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By Ed Dolan (Reporter)
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China is Overinvesting in Electric Cars and Other Links to Eliven Your Econ Course

Monday, December 5, 2011 23:31
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  • The US government has been roundly criticized for its investment in Solyndra’s failed solar panel venture, yet many people think the Chinese government is oh-so-clever when it pours money into “economy of the future” investments of its own. Think again. Governments everywhere are prone to pouring money into the sand. This excellent long post by Michael Pettis explains how the Chinese government has overinvested in the electric car industry and in other sectors as well.
  • Defender’s of Wall Street often defend princely salaries by arguing that a highly efficient U.S. financial sector is adding hugely to the strength of the economy. This nice piece of research by NYU’s Thomas Phillippon blows that argument out of the water. It argues that financial sector costs are rising faster than its output, and that the resulting loss of productivity is a drag on the economy at large, not a boost. The comparison of productivity-enhancing IT investment in retail trade with productivity-sapping IT investment in the financial sector is especially interesting.
  • Last week the stock market got a boost when the Fed announced it would lower the interest rate charged to loan dollars to European banks. Every wonder why European banks need dollars? This report by Binyamin Appelbaum of the New York Times explains some of the reasons.

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