Other Alpha Sources

Update: Here is one for those of you who have trouble figuring out what to give for Christmas; David J Lynch and his five picks on the best books of economic history.

The Economist's Free Exchange on how China's demographic transition should be played by the service sector (i.e. restaurants etc) in the coastal areas who are seeing their main source of labour (people aged 15 to 29) dwindle as a result of ageing in China. The solution is simple, scrap the old age cap on hiring and embrace the maturing of China's workforce. Makes sense to me.

Even though the number of youngsters is about to start a steep decline, China's working-age population as a whole will not fall substantially for another 15 years or more. China's baby boomers are about to turn 30; they are not about to retire. Failing to take advantage of the bulge of thirtysomethings makes no business sense. China's cities also contain about 40m older workers who lost their jobs in the great downsizing of China's state-owned enterprises from 1996 to 2002, a point emphasised by  Dennis Tao Yang of the Chinese University of Hong Kong among others. Some of those older workers would be happy to serve you hotpot.


Eric Banks points us to what appears to be a marvelous tale of none other than the Atlantic Ocean by Simon Winchester aptly titled Atlantic: Great Sea Battles, Heroic Discoveries, Titanic Storms, and a Vast Ocean of a Million Stories;

The book mixes sweeping accounts of economic and political phenomena—slavery, empire, globalism, the rationalized business of Atlantic exploration and its later industrialization—with morsels of trivia: how future Israeli president Chaim Weitzmann's assistance in helping the British navy make much-needed acetone may have helped secure the Zionist cause; how Jack Alcock and Arthur Whitten Brown became the first airmen to cross the Atlantic nonstop in 1919, accompanied by two little black cats named Twinkletoes and Lucky Jim; how the Patagonian toothfish found gastronomic acceptance and a potential for extinction when it was rechristened Chilean sea bass.

Somehow the idea of curling up in front of the fireplace over Christmas with a good malt reading a fable about the Atlantic ocean, its story and secrets seems to me to be the ultimate intellectual self-indulgence.


Martin Wolf offers some original thought as to why it might not be such a bad idea for governments to invest and spend today or rather, mr Wolf points to the obvious fact that for all the talk about government liabilities (in the Eurozone and elsewhere) very few have talked about the assets;

Crises have always led to intense discussion of the role of the state. The present one should be no exception. The immediate danger has not passed: just look at events in the eurozone. But the time has come to look at the longer-run implications. This is particularly important when one considers fiscal consolidation. On this I make a simple point: it is not just about debt; it must also be about assets.


Yet governments should not sacrifice the future to the pressures of the present. What is the sense of cutting spending today if the result is a poorer country tomorrow? This point turns on its head the refrain that we should at all costs avoid burdening the future with additional debt. We should indeed avoid burdening the future with unproductive debt. Yet productive debt is not a burden, but a blessing.

In talking about the notion of productive debt Mr. Wolf draws on recent work from Oxford University which develops the idea, as far as I can see, that as the state has taken on more and more roles in modern society so it is also the holder of many of society's most valuable tangible assets. As a consequence, there is a high potential return of investing in such assets. I have no problem with the gist of this argument, but I would add that since debt ultimately is a future claim on the ultimate asset in the form of the future taxpayer, most OECD economies face the fact that this future asset against which to borrow is falling in value. But, as for investing in utilities and road ... I am all for it, but the return won't be the same as in India or similar places.


Michael Ruse muses, in the Chronicle of Higher Education, about the surge of the doom and gloom cult with specific focus on the climate change discourse, but I reckon we in the economics and finance profession cannot escape this one unscatched either.

Secular apocalyptic thinking continues; indeed, it thrives. The cold war may be over, but the world is not right. America is caught in a seemingly endless foreign conflict; we are in an economic downturn of a kind not seen since the 1930s; and above all hangs—or perhaps more accurately, chokes—the threat of global warming. This last topic has triggered a tsunami of books, almost all of which are linked by an apocalyptic theology of foreboding and warning. The Flooded Earth: Our Future in a World Without Ice Caps; The Climate Fix: What Scientists and Politicians Won't Tell You About Global Warming; The Rising Sea; The Coming Famine: The Global Food Crisis and What We Can Do to Avoid It; Coming Climate Crisis? Consider the Past, Beware the Big Fix; Storms of My Grandchildren: The Truth About the Coming Climate Catastrophe and Our Last Chance to Save Humanity.

I think Ruse' article is worth the whole read especially for the overview it gives of the climate change discourse, and in this sense I would add my own three points as a skeptic towards our endeavors to micromanage the earth.

My first objection concerns the consensus which seems to have formed very quickly in the scientific community over just how bad this is. Now, if only we could agree on the basic things in economics the world would probably be a better place, but I still find it dubious that other theories of general climate change and fluctuations have suddenly been swept aside for the one great truth (i.e. what about the sun for example?).

Secondly, I have a big problem with one of the central premises of the climate change discourse. Thus, a key part of the argument in favor of a drastical shock and awe attack on CO2 emissions is that if global warming runs it course and especially if we get global warming beyond 2 degrees celcius we reach the point of no return beyond which we loose the ability to control the situation. This strikes me as one of the most arrogant scientific arguments made in a long time since it denotes that we were in control in the first place.

Finally, the whole foundation of action (on a global scale) against global warming is a socially minded strong government politician's wet dream since taking the appropriate action would require transferring almost exclusive bargaining power and control to a central organ that would decide the appropriate amount of meat to eat each week, how much you are allowed to drive in your car and how many goods container ships can transport on the seas. I am deeply skeptical of this kind of quantitative social calculus.

In the end, there are a lot of good reasons to rid ourselves from the dependence of CO2 the most important of which is that the ressources we use and depend on will run out in due time. Luckily, many of the climate fighters are beginning to realise that they need to get rid of the apocalyptic discourse and see opportunities in stead of destruction.