Tag Archives: economy

Citizens are happier in countries where the government intervenes more frequently in the economy

How much should the government intervene in a country’s economy? If you ask hardcore capitalists, they’ll tell you as little as possible – let the market sort itself out. But an emerging strong trend in economics claims that government intervention and citizen wellbeing are tightly connected.

A new study adds more credibility to that idea, finding that “in countries where governments intervene more frequently in the economy there is a higher degree of self-reported happiness among citizens.”

It’s not all about the free market – government intervention makes people happier, new study finds. Photo by Thomas J. O’Halloran from the New York Stock Exchange in 1963.

It’s still probably the most heated political debate in the world. Democracies all over the planet are still witnessing a fight between the left and the right side of the political spectrum. The left generally argues for more interventionist policies like generous unemployment protections and welfare benefits, while the right asks that we leave the market alone to regulate itself. The fact that there is no agreement on what is the “best” intervention policy shouldn’t surprise anyone – many variables differ from case to case and it’s hard to draw a general line. However, due to the complexity of policy-making, we don’t even have definite metrics to assess the success of a certain measure. Economic growth, unemployment, per capita productions and levels of inequality are all relevant metrics, but no combination has established itself as a golden standard.

However, in a recent paper, a group of British researchers took a step back from that approach and looked at a much more basic metric: happiness. The release reads:

“In a recently published research paper, we take a step back from purely economic indicators of well-being and instead ask: What public policies lead to citizens living lives that they themselves deem satisfying? In other words, what public policies promote greater human happiness?”

Patrick Flavin, Alexander C. Pacek and Benjamin Radcliff analyzed data across 21 industrialised democracies between 1981 and 2007. In order to rule out other explanations, researchers compensated for a host of individual (such as marital status, education, personal health, employment status, and church attendance) and country (such as GDP, economic growth, average levels of citizen trust) characteristics. Of course, there is always a risk when compensating for factors like this, but their results showed a strong statistic significance. Basically, citizens report being happier in countries where the government intervenes more in the market economy – even if they are not aware that this is happening.

To make things even more interesting, the results were similar for all people. It doesn’t matter if you’re rich or poor, male or female, etc. You are likely happier if the government steps in to regulate the market.

This comes as a big surprise, because while you would expect this to happen for poorer people who generally benefit from government interventions, right-wing politicians argue that an interventionist policy is in the detriment of the middle and high class.

However, the researchers urge for caution in interpreting the results.

“While we find empirically (and believe there are strong theoretical reasons to believe) that social democratic policies do contribute to a world in which there is greater life satisfaction, we offer no judgement on whether an expansive, activist state is “better” or “worse” than a limited one.

Instead, we focused our attention on one part only of this enduring debate about the size and role of government by asking: Does more government enhance human happiness?”

The answer to the last question seems to be ‘yes’.

Venezuela orders 2-day work week in desperate attempt to stave off power crisis

Venezuela’s public workers will only work on Mondays and Tuesdays as the country falls deeper into crisis.

Venezuela is undergoing a severe economic crisis, as well as constant power outages.

Venezuela seems to be inches away from a complete crisis. With a crumbling economy, corrupt politicians and a decaying infrastructure, the country has few back-up plans. But there’s a fine irony for the country with the biggest proven oil resources to undergo an electricity crisis. Revenue from petroleum exports accounts for more than 50% of the country’s GDP and roughly 95% of total exports, most of which go to the United States. But falling oil prices, coupled with a general incompetence or inability to manage the country’s resources and potential have sent them on the brink of collapse. President Nicolas Maduro announced Tuesday that the government was slashing working hours for at least two weeks, in a desperate bid to deal with the country’s lack of electricity.

It’s not as if this move came from nowhere. Power shortages have been a part of the life of Venezuelans for years. First, President Nicolas Maduro shut down the country for a week in March. Then, he made Friday an official holiday and implemented the four-day work week, again to save power. Earlier this month, the president asked women to stop using hairdryers, saving them only for “special occasions.” He also asked citizens to hang their clothes instead of using dryers and to embrace the heat  Rations were introduced in several supermarkets.

“It’s not just electricity; it’s the whole infrastructure of the country that’s crumbling.” says Jean Daudelin, a professor of development and conflict at Carleton University. “It’s the road systems, it’s the ports, it’s the water, it’s everything.”

