Friday, November 16, 2018

Princeton Review: NC State Online MBA #9 in the world

The great rankings news keeps coming!  This time it is Princeton Review which ranked NC State's MBA #9 in the world on their list of the Top 25 Online MBA Programs.  The ranking is based on a student survey, along with school-reported data on graduation rates, student quality, faculty qualifications, student and career services, and technology support.  Kudos to all who have contributed to the program's success.

Thursday, November 8, 2018

NC State MBA zooms to #47 in Businessweek rankings

The full-time NC State MBA program made a huge jump in the Bloomberg Businessweek rankings from #70 to #47 in the US and #20 among public universities.  There was a major change in methodology, which probably have helped some.  Also starting salaries last May were up $10k.  .  

This year the ranking was based on four dimensions.  NC State placed #16 on learning (first time this was ever measured, have to think it reflects the real-world projects), #25 in entrepreneurship (long overdue recognition), #48 in networking (kudos to all who engage with alums and companies), and #61 in compensation (unadjusted for cost of living and taxes of course).  

Other ACC schools that were ranked:
Virginia #9
Duke #15
UNC #23
Georgia Tech #27
Notre Dame #31 
Boston College #59 
Miami #62 
Pittsburgh #68 
Syracuse #77

Bottom line: #47 overall, #20 public universities, #6 ACC.  Great and well-deserved recognition.  

Thursday, November 1, 2018

Is a recession on the way in 2020?

So says NYU Stern's Nouriel Roubini, who was one of the very few academic economists who correctly predicted the 2008 market meltdown and subsequent recession.  Roubini thinks that the global economy will continue to grow in 2019, thanks to strong stimulus in the US and China.  But in 2020 he says "conditions will be ripe for a financial crisis followed by a global recession."

His reasons for concern include the end of fiscal stimulus in the US, higher interest rates, tariffs and the resulting uncertainty in global investment, and overpriced stocks.   Roubini also fears that debt levels will be so high that tax cuts and government spending increases will not be viable policy options.  That could mean the 2020 meltdown, if it happens, could be more severe and longer than the Great Recession.

Wednesday, October 31, 2018

NC State MBA team takes 1st place in Teradata challenge

More honors for NC State's Jenkins MBA program!  Jaideep Basak, Ryan Randall, Dena Simkus and Anjanie Kashidas took 1st place in the Teradata University Network Analytics Challenge.   There were 45 teams involved, five of which presented at the Teradata annual conference in Las Vegas earlier this month.

The NC State team's entry was based on their spring 2018 project in the Decision Analytics Practicum.  Kudos to the team and to David Baumer, their faculty advisor.

Tuesday, October 30, 2018

NC State MBA in Economist magazine global top 100

Great news about the NC State Jenkins MBA program!  The program has been ranked as one of the top 100 full-time MBA programs in the world by the Economist magazine.  NC State’s Jenkins MBA came in at #97.  That put NC State among the top 50 MBAs in the US and the top 25 among public US universities 

The program was ranked especially highly along four dimensions: percentage of graduates with jobs within three months of commencement (#28 in the world), alumni ranking of career services (#49), salary increase pre and post-graduation (#52) and faculty quality (#52).  

Kudos to the faculty, staff and students who have created a world class program.  This is a well-deserved recognition.

Saturday, September 29, 2018

Dairy markets and NAFTA

NYT reports that dairy tariffs are the major sticking point in the NAFTA negotiations between the US and Canada.  In the aftermath of last summer's G7 summit, President Trump slammed the Canadians for their 270% tariff on blended dairy powder.  U.S. negotiator Robert Lighthizer said this week that he viewed Canadian concessions on dairy as essential.

From an economic perspective, I find all of this puzzling for three reasons.  First, neither the US or Canada has anything resembling a free market in dairy.  Both countries overpay dairy farmers to produce too much and then they have to figure out what to do with the surplus.  Consumers and taxpayers are losers in both countries.  If political leaders wanted to help consumers, they would aim at dairy price supports, not NAFTA.

Second, the US runs a dairy surplus with Canada.  According to Bloomberg, Canada imports twice as much dairy to the US as it exports.  You might wonder how this can happen with 270% tariffs.  The answer: the 270% applies only when the US exports more than its allotted quota.  Otherwise the tariff is 7.5 percent.  

Third, dairy is small change in the overall pattern of trade activity between the US and Canada.  The US exported $340.7 billion to Canada in 2017, of which $470 million was dairy.  Blowing up NAFTA over such a tiny sliver of the overall market makes little economic sense.  For the sake of comparison, automotive exports are $52 billion.

Trade agreements depend on political as well as economic arguments.  Keep in mind that the Canadians have elections in 2019.  Dairy farmers in Quebec are an influential group, so no one in the Canadian government is going to do anything to ruffle their feathers.  It is less clear to me what the political arguments are for the US insistence that something must be done on the openness of the Canadian dairy market.  And that's all I will say.

Wednesday, September 26, 2018

What would happen if feds cap airline change fees?

