Six crows trained to pick up cigarette ends and rubbish will be put to work at a French historical theme park, according to its president.
The story by The Guardian is good: A bunch of park rangers have taught crows in western France to pick up trash by rewarding them with food. Simple enough. But what’s really great here is the writing. “Rook At This Mess” for the headline. Rook, a member of the crow family of birds that also includes the carrion crow, jackdaw and raven, are considered to be “particularly intelligent and in the right circumstances like to communicate with humans and establish a relationship through play”. The fact that the writer goes on to quote actual animal experts only adds to the amusement.
A teenager from Texas has taken quantum computing down a notch. In a paper posted online earlier this month, 18-year-old Ewin Tang proved that ordinary computers can solve an important computing problem with performance potentially comparable to that of a quantum computer.
Usually the benefits of quantum computing are difficult to understand – unless you are actively working in the field. But one of the most relatable problems that quantum algorithms could solve better than classical algorithms is the “recommendation” problem. Basically, the question of how services like Netflix or Amazon can find new things you will like based on your viewing/browsing habits and community ratings in a reasonable amount of time. Previously, it was believed that quantum algorithms were the only way to solve this problem, but an 18 year old MIT student has developed a way for today’s computers to solve it just as fast.
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
(Friedrich von Hayek, 1988)
Irrespective of the quote above, there is a further difference between what economists know and what non-economists know. This can be summarised under the heading “folk economics”. There is an interesting observation here: If you (as a non-physicist) were engaged in a conversation with a physicist who tells you about string theory, you are unlikely to interrupt him and disagree with what he was telling you. An economist engaged in a discussion about the economics of obesity, for example, with a non-economist would be far more likely to be questioned about the views being put forward. If the economist told the non-economist that obesity was caused by the rise in poverty levels in countries, it is likely that there would be some disagreement with this view.
The Swiss popular initiative ‘For crisis-resistant money: end fractional-reserve banking’ (Vollgeld-Initiative) will be put to a vote in a national referendum on the 10 June 2018. The initiative calls for the introduction of a sovereign money system in Switzerland. However, a sovereign money system could not prevent credit cycles and asset bubbles in real estate and financial investments. While lending may reinforce such asset bubbles, it does not cause them. Asset bubbles and credit cycles are primarily caused by exaggerated price expectations and a propensity to underestimate risks. The principal causes of the recent financial crisis could not have been circumvented under a sovereign money system. Chief among these are:
the belief that asset prices can go on rising indefinitely;
complex financial instruments with opaque risk liability (e.g. CDOs);
the accumulation of excessive amounts of short-term debt via the money and interbank markets;
and instability at investment banks with no deposit business.
Omitting a variable in a theory can lead to deceptive conclusions. When a theory is being used to support an argument about cause and effect, it is important to ask whether the movement of an omitted variable could explain the result. A second problem is what economists call reverse causality – we might decide that A causes B when in fact B causes A. The omitted variable and reverse causality traps require caution when drawing conclusions about causes and effects. It might seem that an easy way to determine the direction of causality is to examine the which variable moves first. If we see crime increase and then the police force expand, we reach one conclusion. If we see the police force expand and then crime increase, we reach another. Yet there is a flaw with this approach: people change their behaviour also in response to a change in their expectations of future conditions. A city that expects a major crime wave in the future might as well hire more police now. Or people make demands on credits in expectation of low interest rates.
The Scottish philosopher David Hume argued that no ought claim could be correctly inferred from a set of purely factual premises. This result is sometimes referred to as Hume’s Law, or the Is – Ought Problem. Hume found that there seems to be a significant difference between positive statements and prescriptive or normative statements, and that it is not obvious how one can coherently move from descriptive statements to prescriptive ones. You can only derive should claims from premises that include should claims. Yet the initiative backers’ arguments are exactly drawn this way.
Without flexible money expansion and contraction, such a centralised system strongly resembles the communist idea of a command economy. For understandable reasons the initiative’s backers hold a distaste for banks creating money, but a much more democratic and disruptive concept is about to change the world:
Back in the 1930s, cars were relatively rare in in Germany while in the United States, Henry Ford built cars cheaply that everybody could afford. There were far more middle class people in the U.S. who had automobiles than in Germany, and that bothered the Nazis because they were supposed to be superior. Therefore, Hitler hooked up with Ferdinand Porsche and his idea of a people’s car. Porsche went to Ford on several occasions and brought workers to Germany in order to build the Volkswagen factory. It was consciously modeled on Ford, but the Nazis wanted it to be the biggest factory in the world – which it eventually became after the war.
