Economist 11/9/15

  1. WHEN Spanish explorers first landed in San Francisco they settled on a sunny patch of land known today as the Mission District, displacing the Native Americans who had been living there.Those concerned about gentrification of the Mission supported a ballot measure—decided by voters in San Francisco’s election on November 3rd—which would have stopped all new construction in the area for 18 months.The proposition was defeated at the polls.San Francisco has the most expensive rents in America. A one-bedroom apartment costs, on average, over $2,640 a month, 23% more than in New York city. Second to San Francisco, at $2,590 a month, is nearby San Jose in Silicon Valley, where many tech companies have their headquarters. New York city comes third.San Francisco’s onerous permit process (which means it can take years before new constructions break ground), as well as its strict zoning laws, have limited the supply of new dwellings.Some blame tech firms directly for the city’s problems. One closely-watched ballot initiative would have restricted property-owners from renting out their homes for short-term stays through websites like Airbnb for more than 75 nights a year. This, too, was defeated, in part because Airbnb spent so much to fight it.
  2. FEW industries have been shaped more by mergers and acquisitions than pharmaceuticals.In the first ten months of this year, mergers involving drug companies in the S&P 500 share index were worth a total of $328 billion, according to Dealogic, an information provider. Last year pharmaceuticals was the most deal-hungry industry in America.Some of the merger mania is driven by reasons not specific to the drugs industry, such as historically low interest rates. These make the returns on buying assets relatively more attractive.Another motive is the desire to achieve an “inversion”. This is a ploy in which a business based in a country with high corporate-tax rates merges with one based in a low-tax place, so as to shift the combined group’s domicile to the target firm’s home country.In recent years it has appeared that the return on research-and-development spending is dwindling, and that blockbuster drugs are getting harder to find.This is why many of the largest firms, including Sanofi, Merck and GlaxoSmithKline, are based to some extent on successions of deals.Another trigger for deals is that many big firms are suffering from the expiry of patents on their drugs—which allows makers of cheap copies to grab much of their business. This is another reason to buy a rival firm with promising new medicines in development.
  3. SHARES in Walmart, the American retailing behemoth, have dropped by a third so far this year. But those of Walmex, its separately listed Mexican arm, are up 30%.although Mexicans are gloomy citizens, they are cheerful consumers. Retail sales (excluding new stores) increased 6.2% in the first nine months of this year after growing less than 1% in 2014 and barely at all the year before.The United States’ relatively strong growth is boosting remittances from Mexicans living there. Thanks to a devaluation of the peso against the dollar.It is also a sign that the reforms are having some effect. In an overhaul of the telecoms sector, the government encouraged new entrants to challenge América Móvil, a near-monopoly. It gave independence to the regulator and abolished long-distance charges for fixed-line calls within Mexico and the fees charged by América Móvil for national roaming.The government says it is beginning to overcome one of the biggest causes of low wages: low-productivity jobs in small firms that escape tax and regulation, which account for 60% of employment. The evidence of progress is patchy. This year the number of people in formal employment has risen at an annual rate of 4.4%.
  4. As far as is known, Ferrari has never tried to register the sound of its engines. Perhaps that is because it knows, from long experience, how much effort and expense others would have to expend to get their engines to sing from the same song sheet.Having flatplane crankshafts in its engines helps no end. Such power units spin up faster and rev to much higher speeds than conventional vee-eights with crossplane cranks. In so doing, they bark with a banshee shriek rather than a throaty rumble.There is nothing new about flatplane cranks. They were the preferred type back in the early days of motoring. Their simple layout made them easy to manufacture, and they were more than adequate for the needs at the time. In the pursuit of a smoother ride, however, Cadillac introduced the first crossplane vee-eight in 1923.
  5. So why bother with flatplane cranks anyway? For two reasons. First, they do not need heavy counterweights to balance the static weight of their pistons, connecting rods and crankpins. Being all in one plane, opposing pairs of pistons balance each other instead. With a lower rotational mass, the engine can then spin faster, which translates into greater power and a more immediate response to the throttle—an essential feature of sportscars.The second attraction is the flatplane vee-eight’s firing order, alternating evenly between the two banks of cylinders (L-R-L-R-L-R-L-R ). This provides not only better airflow into the engine, but also evenly spaced pulses of exhaust gas from each bank of cylinders—and hence better “scavenging” of the waste gases from the engine.Overall, a flatplane vee-eight is a smaller, lighter engine with a lower centre of gravity than its crossplane equivalent—all features prized by sportscar-makers.
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