Egg Market Makers

The WSJ reports on the Egg Clearinghouse, or ECI while we are in the midst of the recent dramatic egg shortage and increase in egg prices.

While the article mentions that some have suggested price gouging, it seem more likely that supply has shifted in because temporarily, there just are not enough egg laying hens to supply the market.

The deadliest outbreak of avian flu in history has resulted in the death of more than 100 million U.S. chickens, turkeys and egg-laying hens since 2022, according to the Agriculture Department. Once infections are identified in a single bird on a farm, whole flocks are often eliminated to prevent further spread, creating supply shortages in some regions and grocery stores.

As a consequence, the number bids to buy eggs is now more than double the offers to sell. 

 

 

 

Wither the Software Developer?

The employment market for software developers sucks right now. ADP released a study from their payroll data in June, 2024 that included this graph.

It hasn't got better since. But why the severe and persistent decline?

• The decline begins in Spring 2020 so responding to the COVID-19 pandemic could be a cause. But this does not explain why the decline continues.
• The growth of AI is making them so much more efficient that you need fewer of them. But this may only explain maybe the last two years or so.
• The growth of cloud computing means that much of what software engineers do is outsourced to a supplier that can eke out economies of scale in software development. With Software as a Service (SaaS), code can span multiple enterprises instead of being used solely in-house. 

Evidence for this last explanation comes from the timing of cloud computing adoption.

Whichever the cause, I think a takeaway is that all explanations will persist and the market may not rebound very soon.

What do Ferrari and Hermes have in common?

 WSJ:

With a list price of $3.7 million, Ferrari’s new “hypercar” was revealed to the public in October with a twist: It wasn’t available for sale....

Money isn’t enough to buy a top-of-the-range Ferrari. You need to be in a long-term relationship with the company.

By leveraging the rabid fandom of its customers through a business model based on uber-scarcity, the storied Italian company is enjoying a new golden age. Following an almost tenfold increase in the stock since its initial public offering almost a decade ago, Ferrari is now worth $90 billion, making it the most valuable car company in Europe—despite delivering just 13,752 vehicles last year.

 John Yun on Hermes:

Aggrieved ... plaintiffs in California have filed a class-action suit against Hermès alleging that [customers are] “coerced” to spend $1,300 on a shawl or $820 on a belt before being “allowed” to hand over an additional $12,000 or more for a Birkin bag...

In antitrust language, the specific allegation is that Hermès is engaged in an illegal tying scheme—where the French company is leveraging its market power in handbags (i.e., the “tying product”) into ancillary goods, such as scarves, belts, jewelry, and shoes (i.e., the “tied products”).

How long before someone sues Ferrari for "tying" sales of new cars to past purchases?

Should you buy IVF insurance?

Baby or Your Money Back 

It’s that simple. If your IVF is not successful after 2 cycles, you make an insurance claim. You get] your money back.

BUT, only if you qualify.  So the insurance company insures only those with a high chance of success.  

HT: MH

How Europe must respond (or not)

 Economist:

Let us spell out the reality Europe faces. It is an indebted, ageing continent that is barely growing and cannot defend itself or project hard power. ...

Paying for this rearmament will take a fiscal revolution. ...In order to bear that, Europe will have to cut welfare: Angela Merkel, Germany’s former chancellor, used to say that Europe accounted for 7% of the world’s population, 25% of its GDP but 50% of its social spending. To raise growth, Europe must press ahead with obvious but endlessly delayed reforms, from unifying capital markets to deregulation.

Arbitraging Influencers

The WSJ recent;y reported on lawsuits by Internet influencrs against the makers of browser extensions that seek out discounts. These extensions, such as  as PayPal Honey, Capital One Shopping and Microsoft Shopping, automatically seek out discounts that might exist elsewhere and apply them at checkout. Influencers no longer get credit for directing their followers to the retailer. 

“If the customer clicks on…the Plaintiff’s [influencer's] affiliate link and then at checkout clicks on the Honey pop-up, then the business tracks the sale as originated from Defendant [browser extension], and Plaintiff [the influencer] will receive no credit for the purchase,” one suit against PayPal said. “Honey erases Plaintiffs’ affiliate links and replaces it.” 

