Category Archives: Business and Economy

The “suburban depression”

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The ongoing economic crisis has hit a lot of sectors of American society. Some new data suggests the economic crisis has particularly hit the suburbs, the proverbial “land of milk and honey” in American life:

There has not been so large a portion of Americans in poverty since 1993. But this time the growth in poverty is different, hitting whites and suburbia harder than it did during the early 1990s slump…

The suburban poverty rate is 11.8 percent, a level not seen since 1967…

A key factor in the rise in suburban poverty may be the fact that the housing market has played such a central role in the economic slump.

Many suburbs have seen a vast amount of wealth erased by declining housing markets and mortgage foreclosures, resulting in a great deal of economic dislocation. Since white Americans are more likely to own homes than African Americans, this could also explain why whites have fared worse than they did in the 1990s while African Americans have fared better.

The interpretation here is that with homes losing a significant portion of their value, an investment vehicle that many suburbanites had relied on has proven to be a hindrance instead. I would want to see more data: how does the growth of the poverty rate in the suburbs compare to cities and rural areas? If you look at the Census 2010 figures, the poverty rate for central cities is 19.7% (14.8% for metropolitan regions) and it is 16.5% outside of metropolitan areas. While falling housing prices may be part of the problem, what about jobs – are a higher percentage of lost jobs suburban jobs? I haven’t seen anyone write about this jobs link.

This data also affects two other larger ideas narratives about suburbs:

1. Life in the suburbs is not supposed to get worse; rather, it is supposed to always get better. Have we simply reached the point where the standard of living and incomes simply can’t rise much more?

2. There is evidence from recent years that more poor people live in the suburbs than in cities. While the percentages of poor people are lower in the suburbs, the absolute numbers are higher. This is part of a growing trend: the suburbs aren’t just (and never totally were) where wealthy whites can live.

Quick Review: The Greatest Movie Ever Sold

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I recently viewed the latest (April 2011 release) Morgan Spurlock film The Greatest Movie Ever Sold. Here are a few thoughts about this film which could be a nice conversation starter for a number of sociology courses.

1. If you know of Morgan Spurlock and his “formula” (Supersize Me, the TV show 30 Days), you won’t be surprised by how this film goes as Spurlock tries to finance his documentary about product placement (“brand integration”) by having corporations pay to sponsor it. Even though the process may not be a surprise, the movie still feels fresh in a way that many documentaries can’t match.

2. At the most basic level, this film is about raising awareness regarding advertising. It treads some familiar ground about how companies are really selling images or aspirations and how Americans are bombarded with these ideas. While Spurlock doesn’t offer much of a solution at the end (go out into nature for a little?), he certainly is drawing attention to an issue worth paying attention to.

3. Here are a few of the more intriguing sociological insights I picked out of the film:

3a. Spurlock wants to pull back the curtain on product placement and marketing but interestingly, the big companies don’t want to participate. In the end, he catches the attention (and money) of mostly smaller/challenger brands who don’t have the big marketing budgets. From a Marxist perspective, we could suggest that the big companies want to continue to “hoodwink” consumers while the challengers are really interested in doing anything to get product exposure, even exposing their marketing tactics.

3b. Spurlock spends some time in Sao Paulo, Brazil, a city that recently banned outdoor advertising. The mayor and residents talk about how this helps eliminate “visual clutter.” Could we imagine this ever happening in an American city? How many of our famous spaces, like Times Square or Las Vegas, would no longer be famous spaces if advertising was not present?

3c. One marketer suggests Spurlock could play off religious imagery, perhaps portraying himself at the Last Supper surrounded by a bunch of companies who want to use him or to show Spurlock carrying a cross covered in advertising stickers (like a stock car in NASCAR). While the marketer suggests this might be considered blasphemous, it would also get a lot of attention. Later in the film, another insider says to Spurlock regarding marketing his film that “the path of salvation” is to “Sell! Sell! Sell!” in America. What does this commentary suggest about the role of religion in marketing and selling “Christian products”?

4. Spurlock leaves us in a tough spot: can we do marketing with integrity? Can one really “buy in” without “selling out”? The answer is unclear but Spurlock provides us an entertaining venue for starting to think about answers to these questions.

