What are the forces moving the Minnesota economy? Adam Belz tries to identify the trends and show the connections between Minnesota and the larger U.S. and global economies. You can connect with him on Twitter: @adambelz

Opening Belz, Aug. 29

Posted by: Adam Belz under Business trends Updated: August 29, 2014 - 10:07 AM

Medtronic will cover CEO’s $25m inversion tax bill – StarTribune
Templeton Rye comes clean. It’s not an Iowa whiskey at all – Des Moines Register
A piece on Autor, technological change, the economy – Financial Times
New 15-story condo project slated for Downtown East – StarTribune
Fargo-Moorhead authorities OK more money for environmental review of levee – Fargo Forum
Regulators OK $160m upgrade to Enbridge pipeline – StarTribune
Evictions soar in hot market, renters suffer – NY Times
ND delegates criticize Canadian Pacific over rail delays – Fargo Forum
Yellowstone super volcano eruption would bury Billings, disrupt air traffic – Billings Gazette
Central ND could get mega power plant – Bismarck Tribune

Opening Belz, Aug. 27

Posted by: Adam Belz under Business trends Updated: August 27, 2014 - 9:59 AM

SEIU wins historic home health worker unionization vote – StarTribune
Best Buy gives investors a reality check on…Best Buy – StarTribune
Bumper sugar beet crop in Montana means factory starts early – Billings Gazette
Protectionism today: U.S. slaps duties on Mexican sugar – Reuters
There’s a shortage of rural lawyers – Washington Post
Medtronic buys another European company, for $350m – StarTribune
Minnesota Power to add huge solar farm at Camp Ripley – StarTribune
Tourists flock to Seoul for plastic surgery – Washington Post
Cannabis oil ‘light years away’ in Iowa – Des Moines Register
“Denim has struggled to compete against pliable pants” – Huffington Post

Opening Belz, Aug. 26

Posted by: Adam Belz under Business trends, Economics Updated: August 26, 2014 - 10:56 AM

The nation should follow Tennessee, make community college free – Scientific American
Warren Buffett is helping Burger King with its tax inversion deal – WSJ
Toilet paper maker Kimberly-Clark goes tubeless – Milwaukee Journal Sentinel
Environmental study required for frac sand shipper in Winona – Winona Daily News
Is Colorado town “up for whatever”? Bud Lite hopes so – Denver Post
Grain shipments are backed up in the rail system and the NYT is on it – NY Times
A graphic showing the most expensive film props of all time – ShortList
A driverless car test run on the streets of Washington – Washington Post
Federal labor board rules against Jimmy John’s in fired workers case – StarTribune
Emerald ash borer marches across Iowa, confirmed in Story County – KCRG

The positive externalities of child care and market failure

Posted by: Adam Belz under Business trends, Economics Updated: August 25, 2014 - 12:18 PM

We published an article yesterday about problems in the daycare market – especially in rural areas and especially for infant care. It’s become a problem for businesses and for the rural economy, because parents can’t find good enough daycare for their kids, and so either miss work or have to quit their jobs altogether.

One thing I didn’t get into in the piece was the idea that the child care market is an example of classic market failure – that is, a failure of the market to efficiently allocate resources.

There are many types of market failure – caused by monopolies, or negative externalities (for instance, when the costs of a company’s pollution aren’t born by the business or its customers).

But market failure can also happen when the benefits of a good or service spill over to society in general, and the people providing the service aren’t able to charge the customer for those spillover benefits. This is the case with child care, said Rob Grunewald, an economist at the Federal Reserve Bank of Minneapolis.

Child care serves an early childhood education function, and early education prepares kids for school, which sets them on a tax-paying, law-abiding path that is good for the economy and society. But that value is long-term and spills over to all of society — not just to the child and her parents.

The “social marginal benefit” exceeds the “private marginal benefit.” So there's a stalemate. Parents can't pay much more, providers can't charge much more, and yet providers aren't making much money. This is likely because of the spillover benefits.

“Economics tells us that when spillover benefits are present, the market tends to produce too little,” Grunewald said.

Essentially, child care is like education. It provides massive value that doesn’t show up in the price, which helps explain why there aren’t more options for rural parents. Supply isn’t keeping up with demand, because of market failure.

Opening Belz, Aug. 25

Posted by: Adam Belz under Business trends Updated: August 25, 2014 - 10:32 AM

Ricardo Lopez on the economy shaping the MN governor’s race – StarTribune
Brian Bakst on the same subject – StarTribune
“Weed blaster” shows promise as alternative to herbicide – StarTribune
Burger King in talks to buy Tim Horton’s, move HQ to Canada – WSJ
How Colorado’s governor struck a deal on fracking – Denver Post
In quest for oil, natural gas goes to waste – Houston Chronicle
Why the job market improved after the BP oil spill – Washington Post
U.S. rice farmers want to export to China, but can’t – LA Times
A long read on people leaving Toronto for the suburbs – Toronto Life
As fracking technology advances, companies “refrack” old wells – Reuters
No U.S. drones, not much U.S. intelligence on ground in Syria – Washington Post


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