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What We Read Today 13 April 2015

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Rubio tells supporters he is running for White House (Associated Press)  Hoping to turn his relative youth into a benefit, Sen. Marco Rubio entered the presidential race Monday with a promise to move politics beyond the past, a jab at both Democratic favorite Hillary Rodham Clinton and his one-time Republican mentor, former Florida Gov. Jeb Bush.

Marco Rubio Is a Polished Performer, but He’s Out of Position (The New York Times)  The Tea Party, the Christian Right and the Center Right all have their favorite and Rubio is not any of them.


Articles about events, conflicts and disease around the world

U.S.

UK

Greece

Nigeria

Iraq

Iran

Russia

India

China

  • The risks behind China's growth gamble (CNBC)  Hat tip to Marvin Clark.  China is betting on a massive infrastructure and cross-border trade initiative to cushion the economy as it transitions to a period of slower, more sustainable growth.  But experts warn that the strategy does not directlly address the key element of increased domestic consumption but, instead, tries to export China's savings and import foreign demand.  This could assure China stays the "Germany of Asia" with all its neighbors developing unsustainable dependencies.

Japan



It’s the Weather…! (Scott Minerd, Gugenheim Partners, Advisor Perspectives)  Hat tip to Sig Silber.  The expected poor GDP number for the first quarter, according to this analysis, should be, well, expected.  Harsh winters have always depressed the economy and those occasions have been followed by a larger that usual rebound in the second quarter.

winter.weather.gdp


demographic drag on growth (McKinsey Quarterly, April 2015)  The view now is that the earth will soon reach peak growth due to an aging demographic and that will be followed by peak people.  Below is the assessment by McKinsey that most of the world will see slowing growth rates over the next 50 years.  Econintersect:  We think there are other factors than simply demographics in these results but at least they serve to get a limits to growth conversation started even though we don't yet understand the methodology details.

growth.demograph.drag.50.years


Economics as a Hard Science (The Freeman)  Very entertaining discussion of the use of thermodynamic principles to discuss the the functioning of economics with a focus on the cost of wealth accumulation.  Unfortunately the discussion is really "philosophical" and not "hard science" as advertized.  On the plus side the authors draw a conclusion which Econintersect endorses:

  "... thermoeconomics limits our ability to store wealth for future consumption, as every store of wealth eventually dissipates." 

On a less positive side, only because the author's did not define any examples, is the following:

Understanding the difference between those laws of economics that are “hardwired” into our universe and those that derive from human behavior is fundamental to effective social policy. The latter may be subject to legislative manipulation; the former are not. Too often, policymakers who do not understand the difference try in vain to alter the nature of our universe. And then they wonder why their policies don’t have the intended effect.

Econintersect: The preceding excerpt allows the reader to be too selective in deciding how to apply the principle expressed.  It is too easy for the slack minded to immediately jump to the conclusion that all collective decision making is per se subject to inefficiency.  There are such linear thinkers who will maintain that the uninhibited self-benefiting action of all individuals will automatically produce the most efficient result.  The statement is true.  The problem is that the ideal of all individuals freely self-optimizing their own wellbeing is a myth, always has been and always will be.  All individuals cannot self optimize because of (1) individual ignorance and (2) inequality of individual power.  In fact the worse of all possible outcomes results when the ignorance and the power are concentrated in the same individuals.  Throughout recorded human history the record is clear that the two conditions we specify are almost universally the human experience.

On the most negative side of the discussion is expansion of the point that when order is increased locally, entropy (disorder) is increase elsewhere in the universe.  This is clearly stated by the authors but the implication of the "totality of the universe" was not developed sufficiently.

Econintersect:  A simple example comparing two sources of energy would have been informative.  Burning fossil fuel increases entropy quite locally, to a great extent contained within the boundaries of the planet and the atmosphere.  Converting incident sunlight to energy does not appear to be creating as much disorder on the planet.  Does that mean that the entropy increase is no longer primarily local?  Well, one thing that could have been discussed is the fact that the amount of entropy produced per unit of energy is dependent on the closeness to reversibility of the process involved.  It would have been worthwhile to point out that energy choices can have greatly varying entropy effects; combustion is obviously a very irreversible process (vast amounts of material disordered instantaneously) while solar PV is less irreversible with decades needed to disorder the cells producing electricity. 

A further impact of solar energy production is that a "load" of photons which would have been put to other use (like photosynthesis) have been consumed to make electricity.  The photosynthetic products would have been a means of increasing order growing plants and that has been lost to the extent that the energy  was used otherwise (creating electricity) to increase disorder.  This change in "efficiency" of use of sunlight could have a place in the discussion except for the fact that the fraction of sunlight involved is almost infinitesimally small.  This would have been a great opportunity to discuss the importance of considereing the size of the entropy "sink" for any process.  The entropy sink for creating carbon-containing gases by combustion is much much smaller than the biosphere entropy sync involved in solar photovoltaic action.  A second factor would be the assessment of the 'efficiency" of energy production.  The more efficient a process, the closer to the theoretical "reversible process" and the lower the entropy production per unit of energy.  This also would have been an informative inclusion.


Other Economics and Business Items of Note and Miscellanea

In-flight refuelling for airliners will see non-stop services shrink the globe (The Conversation)  How can we make airliners more efficient?  Keep them in the air longer.

How Economics and Literature Made Me a Better Investor (The Wall Street Journal)

Economist:  Hillary 100% Wrong, 'World without Inequality is Life of Unrelenting Drudgery'  (Breitbart News)

Sports Business Minute: Economics inside The Masters (Comcast Sportsnet)

‘The Character of Physical Law': Richard Feynman’s Legendary Course Presented at Cornell, 1964 (Open Culture)  Hat tip to Roger Erickson.

Battery costs drop even faster as electric car sales continue to rise (The Conversation)

battery.cost.projections.elec.cars.600x400



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