Economics

Kahneman and his longtime collaborator Amos Tversky reshaped the field of economics with their insights into how ingrained neurological biases influence decision making.

Daniel Kahneman, a psychologist who won a Nobel Prize in economics for his insights into how ingrained neurological biases influence decision making, died Wednesday at the age of 90.

Kahneman and his longtime collaborator Amos Tversky reshaped the field of economics, which prior to their work mostly assumed that people were “rational actors” capable of clearly evaluating choices such as which car to buy or which job to take. The pair’s research — which Kahneman described for lay audiences in his best-selling 2011 book “Thinking, Fast and Slow” — focused on how much decision-making is shaped by subterranean quirks and mental shortcuts that can distort our thoughts in irrational yet predictable ways.

The U.S. economy grew at a solid 3.4% annual pace from October through December, the government said Thursday in an upgrade from its previous estimate. The government had previously estimated that the economy expanded at a 3.2% rate last quarter.

The Commerce Department’s revised measure of the nation’s gross domestic product — the total output of goods and services — confirmed that the economy decelerated from its sizzling 4.9% rate of expansion in the July-September quarter.

But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports and business investment in buildings and software. It marked the sixth straight quarter in which the economy has grown at an annual rate above 2%.

It may not be too “appeeling,” but the price of some bananas are rising by a few cents.

Trader Joe’s recently upped the price for a single banana to 23 cents, a 4-cent — or 21% — increase from the grocer’s previous going rate for the fruit that had remained unchanged for over 20 years.

“We only change our prices when our costs change, and after holding our price for Bananas at 19¢ each for more than two decades, we’ve now reached a point where this change is necessary,” a spokesperson for the chain based in Monrovia, California, said.

In contrast to other foods more heavily impacted by inflation, bananas have stayed relatively affordable over time — with average global prices never exceeding more than about 80 cents per pound (0.45 kilograms).

The stunning collapse of Baltimore’s Francis Scott Key Bridge is diverting shipping and trucking around one of the busiest ports on America’s East Coast, creating delays and raising costs in the latest disruption to global supply chains.

After the container ship Dali hit the bridge and brought it down early Tuesday, ship traffic entering and leaving the Port of Baltimore was suspended indefinitely. That will require rerouting vessels or their cargo to other ports, potentially causing congestion and delays for importers, said Judah Levine, head of research for the global freight booking platform Freightos.

Two of the world’s largest credit card networks, Visa and Mastercard, as well as the banks that issue cards with them, have agreed to settle a decadeslong antitrust case brought upon by merchants.

The settlement is set to lower swipe fees merchants pay when customers make purchases using their Visa or Mastercard by $30 billion over five years, according to a press release announcing the settlement Tuesday morning.

The settlement, which only applies to US merchants, is the result of a lawsuit filed in 2005. However, nothing is considered finalized until it receives approval from the US District Court for the Eastern District of New York. Even then, the case can also be appealed in what could be a lengthy battle.

Typically, swipe fees cost merchants 2% of the total transaction a customer makes — but can be as much as 4% for some premium rewards cards, according to the National Retail Federation. The settlement would lower those fees by at least 0.04 percentage point for a minimum of three years.

Chinese regulators have accused Evergrande and its founder of inflating revenues by $78 billion, putting the insolvent property developer at the heart of the country’s biggest ever financial fraud case.

The China Securities Regulatory Commission (CSRC) slapped a penalty of 4.175 billion yuan ($580 million) on Hengda Real Estate, the group’s main Chinese unit, the company said in filings to the Shenzhen Stock Exchange on Monday.

Xu Jiayin, founder and chairman of the Evergrande Group, was fined 47 million yuan ($6.5 million) for the overstatement and other alleged violations. Formerly China’s richest man, he was also barred from the securities markets for life.

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The European Deforestation Regulation or EUDR will outlaw sales of products like coffee from December 30, 2024, if companies can’t prove they are not linked with deforestation. The new rules don’t just seek to reduce risks of illegal logging and its scope is wide: It will apply to cocoa, coffee, soy, palm oil, wood, rubber, and cattle. To sell those products in Europe big companies will have to provide evidence showing they come from land where forests haven’t been cut since 2020. Smaller companies have till July 2025 to do so.

Deforestation is the second-biggest source of carbon emissions after fossil fuels. Europe ranked second behind China in the amount of deforestation caused by its imports in 2017, according to a 2021 World Wildlife Fund report. If implemented well, the EUDR could help reduce this, especially if the more stringent standards for tracing where products come from becomes the “new normal,” Helen Bellfield a policy director at Global Canopy told The Associated Press in an interview.

It’s not failsafe. Companies can just sell products that don’t meet the new requirements elsewhere, without reducing deforestation. Thousands of small farmers unable to provide the potentially expensive data could be left out. Much depends on how countries and companies react to the new laws, Bellfield said. Countries must help smaller farmers by building national systems ensure their exports are traceable. Otherwise, companies may just buy from very large farms that can prove they have complied.

