Category Archives: Economy

Are We Living Through Climate Change’s Worst-Case Scenario?

By Robinson Meyer – The year 2018 was not an easy one for planet Earth.

In the United States, carbon emissions leapt back up, making their largest year-over-year increase since the end of the Great Recession. This matched the trend across the globe. According to two major studies, greenhouse-gas emissions worldwide shot up in 2018—accelerating like a “speeding freight train,” as one scientist put it.

Many economists expect carbon emissions to drop somewhat throughout the next few decades. But maybe they won’t. If 2018 is any indication, meekly positive energy trends will not handily reduce emissions, even in developed economies like the United States. It raises a bleak question:

Are we currently on the worst-case scenario for climate change?

When climate scientists want to tell a story about the future of the planet, they use a set of four standard scenarios called “representative concentration pathways,” or RCPs. RCPs are ubiquitous in climate science, appearing in virtually any study that uses climate models to investigate the 21st century. They’ve popped up in research about subjects as disparate as southwestern mega-droughts, future immigration flows to Europe, and poor nighttime sleep quality.

Each RCP is assigned a number that describes how the climate will fare in the year 2100. Generally, a higher RCP number describes a scarier fate: It means that humanity emitted more carbon dioxide into the atmosphere during the 21st century, further warming the planet and acidifying the ocean. The best-case scenario is called RCP 2.6. The worst case is RCP 8.5.

“God help us if 8.5 turns out to be the right scenario,” Jackson told me. more>

Updates from Chicago Booth

How to make money on Fed announcements—with less risk
By Dee Gill – Andreas Neuhierl and Michael Weber find gains of about 4.5 percent when investors bought or shorted markets in the roughly 40 days before and after Federal Open Market Committee (FOMC) announcements that ran counter to market expectations. Investors can make money on these “surprises,” even if they did not take positions before the announcements, the findings suggest.

Markets routinely forecast the content of FOMC announcements, which reveal the Fed’s new target interest rates, and usually react when the Fed does not act as expected. An FOMC announcement is an expansionary surprise when its new target rate is lower than the market forecasts and contractionary when it’s higher than expectations.

Share prices moved predictably ahead of and following both types of surprises, the study notes. Prices began to rise about 25 days ahead of an expansionary surprise, for about a 2.5 percent gain during that time. Before a contractionary surprise, prices generally fell. The researchers find that the movements occured in all industries except mining, where contractionary surprises tended to push share prices higher. more>

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The Future of Machine Learning: Neuromorphic Processors

By Narayan Srinivasa – Machine learning has emerged as the dominant tool for the implementation of complex cognitive tasks resulting in machines that have demonstrated, in some cases, super-human performance. However, these machines require training with a large amount of labeled data and this energy-hungry training process has often been prohibitive in the absence of costly super-computers.

The ways in which animals and humans learn is far more efficient, driven by the evolution of a different processor in the form of a brain that simultaneously optimizes energy of computation with efficient information processing capabilities. The next generation of computers, called neuromorphic processors, will strive to strike this delicate balance between efficiency of computation with the energy needed for this computation.

The foundation for the design of neuromorphic processors is rooted in our understanding of how biological computation is very different from the digital computers of today (Figure).

The brain is composed of noisy analog computing elements including neurons and synapses. Neurons operate as relaxation oscillators. Synapses are implicated in memory formation in the brain and can only resolve between three-to-four bits of information at each synapse. It is well known that the brain operates using a plethora of brain rhythms but without any global clock (i.e., clock free) where the dynamics of these elements operate in an asynchronous fashion. more>

The Truth About the Gig Economy

By Annie Lowrey – The workforce is getting Uberized. The gig economy is taking over the world. Independent contractor jobs are the new normal.

In the post-recession years, this became conventional wisdom, as more and more Americans took jobs—well, “jobs”—with companies like Postmates, Fiverr, TaskRabbit, and Lyft. But the gig economy was then and is now a more marginal phenomenon than it might have seemed.

