Happy St. Patrick's Day!

Do not let the flu get you!

Dear Friends and Followers,

Winter is almost over and spring is about to kick in. Just to think what this winter cost the world's economy: all these snow blizzards, power cuts, snow removal, roads cleaning, etc. However, there is also a bright side of winter in this economic cost and benefit analysis: consider the winter sports, ski resorts, ice skating rinks, Christmas markets (that often last far past Christmas and straight into Easter) and mulled wine vendors, just to name those few who benefit from a properly cold winter.

Anyways, this post is not about the cost and benefit analysis of winters (although we might come up with some calculations about that in the nearest future). This post is about the flu and infectious diseases, as well as about ways how to avoid the seasonal flu and to avoid catching it.

We already wrote about infectious diseases in one of our previous post on the 11th of November 2011 (check this one if you want to know more about the role of infectious diseases in human population dynamics, the story of the most horrifying infectious disease of all times – the “The Great Spanish Flu epidemic” that started in 1918 and killed between 20 and 100 million people in four years). This time, we want to share with you a poster provided courtesy of Allison Morris from a team of designers (Education Database Online) who build graphics for Internet resource sites with a primary goal to be able to make a connection between visualization and learning.

The poster and the Education Database Online blog can be found here. 

Think of the costs you and your loved ones can incur to the social and the health system due to the flu you might be nursing or suffering from! Treatment and fighting the epidemic cost something, so do the leave of absence and empty working places to your employer. However, it is always better to stay at home if you get the first symptoms of the flu, rather than go to work, infect your colleagues, and end up in bed in a couple of days anyways (ask yourself whether one extra paid day of work is worth it).

And please do remember that the flu season is not over yet - spring is one of the most treacherous seasons of the year with the outside temperatures playing a roller coaster, so the flu can always strike back (after all, the Great Spanish flu also started in spring of 1918 as a normal seasonal flu).

Be careful, watch out, learn how to prevent the flu and to minimize your risks and economic losses, and do your best to stay flu-free this year!

WS and EL

Dragon economics or “Dragonomics”

On the Chinese New Year’s Day, we decided to focus on Chinese culture and traditions, trying to evaluate them from the economist’s point of view. Here is where the idea of writing about “dragon economics” emerged.

Dragon economics (or “dragonomics”) is a remarkable research topic that no one has ever considered developing. Well, you might ask: how do dragons and economics match together? The answer is quite simple – we are talking about commercializing the dragons and using them as popular figure in all fields of entertainment industry. Billions of dollars are made on dragon books, films, stories and legends, not to mention the video games and online quests.

Chinese dragons: symbol and tradition

According to the Chinese tradition, dragons are very old and very respectful creatures in China. They symbolize wealth, prosperity and good luck. One can find images of dragons virtually everywhere in China: jewellery, pottery, cloth, decorations. Dragons are known in China since ancient times and are central to Chinese mythology. In contrast to the evil and bloodthirsty Western Dragons, Chinese dragons are peaceful, generous creatures and protectors of the people. The Chinese loved and honoured their dragons - among many titles of the Chinese Emperor, the most honourable one was the "living dragon" and the imperial throne was often called "Dragon’s throne." The coat of arms of the old China also depicted a dragon.

According to one legend, one of the Chinese emperors introduced titles and ranks for his officers by appointing a special dragon protector for each class. Thus, the higher officials of the seventh rank were given the emblem of five-clawed dragon Loong, while less senior officials carried the emblem of less noble dragons with only four claws or less.

In ancient China, dragons were divided not only by the number of claws. At the highest step of the dragon hierarchy were those dragons who could fly. They were subordinate to the spirits of dragons. At the lower steps in the hierarchy were the earth dragons who could fly once but, due to various reasons, lost their ability. The lowest in the dragon hierarchy were underground dragons whose duty was to protect hidden treasures.

Ancient Chinese scholars took the existence of dragons very seriously.  Many of them believed in this kind of monsters and could even prove it logically. For instance, one respected scientist and philosopher reasoned the possibility of the existence of dragons by the following words: "The dragon has a shape. If it has a shape, it can move. If it moves, it should eat. If it eats, it has a material nature. If it has the material nature, it exists".

