of George Soros at City Journal which I commend to your attention. I’m surprised at how rarely people mention that stability and order are bad for currency traders.

My interpretation of Mr. Soros is that he’s a shrewd currency trader and investor. He saw a depressed property (the Democratic Party), invested in it with the intention of showing a profit, and is doing so.

I see Donald Trump in much the same light. He saw a depressed property (the Republican Party), bought it at a bargain in foreclosure, and now he’s tearing it down to build something else, presumably with “Trump” emblazoned on it.

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