Monthly Archives: June 2019

A radical legal ideology nurtured our era of economic inequality

By Sanjukta Paul – Where does economic power come from? Does it exist independently of the law?

It seems obvious, even undeniable, that the answer is no. Law creates, defines and enforces property rights. Law enforces private contracts. It charters corporations and shields investors from liability. Law declares illegal certain contracts of economic cooperation between separate individuals – which it calls ‘price-fixing’ – but declares economically equivalent activity legal when it takes place within a business firm or is controlled by one.

Each one of these is a choice made by the law, on behalf of the public as a whole. Each of them creates or maintains someone’s economic power, and often undermines someone else’s. Each also plays a role in maintaining a particular distribution of economic power across society.

Yet generations of lawyers and judges educated at law schools in the United States have been taught to ignore this essential role of law in creating and sustaining economic power.

Instead, we are taught that the social process of economic competition results in certain outcomes that are ‘efficient’ – and that anything the law does to alter those outcomes is its only intervention.

These peculiar presumptions flow from the enormously powerful and influential ‘law and economics’ movement that dominates thinking in most areas of US law considered to be within the ‘economic’ sphere.

Bruce Ackerman, professor of law and political science at Yale University, recently called law and economics the most influential thing in legal education since the founding of Harvard Law School.

The Economics Institute for Federal Judges, founded by the legal scholar Henry Manne, has been a hugely influential training program in the law and economics approach. more>

Re-made in China

By Amy Hawkins and Jeffrey Wasserstrom – The dominant image of China in the West is of a closed, dark place; a country where what reigns supreme is an authoritarianism based on an ancient imperial past that today’s leaders claim to have renounced, while simultaneously extolling China’s 5,000-year history.

It’s not a wholly false perception, but the notion of China as a fortress state, impervious to foreign influence, is something of a smokescreen. So too – as the opposite but equally flawed assumption goes – is the perception of China as forever on the brink of being Westernized by the liberalizing forces of globalization and the free market, as if, whenever the fortress gates are opened, the country were barely capable of withstanding the influx of ‘contaminating’ or ‘corrupting’ ideas.

This idea of China received a powerful boost from Francis Fukuyama’s ‘End of History’ fantasy that the civilized world would converge around liberal democratic norms, leading many Western observers to believe that China’s economic boom and flirtation with freemarket forces was both inevitable, and would transform it completely.

In reality, China’s longstanding suspicion of foreign influence has not prevented the government or the people from becoming remarkably adept at marshalling the flow of overseas cultural touchstones into the country’s borders, remoulding them into something that isn’t entirely Chinese, but is also totally different from its original form.

Like authoritarian leaders everywhere, China’s are anxious about the population’s interaction with foreign ideas, and the state tries to police this closely, adapting cultural imports to fit national and regional needs. Still, the various ways that the government, villagers and city dwellers of different social classes and generations handle these mutations demonstrate that Chinese concepts of national identity are much more flexible than first impressions suggest.

Appreciating this is especially important now, as tensions between China and the United States rise. A strident form of Chinese nationalism is gaining ground. more>

Eye diagrams: The tool for serial data analysis

By Arthur Pini – The eye diagram is a general-purpose tool for analyzing serial digital signals. It shows the effects of vertical noise, horizontal jitter, duty cycle distortion, inter-symbol interference, and crosstalk, all of which can close the “eye.” While engineers have used eye diagrams for decades, oscilloscopes continually get new features that increase its value.

Oscilloscopes form eye diagrams—the separation between the two binary data states “1” and “0”—by overlaying multiple single clock periods on a persistence display. The accumulation shows the history of multiple acquisitions.

Additive noise tends to close the eye vertically while timing jitter and uncertainty closes the eye horizontally. Duty cycle distortion (DCD) and inter-symbol interference (ISI) change the shape of the eye. The channel will fail if the eye closes to the point where the receiver can no longer recognize “0” and “1” states.

In the days of analog oscilloscopes, the eye diagram was formed by triggering the oscilloscope with the serial data clock and acquiring multiple bits over time using a persistence or storage display. This technique adds the trigger uncertainty or trigger jitter to the eye diagram for each acquisition. Digital oscilloscopes form the eye by acquiring very long record with many serial bits.

The clock period is determined, and the waveform is broken up or “sliced” into multiple single-bit acquisitions overlaid in the persistence display. In this way, all the data is acquired with a single value of trigger jitter that’s eliminated by using differential time measurements within the eye. more>

Young, educated and jobless

By Karola Klatt – In the wake of the financial and economic crisis, youth unemployment has skyrocketed in almost all industrialised countries, especially in southern Europe. When the impact on the labour market peaked in Italy in 2014, 42.7 percent of 14-25-year-old job-seekers were without work. In Spain, the figure was as high as 55.5 percent in 2013, while it stood at 58.3 percent in Greece in the same year.