The country’s economic situation can be explained by a chain of unfortunate decisions. Under Hugo Chavez, the country reduced poverty from 50% to 30% (today’s levels are between 75 and 80 percent, with a drastic inflation). When the price of oil was rising, the country made a big profit but time after time failed to invest that profit into something more sustainable and reliable. They did invest in the food industry and health, but the bulk of that money went into subsidizing oil. Gasoline could be bought for mere cents on the gallon—the cheapest price in the world, and Venezuela consumed much more energy than its neighbors. It seemed the country was living a golden age, but things changed quickly.

Failing to invest in basic electricity production, the country was still stuck paying $12.5 billion in fuel subsidies alone. Because of the unstable political environment, no one really wanted to reduce these subsidies even though they clearly weren’t paying off. Further inability to develop alternative energy sources coupled with a drought (reducing hydro-electricity production) led to the situation we see today.

Power outages may be a chronic problem in Venezuela, but implementing a 2-day work week to save power is something I wouldn’t expect to happen in 2016… or ever.

Royal Bank of Scotland: Oil may reach $16 a barrel in 2016

The Royal Bank of Scotland (RBS) has warned clients to brace for a “cataclysmic year” with a global deflation crisis, claiming that many major stocks will fall and oil may reach $16.

Image via Pixabay.

Oil prices have been tumbling in the past months, with the barrel crashing below $30 for the first time since 2003, marking a spectacular 72% plunge from June 2014 peak of almost $108.

“The fundamental situation for oil markets is much worse than previously thought,” Barclays commodities analysts wrote in a client note.

The RBS has been even more stark with their warnings. In fact, the drop in oil price isn’t even the most worrying thing after them – they expect almost everything to drop.

“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” they said in a client note.

China is spooking everyone at the moment. Their stock closed at lowest level since September, and if their economy is slowing down, then they will also likely need less oil to fuel the country.

“Just in the past week, strong fears of a hard landing in China have reemerged with a vengeance,” Michael Wittner, global head of oil research at Societe Generale, wrote in a research report.

The drop in oil price has been fueled by a gut, caused in great part by the American shale oil boom. U.S. oil production has not been hit nearly as hard as most people anticipated, being one of the few countries that are dealing with the oil price crisis with some success. Iran has also started pumping out massive quantities of oil recently, contributing to the lowering of prices. However, just how low the oil price will go is a deep mystery at the moment.


How many slaves work for you? Find out in this online test

With the Paris COP21 talks underway, we’re hearing the phrase “carbon footprint” more and more these days. But what exactly is a carbon footprint? Well, Wikipedia defines it as being “the total sets of greenhouse gas emissions caused by an organization, event, product or individual,” and Merriam Webster as “the amount of greenhouse gases and specifically carbon dioxide emitted by something (as a person’s activities or a product’s manufacture and transport) during a given period.” So basically it’s a measure of how much greenhouse gas emissions can be attributed to each one of us as a result of our daily activities.

But “a footprint” is an umbrella term that can be used to refer to other similar measurements — for example, a memory footprint shows how much main memory a computer program uses when running. And this brings me around to something very cool (though a bit unsettling) that I found today and wanted to share with you guys.

As a side note, this would probably be a very useful app for a pharaoh.

As a side note, this would probably be a very useful app for a pharaoh.

The Slavery Footprint

Income inequality and social stratification are hallmarks of today’s economy, both in the context of a single country and on an international level. Even in traditionally rich, developed, industrialized countries where life quality is high and there are plenty of goods to go around, it’s become apparent that the current way of doing things just isn’t sustainable and that too much wealth is held by too few people.

But here’s the thing — we see the problems in our society and tend to believe that it’s the same for everyone else, everywhere else. We seldom seem to realize that while the poor (and to some extent the middle class too) in industrialized countries have it rough, in poor countries they go through hell.

And that’s what the guys at slaveryfootprint are trying to make us understand. Part of the Made in a Free World project, the website asks deceptively simple questions like what you like to eat, what you like to wear and what kind of sporting goods you own to give you an estimate of how many people work in near (sometimes full blown) slavery conditions for you to be able to sustain your lifestyle.