Dragons in Europe

The mentioning of dragons can also be found in many European legends. According to one Polish medieval legend, there once was a dragon which lived in the cave below the castle Wawel in Krakow. The dragon was a fire-breather, had a taste for young maidens and was fooled and killed by the local cobbler’s apprentice.

In medieval times, when global travel was still centuries away and crocodiles were virtually unknown to the common folk of Europe, a crocodile’s skull brought from Africa or Middle East was often passed for the dragon’s. In such a way, people had the living proof of dragons’ existence. One known example if the Dragon of Brno (today’s Czech Republic): the stuffed mummy of the Nile’s crocodile served well as the fearsome dragon from the legends.

Popular fantasy book series called “Temeraire” and written by an American author Naomi Novik presents an alternative history setting of the world in the 19^th century where dragons lived amongst humans and were widely used for transportation of goods as well as for war. Many of them were trained as battle dragons and were able to manoeuvre in flight better than WWI propeller-driven airplanes while spitting fire and spaying acid at the enemies. The world co-inhabited by humans and dragons did not differ from the one we used to read about in history books, however the existence of dragons shifted the balance of world power and made the dragons very valuable and expensive creatures. Because they were quite scarce and meant a lot for the warfare, huge sums of money were exchanged for dragon eggs that could potentially contain the future warrior.

Tolkien’s “The Hobbit, or There and Back Again” which was used as the story for recent Peter Jackson’s movie “The Hobbit” is largely about finding and retrieving the treasure from the dragon Smaug who apparently was an underground dragon and the protector of the treasure he managed to amass (mostly steal and plunder).

Dragons are not just the domain of old legends and tales. Recently (and thanks to the revival of fantasy genre) they found their way into popular culture becoming the central figures of books, films and computer games. “Dungeons and Dragons”, the 1974 role-playing fantasy game that set a base for all role-playing games as we know them today. The game lived through numerous modifications and updated, became a popular computer and on-line game and made millions of dollars among fantasy fans.

How to meet a dragon?

The question is whether one can see the dragon? According to Lev Grossman’s book “The Magician King” (the second book of the series about modern-day magicians which is considered by many critics to be the “Harry Potter for adults”), today’s dragons mostly live in large rivers all around the world and hide themselves from humans. One can relatively easy set up an encounter with the dragon of Venice who lives in the Grand Canal: it is enough to come to Ponto Rialto at night carrying a raw steak and a daily newspaper. At the stroke of midnight, the person should jump from the bridge into the Canal and if the dragon would find the person worthy of chatting, it will invite her or him to his hidden underwater chambers.

However, one does not need to travel to as far as Venice to see the dragons. There is one mighty dragon rising in the world and this dragon is China's economic policy. PricewaterhouseCoopers estimated that in 2012 China's economy constituted about 80% of the US economy (based on GDP converted by purchasing power parity). It is very likely that in 2013, the Dragon will continue to beat the Eagle at all fronts and will soon make a significant strategic leap that would breaking the hegemony of the American currency in the world. According to some predictions, by 2030 China will take the title of the world’s largest economy away from the United States. The mighty dragon is flying high gaining height and speed.

Happy Chinese New Year!

Dear Friends and Followers!

We would like to share our best wishes for the Chinese New Year that is due on the 10th of February (with the New Year's Eve on the 9th of February)! The "Year of the Snake" is coming and we hope that all the snakes and reptiles alike are going to through a good celebration!

For those of you who do not know (or do not celebrate the Chinese New Year) - it is a mixture of our Christmas and New Year's Eve that combines both dining in the family circle and firing crackers and fireworks on the streets.

On the Chinese New Year's Eve we are going to share a post that we have provisionally called "Dragon economics". Hope you will enjoy it!

Happy forthcoming CNY!

WS and EL 

Happy New Year 2013!

Dear Friends and Followers!

So, the end of the world (as we predicted it) did not happen on the 21st of December and therefore all of us could enjoy a peaceful Christmas once again.

