Economist 8/11/14

  1. Much of central London is being knocked down and rebuilt. Some 7m square feet of office space is due to be added this year—the most since 2003.Yet building offices (and homes) near the middle of London  is shockingly expensive. Even before the cost of land is considered, it costs roughly a fifth more than erecting similar stuff in New York or Hong Kong. London’s history throws up many problems. Unexploded bombs dropped by the Luftwaffe still turn up surprisingly often, as do interesting medieval bodies.London’s underground networks—including the Tube, but also sewers, various government tunnels and oddities such as the Royal Mail railway—must be negotiated. The planning system then adds all sorts of expensive complexities. In Westminster more than 75% of land is covered by 56 conservation areas protecting the historic appearances of streets, right down to the colour of paint on doors.Taller buildings are trickier still. They must not block designated views of various landmarks.But the sheer complexity of building in the capital makes for a small, specialised industry with high barriers to entry.
  2. The pharmaceutical industry makes the best case for patents.The economists find that pharmaceutical companies conduct 30 times more clinical trials for recurrent cancer drugs than for preventive drugs (the effect persists even after adjusting for market size). The authors also show that firms divert their R&D expenditures away from more curable, localised cancers and focus on incurable metastatic and recurrent cancers instead. The patent system encourages pharmaceuticals to pump out drugs aimed at those who have almost no chance of surviving the cancer anyway. This patent distortion costs the U.S. economy around $89 billion a year in lost lives.
  3. Awareness of the effects of alcohol is extremely low in China.Average annual consumption rose from 2.5 litres of pure alcohol in 1978 to 6.7 litres in 2010. Nearly 70% of that is spirits.Consumption still looks tame by international standards. Intake per person is around half that of Germany or France, according to the World Health Organisation. But the countrywide statistics hide a grimmer picture. More than half the Chinese population is teetotal. Those who do drink often do so to great excess. Male Chinese drinkers down far more than Japanese ones, and almost as much as notoriously sozzled British, Australian or Irish boozers.In 2006 China lowered its already paltry liquor tax.In China drinking with clients and colleagues is now seen as vital to career advancement.
  4. Mr Bostrom in his book Superintelligence: Paths, Dangers, Strategies worries about a more fundamental problem. Once intelligence is sufficiently well understood for a clever machine to be built, that machine may prove able to design a better version of itself. The cleverer it becomes, the quicker it would be able to design further upgrades. That could lead to an “intelligence explosion”, in which a machine arrives at a state where it is as far beyond humans as humans are beyond ants. The thought processes of such a machine, he argues, would be as alien to humans as human thought processes are to cockroaches. It is far from obvious that such a machine would have humanity’s best interests at heart.
  5. Despite reforms that have brought some big changes to Cuba in the form of private restaurants, bed-and-breakfasts and new co-operatives, the economy has virtually ground to a halt. In the first half of the year GDP grew by just 0.6%. Investment is the root of the problem. It is estimated that the growth in Cuba’s capital stock, such as machinery and buildings, fell to 7.8% of GDP last year, close to its level of 5.4% in 1993 when the economy was in serious trouble.Across the bay in Mariel sits is a $900m container port, which was built with Brazilian money and inaugurated in January. There are plans to develop a special economic zone alongside it, modelled on the thriving export hubs, such as Shenzhen, that China developed from 1980 onwards. None of the 23 firms who have sought licences to operate in the special economic zone has yet been granted one.That is why Cuba-watchers have paid close attention to the visits of Russia’s president, Vladimir Putin, and China’s leader, Xi Jinping, in recent weeks. Though both men offered few concrete investments in Cuba.
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