Attention Economy


Tuesday, May 31, 2016

Misallocation of Resources - A Few Real World Examples

Arms Buildup in Asia
A worrisome trend (and potentially a massive misallocation of limited resources) –
http://www.bloomberg.com/graphics/2016-shangrila/

Taxpayers wasted billions of dollars on a war on cocaine that didn’t work, economists say by Christopher Ingraham
“American taxpayers got a dismal return on their $4.3 billion investment in the Colombian drug war between 2000 and 2o08, according to a new analysis by economists at MIT and Colombia's Universidad de los Andes.”

Financial Engineering and the Real Economy

Financial engineering is replacing real engineering by Satyajit Das
“In reality, share buybacks, etc., boost the stock price by increasing EPS. In the US, buybacks have added around $2 a share to earnings on the S&P 500 index. Given that the firm’s underlying operating performance is unaffected, it is merely financial engineering that does not alter the company’s value. A primary motivation is enhancing the remuneration of senior managers, where stocks and options may constitute as much as 80 percent of the total compensation.”

History Lesson – The Rise of the Petrodollar

An interesting Bloomberg piece - The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt Secret
http://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret

The Global Oil Market

Rise and Fall of Megabanks

Fantastic WSJ graphic:

When Bigger Isn’t Better: Banks Retreat from Global Ambitions – WSJ
http://www.wsj.com/articles/when-bigger-isnt-better-banks-retreat-from-global-ambitions-1464628433

Monday, May 30, 2016

China and International Trade

An excellent piece by international trade expert Robert Feenstra:
The International Trade and Investment Program
http://www.nber.org/programs/iti/iti.html

Saturday, May 28, 2016

Africa's Long-Term Economic Prospects

Africa’s Economic Development - Africa’s Rise—Interrupted? By Steven Radelet
Georgetown’s Steven Radelet notes:
“Is Africa’s surge of progress over? During the past two decades, many countries across the continent changed course and achieved significant gains in income, reductions in poverty, and improvements in health and education. But the recent optimism seems to have swiftly given way to a wave of pessimism. Commodity prices have dropped, the world economy has slowed, and economic growth has stalled in several sub-Saharan African countries. If high commodity prices alone drove recent advances, the prospects for further gains seem dim.
But the reality is more complex, and the outlook—especially over the long run—is more varied than many now suggest. To be sure, many countries are confronting some of the most difficult tests they have faced for a decade or more, and even with sound management, progress is likely to slow in the next few years. But for others—especially oil importers with more diversified export earnings—growth remains fairly buoyant. At a deeper level, although high commodity prices helped many countries, the development gains of the past two decades—where they occurred—had their roots in more fundamental factors, including improved governance, better policy management, and a new generation of skilled leaders in government and business, which are likely to persist into the future.”

Related:
http://vivekjayakumar.blogspot.com/2015/11/africa-and-premature-deindustrialization.html

Friday, May 27, 2016

For the Intelligent Reader - The Future of Democracy

Andrew Sullivan’s interesting and wide-ranging piece - Democracies end when they are too democratic:
http://nymag.com/daily/intelligencer/2016/04/america-tyranny-donald-trump.html

A few highlights from Sullivan’s article –
“The web’s algorithms all but removed any editorial judgment, and the effect soon had cable news abandoning even the pretense of asking “Is this relevant?” or “Do we really need to cover this live?” in the rush toward ratings bonanzas. In the end, all these categories were reduced to one thing: traffic, measured far more accurately than any other medium had ever done before.
In Eric Hoffer’s classic 1951 tract, The True Believer, he sketches the dynamics of a genuine mass movement. He was thinking of the upheavals in Europe in the first half of the century, but the book remains sobering, especially now. Hoffer’s core insight was to locate the source of all truly mass movements in a collective sense of acute frustration. Not despair, or revolt, or resignation — but frustration simmering with rage. Mass movements, he notes (as did Tocqueville centuries before him), rarely arise when oppression or misery is at its worst (say, 2009); they tend to appear when the worst is behind us but the future seems not so much better (say, 2016). It is when a recovery finally gathers speed and some improvement is tangible but not yet widespread that the anger begins to rise.”