The problem stems from a standard industry practice. Influencer affiliates include a link into their content for interested followers to make purchases of a brand. The industry has settled on the practice of "last-click attribution." When the extension replaces the influencer attribution with its own, the influencer does not receive credit for the sale. This is kind of like paying someone to stand outside of a high-end boutique informing eager customers that they can save at a discount store. The brand wants to price discriminate by selling through both the boutique and the discounter, but it doesn't want the discounter to interrupt too many of the high-end sales. Actually, it more like a billboard company advertising discounters just outside the boutique. The boutique is suing the billboard company.

Is your master's degree worthless?

Economist:

In America returns are especially large in computer science and in engineering. They are slightly smaller in other science subjects, in part because an undergraduate degree in these already bumps up salaries by quite a lot. Teachers who bag graduate degrees in education tend to earn more, even if wages for the profession as a whole are fairly low, because many American school districts automatically raise the pay of those who have them.

Would Thomas Jefferson approve of DOGE?

From ChatGPT:

Thomas Jefferson would likely have mixed feelings about a Department of Government Efficiency, depending on its scope and function.

• Why He Might Approve: 
•  Limited Government & Fiscal Responsibility – Jefferson was a strong advocate for minimizing government waste and ensuring efficient use of public funds. If such a department worked to reduce bureaucracy and streamline operations, he might have supported it. 
•  Republican Virtues – He believed in a government that served the people effectively without unnecessary complexity, so an effort to improve government efficiency could align with his ideals. 
• Why He Might Disapprove: 
• Bureaucratic Expansion – Jefferson was skeptical of centralized power and large government institutions. The very creation of a new department could be seen as adding more layers to the bureaucracy he often opposed. 
•  State vs. Federal Power – He strongly favored states’ rights and decentralized governance. If the department operated at the federal level, he might argue that efficiency efforts should be handled at the state or local level instead. 
• Final Thought: If structured as a temporary commission to identify inefficiencies and reduce waste, Jefferson might have supported it. But if it became a permanent federal agency with expanding influence, he would likely have opposed it as a contradiction to his vision of a small, decentralized government.

All he wants is "good pricing"

Fron WKRN:

“There are too many liquor stores in Lebanon, just at the rate that more stores are opening. I never really felt that way before,” Andrea Ross, the owner of Cheers Wine and Liquor, said. “We know multiple liquor store owners in Lebanon [TN] that are great people, great business owners, but in order for us to continue to be able to provide good pricing and all the things that we offer, we have to be able to sustain the business.”

For anyone who has not read Chapter 6, what the incumbent liquor store owner means by "good pricing" is high pricing. To the residents of Lebanon, good pricing is low pricing. 

• By limiting competition from entrants, the city council create incentives for incumbents to support their reelection campaigns.
• Does the city council have enough information to make good decisions about the number of liquor stores, and the incentive [see above] to do so?

HT:  MH

Adverse Selection in Genetic Insurance Markets

A new paper by Azevedo, Beauchamp, and Linnér (ABL) finds that some predictions are coming true and that may be a problem. Economists predicted that the Human Genome Project would uncover many markers for diseases that may not present themselves until much later. For two decades, these predictions were hard to come mainly because single-gene mutations are not as informative. ABL show that more recent improvements developed from data on nearly half a million people in the UK Biobank has become much more predictive. This affects insurance markets.

In many countries, but not the US, a market for Critical Illness Insurance (CII) is growing. 

Critical illness insurance (CII) pays out a lump sum in the event that the insured person gets diagnosed with any of the medical conditions listed on the policy (Brackenridge et al., 2006). The lump sum can be used as the policyholder wishes. The policy pays out once and is thereafter terminated.

Consumers with bad test results should gobble up insurance. CII providers will have to adjust rates for this adverse election. Consumers with good test results will not find the insurance worth it. Will CII providers require genetic tests? Will they be allowed to risk rate their policies? As the predictive power of genetic testing improves, as it surely will, these issues will become more acute.

Hat tip: Marginal Revolution