They’re very good at what they do — the first thing you see on the website are two buttons, one taking you to an interactive presentation of the program, and the other to the test itself. Presented in a very clean, well-designed and fluid interface, the questions are really fun to answer and each come with their own uncomfortable fact about slavery in our time.


And I have to admit that by the time I got to see my result, that simple-font white number left me chilled to the core.

My results

My results

I know it’s a rough estimate (they do have a very well-thought algorithm explained on their page that they use to calculate this number, I just wasn’t very precise with my answers), but any number over 0 that I’d see there would still leave me seriously questioning the system I live in and how my life impacts others. I like to think I’m a good person, I guess we all do that, and slavery (intended or not) is something that tends to take you off Santa’s nice list in a hurry.

So go take a look at the website and the intro, then take the test yourself (protip: if you’re not in a hurry you can click on a button to the left after you start the test for a more precise result.) Spread the word, share this article or tell your friends about the website. Tell them to take the test too. If we raise awareness enough, maybe we can break this horrible system and re-make it into something that gives everyone the means for a decent life.

All images credits go to the Made in a Free World Project.

Study finds global effect of temperature on productivity

A recent study published Wednesday in the journal Nature shows that there is a strong functional relationship between a region’s average recorded temperature and economic productivity — further warning of the damage climate warming would do to our economy.

Image via linkedin

The study compiled 50 years’ worth of economic data and temperature readings from over 100 countries and found a strong correlation between these two: regardless of a country’s wealth levels, human productivity seems to be highest for annual temperature values of around 13 degrees Celsius (55 Fahrenheit). In areas where the mean temperature value is higher than this, economic productivity declines “strongly,” the authors conclude.

“The relationship is globally generalizable, unchanged since 1960, and apparent for agricultural and non-agricultural activity in both rich and poor countries,” the study, led by Marshall Burke of Stanford’s Department of Earth System Science, notes. Solomon Hsiang and Edward Miguel, economists at the University of California, Berkeley, also participated in the study.

“These results provide the first evidence that economic activity in all regions is coupled to the global climate and establish a new empirical foundation for modelling economic loss in response to climate change,” they conclude.

Their findings means that unmitigated global warming could lead directly a more than 20 percent decline in incomes the world round, and increase economic inequality: Poorer, hotter countries will feel the effects worse than their colder, richer counterparts — “hot, poor countries will probably suffer the largest reduction in growth,” the authors note, also suggesting that countries such as Canada or Sweden will actually benefit from the change, as they move closer to the optimum mean value of 13 degrees.

“If you’re in a country where the average temperature is cooler than 13 degrees C, a little bit of warming could actually be beneficial,” says Burke. “On the other hand, if you’re already at 13 degrees C, a little extra warming is going to hurt you.”

Countries that fare considerably better are located in currently cold places — adding weight to the idea that northern countries will benefit from climate change. On top of easier shipping, resource exploitation, and tourism, there could be a productivity boost due to more favorable temperatures. Many tropical countries, in contrast, suffer economic damages in this scenario — getting hotter than they already are.

“Warming may amplify global inequality because hot, poor countries will probably suffer the largest reduction in growth,” the study concludes.

“The cross-country implications of the analysis is eye-opening,” said Rick Larrick, a professor at Duke’s Fuqua School of Business, after reviewing the study for the Washington Post. “Climate change is not just an environmental issue but geopolitical issue.”

He also claims that while short term temperature swings might cause economic hardships, the study fails to take into account economic adaptation to a long term temperature increase.

“Using year-to-year changes is a good proxy for long term temperature changes, but countries may not be prepared to invest in mitigation on such a short cycle (it is unanticipated and temporary); in the presence of ongoing climate change, however, countries might be forward looking in terms of investing in mitigation,” he said by email for Washington Post.

But on what factors exactly is this relationship based on? The authors consider agriculture and human behaviour to be the main causes:

“We see that agricultural productivity declines, labor productivity declines, kids do worse on tests, and we see more violence.”

The paper draws on a historical analysis of 166 countries over 50 years, looking at GDP per capita and corellating them to the temperature fluctuations that these countries experienced. They only compared each country “to itself in years when it is exposed to warmer- versus cooler-than-average temperatures due to naturally occurring stochastic atmospheric changes,” to eliminate factors such as national wealth or culture.

“An economy observed during a cool year is the ‘control’ for that same society observed during a warmer ‘treatment’ year,” the authors write.