The gig economy might be new and big and radical and transformative. It might represent a powerful business model for venture investors and tech companies. But Uber and similar companies were not and are not driving tidal changes in the way that Americans make a living.

Wild predictions aside, it was always clear that many gig workers were taking on these kinds of jobs as a temporary stopgap or a way to supplement their income, rather than as a substitute for a full-time position. A comprehensive look at the Uber workforce by Krueger and Jonathan Hall, the company’s internal head of economic research, found that, “Most of Uber’s driver-partners had full- or part-time employment prior to joining Uber, and many continued in those positions after starting to drive with the Uber platform.”

There’s another reason why a false narrative might have hold: Gig work is vastly more prevalent in the big coastal cities where many investors and journalists live, leading to a kind of media myopia about the scale of the phenomenon. And gig work seemed like the future. more>

Why Wall Street Isn’t Useful for the Real Economy

By Lynn Stout – In the wake of the 2008 crisis, Goldman Sachs CEO Lloyd Blankfein famously told a reporter that bankers are “doing God’s work.” This is, of course, an important part of the Wall Street mantra: it’s standard operating procedure for bank executives to frequently and loudly proclaim that Wall Street is vital to the nation’s economy and performs socially valuable services by raising capital, providing liquidity to investors, and ensuring that securities are priced accurately so that money flows to where it will be most productive.

The mantra is essential, because it allows (non-psychopathic) bankers to look at themselves in the mirror each day, as well as helping them fend off serious attempts at government regulation. It also allows them to claim that they deserve to make outrageous amounts of money.

According to the Statistical Abstract of the United States, in 2007 and 2008 employees in the finance industry earned a total of more than $500 billion annually—that’s a whopping half-trillion dollar payroll (Table 1168).

Let’s start with the notion that Wall Street helps companies raise capital. If we look at the numbers, it’s obvious that raising capital for companies is only a sideline for most banks, and a minor one at that. Corporations raise capital in the so-called “primary” markets where they sell newly-issued stocks and bonds to investors.

However, the vast majority of bankers’ time and effort is devoted to (and most bank profits come from) dealing, trading, and advising investors in the so-called “secondary” market where investors buy and sell existing securities with each other.

In 2009, for example, less than 10 percent of the securities industry’s profits came from underwriting new stocks and bonds; the majority came instead from trading commissions and trading profits (Table 1219).

This figure reflects the imbalance between the primary issuing market (which is relatively small) and the secondary trading market (which is enormous). In 2010, corporations issued only $131 billion in new stock (Table 1202).

That same year, the World Bank reports, more than $15 trillion in stocks were traded in the U.S. secondary marketmore than the nation’s GDP. more>

How a Decade of Crisis Changed Economics

By J. W. Mason – Has economics changed since the crisis?

As usual, the answer is: it depends. If we look at the macroeconomic theory of PhD programs and top journals, the answer is clearly, no. Macroeconomic theory remains the same self-contained, abstract art form that it has been for the past twenty-five years.

As Joan Robinson once put it, economic theory is the art of pulling a rabbit out of a hat right after you’ve stuffed it into the hat in full view of the audience.

Many producers of this kind of model actually have a quite realistic understanding of the behavior of real economies, often informed by firsthand experience in government. The combination of real insight and tight genre constraints leads to a strange style of theorizing, where the goal is to produce a model that satisfies the methodological conventions of the discipline while arriving at a conclusion that you’ve already reached by other means. It’s the economic equivalent of the college president in Randall Jarrell’s Pictures from an Institution:

About anything, anything at all, Dwight Robbins believed what Reason and Virtue and Tolerance and a Comprehensive Organic Synthesis of Values would have him believe. And about anything, anything at all, he believed what it was expedient for the president of Benton College to believe. You looked at the two beliefs, and lo! the two were one. more>

Updates from ITU

ITU brings new clarity to 5G transport
ITU – 2018 has seen the launch of a major ITU drive to define the requirements of IMT-2020/5G systems as they relate to transport networks, the extremely high-capacity optical networks that form the ‘backbone’ of the ICT ecosystem.

