Economist

AT FIVE tonnes and 520 megapixels, it is the biggest digital camera ever built—which is fitting, because it is designed to tackle the biggest problem in the universe. On February 20th researchers at the Cerro Tololo Inter-American Observatory (pictured), which sits 2,200 metres (7,200 feet) above sea level in the Atacama desert of northern Chile, will begin installing this behemoth on a telescope called Blanco. It is the centrepiece of the Dark Energy Survey (DES), the most ambitious attempt yet to understand a mystery as perplexing as any that faces physics: what is driving the universe to expand at an ever greater rate.It has been known since the late 1920s that the universe is getting bigger. But it was thought that the expansion was slowing. When in 1998 two independent studies reached the opposite conclusion, cosmology was knocked head over heels. Since then, 5,000 papers have been written to try to explain (or explain away) this result. “That’s more than one a day,” marvels Saul Perlmutter, of the Lawrence Berkeley National Laboratory, who led the Supernova Cosmology Project—one of the studies that was...

EUROPE’S handling of its sovereign-debt crisis has been disastrous. Euro-zone leaders succeeded in turning a manageable economic problem in Greece into a political conundrum that jeopardises the single currency. A premature insistence that private-sector creditors take a hit on Greece has fostered contagion. Massive write-offs are necessary but nobody yet knows what constitutes sustainable debt or what Greece’s “real” GDP is. In Latin America in the 1990s debt relief was granted only when fiscal adjustment and structural reforms were very advanced. This is certainly not the case in Greece. Although the European Central Bank’s three-year liquidity operations and the probable provision of more bail-out money for Athens provide a breathing space for a more comprehensive solution, Greece will remain a source of uncertainty. The country is in a deep recession: its GDP has fallen and unemployment has risen for three consecutive years. More austerity will only increase economic and social pressures within the country.Given this grim outlook many analysts suggest that it would be better for Greece to exit the euro zone....

IN DECEMBER Barack Obama trumpeted a new standard for mercury emissions from power plants. The rule, he boasted, would prevent thousands of premature deaths, heart attacks and asthma cases. The Environmental Protection Agency (EPA) reckoned these benefits were worth up to $90 billion a year, far above their $10 billion-a-year cost. Mr Obama took a swipe at past administrations for not implementing this “common-sense, cost-effective standard”.A casual listener would have assumed that all these benefits came from reduced mercury. In fact, reduced mercury explained none of the purported future reduction in deaths, heart attacks and asthma, and less than 0.01% of the monetary benefits. Instead, almost all the benefits came from concomitant reductions in a pollutant that was not the principal target of the rule: namely, fine particles.The minutiae of how regulators calculate benefits may seem arcane, but matters a lot. When businesses complain that Mr Obama has burdened them with costly new rules, his advisers respond that those costs are more than justified by even higher benefits. His Office of Information and...

DALLAS is in confident mood. The city, one of the fastest-growing metropolitan areas in America, is investing around $11 billion in improving its road, rail and air links. The Perot Museum of Nature & Science is being built downtown along with a new park that will cover the Woodall Rodgers expressway. It clearly helps the local economy that Texas is abundant in both oil and shale gas, even if the price of the latter is rather lower than producers would like. But is betting on energy a good idea? After all, the state went though a nasty bust in the mid-1980s when the oil price collapsed.Economists have long talked of the “resource curse” that can affect economies with lots of energy and minerals. The curse comes in two main forms. First, high revenues from resource development allow governing politicians to be “rent-seekers”, seizing control of the assets and using the income to buy off opposition to their rule. Mobutu Sese Seko, a former dictator of what was then Zaire, is the most glaring example of this tendency. The result is that more stable forms of government fail to develop.The second form of the...