(The movie received fairly good reviews from critics: it is 71% fresh, 77 out of 109 reviews were fresh, on RottenTomatoes.com.)

Bill Clinton: “The American Dream has been under assault for 30 years”

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Former President Bill Clinton, speaking as part of the 10 year anniversary of his foundation, said “The American Dream has been under assault for 30 years.” He says this has happened for two (actually three?) reasons:

1. The challenges of globalization and the information age “which eliminated a lot of intermediate jobs.”

2. Corporations once had more equal responsibility among shareholders, communities, and workers (roughly 35-40 years ago and earlier) whereas today they act as individuals only beholden to shareholders.

3. A thirty year long anti-government rant that says “the government is the source of all our problems.”

Is this just a list of Democratic Party talking points?

More seriously, Clinton’s first point is well accepted: the world has changed. Globalization and information have changed the American and global economy and America is still struggling to catch up. The Rust Belt cities of the Northeast and Midwest are a great example: the departure of good-paying manufacturing jobs has shifted the landscape and cities and states are still scrambling to fill this void. The second issue regarding corporations is also notable: the quest for profits and meeting shareholder’s expectations has seemed to increase. The gap between CEO pay and that of the average worker has only widened. The median income for all Americans has dropped while some corporations earn record profits. The third point sounds more like a political argument though Clinton’s suggestion that there has been a relative lack of interest in public-private partnerships to address some of these issues may have some merit.

Clinton is in a long line of presidents who have promoted the American Dream which is typically thought to include homeownership, a good education, and middle-class standard of living. It would be interesting to hear what Clinton now considers to be the American Dream to be and how individuals and the country can achieve it. A measure of the American dream, homeownership, actually had increased in the last 30 years until the last few years of economic crisis. Is Clinton suggesting that fewer people now have access to the American Dream or something else?

Additionally, Clinton’s words have some sway since the public perception is that he was the president who presided over the last boom era in the United States.

Same data, different conclusions about poverty in “Rick Perry’s Texas”

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With the increased national exposure of Texas Governor Rick Perry comes more people picking apart his political career. While Perry has been quick to tout Texas’ economic progress during his tenure, the same data regarding the state’s poverty rate can be used to reach different conclusions.

A CNN article titled “Poverty grows in Rick Perry’s Texas” has this to say:

While it’s true that Texas is responsible for 40% of the jobs added in the U.S. over the past two years, its poverty rate also grew faster than the national average in 2010.

Texas ranks 6th in terms of people living in poverty. Some 18.4% of Texans were impoverished in 2010, up from 17.3% a year earlier, according to Census Bureau data released this week. The national average is 15.1%.

And being poor in Texas isn’t easy. The state has one of the lowest rates of spending on its citizens per capita and the highest share of those lacking health insurance. It doesn’t provide a lot of support services to those in need: Relatively few collect food stamps and qualifying for cash assistance is particularly tough.

“There are two tiers in Texas,” said Miguel Ferguson, associate professor of social work at University of Texas at Austin. “There are parts of Texas that are doing well. And there is a tremendous number of Texans, more than Perry has ever wanted to acknowledge, that are doing very, very poorly.”

This is the more negative interpretation of this data that highlights a growing underclass in Texas. Perry may talk about job growth but there is a growing segment of the population that isn’t participating in this growth.

On the other side of the spectrum, a “Democrat and urbanist” (Instapundit’s description) suggests “The Texas Story Is Real“:

Lastly, the poverty rate is higher in Texas than in the US as a whole – 17.2% vs. 14.3%, not a small difference. However, the gap actually narrowed between the two during the 2000s, as the chart below in the percentage point change in the poverty rate illustrates.

[The graph shows the “Change in % of Population For Whom Poverty Status Is Determined (2000-2009).” Texas is at roughly 1.8%, the United States as a whole at roughly 1.95%.]

While every statistic isn’t a winner for Texas, most of them are, notably on the jobs front. And if nothing else, it does not appear that Texas purchased job growth at the expense of job quality, at least not at the aggregate level.  There are certainly deeper places one might drill into and find areas of concern or underperformance, but that’s true of everywhere.  And these top line statistics are commonly used to compare cities and states. Unless Texas critics are ready to retire these measures from their own arsenal, it seems clear that Texas is a winner.  The Texas story is real.

