An unintended consequence

Recently I was sent a lavish document celebrating 50 years of mobile telephony, by a large Swedish company – well, obviously, Ericsson. 50 years? you say. Well, AT&T offered a primitive service in 1946, in which quite simply you called an operator and they would ask on a common radio frequency for the subscriber desired, then, should they answer, patch you into the radio circuit. It was crude, insecure (everyone could hear), clumsy (you had to know where the called party was), relied on manual operation, but it was mobile telephony of a sort.

The theoretical principles of cellular radio were discovered in 1948 at Bell Labs, but would have to wait 30 years for electronics to progress far enough to make them practical. So how did Swedish public housing help to make it happen?
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Power failure

In more ways than one. On Saturday night, between 2230 and 2300 local time, a huge chunk of the European power grid fell over, affecting supply from northwest Germany, through Holland and Belgium, and mostly in France. Further afield, small areas of Austria and Italy lost power, and the Spain-Morocco interconnection was shut off to prevent the trouble spreading. Fortunately, power was restored speedily.

At the heart of the whole thing, meet the cruise liner Norwegian Pearl. This floating gin palace was recently completed by the Meyer Werft shipyard on the river Ems in northwestern Germany. Now, Meyer’s shipyard is a long way up the river. To get a ship the size of the Pearl out, you have to wait for a spring tide. But there’s a catch – just downstream of the yard, a 400 kilovolt transmission line belonging to the German utility company E.ON crosses the river. And the more water there is in the river, the less clearance there is under the wires. So, on Saturday night, when the weather and the tide were perfect for Captain Thomas Teitge to take the ship down the river, E.ON switched the wires off. And then the troubles began.

Update: She sailed today without further trouble.
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The Perrenial Euro Story (or lack of it)

Brad Setser has a post, the perrenial dollar story, which IMHO, has one large and significant ommission: it doesn’t really mention the euro. Personally I don’t really see how you can consider the future evolution of the dollar without taking the euro into account. This realisation provoked a rather long comment from me on Brad’s blog, and it is this comment, in a slightly modifed form, that I am now posting here. (Update: incidentally, I notice that Claus Vistessen has two highly relevant summaries of the great greenback debate (here, and here) which. among other things, serve as an excellent introdiction to the issues involved).
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The End of the Dolce Vita?

Are the good times and the good life still going to continue to roll in the Italy of the twenty first century? This is the core question the Economist’s Europe editor John Peet asks in the latest Economist Survey: Italy, Addio, Dolce Vita. As Peet says:

Italy is approaching a crunch. Rather like Venice in the 18th century, it has coasted for too long on the back of its past success. Again like Venice, it has lost many of the economic advantages which underpinned that success. For Venice, it was a near-monopoly on trade with the East that paid for the creation of its beautiful palaces and churches; today’s Italy has benefited hugely from a combination of low-cost labour and a switch of workers away from low-productivity farming (and the south) into manufacturing (mostly in the north). But such good things invariably come to an end.

Italy badly needed a dose of pro-market reforms, liberalisation, privatisation, deregulation and a shake-up of the public administration, all of which Mr Berlusconi had promised. He even pledged to cut taxes. A majority of Italian voters, backed by much of Italian business, were willing to overlook both his legal entanglements and his conflicts of interest and give him a chance to reform the country. But as the next election approaches, very little of what he promised has been delivered, so many of his erstwhile supporters are feeling disillusioned.
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The System of the World

Sorry, this is not a post proclaiming a political theory of everything. It’s a note saying “‘Tis done!” I picked up Neal Stephenson’s The System of the World sooner than I thought and finished it up right quick.

Previous posts on the Baroque Cycle are here, here, here and here. The argument of the trilogy and further thoughts below the fold. Spoilers abound. Doug Muir, I’m finished, we can discuss.
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Catastrophic success?

In one of his many excellent pieces in the run-up to the German election, Alex mentioned the phenomenon of ‘overhang mandates’. These are extra parliamentary seats that a party gains by winning more seats via one of German’s two electoral methods than by the other. This might seem odd enough. What’s even odder is that a party could lose a seat if too many people vote for it.

German electoral law is complex. In a comment to one of Tobias’s posts, Florian recommended the website as a good primer on how it works. He also mentioned examples of some of the electoral weirdnesses explained by For example, did you know (asks Florian) that, under certain circumstances, a vote can have ‘negative weight’ — can reduce the parliamentary representation of the party for which it is cast?

Well, it can. And this conundrum is worth looking at closely, because right now it is more than a mere electoral curiosity. There is one electoral district in Germany, Dresden I, that has not yet voted. (Those who’ve been paying a perhaps unhealthy level of attention to the German elections will know that the death of a neonazi candidate has forced the delay of the election.) And in Dresden I, there is a very real chance that a local triumph of the CDU could cause the party to lose a seat in the national parliament. The reason? It’s those overhang mandates that Alex kept mentioning.

Excellent as is, it’s in German. Below the fold, then, is a summary explanation of how the CDU could lose a seat by gaining votes. For those who read German and are interested in that sort of thing, there are links to the relevant passages of the BWahlG (German Federal Electoral Act).