Maybe it is for the best - there is so much more to do in the upcoming year! We hope you are looking forward to more of our stuff from 'Supernatural Economics'! And there will be lots to look forward to: lunar effects, werewolves, rational inattention, the power of social media, Golem and dark tourism are just a few topics we will be covering in the forthcoming year.

In the meantime, all the best for the New Year 2013 and see you soon!

WS and EL

It's the end of the world (as we know it): Part 2

So, how is the end of the world going for everyone? Do you feel fine? :)

We are continuing with our optimistic predictions that concern some possible scenarios that might be brought about (or come shortly afterwards) the end of the world that is due today. 

Let us consider the two remaining scenarios we outlined in our previous blog: telepathy and psychokinesis.

Telepathic abilities for humans

Scenario number two (telepathy) might be a reality in the nearest future. Mossbridge et al. (2012) conducted a meta-analysis of 26 reports published between 1978 and 2010 and found that for stimuli of two or more types that are presented in an order designed to be unpredictable and that produce different post-stimulus physiological activity, the direction of pre-stimulus physiological activity reflects the direction of post-stimulus physiological activity, resulting in an unexplained anticipatory effect. In another words, sometimes humans can anticipate or even know the future (the concept of premonition).

Although the predicted future would range from a speck of a second to several seconds, the possibility to anticipate future events might have broad consequences for the world trade. Consider for example stock market trading. Scientists have long been waging a debate whether the stock market prices follow the “random walk” or are, on the contrary, non-random and might be understood and studied using some algorithm (knowing this algorithm would be like possessing a modern-day philosopher’s stone, since it would provide its possessor the way to the unprecedented wealth).

While most of the economist and statisticians in the 1960s or 1970s agreed that the random walk hypothesis was the only way to explain the behaviour of stock prices on the stock markets (see e.g. Fama (1965), Cootner (1964), or Malkiel (1973)), the economic science of the 1990s and 2000s started to uncover the non-randomness in the stock prices (see e.g. Lo (1999)).

Telepathic abilities and the possibility of premonition would undoubtedly lead to the total non-randomness of the stock market trading. The brokers would know all about the stocks and the other brokers’ behavior  therefore it will not make any sense to speculate, engage in insider’s trading or do any other usual tricks.

The discovery of telepathic abilities in humans would also lead to another interesting outcome – there will no longer be any need for cellular telephony or the Internet. Of course, everything very much depends on the level of telepathic abilities and the range of the telepathic bounds between humans, but let us to consider for a second that it would be on a planet-scale. This provision would mean that all humans will be connected in one large global network that would enable to share, store, share, pass, or transmit any information all around the planet. The brains of all human (and possibly the animals) will be linked together forming a giant “supercomputer” able to run calculations of an unprecedented depth and complicity. The arrangement was partly described in James Rollins’ “Altar of Eden” (Rollins, 2010), where an experiment linked several animals’ brains and increased their mental abilities to an unprecedented level.

The scenario (however unlikely it might be) was shown in the 2009 Hollywood blockbuster “Avatar”. Planet Pandora was such a giant supercomputer and all pandorians were plugged in into the global network of the planet.

It might as well be that this scenario will become a reality in the nearest future. For instance, Von Radowitz (2012) describes recent experiments where scientists were able to read and decode the electromagnetic impulses in the human brain, turning them into single words and then coding them back again. The technology that was developed to help patients with speech disorders might pave the road to global telepathy and interconnectedness but will mean that some re-arrangement would have to be made in the world’s economy.

Unleashing the power of phychokinesis in humans

The 2012 fiction film “Chronicle” shows a trio of high-school teenagers who encounter a mysterious vibrating and glowing crystal in the underground cave and gain psychokinetic abilities. Starting from lifting small objects into the air, they progress towards lifting boxes and cars and end up lifting themselves.

Although the film has a sad ending (only one of the teenagers survives his newly gained abilities), it portrays what would have happened if everyone had this abilities. First of all, psychokinesis would alter the transportation sector. The ability to lift objects only with the power of one’s mind would surely help the moving and loading industries which would cut the costs of work and create a small army of unemployed manual workers.

