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Monthly Archives: November 2008

My own hypertension was first diagnosed about 18 months ago. Disappointed to hear that I would probably be on medication the rest of my life, I now find out that–at least–I may not need to pay so much for it.

The surprising news made headlines in December 2002. Generic pills for high blood pressure, which had been in use since the 1950s and cost only pennies a day, worked better than newer drugs that were up to 20 times as expensive.

Turns out that Pfizer and other drug producers actively fought the spread of the news, and did their best to discredit the research. Sounds to me like a good case for the anti-trust police, clearly a matter of anticompetitive practice.


Interesting article here about alternative uses for food, particularly ethanol. Ethanol and the subsidies for ethanol production have been widely blamed for rising food prices, a commanding issue because of the effects on the poor.

One issue is that some argue that ethanol programs have had only a marginal influence on food prices, and that expensive oil is more to blame.

Just how much influence biofuels had on food prices is debatable. The U.S. Department of Agriculture said biofuel production was responsible for just 3 percent of the global price increases. It said the real culprits were oil prices, which pushed up fertilizer and transportation costs, and the sharp drop in the dollar’s value.

Another observation is of a very cool machine that makes fuel from all kinds of organic material.

Carlo Bakker’s tiny biofuel operation, World Mobile Plants, avoids edibles. He says his mini-refinery, loaded into a 40-foot shipping container on a flatbed truck, roams South Africa making biodiesel fuel from used cooking oil, or from sunflower seeds or the jatropha shrub, which grows in poor soil with little water. He says he plans eventually to use organic household waste as well.

Another example of high prices encouraging the development of new alternative technologies. I want one of these World Mobile Plants. Very cool to roam around collecting trash and making something valuable from it.

Rampant piracy off Somalia is forcing shipping companies to avoid the Suez Canal and send cargoes of oil and other goods on a longer journey around southern Africa, industry officials said on Thursday.

Some shipping managers are apparantly convinced that the risk of losing a ship to pirates is enough to outweigh the savings in time and fuel using the Suez Canal.

Reminds me of some risk factor models we did in grad school–a long time ago. Lets see if I can remember a bit…

Condition of going round Africa:

CRA < R(ransom) + r(death)

Where CRA is Cost ‘Round Africa. R is risk of being boarded, and r the risk of losing sailors, both a discounting factor based on the chance of being boarded/killed. Shipping companies can probably use insurance costs as an estimate of the right side of the equation, and the left side is a product of fuel and maintenance costs.

Interesting that the article names only two companies making this decision so far, both Scandanavian. Is insurance more expensive for Scandanavian ships? Perhaps they value a life more, or their cargo is less affected by the longer shipping times.

A similar approach could be used to model the pirates’ decision to board a ship.

Fire crews in Southern California continue to battle blazes that have destroyed hundreds of homes, forced thousands of residents to flee and blanketed much of the region with choking smoke.

One lesson to take away from this story–is a natural tragedy good for the economy? Absolutely not, but it sure can look like it. Like war, like a typhoon or hurricane, a big fire means spending, incomes, and employment all increase as communities rebuild.

Are people better off? Of course not.  People don’t finish with more. If anything, we have only used more resources to maintain the status quo. That is economic waste, but the stats all look good.

When will we find a new way to measure economic growth?

Executives of some large private equity firms are meeting in Hong Kong. Word is they are largely pessimistic about the state of the world economy, but believe that Asia will recover more easily than the rest of the planet.

Both executives agreed that Asia, while getting hit by the financial crisis, was well suited to withstand it, thanks in part to banks’ relative lack of exposure to risky subprime mortgage securities which sparked the global crisis.

Another point is that domestic spending has increased in places like China, softening the downturn of export demand.  Economic growth in China is expected to continue at a high level–7 or 8 percent–so, though it is less than the last few years, not even close to recession levels.

Maybe I will stay here in China. As long as the foreign companies stay here, I will have a job. Will they stay? Guess they might if they are selling to the Chinese.

China has also decided on an expensive bailout–spending on infrastructure and aid–in a move that will boost demand for imports. Export demand will also get a boost as export taxes will be reduced.

The plan calls for higher spending through 2010 on airports, highways and other infrastructure, more aid to the poor and farmers, and tax cuts for exporters. That could boost demand for iron ore from Australia and Brazil, factory and construction equipment from the United States and Europe, and industrial components from throughout Asia.

The Chinese plan will cost government 586 billion, a little less than the 700 billion plan in the US. The real difference is that the US bailout goes straight to financial institutions, allowing them to finance loans, possibly boosting investment spending. The China plan is to boost import demand directly and encourage investment and jobs by upgrading infrastructure.  Perhaps both were needed in the form they took, but the Chinese plan will certainly have a more immediate influence.

Taiwan and China signed a range of deals on Tuesday that are aimed at bringing the two sides closer economically, after almost 60 years of hostilities that often took them to the brink of war.

Yesterday, reports from Taiwan were focused on the history of political differences between China and Taiwan. As I suspected, the real story is that both countries are looking for economic stimulus–more tourism in both directions, direct shipping, more flights–all aimed at reducing the costs of trade between them.

At least this once, it looks like the opportunities and gains of free trade are overwheming an old political dispute. Being nice can have its rewards.

Apparantly the developing world is also feeling the global financial crisis.

Now, the aftershocks are shaking the developing world. Countries from Ukraine in Eastern Europe to Pakistan in South Asia need urgent financial attention. Helping them requires a global effort.

Lower export demand is being blamed here, and already the IMF is helping some countries with large loans. The Dollar and Yen are increasing in value as people fear severe drops in the value of their own currencies. Individual countries are also trying to make money available for investors.

I am not sure that the time has come for optimism, though hopeful stories are beginning to be published. The problem for me is that this optimism is based solely on the availability of the money. Until people become more confident in the market, no one will take the risk of borrowing, no matter how low interest rates go.  Maybe these stories are coming out to do exactly that–give people a little more confidence that things are turning around and spending is perfectly safe.