Welcome to New Jersey, known around the world for Tony Soprano, Turnpike tolls, chemical plants, and ... maple syrup?

If a university in the southern part of the state has its way, the sticky sweet brown stuff you put on your pancakes might one day come from New Jersey.

It’s part of an effort to use a species of maple tree common to southern New Jersey that has only half as much sugar as the maples of Vermont, the nation’s maple syrup capital. The idea is to see if a viable syrup industry can be created in a part of the state better known for casinos and its vast forest of pine trees.

Backed by $1 million in grants from the U.S. Department of Agriculture, Stockton University is in its fourth year of producing syrup from the 300 acres (120 hectares) of maples surrounding it.

America’s superstar cities have avoided the post-pandemic death spiral—so far, anyway.

The pandemic was supposed to be the death of the great American city. The rise of remote work unleashed an exodus to the Sun Belt and suburbs, leaving behind empty subway cars, abandoned offices, and desolate downtowns. Violent crime spiked. Suddenly, so-called superstar cities—such as New York, Boston, and Los Angeles, which boomed throughout the 2010s—were facing what experts called an “urban doom loop.” The more people moved away, the worse things would get; the worse things got, the more people would move away; and so on, in an endless spiral that would do to superstar cities what the decline of the auto industry did to Detroit.

But that hasn’t happened. Twenty-five of America’s 26 largest downtowns have more residents today than they did on the eve of the pandemic. Meanwhile, both violent and property crime plummeted in cities across the country in 2022 and 2023 (Washington, D.C., was a notable exception), and some other threats to public order, such as shoplifting, appear to have been overstated. In fact, the biggest problem that superstar cities face today is the same one that afflicted them before the pandemic: Too many people want to live in them. Housing prices have skyrocketed over the past four years. In New York, Boston, and Los Angeles, vacancy rates are at or near their lowest levels in decades. Even San Francisco, the paragon of post-pandemic urban decline, is doing remarkably well. Last year, its population grew more from net migration than any other city in California, and its crime rate fell. Car break-ins, the symbol of Bay Area decay, declined dramatically in late 2023, according to a San Francisco Chronicle analysis. Homelessness and open-air drug use remain big problems, but they haven’t prompted mass urban flight. Even if things aren’t fully back to normal, the arrow appears to be pointing up.

That’s one interpretation, anyway. The father of the doom-loop hypothesis sees things a little differently. In his view, cities haven’t actually beaten the pandemic death spiral. They simply haven’t experienced it yet.

Non-paywall link

New York City saw its population of millionaires jump by 48 percent in a decade, according to a new report. 

The Big Apple still leads the U.S. — and the world — among wealthy cities. It has nearly 350,000 millionaires and 60 billionaires, according to the USA Wealth Report from an investment migration consultancy firm Henley & Partners and New World Wealth. 

New York also has the most centi-millionaires in the country with 744. 

The San Francisco Bay Area came in second place — and in fact has more billionaires than New York. The Bay Area has more than 305,000 millionaires, 675 centi-millionaires and 68 billionaires. 

San Francisco’s millionaire growth contributed to its rise in the ranking, amassing 82 percent growth over the past 10 years. 

Los Angeles, Chicago and Houston round up the top five list in the U.S.

Key Points

• The U.S. Federal Reserve on Wednesday raised its U.S. GDP growth projection to 2.1% for 2024, up from 1.4% in its December outlook, as the economy continues to display resilience.
• But the labor market has remained relatively hot and January and February inflation prints dampened hopes that price increases were fully under control.
• “I think one thing that was really underestimated in the U.S. was the immigration story,” Joyce Chang, chair of global research at JPMorgan, told CNBC on Thursday.

As Ottawa overhauls its temporary immigration programs, a new analysis by Bank of Nova Scotia warns that the unchecked population surge of the past two years is behind two-thirds of the “massive” decline in productivity over the same time period.

The drop stems from a combination of two factors: chronically-low business investment in Canada and the sudden explosion in population, which grew by 1.25 million last year alone.

Given weak investment levels, that’s far more than the 350,000 permanent and temporary immigrants Canada’s economy can absorb without having a negative impact on productivity, according to Scotiabank economists Rebekah Young and René Lalonde.

Japan’s exports rose 7.8% in February from a year earlier on strong shipments of cars and electrical machinery, the government said Thursday. 

Exports in February totaled 8.2 trillion yen ($55 billion), marking the third straight month of growth, according to preliminary customs data. 

The report showed the trade deficit sank by more than half on-year to 379 billion yen ($2.5 billion), marking the second straight month of a deficit.

The US central bank has left its key interest rate unchanged again, while it looks for more evidence that inflation is coming under control.

The decision kept the target range for the Federal Reserve's influential rate in the range of 5.25%-5.5%, the highest in more than two decades.