--
Robert Kagan’s (senior fellow at the Brookings Institution) piece – This is how fascism comes to America


UPDATES: Global Fascism
http://www.nytimes.com/2016/05/29/world/europe/rise-of-donald-trump-tracks-growing-debate-over-global-fascism.html
MIT economist Simon Johnson - Donald the Destroyer
Washington Post’s Richard Cohen on Trump –
https://www.washingtonpost.com/opinions/trump-has-taught-me-to-fear-my-fellow-americans/2016/05/30/1b364736-242a-11e6-aa84-42391ba52c91_story.html

Businessmen are not Economic Experts

Nobel laureate Paul Krugman notes:
“Still, I was struck by several recent polls showing Mr. Trump favored over Hillary Clinton on the question of who can best manage the economy.
This is pretty remarkable given the incoherence and wild irresponsibility of Mr. Trump’s policy pronouncements. Granted, most voters probably don’t know anything about that, in part thanks to substance-free news coverage. But if voters don’t know anything about Mr. Trump’s policies, why their favorable impression of his economic management skills?
The answer, I suspect, is that voters see Mr. Trump as a hugely successful businessman, and they believe that business success translates into economic expertise. They are, however, probably wrong about the first, and definitely wrong about the second: Even genuinely brilliant businesspeople are often clueless about economic policy.”

Behavioral Economists on the True Cost of Waiting in Lines

Waiting in Line for the Illusion of Security by SENDHIL MULLAINATHAN and RICHARD H. THALER
Economists SENDHIL MULLAINATHAN and RICHARD H. THALER note:
“You might object that such measurements are pointless because this time spent is a small price to pay for safety. That’s true, but only up to a point. It is an illusion to think that, by waiting in line, we are buying complete safety. In every domain, we make a trade-off between risks and costs. We do not post 10-mile-per-hour speed limits on all highways, even though that would be safer. We try to find a balance between travel time and fatalities.”

Related:
Some aspects of modern life are not so great
http://www.nytimes.com/2016/05/19/us/tsa-airport-security-long-lines.html

Profile of Dani Rodrik

Profile of Turkish-born Harvard economist Dani Rodrik
http://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/people.pdf

An Extraordinary Story of Corruption

Impressive report from the Washington Post – The man who seduced the 7th Fleet
http://www.washingtonpost.com/sf/investigative/wp/2016/05/27/fat-leonard/

Spelling Bee/Geographic Bee Dominance Continues

2016 National Spelling Bee Winners –

Thursday, May 26, 2016

Unintended Consequences of Farm Subsidies

An excellent WSJ op-ed: A Subsidy as Shameful as They Come
“The real culprit here are federal peanut programs with an almost 80-year record as one of Washington’s most flagrant boondoggles. Subsidies have encouraged farmers to overproduce and then dump surplus peanuts on the USDA, which winds up stuck with hundreds of millions of pounds.
That food has to go somewhere, and the department sees Haiti as the ticket. Food-aid policies have long been driven not by altruism, but by bureaucratic desperation to dispose of the evidence of failed farm policies.”

International Affairs - Interesting Readings

Wednesday, May 25, 2016

Panama Canal and Global Trade Routes

Panama Canal is likely to shake up trade routes once again:
“Nine years of construction work, at a cost of more than $5 billion, have equipped the canal with a third set of locks and deeper navigation channels, crucial improvements that will double the isthmus’s capacity for carrying cargo between the Atlantic and Pacific oceans.
When the new locks slide open to receive traffic for the first time in late June, the reverberations will be felt from Asian gas terminals to Great Plains farms and ports from Miami to Long Beach to Santiago.”