While acknowledging that Texas has a higher poverty rate (and this doesn’t include 2010 data), this commentator suggests that Texas had a smaller increase in this population compared to the United States.

This is a classic example of how two sides that are looking at the same data can come to two very different conclusions. For one, the poverty data indicates that Rick Perry is allowing some of Texas’ population to fall behind while the other suggests the poverty data isn’t so bad since the poverty rate grew less than that of the United States as a whole. In this case, I suspect the data itself won’t win over either side since ideology trumps the data.

More broadly, will most Americans consider these fine-tuned arguments when considering Rick Perry as a candidate? Probably not. Quoting a sociologist in a post yesterday, “Questioning someone’s religious sincerity is totally a factor of whether you already like that person.” This may also apply to their supposed economic impact.

Patent trolls: 20 years, $500 billion in losses

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One of my BU law professors, Mike Meurer, just posted a working paper (pdf) he co-authored with James Bessen and Jennifer Ford titled “The Private and Social Costs of Patent Trolls.”  Quoting the abstract:

In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives.

This works out to around $25 billion in lost wealth per year.  For comparison, even in its pre-Napster days, the RIAA only sold $14.7 billion per year—more than $10 billion less.

H/T Groklaw.

Update:  More analysis by Ars Technica.

The real America can be found at Wal-Mart

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I vividly remember what one professor told us one day in a sociology of religion class in graduate school: “If you want to find real Americans, just go to Walmart.” Several members of the class gasped – could the real America really be at Walmart, that exemplar of crass consumerism, low wages, and the loss of community life in America? This story from NPR makes a similar point:

The Wall Street Journal spotted the phenomenon recently. The headline: “Today’s Special at Wal-Mart: Something Weird.” “Almost any imaginable aspect of American life can and does take place inside Wal-Mart stores, from births to marriages to deaths,” observed the Journal‘s Miguel Bustillo. “Former Alaska Gov. Sarah Palin once officiated a wedding at the Wal-Mart in her hometown of Wasilla.”…

What is it about Walmart? As a species, we are fascinated by the place. The Web is awash with sites that scrutinize the Arkansas-based retailer’s every move. Walmart Watch, funded by the United Food and Commercial Workers Union, says its mission is to challenge the multibillion-dollar retail chain “to more fully embrace its corporate responsibilities.” The now-infamous and snarky People of Walmart posts photos of shoppers. Hel-Mart offers anti-Walmart merchandise, such as T-shirts that say, “Resistance Is Futile.” Videos of people praising, mocking, pranking, walking around, dancing in Walmart are continuously posted on YouTube…

Officially, Walmart explains the apparent zaniness this way: “Over the years, Walmart has become a microcosm of American life,” says company spokesman Lorenzo Lopez. “With stores serving millions of customers in communities nationwide, it’s not uncommon for us to see our share of what happens every day in cities and towns all across the country.”…

* Of the 3,822 Walmart stores, 2,939 are Supercenters, which means they are open 24 hours a day. So in virtually every county, 500 people work at Walmart, and there is a Walmart open every hour of every day, and every one of those Walmarts is being visited by 37,000 people a week — that’s 220 people an hour, in every Walmart, in virtually every county in the whole country, every hour of the day.

So how come there are not more sociologists doing studies at or about Walmart? I suspect many do not like the place – even though some may even shop at Target and other big box stores. But just because sociologists might disagree with the practices of Walmart does not mean that it shouldn’t be the focus of much research.

This story also illustrates something Joel Best likes to talk about: the scale of numbers. Some of the statistics about Walmart from the article include half of American adults visit Walmart each week covering 70 million hours and the company has 1.5 million employees. This is hard to visualize because these are big numbers. We know what a couple of hundred people looks like but to understand 1.5 million, we might need to make some comparisons such as this is about the population of the City of Philadelphia or is around the same size as the metro area of Nashville or Milwaukee. Another way to understand these big numbers is to break it down into how often something happens per hour or minute or second. In this article, this translates to “that’s 220 people an hour, in every Walmart, in virtually every county in the whole country, every hour of the day.” We know what roughly 220 people looks like so we can then grasp a little better the enormity of the figures.