After identifying the temperature-productivity relationship, the authors created estimates for the effect it will have in the future, if steps are not taken to stem global warming:

“In 2100, we estimate that unmitigated climate change will make 77% of countries poorer in per capita terms than they would be without climate change.”

Previous work done by the three researchers showed that increasing temperatures lead to increased violence, and Hsiang found a relationship between warmer climate and poorer math test scores.

“We find that math performance declines linearly above 21C (70F), with the effect statistically significant beyond 26C (79F),” that previous paper reported.

Other research confirms that global warming will reduce wheat yields, among other detrimental effects on agricultural production.

But, even considering this large body of research is consistent with the new study, the paper is not without its critics. University of Sussex economist Richard Tol considers it “hugely problematic” in an email to the Washington Post.

“They extrapolate from modest warming between 1960 and 2015 to massive warming between 2015 and 2100,” he objected, among a number of other technical criticisms.

In an accompanying commentary on the paper, also in Nature, economist Thomas Sterner of the University of Gothenburg, Sweden was less critical but noted that the work will have to withstand academic scrutiny.

“The conclusion that temperature-associated costs will be higher than previously calculated will cause a stir, and should have stark repercussions for policy,” wrote Sterner. “The authors take great care to check the robustness of their findings but there will, no doubt, be attempts to look for other data and approaches, which may give different results.”

Another question that arises from the study is to what extent technology can overcome the adverse effects of warmer temperatures:

“Air conditioning absolutely can help, but the data suggests that it does not fully insulate you from the effects of temperature,” says Burke. “We do not find that technological advances or the accumulation of wealth and experience since 1960 has altered the relationship between productivity and temperature.”

It remains to be seen if the scientific comunity’s review of the paper is favorable or not.

Sweden is becoming the first cashless country, report finds

Sweden is definitely one of the more avantgarde countries in the world – it’s not just that they recycle 99% of their garbage, are working heavily on becoming fossil free, have some amazing engineering, and are implementing the six hour work day, but now, as a new study concluded, they are also the first country to move towards a cashless economy.

Image via Wiki Commons

Industrial technologists at Stockholm’s KTH Royal Institute of Technology have just published a study that shows how fast cash is disappearing in Sweden.

“Our use of cash is small, and it’s decreasing rapidly,” says Niklas Arvidsson, an author of the study.

The rate of decrease is quite amazing: nowadays, there are just 80 billion Swedish crowns (about €8 bn) in circulation, down from 106 billion just six years beforehand – and the trend isn’t slowing down.

For inhabitants of the country, this is no surprise. Walking through the streets of cities, it’s almost impossible to find a shop that doesn’t accept card, and most locals almost never carry any cash on them.

It’s not just people, banks are following the same trend – several branches don’t even accept cash anymore.

“At the offices which do handle banknotes and coins, the customer must explain where the cash comes from, according to the regulations aimed at money laundering and terrorist financing,” says Arvidsson. Any suspicious cash transactions are reported to the police.

But this is not necessarily a good thing, especially as there are people left behind. Sweden too has its share of homeless, who can’t really access the system; the same goes for many immigrants, and even the elderly can find it difficult to adapt. In a cashless society, the government’s generous social system has to compensate for these people. Also, there are concerns about a lack of privacy – the bank can at any time see what, when and how much I bought, and that can be seen as an intrusion to privacy



How much is your university paying for journal access?


At the turn of the 1990s, scholarly publishers were increasingly concerned about what had become known as the serials crisis. Journal subscriptions were rising at an average of 10% per year, which in turn meant each year libraries were struggling harder to keep up and in, consequence, many would cancel. To counter, publishers would further increase their pricing, then more and more libraries would cancel, and again rinse and repeat. The result: a vicious cycle that threatened to undermine a 350-year-old scholarly publishing system.

The Big Academic Buffet

Then came 1996 and Academic Press (AP) introduced what would become known as the “Big Deal” – online subscriptions to large bundles of electronic journals sold at a fixed fee for an arranged period of time (typically three years). Much like home cable subscriptions that include hundreds of TV stations, the Big Deal came with an all-you-can-eat offer for universities and libraries – and they all gobbled it up whole! At first glance, the system, which was soon adopted by all the other big publishing houses, was a breath of fresh air and came as a solution to a desperate problem.

