Economist 9/30/16

  1. Skytrax releases an annual ranking of the world’s top 100 airports. This year’s list puts five airports in developing countries ahead of the top American airport, Denver International, which lies in 28th place.The top 50 includes 15 airports in developing countries and just four in the United States.New York JFK and Los Angeles LAX come in 59th and 91st, respectively. Newark and LaGuardia don’t even make the top 100.What is it that makes American airports so bad? There are a number of factors, beginning with chronic underinvestment in public infrastructure across the country.But part of the answer can be traced to a related trend: the poor performance of American airlines compared with international rivals.So while both Singapore Changi (the top airport) and Emirates (the top airline) add new amenities to lure international travellers, America’s carriers and hubs are more focused on the dominant domestic market, where there isn’t as much competition or pressure to improve.
  2. HUNGARY will hold a referendum on October 2nd.The question is: “Do you want the European Union to be entitled to prescribe the mandatory resettlement of non-Hungarian citizens in Hungary without the consent of parliament?” (Note the neutral wording.) The referendum was prompted by the EU’s Emergency Response Mechanism, adopted in September 2015, under which 160,000 of the migrants who began surging into Europe last year are to be shared out between member states according to quotas. The decision passed in the EU’s Council of Ministers by majority vote, but four countries voted against it: the Czech Republic, Slovakia, Romania and Hungary. Hungary and Slovakia have challenged the system in the European Court of Justice.The referendum is largely a popularity ploy by Viktor Orban ,Hungary’s populist prime minister, and will have no legal effect.
  3. Polls predict a comfortable majority of voters will choose “no”. Outside Budapest and the major cities, Hungary is a conservative and insular country, where many people speak no foreign languages and have little experience of those with different skin colours or faiths. But more than 50% of Hungary’s roughly 8m eligible voters must turn out for the result to be valid, and they may not.Since the start of 2015 Hungary has received 203,898 asylum applications, and granted only 880 people any form of protection, according to the government.It is not clear how anti-migrant the public is.
  4. GOLF clubs abounded in Arnie Palmer’s life.He had won seven majors (the US Open, the British Open twice, the Masters four times) in seven seasons, and 92 professional tournaments worldwide. They made him the most celebrated player in America and his sport, once the preserve of snobs in plus-fours, a popular sensation. He did not play like other people: he was muscular, dramatic, with his flopping hair and working man’s hands.Thanks to him, golf became a TV fixture and a maker of millionaires. He was the first.His style was not subtle.“Go for broke” was his motto, and his speciality was the “Palmer charge”, where he would roar in from behind to clinch a title.From 1959, though, his business manager Mark McCormack taught him the ropes of borrowing, investing, sponsorship and endorsements, and two years later Arnold Palmer Enterprises Inc marked the first transformation of golfing prowess into a business empire.
  5. BARRING any last-minute hiccups, America’s government will let lapse a contract that gives it control over part of ICANN on October 1st.Whoever controls the internet’s address book can also censor the internet: delete a domain name (such as economist.com) and the website can no longer be found. That is why, as the internet grew up, America decided not to hand control to the United Nations or another international body steered by governments. Instead, in 1998 it helped create ICANN, which is a global organisation that gives a say to everybody with an interest in the smooth running of the network, whether they are officials, engineers, domain-name holders or internet users.Most were happy with the arrangement, at least at first. But American oversight came to seem odd as the internet grew into a vast global resource with much traffic no longer passing over American cables.But America’s Department of Commerce, which oversees ICANN, was provoked to announce in March 2014 that it would relinquish its role if it were convinced that the organisation would be truly independent and able to resist power grabs by other governments and commercial interests.

Economist 9/5/16

  1. According to the National Highway Traffic Safety Administration (NHTSA), just over 35,000 people were killed in crashes in 2015. That was 7% more than in 2014, the biggest annual percentage increase since 1965.By most counts America has the worst road-safety record in the rich world. Its rate of 10.9 deaths per 100,000 people per year is almost twice as high as Belgium’s, the next-worst well-off country, and roughly level with that of Mexico. One of the main reasons that the United States sits atop this grim ranking is because Americans drive far more often than the rich-world average. When miles travelled are taken into account, America was actually a bit safer than Japan, Slovenia and Belgium in 2013.In 2000 Slovenia’s death rate per person was higher than America’s; by 2013 it was 40% lower. Sweden, which in 1997 introduced a plan to reduce fatal crashes to zero, now has the safest roads in the world.
  2. Thanks to better anti-lock brakes, airbags and side-impact protections, cars have become far safer, while other road users have not benefited from similar advances. As a result, car users’ share of road deaths in America fell from 42% in 2006 to 36% last year.Mark Rosekind, head of the NHTSA, says 94% of crashes “can be tied back to human choice or error”. Fully 85% of the people who perished on America’s roads last year either were not wearing a seat belt or were in accidents where a driver had been speeding or drinking.
  3. George Akerlof was at the forefront of the effort to to incorporate “asymmetric information” into their thinking.George Akerlof was at the forefront of this effort. In his seminal 1970 paper “The Market for Lemons”, Mr Akerlof asked what would happen to the market for used cars if buyers could not tell between good and bad.Suppose a buyer would pay $1,000 for a good set of wheels (a “peach”) but only $500 for a malfunctioning car (a “lemon”).But if lemons and peaches are hard to distinguish, buyers will cut their offers accordingly. They might be willing to pay, say, $750 for a car they perceive as having an even chance of being a lemon or a peach. The problem is that dealers who know for sure they have a peach will reject such an offer. As a result, the buyers face “adverse selection”: the only sellers who will be prepared to accept $750 will be those offloading lemons.
  4. Subsequent research highlighted two sorts of solutions. Peter Spence, another pioneer of information economics, focused on “signalling”. His example was the labour market. Employers may struggle to tell which job candidates are best. So workers can signal their talents to firms by collecting gongs, like college degrees.Adverse selection is plaguing America’s Affordable Care Act, better known as “Obamacare”. Fewer healthy people than expected have signed up to the government-sponsored insurance exchanges, which limit how much premiums can vary with risk. Insurers are making losses; as a result, they are raising prices substantially (or pulling out altogether). Critics say those price rises will drive away more healthy customers, leading to a “death spiral”.
  5. Americans are furious about the cost of medicines. Over the past week their ire engulfed Mylan, a generic-drug firm, which had raised the price of its EpiPen, an injectable medicine that fends off deadly allergic reactions, to $608, from about $100 in 2007. On August 29th Mylan said it would start selling a generic version for half the price.For pharma firms, this is a worrying prospect. To date the government has done little to lower or cap spending on medicines. Across Europe governments control prices in one way or another, but American drug firms can set whatever official price they like. Their single biggest customer is Medicare, which spent a massive $112 billion on medicines for the elderly in 2014.And it is illegal for Medicare to negotiate with drug companies. Only private health insurers do so on the government’s behalf, but they are sharply constrained. Insurers are obliging patients to pay a greater share of the cost for their treatment, so they notice higher prices.Prices are also rising rapidly. The average launch price of a range of cancer drugs, adjusted for inflation and health benefits, grew by 10% each year between 1995 and 2013