In addition, this would mean that the traditional means of transports (e.g. cars, trams, metro) will be abandoned in favor of flying. Imagine a sky full of people running (or flying) errands, going to and from work, chatting on the rooftops and the like!

Nevertheless, it is easier to see that this scenario of no transportation costs of goods and labor would not be as perfect, as in “wormholes model”. People would still need to spend time and energy to move from place to a place and the border controls might still be effective (although, in most of the cases, they would become the airspace controls). The discovery of telekinetic abilities will not necessarily lead to the fall of the states and the governments, since they will still be able to provide public goods and protection to their citizens. Military powers would still mean something and the rule of law would be quite easy to execute.

Let us see what would happen to the economy and the global trade. Well, fist of all, telekinetic abilities would surely mean smaller transactions costs for trading and shipping goods than in the real world. There might be a sharp decrease in the transaction costs for labor and services but to a very limited range. For instance, labor migration might take place from less wealthy countries to their more wealthier neighbors and it is even possible that this migration would take up the form of commuting, however there still would be considerable costs associated with commuting (or flying) to work every day. The distance would still matter, since no cheap labor from Mexico would be able to travel to, say, New York City back and force every day in a row. In short, equalization of factor prices would not be as quick and smooth (as in “wormholes model”). This scenario would be more like a real-world case, but, in a way at least, more efficient, although some implications might be considered (see e.g. Frankel, 1975).

Another non-negligible effect would be the losses of transportation sectors, producers of cars, trains, and airplanes. Although it seems unlikely that the public and private transport would disappear entirely (some individuals might get injured and unable to fly, and long-distance flights might be beyond the abilities of some people), a sharp decrease followed by the fundamental changes in the industry would follow.

There is also a question what would happen to all those people who would be made redundant in the sectors of transportation and heavy industry, but it might be that this would not create massive unemployment, since new possibilities in the other sectors would also arise.

Conclusions

Whether the end of the world happens today or some time later, major unpredictable planetary events can possibly happen any time and disrupt the existence of humanity. These events might bring substantial changes altering the world we live in and making it a very different place.

In this paper, we discussed the possibility of three “end-of-the-world” scenarios: a) collision with the parallel universe and opening of passages or wormholes, b) discovery of telepathic abilities in humans, and c) unleashing the power of psychokinesis in humans. It becomes apparent that these scenarios can be ranked by the scale of their impact on global economics and trade. With regard to this, we can nominate scenario c) psychokinesis to be the “optimistic” scenario, scenario a) telepathy to be the “realistic” scenario, and scenario a) “wormholes model” to be the “pessimistic” scenario.

It is easy to show that while the possibility to move around goods and people without no visible costs would only slightly alter global trade on Earth and the discovery of telepathic abilities in humans (which might be a reality in the nearest future) would only lead to the demise of global communication systems, cell phones and the Internet, the scenario of a collision with a parallel universe and opening of multiple “wormholes” or passages between various spots on Earth or in the parallel Universe, would make global trade and economy redundant. The possibility to be in various places or to carry goods or services to multiple locations within seconds would undoubtedly mean the end of the world’s economy (as we know it) which would make many of us feeling far from fine.

It's the end of the world (as we know it): an economist's view

What would the end of the world be like?

The end of the world is coming and only three days are left. Whether you believe in the end of the world (as we know it) or not, let us take a moment and think about the implications it might bring from the economist’s point of view.

Well, first of all, all those catastrophic scenarios that include a sudden switching of Earth’s magnetic poles, a massive meteor collision with Earth, ejection of mass from the Sun, biblical-sized floods, and a sudden shift in Earth’s crust, do not constitute any interest to economists. They would simply lead to the demise of the whole humanity which would be very unfortunate for the economists, because they would have no markets and economic agents to research anymore. This is not to mention that the 21^st of December that is regarded as the end-date of a 5125-year-long cycle in the Mesoamerican Long Count calendar, is misinterpreted and miscalculated according to Mayan scholars.