The administrative tasks involved in subscriptions was dramatically shortened, as now there was just one collection of journals (i.e., the entire portfolio published by AP) and just one customer. Second, if the license fee was paid by means of top-slicing, the pressure on library budgets would be less severe. Finally, by bundling its entire portfolio of journals in a single product, AP could hope to break the cancellation cycle, since the bundle would be offered on an all-or-nothing basis.

Almost twenty years later, the Big Deal turned out not to be that much of a bargain. The Big Deal is like a single all-you-can eat subscription for a set fee, however libraries soon learned that there are many downsides to consuming academia in a bundle. Most libraries would spend a great deal of their budgets on the Big Deal, then would find themselves lacking funds for other important purchases like buying monographs, which had an impact on scientists and other researchers alike, a situation exacerbated by the fact that the proportion of research university funding allocated to libraries has been falling over time.

“Big Deals consume a disproportionately large percentage of the total library materials budget, and often the purchase of books suffers because monies have to be prioritised for journals,” says Paul Ayris, director of library services at University College London. “This affects scholarship in the Arts, Humanities and some Social Sciences since the unit of publication in these areas is still the book.”

But it would be wrong to portray the Big Deal as a cunning plan by publishers to entrap librarians, as some conspiracies might have us believe. So, libraries should hold no ill grudge for this, but they have other reasons to be unhappy. One being that journal charge preferentially for their subscriptions, as revealed by an investigative paper published in Proceedings of the National Academy of Sciences. It’s not that universities and libraries pay a different price for the same bundle – this is something we all knew somehow – it’s the crazy inequality of it all.


Universities negotiate with academic publishing companies behind closed doors, and those deals usually come with nondisclosure agreements that keep the bundled prices secret. The authors of the study got ahold of “big deal” contracts with publishers (non-profit and for-profit alike) from 55 public university libraries and 12 consortia via FOIA (Freedom of Information ACT) requests or just plain asking nicely. It wasn’t no easy task, of course – Elsevier, Springer and the other big publishing houses contested the request for contracts from libraries like University of Texas or University of Washington, but the courts eventually ruled in favor of the researchers involved. The authors found that:

“The contracts we have seen show remarkable institution-specific price variation that cannot be explained by university characteristics such as enrollment and PhD production. Some institutions have been quite successful in bargaining for lower prices wheras others may not have been aware that better bargains can be reached. Perhaps this variation explains publishers’ desire to keep contract terms confidential.”

Take the case of University of Oregon and Oklahoma State University – both are similar in size and numbers of PhDs graduated each year, yet OK State paid $185,795 for the Wiley journal package and the University of Oregon paid $285,036. There are many other cases you can find in the full paper, and what this goes to show is that pricing is not made over some objective metrics, but rather by bargaining. University of Michigan paid almost twice as much as the University of Wisconsin for the same Elsevier package. Not coincidentally, UM’s acquisitions budget is almost double the size of UW.

So, is this the Big Deal libraries have been waiting for? In light of all this, I can only hope and wish that efforts that try to make journal entries open access for everybody, whether you’re in a library or home on your personal computer. Even so, the big publishing houses will rejoice just as well. It will be the government’s money that will pay for the subscriptions, instead of the libraries, and their money is the best and fattest in the world, straight from your pocket.

electricity bill

UK funds new cutting-edge science facilities, but forgets it needs to pay the electricity bill

electricity bill

(c) The Guardian

The House of Lords Science and Technology Committee  has recently issued a report that laments the embarrassing lack of efficient planning and strategy of science funding in the UK. Namely, the report speaks primarily of the seemingly lack of communication between the people who write the funding projects for infrastructure and those who write the funding for operation costs.

For instance, the report cites the ISIS site in Oxfordshire – a cutting edge scientific facility where beams of neutrons and muons are used to probe material properties. It’s rather clear that ISIS is an extremely important facility, but nevertheless it has recently been operational only 120 days a year, down from the typical 180 days a year. We’re in a tough economy, sure, but when you look at the the savings from truncating the hours one realizes that these are only marginal.