Tuesday, May 24, 2016

US, China and India – 21st Century Power Dynamics

How to Manage a Rising Power—or Two by KORI SCHAKE AND ANJA MANUEL
http://www.theatlantic.com/international/archive/2016/05/china-india-rising-powers/484106/

Supply, Demand and Asset Prices

A simple yet fundamentally important point is highlighted by JAMES MACKINTOSH:
“High prices eventually lead to supply, which leads to lower prices. London has among the highest prices for residential real estate in the world, but the lesson applies to any company, in any sector, when it gets its moment in the market spotlight.
The pattern is evident in markets time after time, yet investors repeatedly make the same mistake, arguing that this time is different, because this time demand is running ahead of the surge in supply. Mining and oil companies are suffering the effects of the biggest of these capital cycles, with holes in the ground still being dug years after commodity prices plunged. But even in these most cyclical of sectors, investors still got carried away with their projections of demand in the good times, ignoring the solid evidence of increasing supply.”

Admissions Bias at Top US Universities

An interesting piece on an important issue:
“…Yet one feature of modern college admissions practices in the United States that can often be overlooked in this discussion is that white applicants receive a significant boost relative to Asian-Americans. This is among the findings of a major study by Princeton sociologists Thomas J. Epenshade and Alexandria Walton Radford, who also observe that Hispanic and African-American applicants receive a boost relative to whites.
According to the authors’ models, an Asian-American applicant must score 140 points more on the SAT out of 1600 than her white counterpart, all other things equal, to stand a comparable chance of admission at an elite institution.”

Related:
http://vivekjayakumar.blogspot.com/2015/06/bamboo-ceiling.html

Puerto Rico Debt Relief

US Congress appears to be headed in the right direction (finally):

Monday, May 23, 2016

Getting Rid of the ‘Developing Countries’ Tag

The World Bank shifts away from designating countries as developing economies:
“When you look at the actual numbers, many of the traditional divisions turn out to be way past their sell-by-date. In its 2016 update of its Development Indices, the World Bank decided to get rid of the distinction between the “developing” world, defined as low and middle- income nations, and “developed” world, defined as high-income nations, across its whole range of statistics and programmes. The reason for that decision was fascinating. “There is no longer a distinction,” it concluded.” 

The Future of Smartphones – Complete Modular Phones

Google’s Ara Project


John Oliver on US Primaries and Caucuses

An instant classic -

China Gets Serious about Science

Scientific revolution underway in China
http://www.bbc.co.uk/news/resources/idt-0192822d-14f1-432b-bd25-92eab6466362

Sunday, May 22, 2016

Global Migration – A Reality Check

A timely piece from Der Spiegel notes:
“Take a tape measure. Unroll the tape to about two meters (six feet) and place one end against a wall. The distance between you and the wall corresponds to the world population of about 7.3 billion people. The number of people worldwide who left their native countries in the last five years -- in other words, migrated -- takes up about one centimeter (three-eighths of an inch) of the tape measure. That number amounted to 36.5 million, or 0.5 percent of the world's population. All others, or 99.5 percent of the global population, are non-migrants, or people who were living in the same country in 2015 as in 2010. They represent the other 199 centimeters on the tape measure.”

Economics of the Animation Industry

Globalization and Technology - Two critical drivers of the US animation industry
http://www.theatlantic.com/entertainment/archive/2016/05/a-new-age-of-animation/483342/

Venezuela – From Socialist Paradise to Hyperinflation Hell

The rapid demise of the Venezuelan economy offers a cautionary tale of economic mismanagement:
http://www.telegraph.co.uk/business/2016/05/21/venezuela-how-the-socialist-paradise-turned-into-debt-and-hyperi/

Readings on American Capitalism

Wall Street and the American Economy

Big Pharma and US Drug Prices - A revealing cover story from Bloomberg BusinessWeek:
http://www.bloomberg.com/news/articles/2016-05-19/the-real-reason-big-pharma-wants-to-help-pay-for-your-prescription

Thursday, May 19, 2016

Is the World Becoming More Conformist?

Thought-provoking piece from NYT’s Roger Cohen:
“In his great poem “The City,” C.P. Cavafy wrote that: “As you’ve wasted your life here, in this small corner, you’ve destroyed it everywhere else in the world.” We never escape our own skins, nor our lives lived to this point, however far we go in search of escape. But today’s trap, fashioned through technology, is of a different nature. The homogenization of experience is also an insidious invitation to conform.”