In the mean time, we should note that the possible ‘negative weight’ of CDU votes in Dresden I, though perverse and undemocratic, would not affect the overall results in Germany. Even if the CDU are ‘catastrophically successful’ in Dresden I, the Union will still have more seats than the SPD, albeit with a lead of only 2 rather than 3 MPs. The really perverse thing that could come out of the Dresden special election is this: CDU and SPD wind up with an equal number of seats. As the Spiegel explains, however, this is mathematically a possibility, but in real-world terms exceedingly unlikely. To achieve this result, the SPD would need to poll 91% of voters in the district, and every single eligible voter would have to vote.

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Merkel’s Reform Agenda

Angela Merkel has an interview in the Financial Times today. Unfortunately the transcript is subscription only. This is a pity, since to some extent she defines the kind of Europe she would like to see:

In an interview with the Financial Times, Angela Merkel, leader of the Christian Democrat Union, on Wednesday issued a clarion call for economic reform in Europe based on countries borrowing successful policies from one another. ?If I look at Scandinavia, for instance, I see we still have a long way to go in decoupling our social security system from labour; if I look at central and eastern European countries, I see I still have a long way to go in reforming my tax system; and when I look at the UK, I see I still have much to do to make my labour market more flexible.?

Ms Merkel’s references to central European countries and to the UK are striking, since the former are identified with low corporate taxes and in some cases, such as Slovakia with a ?flat tax? system. The deregulated UK labour market is often demonised by continental European politicians as alien to the European social model.

Her remarks provide clear backing for Tony Blair, prime minister and current holder of the EU’s rotating presidency, in his campaign to put economic reform at the centre of the EU’s effort to reconnect with European voters after their rejection of its planned constitution in France and the Netherlands in the past two months.

The big difficulty I see with her proposals is that they will put more of the burden of financing government on consumer taxes (VAT), and this will not help Germany lift domestic consumer demand which is one of the ‘big issues’.

Morgan Stanley economist Elga Bartsch, who I have in the past maligned somewhat here on this blog, has a pretty fair and balanced summary of the CDU reform programme here.

Promising Elections

The Guardian today has a short profile on Angela Merkel, while the FT looks at some of the proposals which may well form part of the SPD campaign manifesto. Far be it from me to worry about ‘sting the rich’ tax proposals, but as far as I can see the main isssue is getting Germany back to work, and Schr?der’s time might be better spent adressing this issue.

Talking of which, this could be a good moment to mention the whacky world of Hans Werner Sinn.
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Subsidiarity To The Rescue?

The wrangling continues. To the world this must present a pretty unedifying spectacle of day-to-day political life here in the EU.

Italy has now threatened to use the veto, Peter Mandelson (taking time out from advising the US on how to handle China) asks Blair to think again, Blair himself is on a whilstlestop, and the whole question of how to handle Turkey admission is – like the proverbial hot potatoe – rapidly moving from one hand to the next.

Yesterday the euro – reeling from the referendum and the ECB rate crisis, went bobbing up and down like a yo-yo, and all in all we’re having a ‘very happy time of it’.

What the EU needs now is some short term success, some visible signs that things actually work, some ‘baby steps’ even.

Well one possible area where things could advance, and to everyones pleasure, might be related to the so-called ‘early warning system’ contained in the Consitution Treaty. Ian Cooper explains:
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No Answers Only Questions

One person who could rightly claim to know more about global ageing and its possible consequences than anyone else in the business is the German Director of the Manheim Research Institute for the Economics of Ageing Axel B?rsch-Supan. If there’s a conference being organised, he seems to be there. Actually his comments at both these meet-ups are well worth reading in and of themselves (here, and here).

In a sense B?rsch-Supan is almost uniquely qualified to express opinions on the topic since he has both devoted a large part of his professional career to studying the question, and he lives and works in a society which is already reeling under the impact. As he says:

“Today?s Germany has essentially the demographic structure that the United States will reach in a quarter of a century. The dependency ratio (the ratio of persons aged 65 and over to those aged from 20 to 59) is at 28 percent, and it will reach 75 percent in 2075, if we dare project that far. Almost one-fifth of the German population today are aged 65 and over. One quarter are aged 60 and over, which is relevant because the average retirement age in Germany is 59.5 years. Thus, in this sense the United States is not ?entering largely uncharted territory,? …. Rather, they can look to Europe?in particular to Germany and Italy?to see what will happen in the United States.”

I mention B?rsch-Supan because he serves as a good pretext for going over where we are to date with the issue. As he says himself. watching demography change is rather like watching a glacier melt, on a day-to-day basis it’s hard to see that anything is happening, but over time the impact is important.

One of his recent papers has the intriguing title: “Global Ageing: Issues, Answers, More Questions“. It is a good up-to-date review of the ‘state of the art’, and a quick examination of the points he makes probably serves as a good starting point, since I can’t help thinking, in the case of global ageing, it isn’t so much what we know that matters, it’s what we don’t know.

So here we go, a review of what we “know”, what we think we know, and what we don’t know:
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