THE past few years have been “as miserable as I can remember”, says Johnny Boyer of Boyer Allen Investment Management, a British hedge fund focused on Asia. The fund, which looked after $1.9 billion at its peak, faced the prospect of spending the next few years trying to claw its way back to pre-crisis asset levels. Instead the founders decided to shut the fund and give investors their money back.Others have also had enough. “I’ve been doing this for 15 years and I’ve never seen as many people give up as in the last three months,” says Luke Ellis of Man Group, a large listed fund. This trend is distinct from the round of closures in 2008. Then, managers were hit by investors’ redemptions and had no choice but to close; today many are electing to walk away.For some managers, the markets have become too stressful. Running a hedge fund today is “three times as much work for a third of the fun,” says one. But many are motivated by economics. Hedge funds typically get paid a 2% management fee on assets to cover expenses and a 20% performance fee on the returns they achieve for investors. Most funds do not earn performance fees unless they outperform their peak level or “high-water mark”. At the end of 2011, 67% of hedge funds were below their high-water marks, according to Credit Suisse, and 13% have not earned a performance fee since 2007 or earlier.Funds can survive off a...

Dear investor,In line with the rest of our industry we are making some changes to the language we use in our marketing and communications. We are writing this letter so we can explain these changes properly. Most importantly, Zilch Capital used to refer to itself as a “hedge fund” but 2008 made it embarrassingly clear we didn’t know how to hedge. At all. So like many others, we have embraced the title of “alternative asset manager”. It’s clunky but ambiguous enough to shield us from criticism next time around.We know we used to promise “absolute returns” (ie, that you would make money regardless of market conditions) but this pledge has proved impossible to honour. Instead we’re going to give you “risk-adjusted” returns or, failing that, “relative” returns. In years like 2011, when we delivered much less than the S&P 500, you may find that we don’t talk about returns at all.It is also time to move on from the concept of delivering “alpha”, the skill you’ve paid us such fat fees for. Upon reflection, we have decided that we’re actually much better at giving you “smart beta”. This term is already being touted at industry conferences and we hope shortly to be able to explain what it means. Like our peers we have also started talking a lot about how we are “multi-strategy” and “capital-structure agnostic”, and boasting about the benefits of our “unconstrained” investment...

Why the banks could not win IT WAS billed as a landmark deal that exacted retribution on banks which wrongly turned millions of Americans out of their homes. Yet the announcement on February 9th of a huge mortgage-foreclosure settlement between five American lenders, the federal government and 49 state attorneys-general is most notable for the questions it leaves unanswered.The deal, which may have been sealed but is apparently not yet signed, calls for $25 billion to come from five of the largest American financial institutions: JPMorgan Chase, Wells Fargo, Bank of America, Citigroup and Ally Financial. No justification has been given for this overall number nor for the amount each bank is to pay (which seems to reflect market share rather than any measure of culpability). It is not clear if the money will come in the form of cash or as write-downs on loans.Where the money will go is also unclear. The federal government and the 49 states will get $5 billion, with $3.5 billion headed for a nebulous pot “to repay public funds lost as a result of servicer misconduct and...

CONSERVATIVE, cautious and cowardly: the Bank of Japan (BOJ) has endured all manner of insults over the years. Among the complaints from critics is the charge that the central bank could have boosted Japan’s economy if it had increased its balance-sheet more rapidly during the financial crisis.The BOJ believes there is only so much a central bank can do if businesses won’t borrow and banks won’t lend because growth prospects are meagre and firms are already stuffed with cash. But politicians are threatening to introduce laws to dilute the bank’s independence. And its counterparts are being embarrassingly dynamic. In January the Federal Reserve set an inflation target of 2% and promised near-zero interest rates until the end of 2014; the European Central Bank is lending money to euro-zone banks like there’s no tomorrow. Inaction is not an option.So on February 14th the BOJ tried to disprove its critics. First, it changed its wording on price stability. Instead of calling it an “understanding” among the nine individual policy-board members, it now refers to price stability as a “goal” of the institution. Importantly, the term in Japanese, medo, does not mean “target” but implies a vaguer aspiration, unsurprising given that Japanese bureaucrats must “take responsibility” if formal targets are not met. Nonetheless, it still marks progress.Second, the BOJ...

