Category Archives: Economics

Hints about the future of rural America?

I thought these observations gleaned from recent news stories, were worth sharing. They arrived in emails from someone who comments as “Compare Decide”.

The good news is that JC Penney has made its first profit since 2010.

The bad news is that they have decided to close up to 140 stores.

The worse news is that this will probably trigger the closing of many struggling shopping malls.

Most of these articles on this subject frame it in terms of the rise of online shopping, or the executive mistakes of the past.

But it has been little noted that these store closings are in rural areas.

The story of the century is the decline, obsolescence and doom of small towns and outside suburbs, and so few seem to see this pattern.

But back in September of 2016, an optimistic JC Penney was planning on replacing Sears and Macy’s.

Some of J.C. Penney’s most profitable locations turned out to be small stores in rural areas where the retailer pays almost no rent; two California stores opening this year will be completely funded by the landlord.

A less happy story from yesterday.

Penney on Friday eked out its first annual profit since 2010, but executives said they were closing weaker stores so they could focus their investments on revamping those in stronger markets. Penney said it would identify the locations that are set to close next month, though executives said many were smaller stores in rural locations.

Geography is critical.

Optimism is still evident in some parts of the retail industry.

But another mall giant, Gap Inc., posted higher comparable quarterly sales for the first time in two years. “If you read the headlines today, you’ll see the words dead, dying, sick. We are none of those,” CEO Art Peck told investors late Thursday. “We are healthy and strong and have a plan and clear direction.”

Um, that’s what JC Penney was saying last year….

Watching the rising waters

A New York Times story published this week reports that the economic impact of climate change and rising sea levels on coastal real estate “could surpass that of the bursting dot-com and real estate bubbles of 2000 and 2008.”

It’s an important story with plenty of implications for Hawaii, but likely got lost in the Thanksgiving and Black Friday news and advertising.

See: Ian Urbina, “Perils of Climate Change Could Swamp Coastal Real Estate.”

“The fallout would be felt by property owners, developers, real estate lenders and the financial institutions that bundle and resell mortgages,” according to the story.

The article cites “nuisance flooding,” or flooding caused by tides rather than by weather, as sort of a leading indicator. Honolulu already has its share. The high tide floods in the Mapunapuna industrial area is just the most recognized. But some older high rise buildings in low lying areas of Honolulu, including in and around Waikiki, are already facing problems created by a rising water table. I know of several condominiums on the edge of Waikiki where water is entering elevator shafts, requiring expensive efforts to seal or block the waters. Given the number of older buildings, I would be surprised if this isn’t a major issue that just hasn’t grabbed the public’s attention yet.

There are many unknowns, including the pace of sea level rise over coming decades and the reaction of real estate markets.

The NYT story cites a recent post by Freddie Mac, the mortgage giant, concerning the impact on the mortgage market.

One challenge for housing economists is predicting the time path of house prices in areas likely to be impacted by climate change. Consider an expensive beachfront house that is highly likely to be submerged eventually, although “eventually” is difficult to pin down and may be a long way off. Will the value of the house decline gradually as the expected life of the house becomes shorter? Or, alternatively, will the value of the house—and all the houses around it—plunge the first time a lender refuses to make a mortgage on a nearby house or an insurer refuses to issue a homeowner’s policy? Or will the trigger be one or two homeowners who decide to sell defensively?

I’m now living a quarter-mile from the beach, and I’m old enough that the long view isn’t as much of a personal concern. But for younger folks, this all deserves to be a much higher priority.

Airport maintenance woes still obvious to travelers

Ah, let’s hear it for our highly ranked airport in Honolulu!

You know that this ranking didn’t take into account the physical condition of the airport or the level of its maintenance.

We left Honolulu on a United flight direct to Houston on Monday night, connecting to New Orleans. The flight departed from one of United’s most heavily used gates. Gate 9.

This was part of the view in the waiting area. Those are missing ceiling tiles up there, apparently exposing conduits that are under repair. The missing tiles extended in both directions. There was no indication of active repairs going on.


The problem, of course, is that it’s been that way for quite a long time. It seems to be a chronic condition. On another trip in the past year, I also took a picture or two. It doesn’t look like anything has been done in the meantime.

This is the image of Honolulu that millions of travelers take with them each year.

Just another HNL moment.

By the way, there were no visible issues comparable to this in the airports we traveled through in either Houston or New Orleans. Hawaii’s a special place.

Recommended: “In praise of incrementalism”

Do you listen to Freakonomics Radio? I usually download their programs as podcasts and listen when I have time. I would highly recommend this week’s episode, “In Praise of Incrementalism.” It’s aimed at those who expect change to happen all at o once, in revolutions, or “big-bang successes”. But change, even very big sea changes, more typically happen incrementally, in a series of small steps that eventually accomplish those big changes.

In discussing this, the program argues that the belief in or search for the “magic bullet” that we expect to solve social issues actually interferes with the real process of change.

Here’s an excerpt.

But it’s certainly true that in the political sphere we are always looking big bang solutions. We’re looking for a leader who will make everything right by coming around the corner, and inevitably we’re incredibly disappointed that somehow or other this new leader didn’t magically change everything. The more that you just think that the right answer is just to elect one person who will magically fix anything, the less that you actually pay attention to what really matters, which is the nit and grit of everyday decision-making, of everyday governance.

DUBNER: So civil-rights reform strikes me as one where, incrementally, there have been massive improvements, and yet it seems as though the appetite for an overnight solution to every civil-rights issue is kind of expected. And when that doesn’t happen, there’s massive hue and cry — even though, overall, the trend has been moving in the right direction. You see that as well, or do you think I’m wrong on that?

GLAESER: No, no I agree totally with that. And it required people who — the NAACP for example, which worked for decades before the Civil Rights Act, right, to move the ball forward. Often in, you know, ways that were important, but seem today quite modest. I mean fighting up to the Supreme Court. Fighting the attempts to zone by race, for example, which it did in the teens. Right? You know, American segregation would’ve been even worse if cities could explicitly zoned by, by race, but they couldn’t. Fighting restrictive covenants as it did in the 40s. Fighting segregation in American schools as it did in the 50s. Decade by decade, increment by increment. And once we start thinking that there’s a silver bullet, we lose that, we lose the fact that we need to be working day by day, over decades, to affect change.

It seems to me that this is a perspective that speaks directly to the disappointment and disillusionment expressed by many supporters of Bernie Sanders’ campaign, and so very relevant to where we find ourselves today.

Anyway, the website includes both a link to download the audio as well as a transcript of the episode.