Once upon a time you bought a plane ticket from point A to point B and it included a seat assignment (unless you were on Southwest), luggage (checked or on-board), and maybe even a snack or meal.  Now everything has been unbundled, with separate charges for seats, luggage, priority boarding and so much more.

Congress is considering an intervention by capping the amount airlines can charge for changing a flight reservation.  Currently American, Delta and United all charge $200 to change a reservation for a domestic flight.  According to WSJ, US airlines collected $2.9b in change fees last year.

What would happen if Congress put an upper limit of, say, $150 on change fees?  Standard economic analysis would interpret this as a price ceiling that would have unintended side-effects.  Airlines have already warned that they would raise fares and other fees in response, along with making fewer tickets changeable.  They also point out that customers who want more flexibility can pay for it when they buy their ticket by paying a higher fare.

But here's another thought.  The US domestic airline market is now very far from the competitive ideal of economics textbooks.  Price ceilings imposed on monopolists lead to lower prices AND increased output as long as the price provides a competitive rate of return.

My take: passengers and airlines have both benefitted from airline deregulation in the late 1970s.  Fares are much lower, more planes are flying and those planes are full.  What would really help customers is more competition.  What if we let foreign airlines provide domestic service?

Sunday, September 23, 2018

What should we expect from Trump's new NAFTA?

President Trump declared a month ago that he had negotiated the key elements of a new NAFTA deal with Mexico.  US and Canadian negotiators continue to meet and have not yet come to terms.  Assuming that the Canadians do get on board, what should we expect in terms of economic impact?

Most of the attention in the press has focused on the provisions dealing with the automotive industry.  And here the news is not good for US consumers.  Right now cars imported by the US from Mexico must have 62.5 percent of the value of their components made in the US, Canada or Mexico.  The new deal ups the ante to 75 percent.  That means fewer components made in Asia and more made in North America which translates into higher costs.  

The deal also micromanages Mexican wage determination, requiring almost half of the value of a car imported from Mexico to be produced by workers making $16 an hour or more.  This will be a windfall for some Mexican workers, paid for by US consumers.  Gains for US auto workers are less likely as most of them make well above $16 per hour.  

Mexican imports are a key part of automotive supply chains, not just for GM, Ford and Fiat Chrysler but also for Toyota and Honda.  The auto companies will have to decide whether to accept higher costs on duty-free Mexican imports under NAFTA versus redirecting their supply chains to Asia and paying whatever tariff has to be paid.  

US consumers also will react; higher prices for cars made in North America will lead to increased demand for Kias and Volkswagens.  

NAFTA is 25 years old and certainly needs some updating.  WP reports the new NAFTA will address intellectual property, worker rights and environmental concerns.  Ironically the new NAFTA's provisions on these issues are very close to those in the Trans-Pacific Partnership, signed by Mexico and Canada, but rejected out of hand by both Trump and Hillary Clinton.  

It is still not clear whether Canada will sign on to the deal.  With or without Canada, any new deal will have to be approved by Congress.  The main economic consequence right now is increased uncertainty which is freezing investment decisions by companies who had counted on relatively open borders in North America.  

Sunday, August 26, 2018

How to compete with China

MIT President L. Rafael Reif wrote an NYT op-ed two weeks ago about trade with China and the risk of losing American technological supremacy.  Reif does not condone Chinese trade practices that dictate technology transfers and often involve actual theft of intellectual property.  He cautions that China has become a research powerhouse in its own right, especially in fields such as quantum computing, 5G networks, and mobile software.  His main concern:
Unless America responds urgently and deliberately to the scale and intensity of this challenge, we should expect that, in fields from personal communications to business, health and security, China is likely to become the world's most advanced technological nation and the source of the most cutting-edge technological products in not much more than a decade.  
To maintain America's leadership position, Reid recommends the following: (1) a multiyear strategy to increase funding in key areas and to coordinate the efforts of multiple agencies, (2) revive industry-government-university partnerships, (3) invest more in STEM education, and (4) an immigration policy that attracts the best and the brightest.   

Wednesday, August 22, 2018

Different ways of looking at trade deficits

Tim Taylor's Conversable Economist blog has some updated information about trade balances for the world's largest economies.  Germany ($296b), Japan ($196b) and China ($165b) run the largest surpluses in the world in absolute dollar amounts.  The US ($466B), UK ($107b) and Canada ($49b) run the largest deficits, again in absolute dollar amounts.

It is useful to compare these surpluses and deficits to the size of the relevant economy.  Germany's surplus represents 8.0 percent of German GDP, whereas China's accounts for a mere 1.4 percent of Chinese GDP.  Yet China has been cast as the rogue nation in the eyes of the President and much of the media.

As for the US, its trade deficit represents 2.4 percent of US GDP.   This is quite a bit smaller than the UK (4.1 percent).  Turkey perhaps has the biggest trade deficit challenge of any country at 5.6 percent of GDP.

Regrettably media discussions of trade deficits never consider the size of the deficit in relationship to the size of the country.  Turkey's deficit of $47.4 billion subjects its citizens to destabilization risk far beyond what any US citizen has to worry about.