Category Archives: Managerial Econ

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How robots change the world | Oxford Economics

Thanks to Supply Chain Digest for promoting this study by Oxford Economics.  Read the article here for a synopsis of its findings: Supply Chain News: Oxford Economics Says Robots Benefits will Outweigh Cons

Basically, it says robots will greatly raise productivity and take jobs with a repetitive aspect, displacing workers toward jobs with high cognitive content.  But there may be local dislocations that will be hard for some people.   We’d better prepare for that and put in measures to alleviate the suffering, if we care about people and their lives.  They think about 1.6 jobs will be lost for every job robots take. but GNP may grow 5% as a result.  China is the major user of robots now, and the revolution promises to be harder on them than any other country as it looks now.

It isn’t clear from the summary whether the 1.6 jobs lost will be found again in other sectors, such as service and sales, support of the robots, or technical work like fixing the robots.  Nonetheless this kind of assessment is an eye opener to concerns we may have in our economy and political world for quite a while.

The report is available here:  How robots change the world | Oxford Economics

Or here: Oxford Economics 2019 Report – How Robots Change the World

 

Some box terminals are facing ‘catastrophic economic failure’, warns analyst – The Loadstar

What’s the truth? Some experts say that terminals must be able to handle giant ships and therefore few customers, or fail.  Olaf Merk (of the OECD) says it looks like a ‘monopsony’; a port has only one or very few customers. Actually according to Alan Manning [1], who ‘wrote the book’ on monopsony, a monopsony simply means that there is little elasticity of supply (of incoming containers i.e. ships) for the port.

The classic monopsony situation occurs in labor supply; the ‘company town’. It used to be seen in mining and very early, in manufacturing.  In a company town, if you want to work, you have to work for the one employer.  The firm must raise wages for all employees if it needs more than are available at the town. If it needs fewer employees, it can drop wages.  Manning’s book defines labor monopsony as any case in which the labor supply (of workers) is inelastic (relatively vertical supply curve) while labor demand by the employer is elastic (downward sloping demand for labor).

What makes for inelastic labor supply? In the company town it happens because workers feel they don’t have mobility flexibility– it’s too far to the next place to work. But monopsony can happen for lots of reasons– discrimination, for one, can limit workers’ ability to get a different job.  In fact, any condition that prevents workers from seeking other work, and thereby constricting individuals’ market for jobs, suffices. Examples include safety on the job, or most recently in the news, forcing truck drivers to lease their trucks through a drayage firm.  The huge lease obligations pin the drivers to the job, and they lose control of work conditions and in the case of trucking, pay scales as well, since the drayage work in US ports is often piece work rather than (often unionized) pay by the hour.

In the port example the port is the labor supply– if the port is forced to upgrade to support ULCC ships in the 17-20KTEU range, it will be captive to those carriers that wish to run those big  ships to it. These consume so much port capacity that the port will not be able to solicit other jobs from smaller ships.  If it does, congestion will result.  The very few carriers calling there with their ULCCs will demand lower prices to land, and the port ‘wage’ will decline. That naturally also affects their profitability.

And the ports that don’t adapt to the large ships will not be able to get work at all, or nowhere near as much. It’s like the people living too far from the company town (on the remote farms) who will fall out of the labor market for that firm.

Such fun employing economic analysis to ports.

Source: Some box terminals are facing ‘catastrophic economic failure’, warns analyst – The Loadstar

[1] Alan Manning (2003) Monopsony in Motion

 

State of the Logistics Union 2017

Dan Gilmore’s take on the latest report from CSCMP on the state of logistics.  A copy would be good reading, but you have to be a CSCMP member to get it free.

One interesting chart is this one showing innovations.  It’s a classic innovation grid showing estimated impact vertically, and when it’s likely to be mainstream horizontally. The authors think co-opetition in supply chains, a high-impact innovation, is going to be mainstream in a couple of years. While I agree it has high impact potential, I think it’s a lot farther off than that.  Especially in the US, we seem to be reverting to an unregulated world where markets rule, and this makes it very hard to hold cooperative schemes together.  Similarly, Brexit blows apart many attempts at cooperation cross-border, and as nations start trying to foist their local problems off on others we’ll see natural reactions.

Supply Chain Digest LogoLogistics Costs as Percent of GDP Down Again in 2016, Falling in Relative and Absolute Terms

Source: State of the Logistics Union 2017