Whether corporate tax breaks help the average citizen

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Phil Rosenthal tackles an interesting question that pertains to Illinois and Chicago after recent news about certain companies threatening to leave unless they get more tax breaks: do such deals help the average citizen? While the conclusion is unclear, here is a bit about the effect of TIF (Tax Increment Financing) Districts which typically generate funds for localized development and infrastructure:

The TIF has become a fashionable way for a municipality to encourage a business to set up shop in a particular locale it might not have chosen otherwise.  Some, however, see TIFs as too often just a handout for businesses that want to go somewhere.

“They’re a very popular tool for economic development,” Rebecca Hendrick, an associate professor in political science at the University of Illinois at Chicago, whose book, “Managing the Fiscal Metropolis,” is due out in November. “There are a lot of discrepancies in the empirical research as to whether they’ve had the intended effect. Would the steel company have come in but for the TIF, or would it have come in anyway?”…

“But it turns out that tax rates go up in the entire jurisdiction in the city of Chicago as a result of a TIF being created in the city of Chicago because the way the property tax works is kind of a zero-sum game. If someone gets money, someone else has to pay for it. … Plus, it’s also off-budget.”

Chicago has a lot of TIF districts so this is not a small issue. Of course, there are different ways to measure the benefits of such development for the average citizen: should it lead to a smaller property tax bill? Should it lead to more city and state services since they should have more tax dollars? Should it lead to a better quality of life in rebounding neighborhoods? Should it lead to more jobs? The common focus seems to be on jobs, as the recent offer from Amazon.com to the State of California illustrates. But these tax breaks often lead to a very limited number of jobs.

The article also hints that certain kinds of economic change receive press coverage while others do not:

A steel company moving to Chicago gets our attention. One person losing his or her home generally doesn’t. Even 100 people losing their homes might not make the papers.

“One hundred people losing their mortgages may involve the same amount of money as a steel company moving to Chicago,” Bowman said. “One of the reasons that TIF money is provided to these businesses is it does get more attention, and people feel like, ‘Maybe things are starting to turn around if Chicago’s more attractive than Cleveland.'”

So is this more of a journalism problem? If newspapers and other media sources are more interested in the “movers and shakers,” typically politicians, business leaders, and entertainment/celebrity figures, does this help the average citizen? I assume the media would suggest that they are the public “watchdog,” helping inform people about abuses of power. But, the media, often in big corporations themselves, can also easily be cozy with these bigger interests and also want to be boosters and help improve the image of their community.

In these poor economic times, I imagine we will be hearing more about corporate tax breaks and whether local, state, and national governments should be in the business of handing them out.

The Freakonomics of fair use

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The NYTimes’ Freakonomics blog uses the subject of poetry criticism to tackle fair use:

In a recent article, the poetry critic of the New York Times complained that to do poetry criticism right, it’s often necessary to quote extensively from a poem. Indeed, in the case of a short poem, it might be helpful to readers to copy the whole thing. But, the critic said, this can’t be done because it might run afoul of copyright law.

It is true that copyright law prohibits the unauthorized copying of any substantial part of someone’s poem, song, or other work.…Is this a good policy?  From an economic perspective, no.

The reason this is bad policy, however widely discussed, bears repeating:

Use of a small bit of someone else’s creative work to build a new creative work rarely harms the economic interests of the first copyright owner, because most “derivative” works do not directly compete with the original.

Every creator builds on what came before, and such building usually doesn’t “compete” with that earlier work in any economic sense.  Creating legal fear and uncertainty about building on the past, however, is quite effective in limiting the creation of new works in the present.

Righthaven “nearing bankruptcy”

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I was suspicious several days ago when I heard that Righthaven might be going under, but apparently it’s true:

The Las Vegas copyright-trolling firm Righthaven told a Nevada federal judge Friday it might file for bankruptcy protection, or cease operations altogether.

To prevent that, Righthaven is asking U.S. District Judge Philip Pro to stay his decision requiring Righthaven pay $34,000 in legal fees to an online commenter it wrongly sued for infringement.