These 5G transport projects have built strong momentum, drawing on the expertise of a wide range of working groups within ITU’s standardization expert group for ‘transport, access and home’, ITU-T Study Group 15.

The baseline for this work was established in February 2018 with the release of an influential ITU Technical Report placing emerging 5G radio requirements in the context of their demands on transport networks.

The second version of this Technical Report was agreed in October 2018. Download the report… more>

Economics as a moral tale

By John Rapley – Think of human development as a long journey.

At the beginning, we live at the mercy of nature. Dependent on its bounty, we pray for rains and freedom from natural disasters and plagues. At the end of the journey, nature lives at our mercy.

We use science and technology to release new wealth and remake the planet. Today, as humans implant themselves with microchips, install artificial organs and plan Mars colonies, we even aim for a ‘singularity’ that will lift us out of nature once and for all.

Economists began to compose the narrative of this odyssey, from subjection to dominion, in the 1700s. Once it became apparent that Europe had broken with millennia of stasis to begin a long period of rising growth – the same through which we are still living – political economists abandoned philosophical reflection to draft roadmaps to development.

Two broad types emerged. One approach described the walk, the other the walker. The first presumed that the context in which we made the journey – the natural environment, the institutions, the culture, the legal and political systems – determined the direction of the path. In this model, the government bore responsibility to build the path so that it could accommodate as many people as possible.

The second approach took a more individualist perspective. It presumed that the walker determined his or her own success in the journey. It concentrated on the moral, intellectual and physical attributes it believed an individual needed to advance. In this model, the task of the government was to sweep aside obstacles impeding the gifted few from embarking on their personal journeys – restraints that ranged from restrictions on labor mobility to usury laws. Thus liberated, gifted individuals would beat the path to prosperity. more>

Is America’s future capitalist or socialist?

By Ezra Klein – In American politics, and particularly in the Democratic Party, the primacy of capitalism is, for the first time in ages, an open question.

Sanders is expected to run again in 2020, and to run with the support of a grassroots movement that thrills to his break with capitalist convention. He’ll face, among others, Massachusetts Sen. Elizabeth Warren, who says one key difference between her and Sanders is that she’s “a capitalist to my bones.”

But what are the actual differences between liberal reformers of capitalism, like Warren and Pearlstein, and democratic socialists, like Sanders? I invited Pearlstein to discuss his book, and the broader capitalism vs. socialism divide, with Bhaskar Sunkara, editor of the journal Jacobin, and author of the forthcoming book, The Socialist Manifesto. Their debate follows, lightly edited for style and length.

A CEO like Charles Wilson could say “what was good for the country was good for General Motors and vice versa,” but he was responding to the same exact market pressures as CEOs today. The only difference is that he was constrained by unions and a liberal political coalition.

Social democracy was always predicated on economic expansion. Expansion gave succor to both the working class and capital. When growth slowed and the demands of workers made deeper inroads into firm profits, business owners rebelled against the class compromise. And they were in the structural position to force their own solutions, even in countries like Sweden where there were experiments with wage-earner funds and other left-solutions to the crisis. more>

Updates from Siemens

Digital Transformation for Retail
Siemens – Retail is in a state of constant fluctuation, changing at a rate so rapid, many retailers cannot maintain the pace.

Technology solutions are becoming pervasive in every part of a retailers operations. It is critical that the solutions drive digitalization of a retailer’s processes and that the software itself can be validated, but also be configured at the pace of change in the industry.

Our focus on providing real-time collaboration via patented, digital solutions are helping retailers prepare for the future by recognizing that delivering innovation requires a broad ecosystem of partners is the key to long-term success. more>

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