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What We Read Today 13 October 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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Articles about events, conflicts and disease around the world

Global

U.S.

  • Frackers could soon face mass extinction (Fortune)  It's not that fracking cannot produce oil that sells for $45 a barrel.  It's that they cannot both produce at that price and service their high-interest junk bond debt.  An analyst says one-third of the companies could be bankrupt by the end of next year.  Doomsday may finally be coming to the fracking industry.  Despite the big drop in oil prices in the past year, there have been relatively few bankruptcies in the energy industry. That may be about to change. James West, an energy industry analyst at ISI Evercore, says months of low activity have left many of the companies in the hydraulic-fracturing business either insolvent or close to it. 

  • Planned Parenthood Stops Taking Reimbursements for Fetal Tissue (The Wall Street Journal)  Planned Parenthood Federation of America said it is immediately stopping taking reimbursements for procuring fetal tissue for medical research, an attempt to tamp down controversy that has led to Republican investigations in Congress and efforts to end federal funding.  Planned Parenthood President Cecile Richards said in a letter Tuesday to the National Institutes of Health that the organization’s affiliates will no longer accept any reimbursements for costs associated with procuring tissue from abortions. Fetal tissue has been provided by affiliates in California and Washington state, and the Washington clinics haven’t been taking any money for it, she said. The Oregon affiliate has been providing placental tissue for reimbursement. Planned Parenthood didn’t disclose the amount it will forgo with its new policy.  In all cases tissues are not recovered without prior consent from the patient undergoing an abortion.

  • If Socialist Candidate Bernie Sanders Was President, Here's What Would Happen to the U.S. Economy (TheStreet)  While the U.S. economy would certainly look different under a socialist Sanders presidency, it might not be as crazy as you'd think.  Of course, a Sanders presidency would face a number of hurdles to enacting its proposals -- ahem, Congress, which is controlled by Republicans, who don't love socialists. But taking legislative hurdles out of the equation, we can glean much of what a U.S. economy run by Sanders would look like.  Among Sanders's most significant proposals are implementing a single-payer health care system, breaking up big banks, raising the minimum wage to $15, and ending free trade agreements NAFTA, CAFTA, permanent normal trade relations (PNTR) with China and the recently-signed Trans-Pacific Partnership.  Thus far, most of the senator's ideas -- economic and otherwise -- have been focused on spending, without a clear picture on how he would pay for his proposals. However, one can infer that paying for his programs would require one of two things (or a combination of both): an increase in the deficit, and higher taxes.  Econintersect:  This article is constrained by the assumption that taxes pay for federal spending when that is a debated assumption. 

Syria

  • US draws a line on protecting CIA-backed rebels in Syria  (Assoicated Press)  The Russian military intervention to prop up Syria's government has brought new scrutiny of the CIA's secret support to Syrian rebels fighting Bashar Assad. But how far is the U.S. willing to go to empower its proxies to take on Vladimir Putin's allies?  The answer seems to be: Not very far.   White House spokesman Josh Earnest told reporters Tuesday:

"Countering Russia's involvement in Syria doesn't rate nearly as high on the scale" as battling the Islamic State, which has declared a caliphate across parts of Syria and Iraq.

Ukraine

Iran

  • White House says Iran's missile test may have violated U.N. resolution (Reuters)  White House spokesman Josh Earnest said on Tuesday that there are "strong indications" that Iran's test of a new precision-guided ballistic missile on Sunday violated a U.N. Security Council resolution.  The U.N. Security Council prohibits Iran from undertaking any activity related to ballistic missiles that could deliver a nuclear warhead, but Iranian officials have pledged to ignore the ban.

Other Economics and Business Items of Note and Miscellanea

  • What Health Policy Analysts Can Learn From Development Economics (Health Affairs Blog)  Have you ever wondered why some countries seem completely dysfunctional — enjoying no economic growth or even negative growth and serving as home to millions of people who live on the income equivalent of one or two dollars a day?  In 1993, a group of economists developed a model which appears to theoretically explain this phenomenon quite well. As it turns out, the very same model can be used to explain the dysfunctionality in our health care system. It can also help us understand why so many proposed reforms are completely wrongheaded.  The enemy of growth is rent seeking activity dominating production activity.  For more details see Why Is Rent-Seeking So Costly to Growth? (Kevin M. Murphy, Andrei Shleifer and Robert W. Vishny, The American Economic Review)  The preview of the article is free, full article download $10.

  • The Absurd Economics Of The Fossil Divestment Campaign (Tim Worstall, Forbes)  Worstall discusses the improper discounting of far future events, such as the end of the age of fossil fuels.  He thinks that the argument that investors should divest now from fossil fuel investments is wrong-thinking because it ignores the short-term and intermediate-term value.  Econintersect:  A correct analysis involves the determination of depletion of value rather than depletion of the commodity.  (Think coal, for example, which is suffering massive market value declines in recent years.)  The key to success then is to plot the decline in resource usage over a long time period, say 20, 30 or 40 years into the future.  This is what Worstall is trying to get at here, in a very general sense.  Here is his summary of what he thinks is a common error:

It’s entirely possible to believe that large parts of current fossil fuel reserves are going to be worth nothing in the future as we won’t burn them. Either because we don’t want to boil the planet or because in our concern for not doing so we’ve invented some better method of powering civilisation. It’s also entirely possible to believe that investors and corporations are too short term in their thinking. I rather tend to both views myself. However, it’s an economic absurdity to believe both and then insist that investors need to display better long term thinking by then divesting from fossil fuel companies. Because we’ve already said that investors are thinking in too short term a manner: therefore they’re not thinking about the long term value of those fossil fuels at all.

  • Piketty in Africa: heat, hype and heterodox economics (African Arguments)  An interesting and readable account of what happened when Thomas Piketty visited the most unequal country on the planet.  Interestingly the author discloses that she has read only selected chapters of Piketty's book.  Don't let that put you off, though.  This is worth reading.

  • Key member of Swedish Academy of Sciences calls for immediate suspension of the “Nobel Prize for Economics” (Real-World Economics Review Blog)   Bo Rothstein, an important member of the Royal Swedish Academy of Sciences, has today in Sweden’s most widely read newspaper called for an immediate declaration of a moratorium on the awarding of Sveriges Riksbank Prize for Economics in the name of Nobel and the Nobel Foundation.  Rothstein’s article argues that today with increasing success, economics as commonly taught in universities and endorsed by most winners of the economics prize promotes corruption in societies around the world.  Therefore he concludes that the Nobel Foundation’s awarding the economics prize is “in direct conflict with what Alfred Nobel decreed in his will.”  Rothstein says he will press forward on this with the Academy.

  • Taking Price Matching to the Next Level (Nathan For You, Comedy Central)  How to compete with a big box store price match policy.


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