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.
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Topics today include:
Neoliberalism is Dead
New Economic Thinking is Recognizing Complexity
Energy in Economic Production Functions
Maximizing Shareholder Value is Cannibalizing Corporations
Hunt for a Replacement for GDP
Fischer Signals 2016 Rate Hike
EU Officials Knew of Emissions Evidence and Ignored it for Years
EU Leaders Trying to Plan for Brexit
More on Distressed Eurozone Financial System
80% of UK Wants Immigrants to Stay Post Brexit
Child Bomber Kills 51 in Turkey
Hidden Codex in Mexico Describes Pre-Conquest Life
Articles about events, conflicts and disease around the world
The Hunt Is On for a New Way to Measure the World's Economic Output (Bloomberg) Gross domestic product is so twentieth century. The measure has risen from humble beginnings during the Great Depression to be an essential gauge for governments and central banks the world over. Long-term investors allocate capital based on its findings; traders buy and sell stocks, bonds, currencies and commodities in the blink of an eye after readings flash on their screens. One such closely-watched report comes this Friday, when the U.S. releases its revised estimate of second-quarter GDP. Problem is -- whether compiled by production, income or expenditure approaches -- GDP is increasingly struggling to keep up with the pace of economic change.
Fischer Signals 2016 Rate Hike With Economy Nearing Fed Goals (Bloomberg) Federal Reserve Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration, saying the U.S. economy is already close to meeting the central bank’s goals and that growth will gain steam. Fischer said in a speech at the Aspen Institute in Aspen, Colorado on Sunday:
“We are close to our targets. Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes.”
Ventotene summit to chart roadmap for EU's response to Brexit vote (The Guardian) The leaders of the eurozone’s three largest countries will meet on a small southern Italian island on Monday for further talks on the way forward for the European Union following Britain’s shock vote to leave. Italy’s prime minister, Matteo Renzi, will welcome the German chancellor, Angela Merkel, and the French president, François Hollande, to Ventotene off the coast of Naples for a second round of trilateral talks before an informal EU summit in September.
Two conclusions are worth retaining. First, it would seem to me utterly imprudent to maintain that the Eurozone is no longer exposed to a bad shock, given the lack of adequate risk sharing arrangements. Second, existing rules in EU law do not require the application of burden sharing when this risks financial instability. And indeed, the current financial conditions in the Eurozone seem to require great caution in the application of burden sharing.
The idea that the Eurozone would be made more stable by ruthless application of burden sharing without due consideration to the current economic and financial conditions of the banking system seems to me ill-thought and indeed quite dangerous.
British want EU migrants to stay after Brexit, says poll (The Guardian) More than eight out of 10 people in the UK believe EU migrants already living in Britain should be allowed to remain after Brexit, including 77% of Leave voters. The figures are revealed in new poll for the British Future think tank which wants a “national conversation” on immigration as part of a comprehensive review of a system in which, it says, “the public has lost all confidence”. In its new report, “What next after Brexit? Immigration and integration in post-referendum Britain”, British Future claims that its ICM poll confirms that the majority of people in post-referendum Britain fall into what calls the “anxious middle” – while concerned about the pressures of high migration, they also accept the benefits that migrants bring to the economy and wider society.
Turkey's Erdogan blames child bomber for attack that killed 51 (Reuters) A suicide bomber aged between 12 and 14 carried out the attack on a wedding party in the Turkish city of Gaziantep on Saturday that killed at least 51 people, the president said. The attack was the deadliest in a series of bombings in Turkey this year, and President Tayyip Erdogan said Islamic State was likely behind it.
Iraq hangs 36 people sentenced to death for killing of troops in 2014 (Reuters) Iraq said on Sunday it had hanged 36 militants sentenced to death over the mass killing of hundreds of mainly Shi'ite soldiers at a camp north of Baghdad two years ago. It is the highest number of militants executed in one day by the Iraqi government since Islamic State fighters took control of parts of northern and western Iraq in 2014. The executions were carried out at a prison in the southern Iraqi city of Nasiriya, state television quoted the Justice Ministry as saying. As many as 1,700 soldiers were killed two years ago after they fled from Camp Speicher, a former U.S. military base just north of Saddam Hussein's home town of Tikrit, when it was overrun by Islamic State, the ultra-hardline Sunni group.