‘I am pleased that, at the skilled hands of a brilliant design engineer and his staff, preliminary designs for a German Volkswagen have been completed, and the first models will finally be tested by the middle of the year.’
Wolfsburg as a city did not exist at the time. Everything visible in Wolfsburg today is grown up around the original factory. Although VW’s acquired brands like Audi, Seat, and Skoda are successful in Europe, Volkswagens’s road to global dominance has always led through America.
In the 60s, sales hit new highs when the VW Beetle populated American streets in its thousands. The unique and unconventional design of the Beetle perfectly matched the new revolution and ensured that peace, love and freedom found their way to even the remotest corners of the USA. The car designed for Hitler became a symbol of the counter culture. But VW did not innovate and keep up with time. As the counter culture gave way to the Reagan era, VW sales dropped as fast as the quality of its cars and led the manufacturer to the brink of bankruptcy. The rescuer of VW appeared in the former head of Audi, Ferdinand Pi?ch, a grandson of Ferdinand Porsche. Personally and professionally very productive and ambitious, the brilliant and dangerous man infused VW with a new culture of aspiration and success.
Pi?ch came just in time to turn the company around and introduced a strategic large-scale thinking. He had the idea of producing small Diesel engines. TDI? – a diesel that was fun to drive, powerful and clean. It was a huge success in Europe. However, the exhaust was not really clean. Nitrogen oxide (NOx) causes air pollution and damage to health. The infamous NOx filled smog in southern Califormia and major cities in the US in the 70s was not only damaging to plants, it caused asthma, cardiac problems, cancer, and premature death. Therefore the much more strict NOx standards in the US than in Europe. To keep efficiency on Diesel but to cut down on NOx, manufacturers like VW tried to create “NOx traps” that caught and burnt the stuff before it left the tail pot. But the special parts needed were expensive and had to be replaced every few thousand miles. Yet they were the only way to meet the NOx standard set in the US. Solving that problem was critical for the “Strategy 2018” set by Martin Winterkorn and Ferdinand Pi?ch: VW’s big game for world domination. They wanted Diesel cars for the United States (at the time the world’s largest market), but everyone knew this was incredibly hard to achieve. Pressure on workforce to succeed and increase sales became unbearable. On its mission to become the biggest automobile manufacturer in the world, Volkswagen created Diesel cars that could cheat emissions tests while pumping 40 times more NOx into the air than they claimed to. With the opening of a new plant in Chattanooga, Tennessee, the CEO boasted about his new found corporate responsibility.
VW’s “solution” to the Diesel problem caught the attention of a group focused on clean transportation. They studied VW Diesels – not to see if they were bad, but why they were so good and whether they could serve as a model for the US. It was also unclear why they came out clean in the US and not in Europe, so there was a missing piece of data. But what they found in 2013 did not add up.
‘The International Council on Clean Transportation (ICCT) provided the results of its measured “off cycle emissions” and its (comparison) values detected in parallel in the FTP test to VW Group of America (VWGoA) EEO and requested comments on the high exceedances. In a conference call, the California Air Resources Board (CARB) authority also announced further investigations; specific questions of the authority with respect to the regeneration strategy of the NOx storage catalyst and the UREA dosing strategy in the SCR system in the Volkswagen R4 TDI vehicles have already been received by the EEO.
A thorough explanation for the dramatic increase in NOx emissions cannot be given to the authorities. It can be assumed that the authorities will then investigate the VW systems to determine whether Volkswagen implemented a test detection system in the engine control unit software (so-called defeat device) and, in the event a “treadmill test” is detected, a regeneration or dosing strategy is implemented that differs from real driving conditions.’
(VW Quality Manager Frank Tuch in an email to CEO Martin Winterkorn)
VW’s only answer was to stall for time. Following 16 months of investigation and the revelation that Volkswagen had embedded defeat devices in its software calibrations for all of its 2009–2014 Diesels in Europe and 2009–2015 Diesels in the US, regulatory agencies have taken various measures to force VW to remedy the problems. However, VW did not fix the problems – in contrary, they fixed the defeat device to make it even better at cheating. With VW’s announcement in the United States of a recall and a “fix” for various Volkswagen Group models, regulators have defined required emission system modifications for almost all VW Diesel engines in the US market.