Failing to secure a job means young adults face a hurdle right at the start of their independent lives. They remain reliant on their parents, boosting feelings of exclusion and helplessness.

It is a political as well as economic challenge, as those lacking prospects often veer towards extremist and populist movements. Anti-democratic attitudes commonly emerge from a context of personal crises: a sense of being socially excluded and an inability to improve one’s lot often triggers a rejection of the ruling system.

Switzerland, Norway and Germany have however not witnessed a dramatic increase in youth unemployment in the aftermath of the crisis. One reason for this, according to experts, is the success of the dual training system which is particularly important in Germany, Austria and Switzerland.

In Germany, young people and young adults gain hands-on experience of their future professions in companies, while completing the theoretical part of their training in vocational schools. Ideally, trainees should be taken on by the training company after their apprenticeship. Where this is not possible, they can use the experience gained during their apprenticeship to apply to other companies, thus easing their transition to working life. more>

The world is running out of time

By Bertrand Badré – In 2015, the international community launched a renewed effort to tackle collective global challenges under the auspices of the United Nations Sustainable Development Agenda and the Framework Convention on Climate Change (COP21). But after an initial flurry of interest, the progress that has been made toward achieving the Sustainable Development Goals and tackling climate change has tapered off. Around the world, many seem to have developed an allergy to increasingly stark warnings from the UN and other bodies about accelerating species extinctions, ecosystem collapse, and global warming.

Now is not the time to debate whether progress toward global goals is a matter of the glass being half-full or half-empty. Soon, there will no longer even be a glass to worry about. Despite global news coverage of civic and political action to address our mounting crises, the underlying trends are extremely frightening.

For decades, most of the major economies have relied on a form of capitalism that delivered considerable benefits. But we are now witnessing the implications of the Nobel laureate economist Milton Friedman’s famous mantra: “the social responsibility of business is to increase its profits.”

A corporate-governance model based on maximizing shareholder value has long dominated our economic system, shaping our accounting frameworks, tax regimes, and business-school curricula.

But we have now reached a point where leading economic thinkers are questioning the fundamentals of the prevailing system. Paul Collier’s The Future of CapitalismJoseph E. Stiglitz’s People, Power, and Profits, and Raghuram G. Rajan’s The Third Pillar all offer comprehensive assessments of the problem.

A capitalist system that is disconnected from most people and unmoored from the territories in which it operates is no longer acceptable. Systems do not work in isolation. Eventually, reality asserts itself: global trade tensions reemerge, populist nationalists win power, and natural disasters grow in frequency and intensity.

Simply put, our approach to capitalism has exacerbated previously manageable social and environmental problems and sowed deep social divisions. The explosion in inequality and the laser focus on short-term results (that is, quarterly earnings) are just two symptoms of a broken system. more>

Updates from Chicago Booth

Who’s at fault for student-loan defaults?
By Howard R. Gold – A central driver of growing income inequality in recent decades has been the earnings premium commanded by those with technical skills, and a widening gap between college graduates and those with a high-school diploma or less.

Workers in the United States have responded by seeking college courses to improve their skills, and many have been drawn to for-profit institutions, which offer two- or four-year degrees or professional certificates in fields such as health administration, culinary arts, and cosmetology. But rather than enjoying an income boost, many graduates of for-profit schools have found themselves struggling to pay back student loans, and defaulting on their debts.

This has particularly affected nontraditional students, according to research by Harvard’s David J. Deming, Claudia Goldin, and Lawrence F. Katz.

Nontraditional students tend to be older than 25 and often they are the first in their families to attend college. They tend to have lower family incomes than typical college students. They are disproportionately women and single parents. They are more likely to be Hispanic or African American.

To be sure, college tuition rose almost 360 percent between 1985 and 2015, and graduates of professional schools, which boast some of the highest tuition rates, tend to owe the most. The median student debt of a new medical-school graduate was $190,000 in 2017, as reported by the Association of American Medical Colleges, while the average debt for graduates of US business schools was $70,000, according to the consumer-finance site SoFi.com, which derived the figure from 60,000 student-loan refinancing applications submitted between January 2014 and September 2016. more>

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Updates from Ciena

Trouble-to-Resolve: Assure Layer 3 Service Performance in Minutes
By Don Jacob – Service provider networks have come a long way from the flat networks of yesteryear. Today, they are highly complex with multiple hierarchies and layers, while running a plethora of services and technologies. Providers use the same underlying network to cater to different applications, ranging from financial applications to streaming video, each with its own unique performance and fault-tolerance requirements.

In this complex scenario, how can service providers assure performance of their Layer 3 services, to verify that services are being delivered and ensure customer satisfaction? Take the case of a service provider who’s providing MPLS services to hundreds of customers. Let us look at how the network engineer managing a service provider network handles a routing issue without a routing analytics solution.