Wired has posted Righthaven’s Motion to Stay here (pdf).  They are exceptionally candid about the economics of copyright troll litigation:

In Colorado, 35 Righthaven copyright infringement cases have been stayed since May 19, 2011 pending a ruling on whether the company has standing to maintain these actions. Likewise, ten infringement actions, most of which involve an amended version of the SAA that addresses the concerns expressed by this Court in its subject matter decision, have been stayed in this District until a standing determination is made. Thus, Righthaven has been precluded from actively litigating and resolving the stayed cases. Moreover, Righthaven has delayed filing new copyright enforcement actions until a standing determination is made based upon the terms of the currently operative version of the SAA. Throughout this period, and despite a lack of incoming revenue given that numerous pending action are stayed, Righthaven has continued to incur operating expenses.

Clearly, Righthaven is a cash-poor outlet these days.  And here’s where things get really interesting:  based on its motion, Righthaven seems deathly afraid that they might have to sell some of their assets to satisfy a $34,000 judgment.  As they explain to the court:

Righthaven also has significant proprietary rights in its copyright infringement search engine software (the “Software”), which plays an integral role in the company’s operations. If a stay is not granted pending appeal, this valuable Software may be seized and liquidated in an attempt to satisfy the Judgment. Liquidation may result in the Software being sold to a competing organization or entity.

Talk about woeful undercapitalization.  A $34,000 judgment is going to force them into selling off their core business assets?  Really?

Righthaven always presented defendants in its copyright litigation with an unfair dilemma:

(1) pay out a few thousand in “go away” money now, or
(2) mount an actual legal defense (at an initial, minimum cost of a few thousand, with no guarantees that things would work out well).

It seems that Righthaven now faces a dilemma of its own:

(1) raise enough capital to pay off this $34,000 pending appeal, or
(2) go bankrupt.

The difference, of course, is that the dilemma Righthaven faces is fair.  They put defendants to the expense of hiring lawyers.  Some of those defendants won.  The law says that those winning defendants should have their legal expenses paid by Righthaven.  Sounds about right to me.  If Righthaven can’t afford to pay without selling assets, perhaps they never should have been filing lawsuits in the first place.

Sears appliance circular does strange things to the Chicago skyline

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It is not too unusual for cities to be misrepresented in movies or television shows but this takes place in other areas as well. A Sears advertising circular from Friday, September 9, takes some interesting liberties with the Chicago skyline. Take a look:

Perhaps this looks fairly standard: the Sears logo in the top left, a “big price drop” balloon coming down from the sky in the upper right corner, six appliances on sale, and then a picture of the Chicago skyline at the bottom. While this may be just pandering to this metropolitan region, it also hints at Sears’ history: the first Sears store opened in Chicago in 1925 and their headquarters are still in the region.

But if you look more closely at the skyline picture, two strange things pop up. The first: a green lawn. Here is a close-up of the bottom left of the circular:

This green view is pretty much impossible. To get a wide view of the skyline from this angle, one needs to be at the Adler Planetarium promontory. From there, one needs to stand either on a hill sloping down, meaning the lawn is difficult to get into the shot, or from the concrete steps or walkway that go around this point. Plus, the grass is pretty high here relative to the height of the buildings. So why include the grass? It would make some sense if the circular was advertising lawn mowers – but it is not. Perhaps the “big price drop” balloon needs a safe place to land. Or the circular needs a touch of pleasing green. Or a focus group suggested the green lawn invokes images of home life, the need for beautiful appliances, and the American Dream.

In addition to the strange grass, there is something odd going on at the right (east) side of the skyline. Here is a closer view:

Even looking closely at the circular, I have a hard time figuring out what is going on here. It appears to be a hill sloping up from the lake with some buildings on the hill. Why was this added to the picture? I really have no good idea – to fill up space?

Here is what the view of the Chicago skyline looks like from my own camera near Adler Planetarium, sans verdant lawn or black hill:

If this was the starting point for the Sears image, one could crop and play with it in such a way that the added blue from Lake Michigan could be removed but adding the lawn and hill is not necessary. It would still be a very nice and useful shot.