Daily Archives: July 8, 2015

Europe doesn’t have a debt crisis—it has a democracy crisis

By Matt Phillips – Wolfgang Merkel, a German academic who studies democracy, published a provocative essay last year titled “Is capitalism compatible with democracy?”

In it, he argues, essentially, that the fragile post-World-War II peace between markets and democracy—both of which have grown rapidly—seems to to be fraying. In the aftermath of the global financial collapse of 2008, “the crisis of capitalism threatens to turn into a crisis of democracy.”

That’s what’s happening to Greece.

In a debt crisis that has already lasted a half decade, Greece has repeatedly ceded sovereignty in matters of economic-policy-making—very clearly territory of its own democratic institutions—to a group of institutions such as the IMF, the European Commission and the European Central Bank, which all have fairly tenuous links to democratic legitimacy. more> http://tinyurl.com/njeetbj

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Updates from Chicago Booth

BOOK REVIEW

The Protestant Ethic and the Spirit of Capitalism, Author: Max Weber.
Underdevelopment is a State of Mind, Author: Lawrence Harrison.
Culture Matters: How Values Shape Human Progress, Editors: Lawrence E. Harrison and Samuel P. Huntington.
Notes on a New Sociology of Economic Development, Author: Jeffrey Sachs.

To understand the eurozone crisis, consider culture
By Séamus A. Power – They call it the Kissinger Question. “If I want to call Europe, who do I call?” Henry Kissinger reportedly remarked in the 1970s, when he was US Secretary of State.

At the time, there was no European Union, and there was far less economic, fiscal, and political integration than today.

The Kissinger Question is a good one. The expanding political and fiscal union in Europe, motivated by a desire not to repeat the mistakes leading to the two world wars, rests on centuries of interrelated but distinct national beliefs, values, desires, and morals—factors that lie at the foundation of economic practices.

For example, the cultural psychological differences across the EU reveal some foundational issues at the heart of the current eurozone crisis. more> http://tinyurl.com/pwtwnf5

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New model of cosmic stickiness favors ‘Big Rip’ demise of universe

By Vanderbilt University – The universe can be a very sticky place, but just how sticky is a matter of debate.

That is because for decades cosmologists have had trouble reconciling the classic notion of viscosity based on the laws of thermodynamics with Einstein’s general theory of relativity. However, a team from Vanderbilt University has come up with a fundamentally new mathematical formulation of the problem that appears to bridge this long-standing gap.

The new math has some significant implications for the ultimate fate of the universe. It tends to favor one of the more radical scenarios that cosmologists have come up with known as the “Big Rip.” It may also shed new light on the basic nature of dark energy.

The new approach was developed by Assistant Professor of Mathematics Marcelo Disconzi in collaboration with physics professors Thomas Kephart and Robert Scherrer. more> http://tinyurl.com/q9lp9ep

Obamacare: The business world’s biggest disruptor

By Alice M. Rivlin – While the U.S. Supreme Court has removed much of the uncertainty surrounding the future of the Affordable Care Act (ACA), the impact of this far-reaching change in U.S. health care financing and delivery will be a complex story unfolding gradually for years to come.

First, it profoundly alters the nature of competition in health insurance markets: it forces insurers away from competing with each other through trying to attract the healthiest, least costly to insure toward competing for a larger pool of customers by offering lower premiums and better service.

As long as insurers were permitted to charge sicker people higher premiums, refuse coverage to customers with pre-existing conditions, and impose life-time spending limits, companies had to compete by attracting customers least likely to incur high medical expenses.

The ACA put this form of competition out of bounds, but kept the insurers in the game by mandating that most people have adequate health insurance (not just a bare bones policy that wouldn’t help them much if they needed it) and providing taxpayer subsidies to make the higher-standard coverage affordable to lower-income persons.

The contours of these new markets are only beginning to be visible. more> http://tinyurl.com/nbsmo5g