Today, when a customer raises a ticket for a reachability or service delivery problem, the provider manually analyzes the issue, making their trouble-to-resolve process long and time consuming.

To start with, if the customer raises the trouble ticket while a connectivity issue is in progress, the first thing the provider needs to know is the routing path taken by the service. This requires the network engineer finding the source router and then running a traceroute from that router to determine all the hops along the path. Once the routers along the path have been identified, they would then log into each router to understand its performance.

This process is repeated on all routers along the path until the problematic router or link is identified. more>

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Globalization’s Wrong Turn

And How It Hurt America
By Dani Rodrik – Globalization is in trouble. A populist backlash, personified by U.S. President Donald Trump, is in full swing. A simmering trade war between China and the United States could easily boil over. Countries across Europe are shutting their borders to immigrants. Even globalization’s biggest boosters now concede that it has produced lopsided benefits and that something will have to change.

Today’s woes have their roots in the 1990s, when policymakers set the world on its current, hyperglobalist path, requiring domestic economies to be put in the service of the world economy instead of the other way around. In trade, the transformation was signaled by the creation of the World Trade Organization, in 1995. The WTO not only made it harder for countries to shield themselves from international competition but also reached into policy areas that international trade rules had not previously touched: agriculture, services, intellectual property, industrial policy, and health and sanitary regulations. Even more ambitious regional trade deals, such as the North American Free Trade Agreement, took off around the same time.

In finance, the change was marked by a fundamental shift in governments’ attitudes away from managing capital flows and toward liberalization. Pushed by the United States and global organizations such as the International Monetary Fund and the Organization for Economic Cooperation and Development, countries freed up vast quantities of short-term finance to slosh across borders in search of higher returns. more>

Why economics must go digital

By Diane Coyle – One of the biggest concerns about today’s tech giants is their market power. At least outside China, Google, Facebook, and Amazon dominate online search, social media, and online retail, respectively. And yet economists have largely failed to address these concerns in a coherent way. To help governments and regulators as they struggle to address this market concentration, we must make economics itself more relevant to the digital age.

Digital markets often become highly concentrated, with one dominant firm, because larger players enjoy significant returns to scale. For example, digital platforms incur large upfront development costs but benefit from low marginal costs once the software is written. They gain from network effects, whereby the more users a platform has, the more all users benefit. And data generation plays a self-reinforcing role: more data improves the service, which brings in more users, which generates more data.

To put it bluntly, a digital platform is either large or dead.

As several recent reports (including one to which I contributed) have pointed out, the digital economy poses a problem for competition policy.

Competition is vital for boosting productivity and long-term growth because it drives out inefficient producers and stimulates innovation. Yet how can this happen when there are such dominant players?

Today’s digital behemoths provide services that people want: one recent study estimated that consumers value online search alone at a level equivalent to about half of US median income.

Economists, therefore, need to update their toolkit. Rather than assessing likely short-term trends in specific digital markets, they need to be able to estimate the potential long-term costs implied by the inability of a new rival with better technology or service to unseat the incumbent platform.

This is no easy task because there is no standard methodology for estimating uncertain, non-linear futures. Economists even disagree on how to measure static consumer valuations of free digital goods such as online search and social media.

And although the idea that competition operates dynamically through firms entering and exiting the market dates back at least to Joseph Schumpeter, the standard approach is still to look at competition among similar companies producing similar goods at a point in time. more>

Updates from ITU

Iceland’s data centers are booming—here’s why that’s a problem
By Tryggvi Adalbjornsson – The southwestern tip of Iceland is a barren volcanic peninsula called Reykjanesskagi. It’s home to the twin towns of Keflavik and Njardvik, around 19,000 people, and the country’s main airport.

On the edge of the settlement is a complex of metal-clad buildings belonging to the IT company Advania, each structure roughly the size of an Olympic-size swimming pool. Less than three years ago there were three of them. By April 2018, there were eight. Today there are 10, and the foundations have been laid for an 11th.

This is part of a boom fostered partly by something that Icelanders don’t usually rave about: the weather.

Life on the North Atlantic island tends to be chilly, foggy, and windy, though hard frosts are not common. The annual average temperature in the capital, Reykjavík, is around 41 °F (5 °C), and even when the summer warmth kicks in, the mercury rarely rises above 68. Iceland has realized that even though this climate may not be great for sunning yourself on the beach, it is very favorable to one particular industry: data.

Each one of those Advania buildings in Reykjanesskagi is a large data center, home to thousands of computers. They are constantly crunching away, processing instructions, transmitting data, and mining Bitcoin. Data centers like these generate large amounts of heat and need round-the-clock cooling, which would usually require considerable energy. In Iceland, however, data centers don’t need to constantly run high-powered cooling systems for heat moderation: instead, they can just let in the brisk subarctic air.

Natural cooling like this lowers ongoing costs. more>

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