Another hilarious example is the case of the  high performance computers at the Hartree Centre near Manchester, for which some  £37.5 million of government funding were allocated in 2012 to upgrade systems. That’s a nifty sum of money, but apparently the government didn’t accurately take into account the potential electricity bill a supercomputing facility gobbles up each year. In consequence, a part of the facility is shut down because they can’t afford to supply electricity.

Obviously, one would think that operational costs would be taken into account with the initial, new infrastructure plans, however it seems UK politicians like to go ahead of themselves. When inquired about these infrastructure vs operational costs discrepancies  and mismanagement,  John Womersley, chief executive of the Science and Technology Facilities Council which oversees much of the UK’s government-owned science infrastructure, said:

“It has been difficult to invest in the routine maintenance and upkeep of existing facilities, because [government] ministers very naturally are interested in new initiatives and transformative change in entirely new projects.”

via Nature Blog

Are you ready to greet our new office robot overlords? (C) MotherJonas

Half of U.S. jobs at risk of being taken over by computers


Are you ready to greet our new office robot overlords? (C) MotherJonas

Are you ready to greet our new office robot overlords? (C) MotherJonas

An Oxford study that assessed the risks that the introduction of automation in work sectors currently managed by people might have on employment found that 47% of jobs in the U.S. could be replaced by computers/robots. Most of these jobs are low-wage and routine-based, however the study stresses that once with the advent of more robust computing systems capable of distinguishing patterns, arguably humans’ greatest leverage in front of computer today, might swing away jobs that are more complex in nature. Examples given are diagnosis machines or legal research computing algorithms.

“While computerization has been historically confined to routine tasks involving explicit rule-based activities, algorithms for big data are now rapidly entering domains reliant upon pattern recognition and can readily substitute for labor in a wide range of non-routine cognitive tasks,” write study authors Carl Benedikt Frey and Michael Osborne.

It’s important to stress that the authors do not claim half of all U.S. jobs currently in occupation will be taken over by bots, but that there’s the risk these may be replaced. Evaluating how the work force will look like decades from now is an extremely complex task with high margins +/- of predictions.

Some might argue that this isn’t the first time the working class has to adapt to accommodate employment paradigm shifts. The industrial age is a worthy example. Millions of jobs were displaced then in a myriad of fields by factories. The introduction of fast-paced and efficient assembly lines at the turn of the last century produced a new displacement. Massive globalization starting a few decades ago also caused millions of jobs in developed countries to be lost at the hand of outsourced cheap-labor in developing countries, mostly from Asia.

The workforce has been forced to adapt, although periods of transition have always been followed by turmoil. The real question is will this transition period be this time more difficult than the previous ones? As more and more jobs become automated, it may be the case that people could have a tougher time at re-purposing their skill set. In an article for the New York Times, Economists David Autor and David Dorn argue that most of the jobs that will be displaced in the near future by computers are those currently classed as entry-level. Displaced workers will thus have do move down the ladder and settle for lower paying jobs – jobs that are cheaper to be handled by humans than computers. This will lead to an even further deepening of the gap between the lower class and upper class – basically bashing the middle class. These possibly foreseeable consequences need to be thoroughly assessed by policymakers.

[READ ON] Chinese manufacturer of Apple iPads and iPhones wants to replace workers with 1 million robots

Story via Singularity Hub

Japan earthquake causing damage of £100 bln, still rising

The sad loss of over 10.000 people caused by the M8.9 earthquake and the tsunamis it generated is not the only problem Japanese people will have to deal with; this major disaster is also the most costly in world history, a “title” previously held by Katrina in the US, with an estimate of £77  billion but with way less deaths.

The disaster caused a 6.2 per cent drop in Japan’s Nikkei share index, wiping £90 billion off stocks and shares traded there, and although this is not the highest concern at all right now, it is yet another difficult task to handle; furthermore, a significant part of the world is economically addicted to Japan, so if they were to suffer a recession, probably the whole world would have to face another recession.

Andre Bakhos, the director of market analytics at Lek Securities in New York, said: “The earthquake could have great implications on the global economic front. If you shut down Japan, there could be a global recession.”

The earthquake in Japan had an estimated magnitude of 8.9, making it one of the top five earthquakes ever to be recorded. The tsunamis it generated violently struck not only Japan, but other parts of the world as well, and because the electricity dropped in most of the country, several nuclear plants are in danger of a meltdown. So far, the deathtoll goes way beyond 10.000 people.