Although the humanity seems to enjoy flirting with the idea of its own extinction on 21 December 2012 (just recall some recent Hollywood blockbusters, as “The day after tomorrow” (in which global warming led to the new Ice Age), “Knowing” (in which the long-anticipated Sun eruption destroyed all living things on Earth, although the aliens transferred some life species to another planet), “2012” (in which massive solar flares caused devastating tsunami and earthquakes that re-shaped the face of the planet)), the New Age interpretation of “the end of the world” might mean the start of time in which Earth and its inhabitants may undergo a positive physical or spiritual transformation or enter the new era. This new era (often referred to as the Age of Aquarius) would allegedly help the humanity to discover its true potentials, like the “third eye”, telepathy or psychokinesis (often referred to as “telekinesis”). Other scenarios, often described in popular literature and films, might include collision with the parallel universe or even universes (see e.g. “2012: The War for Souls” by Whitley Strieber, or the U.S. TV series “Fringe”). 

Let us explore some of the ideas of the “end of the world” from the economist’s points of view. In order to do that, we have chosen three major (less grim and more pleasing) scenarios of the world’s end: a) collision with the parallel universe and opening of passages between the worlds, b) spiritual transformation of the humanity leading to the discovery of telepathy, and c) global changes leading to the unleashing the power of phychokinesis in humans.

There is no particular reason why these three scenarios were chosen over the devastating floods, sun flares or planet collisions. All of them seem equally unlikely but the ones we chose might be interesting to look into using the toolbox of economic science.

We will gradually take each of these three scenarios and analyze them in details as the doomsday clock is ticking. It is hard to predict which of them would come true (and it might be that none of them would materialize at all) but at least you will be prepared, just in case.

Collision with the parallel universe and the “wormholes model”

In today’s blog entry we will concentrate on the scenario number one: collision with the parallel universe and opening of passages between the worlds, or wormholes in our world that would allow humans to travel between multiple places on Earth (or between Earth and other planets) in an instance.

The possibility to move freely and without borders all over Earth (and perhaps to the other planets universes) would fundamentally change the flow of goods, services, and labour. There will be no borders to cross, there will be no tariffs or duties to pay, workers from less wealthy countries would be able to commute every day, so all the transaction costs of migration would be cancelled. Global security would suffer too – since every human being would be able to move around or travel between Earth and parallel Earth, no state of global force would be able to keep track of potential criminals, terrorists or abductors.

Let us name this scenario a “wormholes model”. Under the model’s assumption, there would be no barriers to factor movements and the situation would be very much similar to the textbook example of the common market. 

It is easy to show that the situation described above would be similar to the Paul Krugman’s paper on interstellar trade. In his 1978 paper (entitled “The theory of interstellar trade” and published in 2010 in ‘Economic Inquiry’), Paul Krugman, a Nobel Prize laureate of 2008, points out that the assumptions underlying neoclassical theory bear very little resemblance to the world we live in (Krugman, 2010). The paper formulated two fundamental theorems of interstellar trade: a) When trade takes place between two planets in a common inertial frame, the interest costs on goods in transit should be calculated using time measured by clocks in the common frame and not by clocks in the frames of trading spacecraft, and b) If sentient beings may hold assets on two planets in the same inertial frame, competition will equalize the interest rates on the two planets.

Similar to Krugman, one might analyzing the simple neoclassical model of trade, introducing the new (doomsday) conditions. Equalization of the factor prices is what would happen under the provisions of neoclassical theory. This is of course often criticized, since such assumptions represent a way too simplified view of the economic relations in the world. However, this is exactly what would happen under the first doomsday scenario we have described!

Since the economic theory states that the total welfare effect of the common market (comparing to the customs union) is always positive for all participating countries, we might conclude that the “wormholes” model might also bring positive gains for all parties (parallel Earths or universes alike). Of course, this analysis is too simplistic and deserves further consideration but the benchmark has been set.

More scenarios and economic analysis tomorrow! All the best and looking forward to the forthcoming end of the world (we feel fine)!

WS and EL