Economist 2/11/16

  1. THE inaugural United Nations day celebrating “Women and Girls in Science” is observed on February 11th. The UN designates specific days of the year to promote “international awareness and action” on issues it deems important as well as commemorating important events in its history. But with 137 occasions given over to UN days, many argue that the calendar is way too crowded.In the first four decades of its existence the UN added 25 days to the list. But since 1980 only two years, 1984 and 1985, did not give rise to a new UN day and since 1990 over 110 more have taken a slot in the diary.Perhaps the UN should take another look at the list. What is the point of “World Post” day now that electronic communication is far more common? Days for jazz, statistics, teachers and yoga are peculiar choices. “South-South Co-operation” day is simply baffling.
  2. The repeal of prohibition marks the start of complex arguments about how to regulate cannabis. What sound like details for bureaucrats—how to tax it, which varieties to allow, who should sell it and to whom—are questions that force policymakers to decide which of legalisation’s competing aims they value most. Trailblazers like Canada are writing rules that the rest of the world will copy; once laid down, they will be hard to uproot.States can tax users to deter consumption—though not so much as to make consumers turn first to the untaxed black market. The “right” level of tax will depend on a country’s circumstances. In Latin America, where abuse is rare and the black market is bloody and powerful, governments should keep prices low. In the rich world, where problem use is more common and drug-dealers are a nuisance rather than a threat to national security, prices could be higher.The starting-point should be to legalise only what is already available on the black market. That would mean capping or taxing potency, much as spirits are taxed more steeply and are less available than beer.
  3. In one respect, governments should be decidedly illiberal. Advertising is largely absent in the underworld, but in the legal world it could stimulate vast new demand. It should be banned. Likewise, alluring packaging and products, such as cannabis sweets that would appeal to children, should be outlawed, just as many countries outlaw flavoured cigarettes and alcohol-spiked sweets. The state should use the tax system and public education to promote the least harmful ways of getting high.
  4. AT FACE value, there is little sense in the $5.6 billion proposal by Foxconn, the world’s largest contract electronics manufacturer, owned by Hon Hai of Taiwan, to buy Sharp of Japan. It seems an extravagant price for a debt-laden firm that is bleeding red ink and squandered two previous bail-outs.Why is he now so keen to spend lavishly on something that may prove a millstone around his neck? Mr Gou is not saying, but there are several possible explanations. Hon Hai surely wants to gain bargaining power over Apple, which provides around half its revenues.Since Sharp, which makes display panels, is also a big supplier to Apple, the combination would have more clout in negotiations over margins—which, at barely 3%, are now meagre at Hon Hai.Another factor might be Mr Gou’s desire to diversify Foxconn away from the grinding business of making devices for other firms, which profit nicely from owning the brands.
  5. In the last quarter of 2015 the combined earnings of the big American and Canadian freight-rail firms fell by a fifth, compared with a year earlier, mainly because of the commodity-price crash. The industry has tried to shrug this off as a temporary blip. But if the downturn persists, the investment extravaganza will be over.Railroads could be accused of gouging their customers: pre-tax return on capital for the big six firms rose from 10% in 2004 to 19% in 2014. But that misses the bigger point. For every dollar of gross cashflow in 2014, 67 cents was reinvested.The industry’s appetite for capital spending is all but unique in America, where most firms spend bumper profits on share buy-backs to boost their stock price.The industry’s unspoken plan is probably to keep raising prices while investing less and returning more cash to shareholders to keep them happy. This approach is likely to enrage everyone else.So how can the industry continue to satisfy both investors and society if demand and profits are lower and the need for capital spending is just as high? Perhaps by turning the big six railways into four, or even two. How big the rewards would be from mergers is fiercely contested.

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