Winterkorn denied any knowledge of a defeat device, but he was forced to resign the day after giving this statement. Nobody believed the fairy-tale brought up by Michael Horn and Martin Winterkorn that a small group of engineers at VW did something on their own. The state of New York launched a civil suit proclaiming fraud by VW. Along with various sanctions, VW was forced to pay over 25 billion in fines and to buy back over 550’000 vehicles from angry owners. The data continues to support earlier findings that enforcement in the United States is far more effective and stringent than in Europe. The German government enables cheating by regulation, allowing calibration strategies implemented through defeat devices. This is called “protection of the engine”. The German government cares more about protection of the engines than protection of human beings. Additionally, the German government has a stake in the partially state owned car industry. Should they harm their national car industry? It means jobs and taxes, after all. To this day, VW and the other German brands are selling dirty cars throughout Europe and the world. In order to fight back and show “the benefits of clean Diesel cars”, the German car companies and particularly VW embarked in a plan to do their own tests on monkeys and humans. They established a phony research company called EUGT to study the effects of Diesel exhaust. EUGT paid a company called Lovelace Respiratory Research Institute (LRRI) to conduct a study in order to show that the “new” Diesel technology was environmentally friendly. It involved research monkeys and inhale pipes.
A couple of days after the news broke of the monkey experiments in the US, a report in the Stuttgarter Zeitung accused the big three carmakers of also conducting emissions tests on humans.
Property rights are fundamental to law and economics. La Porta et al. (1997) show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These and other authors argue in a succession of articles that the common law is economically superior to the civil law system. The term civil law describes those systems which have developed out of the Romano-Germanic legal tradition of continental Europe. It is the civil law tradition which dominates whithin the present European Union, but common law is economically superior to civil law because common law systems
have stronger investor protection and provide easier access to equity. This leads to larger stock markets, more numerous companies and more IPOs;
[La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1997) Legal determinants of external finance, Journal of finance, pp. 1131 – 1150]
have better protection of outside investors relative to insiders and agents (compared e.g. to French civil law);
[La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000) Investor protection and corporate governance, Journal of financial economics, 58(1), pp. 3 – 27]
have lower entrance barriers to markets (procedures, time, cost);
[Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2002) The regulation of entry, The quarterly Journal of economics, 117(1), pp. 1 – 37]
have more efficient courts, measured by the procedures used by litigants and courts to evict a tenant for nonpayment of rent and to collect a bounced check;
[Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2003) Courts, The Quarterly Journal of Economics, 118(2), pp. 453 – 517]
show lower labour market regulation and a higher labour-force participation rate, and therefore lower unemployment rates (with some exception);
[Botero, J. C., Djankov, S., Porta, R. L., Lopez-de-Silanes, F., & Shleifer, A. (2004) The regulation of labor, The Quarterly Journal of Economics, 119(4), pp. 1339-1382]
have laws mandating disclosure (e.g. to mortgage borrowers) and facilitating private enforcement through liability rules that benefit stock markets.
[La Porta, R., Lopez‐de‐Silanes, F., & Shleifer, A. (2006) What works in securities laws?, The Journal of Finance, 61(1), pp. 1 – 32]
have more efficient procedures in case of insolvency – measured by time, cost, and the likely disposition of the assets (preservation as a going concern vs. piecemeal sale);
[Djankov, S., Hart, O., McLiesh, C., & Shleifer, A. (2008) Debt enforcement around the world, Journal of political economy, 116(6), pp. 1105 – 1149]
This boils down to higher levels of investment and higher rates of growth in common law countries.
[La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1997) Legal determinants of external finance, Journal of finance, pp. 1131 – 1150]
‘First, the built-in judicial independence of common law, particularly in the cases of administrative acts affecting individuals, suggests that common law is likely to be more respectful of private property and contract than civil law.
Second, common law’s emphasis on judicial resolution of private disputes, as opposed to legislation, as a solution to social problems, suggests that we are likely to see greater emphasis on private contracts and orderings, and less emphasis on government regulation, in common law countries. To the extent that there is regulation, it aims to facilitate private contracting rather than to direct particular outcomes. Pistor (2006) describes French legal origin as embracing socially conditioned private contracting, in contrast to common law’s support for unconditioned private contracting. Damaska (1986) calls civil law “policy-implementing,” and common law “dispute resolving.”
Third, the greater respect for jurisprudence as a source of law in the common law countries, especially as compared to the French civil law countries, suggests that common law will be more adaptable to the changing circumstances, a point emphasized by Hayek (1960) and more recently Levine (2005). These adaptability benefits of common law have also been noted by scholars in law and economics (Richard Posner 1973, Paul H. Rubin 1977, George L. Priest 1977, Giacomo A. M. Ponzetto and Patricio A. Fernandez forthcoming), who have made the stronger claim that, through sequential decisions by appellate courts, common law evolves not only for the better but actually toward efficient legal rules.’
[La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008) The economic consequences of legal origins, Journal of economic literature, 46(2), pp. 285 – 332]