Economist 4/1/16

  1. Last year technology companies spent $8.5 billion on deals and investments in artificial intelligence, four times more than in 2010.AI is already starting to generate big financial gains for companies, which helps explain firms’ growing investment in developing AI capabilities. Machine-learning, in which computers become smarter by processing large data-sets, currently has many profitable consumer-facing applications.The biggest concern, however, is that one firm corners the majority of the talent in artificial intelligence, creating an intellectual monopoly of sorts. Google looks best positioned to do this: between its Google Brain project and its acquisition of DeepMind, it has some of the brightest human brains working on AI. Because superior AI systems are able to learn and improve more quickly, the firms that develop an early edge in artificial intelligence may reap the greatest rewards and erect barriers to entry that smaller firms will find hard to overcome.
  2. China’s latest medical scandal has erupted. The country, it turns out, has been using millions of doses of outdated or improperly stored vaccines for the diseases not covered by the mandatory program.The vaccine scandal first came to light a year ago when police in Shandong, an eastern province, arrested a pharmacist and her daughter. Allegedly, they had been buying vaccines that were out of date or about to expire and selling them to hospitals and clinics across the country.At first, the government’s reaction was sluggish to non-existent.In all, roughly 2m faulty vaccines are thought to have been sold, for a total of 570m yuan ($90m). The scandal has implicated 29 pharmaceutical firms and 16 health departments. The police are pursuing 69 criminal cases. On March 28th the government finally launched its own investigation under the China Food and Drug Administration.
  3. China has a two-tier vaccination system. Mandatory vaccines, such as those against hepatitis-B, are provided free by provincial disease-control authorities, which are responsible for production and distribution. Non-mandatory vaccines, such as for chickenpox, have to be paid for.Provincial health bureaus are poorly financed; cash-strapped disease-control departments have turned the vaccination system into a revenue stream. The outdated vaccines do not seem to be dangerous in themselves; no deaths have been reported as a result of receiving them. The World Health Organisation describes the health risks as “very low”.But the scandal may still have damaging consequences because anxious parents are now reluctant to have their children vaccinated.
  4. As with wine, the processing of coffee beans and cacao, used to make chocolate, also requires some fermentation. But new research shows that coffee and cacao yeasts are far more genetically diverse than wine strains. This opens up the intriguing possibility of imparting entirely new tastes to the terroir of coffee and chocolate.As they report in Current Biology, although all vineyard-yeast strains are extremely similar genetically, there is tremendous diversity among the yeast strains associated with cacao and coffee. More specifically, they discovered that these differences correlated with geography.The differences were so great that the researchers were able to use DNA sequences of the yeast strains alone to determine which country a sample of cacao or coffee came from.Why cacao and coffee yeasts vary so much is unclear, although human behaviour is likely to play a role.Winemakers also have a long history of using starter cultures of yeast from places that have traditionally produced wines.
  5. THE idea of a higher minimum wage (along with a citizen’s income) is getting more momentum, as governments grapple with the rise in inequality over recent decades.Economists have been grappling for decades with whether (and by how much) a higher minimum wage affects employment. A paper by David Neumark of the University of California (on the very useful IZA World of Labor’s website) summarizes the literature. Most studies show there is an impact with a 10% rise in the minimum wage causing around a 2% drop in employment for affected workers (normally the young and low-skilled).  This is not the same as saying that overall employment will fall by the same amount. The paper also shows that a higher minimum wage may not be as effective in tackling poverty as many hope. Low-wage workers don’t all belong to low-income families.Still there are other potential impacts of higher minimum wages; one is higher productivity. Some British companies that voluntarily shifted to a higher living wage found that staff absenteeism and turnover rates reduced, and productivity improved.
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