The Fed is debating whether higher borrowing costs have done enough to ease the pressures pushing up prices.

Officials said they still expected to cut rates by the end of the year.

But after raising borrowing costs aggressively in response to soaring prices in 2022, the bank is proceeding cautiously.

Amid a housing shortage and an affordability crisis, US homebuilding heated up in February as builders anticipate demand for new homes to stay strong.

One sure way to improve affordability is to increase the availability of apartments to rent and homes to buy. In areas of the country where there has been robust homebuilding, rents and home price increases have been more moderate.

The pace of new housing starts soared by 10.7% in February from the month before, after slumping in January, according to data released Thursday by the Census Bureau and the Department of Housing and Urban Development.

KEY POINTS

• Intel is in line to receive as much as $8.5 billion in direct funding from the federal government as part of the CHIPS Act, the White House said on Wednesday.
• The company could also receive up to $11 billion in loans tied to the legislation, which was passed in 2022.
• The awards highlight the scale of the Biden administration’s push to subsidize semiconductor manufacturing on U.S. soil.

Mainstream economics is in "disarray."

It ignores the reality of power, it neglects questions of equity, and its policy recommendations can be "little more than a license for plunder."

That's the opinion of Angus Deaton, the British-American economist who won the economics version of the Nobel Prize in 2015.

The 78-year-old professor says he's recently been changing his mind about views he's long held and it's a "discomfiting process."

But will his colleagues listen to him?

China’s Longi looks to slash costs as renewable energy sector faces tough headwinds from inflation

The world’s largest solar manufacturer has slashed nearly a third of its workforce after a cost-cutting drive that included telling staff to only print in black and white fell short and as a chill ripples through the renewable energy sector.

China’s Longi is to cut as much as 30% of its workforce, in an acceleration of cost reductions that began late last year, Bloomberg reported.

It is unclear exactly how many jobs will be lost at the company, which employed 80,000 at its peak last year, as an internal function allowing employees to see the total number of staff has reportedly been disabled.

The renewables industry is facing significant headwinds in the fallout from Russia’s full-scale invasion of Ukraine in early 2022. Moscow’s reduction in gas supplies into continental Europe left governments scrambling to beef up domestic power generation, accelerating a shift towards renewables.

Volkswagen’s factory in Chattanooga, Tennessee, is likely to be the first test of the United Auto Workers’ effort to organize nonunion automobile plants across the nation.

Workers at the 3.8 million square foot (353,353 square meter) factory on Monday filed paperwork with the National Labor Relations Board seeking an election on union representation, the UAW said.

They are the first to ask for a vote in the union’s campaign, which was announced last fall after the UAW won strong contracts with Detroit automakers. The UAW said it would simultaneously target more than a dozen nonunion auto plants including those run by Tesla, Nissan, Mercedes-Benz, Hyundai, Kia, Toyota, Honda, and others.

The drive covers nearly 150,000 workers at factories largely in the South, where the union thus far has had little success in recruiting new members.

Fabric and crafts retailer Joann has filed for Chapter 11 bankruptcy protection, as consumers continue to cut back on discretionary spending and some pandemic-era hobbies.

In a Monday statement, the Hudson, Ohio-based company said that it expected to emerge from bankruptcy as early as the end of next month. Following this process, Joann will likely become privately-owned by certain lenders and industry parties, the company added — meaning its shares would no longer be publicly traded on stock exchanges.

Joann's more than 800 stores and its website will continue to operate normally during the bankruptcy process. Vendors, landlords and other trade creditors should also not see any pay disruptions, the company said, pointing to a deal it had struck with most of its shareholders for financial support.

President Joe Biden’s administration has conditionally agreed to loan more than $2 billion to the company building a controversial lithium mine in Nevada with the largest known U.S. deposit of the metal critical to making batteries for electric vehicles key to his renewable energy agenda.

The U.S Energy Department agreed on Thursday to provide the $2.26 billion conditional loan to Canada-based Lithium Americas to help cover costs at its open pit mine deeper than the length of a football field near the Oregon line.

The loan would help finance the a lithium carbonate processing plant at the Thacker Pass mine about 200 miles (322 kilometers) north of Reno — “the largest-proven lithium reserves in North America,” DOE said in a statement.

The 6% commission, a standard in home purchase transactions, is no more.

In a sweeping move expected to dramatically reduce the cost of buying and selling a home, the National Association of Realtors announced Friday a settlement with groups of homesellers, agreeing to end landmark antitrust lawsuits by paying $418 million in damages and eliminating rules on commissions.

The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.

Home loan borrowing costs fell for the second week in a row, pulling the average long-term U.S. mortgage rate to its lowest level since early February — good news for prospective home shoppers as the spring homebuying season gets underway.

The average rate on a 30-year mortgage dropped to 6.74% from 6.88% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.60%.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, pulling the average rate down to 6.16% from 6.22% last week. A year ago it averaged 5.90%, Freddie Mac said.