Why Economists Don’t Know How to Think about Wealth (or Profits)

By Steve Roth – “Wealth” is just the beginning. As Noah Smith has said so aptly, economics terminology is a dumpster fire. The carnage extends right down to (necessarily accounting-based) definitions of income, saving, and investment.

The national accounts and the terminology therein have both embodied and promulgated an incomplete (and deeply regressive) economic world view. Even accounting-based adepts often find themselves conceptually trapped inside these incomplete, inconsistent, jumbled, and muddled concepts and definitions.

Everyone agrees that government deficit spending and bank lending create “money” (much better: “assets”) in ways that are impossible in the simplified spending-equals-expenditures circuit diagram.

Nevertheless, a huge amount of economic thinking quietly operates inside that simple circular model. more> https://goo.gl/HUF5RZ

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Donald Trump’s infrastructure plan won’t work while he’s president

By Allison Schrager – Interest rates have been so low that the potential long-term national economic benefit from improving US infrastructure, such as roads, airports, bridges, and internet access, could easily outweigh the cost of borrowing money to do it.

Now US president-elect Donald Trump is pushing forward with infrastructure plans rooted in such analysis. But there are two vitally important wrinkles to the argument to consider:

  1. The right kind of infrastructure spending will take several years to have any perceptible economic impact; there is no instant   gratification here, given the nature of projects and the current low level of US unemployment.
  2. Interest rates are rising in anticipation of such spending, making borrowing to fund it more expensive.

The result is that the projects will ultimately cost more and, if the right projects are selected, any economic benefits will take longer to arrive.

It seems how well Trump’s infrastructure plan will work will depend on how patient he is. Given the state of the economy, boosting economic growth will require picking useful infrastructure projects. They have the potential to boost America’s productive capacity for years to come. more> https://goo.gl/vbypf1

Simulation Takes on Bigger Roles in Product Development

By Rob Spiegel – The real world isn’t what it used to be when it comes to testing. Simulation has created a world of new product testing that puts products through scenarios that cannot be duplicated by prototypes in the real world.

Instead of just testing an actual part physically, simulation can test an entire complex product – like a car – and see how each part performs in conjunction with the entire product – a form of accurate testing that can’t be done in the real world.

The exception is with composites and some 3D-printed parts. There is not enough data on the new materials and 3D-printed shapes to provide accurate simulation. That’s temporary, however. The data from the physical testing of composites and 3D shapes are getting fed into simulation programs so those programs can begin to include new materials and shapes into the digital world of simulation.

Simulation used to be a side function, something done after preliminary design to see how the product performs in the real world. Simulation has moved to the center of the process so the product’s performance can be evaluated as it is being designed. more> https://goo.gl/72FE3N

Preventing the Next Eurozone Crisis Starts Now

By Jean Pisani-Ferry – European leaders have devoted scant attention to the future of the eurozone since July 2012, when Mario Draghi, the European Central Bank’s president, famously committed to do “whatever it takes” to save the common currency.

For more than four years, they have essentially subcontracted the eurozone’s stability and integrity to the central bankers. But, while the ECB has performed the job skillfully, this quiet, convenient arrangement is coming to an end, because no central bank can solve political or constitutional conundrums.

Europe’s heads of state and government would be wise to start over and consider options for the eurozone’s future, rather than letting circumstances decide for them.

So far, Europe’s leaders have had little appetite for such a discussion.

The eurozone still lacks a common fiscal mechanism, and Germany has flatly rejected the European Commission’s recent attempt to promote a “positive stance” in countries with room to boost spending. Of course, when the next recession hits, fiscal stability is likely to be in dangerously short supply.

Finally, the governance of the eurozone remains excessively cumbersome and technocratic. Most ministers, not to mention legislators, appear to have become lost in a procedural morass. more> https://goo.gl/CsBcAJ

End the Corporate Shell Games

By Leslie Caldwell – It is no secret that the U.S. financial system is an attractive playground: We have the deepest, most liquid and most stable markets, and criminals seek to use the tools of our financial and banking systems to serve their illicit purposes. For an illegal enterprise to succeed, criminals must be able to hide, move and get access to their proceeds without detection.

And when they are successful, their actions serve as a dual threat: Their criminal conduct itself can threaten the safety and security of all citizens, and their use of the financial and banking systems to hide their gains — or to fund additional criminal conduct — undermines the integrity of those systems.

The U.S. does not require corporate entities to disclose their true owners to the government. Corrupt foreign officials and other criminals are well aware of this loophole and exploit it, for example, to purchase expensive assets, such as real estate, here in the U.S.

As a result, we see the movement of billions of dollars — some of which represents proceeds of corruption or other crimes — through shell companies around the world. Whether an individual’s decision to use a shell company is motivated by corruption, tax evasion or a legitimate investment strategy, the end result is a lack of financial transparency.

This lack of transparency is precisely what makes the U.S. attractive to criminals, including corrupt foreign officials, who seek to use the financial systems to hide their assets. more> https://goo.gl/76QAAn

Solving the Problem of Fake News

By Nicholas Lemann – What we are now calling fake news—misinformation that people fall for—is nothing new. Thousands of years ago, in the Republic, Plato offered up a hellish vision of people who mistake shadows cast on a wall for reality.

The framers of the American Constitution devised a democratic system shot through with restrictions: only a limited portion of the citizenry could vote, and even that subset was permitted to elect only state and local politicians and members of the House of Representatives, not senators or Presidents. In guaranteeing freedom of the press, the framers gave a pass to fake news, since back then the press was mainly devoted to hot-blooded opinion.

They felt protected against a government that came to power through misinformation, because the country wasn’t very democratic, and because they assumed most people would simply vote their economic interests.