Hidden codex may reveal secrets of life in Mexico before Spanish conquest (The Guardian) One of the rarest manuscripts in the world has been revealed hidden beneath the pages of an equally rare but later Mexican codex, thanks to hi-tech imaging techniques. The Codex Selden, a book of concertina-folded pages made out of a five-metre strip of deerhide, is one of a handful of illustrated books of history and mythology that survived wholesale destruction by Spanish conquerors and missionaries in the 16th century. The codex is one of fewer than 20 dating from before or just after the colonisation, which were saved by scholars who realised the importance of the strip cartoon-like images, a complex system that used symbols, stylised human figures and colours to recount centuries of history and beliefs, including religious practice, wars, the founding of cities and the genealogy of noble families.
Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea
Nobel Prize-winning economist Stiglitz tells us why 'neoliberalism is dead' (Business Insider) Hat tip to Rob Carter. Joseph Stiglitz, the Nobel Prize-winning economist and former adviser to US President Bill Clinton, says the consensus surrounding neoliberal economic thought has come to an end. He told BI that the dominant school of economic thinking in the West for the past 30 years or so, is on its last legs:
Since the late 1980s and the so-called Washington Consensus, neoliberalism — essentially the idea that free trade, open markets, privatization, deregulation, and reductions in government spending designed to increase the role of the private sector are the best ways to boost growth — has dominated the thinking of the world's biggest economies and international organizations like the International Monetary Fund and the World Bank.
The policies of Ronald Reagan and Clinton in the US and Margaret Thatcher in the UK are often held up as the gold standard of neoliberalism at work, while in recent years in Britain George Osborne and David Cameron's economic policies continued the neoliberal tradition.
What is New Economic Thinking? (Evonomics) Hat tip to Rob Carter. This is a long but very worthwhile essay on how complexity theory is finding new users in heterodox economics. The new economic thinking is most strongly characterized by leaving behind the idea that economies spend any significant amount of time in equilibrium, are dominated by linear forces which focus on expectations, rational self-interested individuals and profit maximizing firms. The author cites Brian Arthur, Steven Durlauf and David Lane (1997) who suggested complexity has six defining characteristics:
Dispersed interaction: Developments in the economy result from the interaction of heterogeneous agents, whose actions are determined by their environment and by the predicted actions of other agents.
The absence of a global controller: The economy is characterised by competition and coordination between decision-makers and no single agent is able to exploit all opportunities in the economy.
A cross-cutting hierarchical organisation: The economy is comprised of many levels of organisation and there are many intertwined interactions that span across all levels.
Continual adaptation: Decision-makers or agents are continually learning and adapting to their environment, emergent patterns and interactions.
Perpetual novelty in the system: New niches continually emerge out of new markets, new technologies, new behaviours and new institutions.
Out-of-equilibrium dynamics: The economy is typically operating far from any equilibrium or optimal output and there is constant improvement.
Incorporating Energy Into Production Functions (Steve Keen, Forbes) Steve Keen contributes to GEI. Prior to Adam Smith, energy was considered one of the key inputs to production. But with Smith and those who followed him, capital and labor were considered the two "fonts of wealth" and energy has not been a factor in economic thinking for more than 200 years. Prof. Keen describes why and how energy can be properly included in descriptions of an economy once again.
The Cannibalized Company (Reuters) Combined stock repurchases by U.S. public companies have reached record levels, a Reuters analysis finds, but as the recent history of such iconic businesses as Hewlett-Packard and IBM suggests, showering cash on shareholders may exact a long-term toll. Econintersect: This is emblematic of "maximizing shareholder value" which compensates executives based on how much money per share can be returned to shareholders in real time and offers no meaningful compensation for enabling future growth of a company. According to this article, large dividends and share buyback programs "cannibalize innovation, slow growth, worsen income inequality and harm U.S. competitiveness".
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