Only in the twentieth century, as the United States became a complex modern society with mass media and professional journalism, did people begin to worry about the fake-news problem, and when they did they usually came down either on the side of restricting democracy or restricting the media. more> https://goo.gl/hsyJyu

Updates from GE

No Laughing Matter: The World Is Running Out Of Helium, But It Won’t Hold These MRI Engineers Down
By Tomas Kellner and Dorothy Pomerantz – MRI machines explore the body by using powerful magnets and pulsing radio frequency signals. For the magnets to work, MRI manufacturers such as GE use liquid helium to cool them to minus 452 degrees Fahrenheit (minus 269 Celsius), just above absolute zero. At that temperature, they lose all electrical resistance and become superconducting.

“When you power up a super-cooled magnet, it can produce the same magnetic field for a thousand years with no more power required,” MR engineer and inventor Trifon Laskaris told GE Reports. The problem is that some machines need as much as 8,000 liters of the helium, and the world is running out of it, to the chagrin of radiologists and party-store owners alike.

After the fall of the Soviet Union, the Helium Privatization Act of 1996 got the government out of the business of producing the gas. But sales from the huge U.S. helium reserve stored in porous rock deep underneath Amarillo, Texas, kept down prices and gave private producers few incentives to enter the market. The shortage followed. more> https://goo.gl/emDpN3

Trump’s Challenge to American Democracy

By John Cassidy – The United States, thank goodness, isn’t Weimar Germany or early-twentieth-century Italy. The country hasn’t been invaded, the economy has grown for seven years in a row, and the commitment to democracy is deeply rooted. All this suggests that what we know as the American system is unlikely to be felled in one blow.

The real danger, as Jeff Colgan and others have pointed out, is that we will witness a gradual uprooting of the system’s foundations. Broadly speaking, this is what we have witnessed in Russia and Turkey during the past fifteen years. When Putin was elected, in 2000, following a decade of chaos, he claimed a mandate to restore order. It was only over time that he concentrated power in his hands, harassed and imprisoned his opponents, and cracked down on many forms of dissent. Using a rationalization for repressive measures that dates back at least to the French Revolution, the Russian President cited national-security imperatives, such as the need to confront Chechen terrorism.

Thankfully, the United States isn’t Russia or Turkey, either. On his first day in office, Trump is unlikely to ban protests or abolish a suspect’s Miranda rights. Other dangers loom, however, beginning with how he runs the Justice Department and other key agencies.

Then there is the issue of how Trump will deal with the press, which, for all its faults, remains a bulwark of American democracy. As he showed last week during his interview with the Times, the President-elect can butter up the Fourth Estate when he wants to. But, as he demonstrated during the campaign, he is also perfectly willing to attack journalists personally, boycott shows that run segments he doesn’t like, and bar entire news organizations from covering him. Through his Twitter and Facebook accounts, he has a personal “fake news” network with enormous reach, which he can use to circumvent the mainstream media. And in Steve Bannon, his former campaign C.E.O. and now his chief strategist, he has a skilled and unscrupulous propagandist. more> https://goo.gl/iO6HQH

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How the 24-hour society is stealing time from the night

BOOK REVIEW

Rhythms of Life, Author: Leon Kreitzman.
Technics and Civilization, Author: Lewis Mumford.
The Wealth and Poverty of Nations, Author: David Landes.
Night as a Frontier, Author: Murray Melbin.

By Leon Kreitzman – Until the Industrial Revolution, ‘jobs’ as we know them barely existed. People did whatever needed to be done, and then got on with something else.

In the transition from the biblical task-orientation of event time to contemporary clock time, workers were turned into disciplined industrial laborers through an Industrial Revolution that used the clock to organize factory work. Instead of being paid for the task, workers began to be paid for their time. The clock became a measure not only of time but also of money, which put a premium on accuracy.

Lack of time has become a common complaint. For many of us, there are not enough hours in the day to do all the things we want.

There are two easy ways to solve the problem, and one harder way.

First, we could stop watching television. This would free up three to four hours a day for most of us.

Second, we could stop buying so many goods, and more especially services. This would save some time. We would not need shops opening round the clock.

Third, if we purchased less, we would not need to earn as much and so could work fewer hours. We could do all these things, but there is about the same chance of that happening as there is of pigs flying. more> https://goo.gl/l3IKm5

Are humans evolving beyond the need to tell stories?

BOOK REVIEW

Phone, Author: Will Self.
Pride and Prejudice, Author: Jane Austen.
Ulysses, Author: James Joyce.

By Will Self – The neuroscientist Susan Greenfield has been prominent in arguing that our new digital lives are profoundly altering the structure of our brains. This is undoubtedly the case – but then all human activities impact upon the individual brain as they’re happening; this by no means implies a permanent alteration, let alone a heritable one.

After all, so far as we can tell the gross neural anatomy of the human has remained unchanged for hundreds of millennia, while the age of bi-directional digital media only properly dates – in my view – from the inception of wireless broadband in the early 2000s, hardly enough time for natural selection to get to work on the adaptive advantages of … tweeting.

If we take seriously the conclusions of these recent neuroscientific studies, one fact is indisputable: whatever the figures for books sales (either in print or digital form), reading for pleasure has been in serious decline for over a decade.

That this form of narrative absorption (if you’ll forgive the coinage) is closely correlated with high attainment and wellbeing may tell us nothing about the underlying causation, but the studies do demonstrate that the suite of cognitive aptitudes needed to decipher text and turn it into living, breathing, visible and tangible worlds seem to wither away once we stop turning the pages and start goggling at virtual tales. more> https://goo.gl/8eOXh4