IS AMERICA fading? It seems an odd thing to say about a country that so dominates the industries of the future. Where else could Facebook have grown from a student prank to a $100 billion company in less than a decade? America has been gripped by worries about decline before, notably in the 1970s, only to roar back. But this time it may be serious.There is little doubt that other countries are catching up. Between 1999 and 2009 America’s share of world exports fell in almost every industry: by 36 percentage points in aerospace, nine in information technology, eight in communications equipment and three in cars. Some loss of market share is inevitable as China and other economies emerge. But even in absolute terms, there is cause for worry. Private-sector job growth has slowed dramatically, and come to a halt in industries that are exposed to global competition. Median annual income grew by an anaemic 2% between 1990 and 2010.The March issue of the Harvard Business Review is devoted to “American competitiveness” (by which it means the country’s ability to improve productivity and living...

Hindsight can be frustrating. We kick ourselves for not buying Apple shares ten years ago, when they were $12.50 each. On February 13th they rose above $500. So $100 invested in Apple in February 2002, around the time it unveiled its redesigned iMac, would be worth almost $4,000 today. The same investment in Sberbank, Russia’s biggest state-owned bank, would now be worth more than $3,700. But cheer up. We can at least be grateful that we didn’t buy shares in Allied Irish Banks or AIG. Bets of $100 in those firms ten years ago would now be worth $1.33 and $2.21 respectively. Western financial institutions have been by far the worst investment of the past decade. As for the next one, who knows? (Because this chart looks at the 200 biggest existing companies that also existed in 2002, it ignores both new and recently bankrupt firms.)

A spot of bother over phones GO AHEAD, but we’re watching you. That, in effect, is what competition authorities in America and the European Union told Google on February 13th. Last August the search-engine giant agreed to buy Motorola Mobility, a maker of mobile phones with 17,000 issued patents and 6,800 pending, for $12.5 billion. Neither America’s Department of Justice (DoJ) nor the European Commission has found a reason to halt the deal, but both tempered their approval with words of caution.The watchdogs sniffed the deal carefully because patents are powerful weapons and war is already being waged. This month Motorola Mobility won a court ruling in Germany to stop Apple selling several iPhones and iPads in its online store there; Apple managed to have the ban suspended. Microsoft and Apple have been firing regular volleys at devices that use Google’s Android operating system. At the International Trade Commission (ITC), a popular American venue for patent disputes, Microsoft is suing Barnes & Noble over the bookseller’s Nook e-reader. In April some Android phones...

Atomic Anne is angry FANS of the cock-up theory of events got a boost this week when Areva, a French nuclear-energy one-stop shop, said there had been no fraud in its disastrous purchase of UraMin, a Canadian start-up firm with mining assets in Namibia, the Central African Republic and South Africa, in 2007 for $2.5 billion. The acquisition had simply been badly managed, it said, leading Areva to overpay. Last December the company took a €1.46 billion ($2 billion) charge against the acquisition, resulting in a huge operating loss for 2011.Areva had suspected a plot. It ordered an external study of the UraMin deal in 2010, which suggested dodgy goings-on. Then in 2011 it hired a Swiss private-detective agency, Alp Services, to investigate the circumstances of the transaction. Anne Lauvergeon, Areva’s boss at the time and France’s most prominent businesswoman, was not informed of the probe. Last month she announced that her husband had been spied on by Alp Services, and on February 8th began a legal complaint against unidentified people. Areva’s head of mining, Sébastien de...

AMERICAN telecoms firms are clamouring for more wireless spectrum. Hence the interest in LightSquared, a firm which had hoovered up a chunk of airwaves formerly used by satellite operators. It planned to build a high-speed terrestrial network and rent it out to others. But on February 14th America’s Federal Communications Commission (FCC) said no.The FCC’s announcement was prompted by a report from another government body, the National Telecommunications and Information Administration (NTIA), which concluded that LightSquared’s technology would interfere with navigation equipment used by planes and other moving things. The company protests that the testing process the NTIA has used is deeply flawed. It is hoping to convince the FCC to take the NTIA’s findings “with a generous helping of salt”.Its efforts are likely to prove futile because the FCC isn’t in a position to conduct its own tests. “I think the writing has been on the wall for LightSquared for a few months,” says John Fletcher of SNL Kagan, a market-research firm. If the FCC does not relent, this will be a serious blow to LightSquared, which has invested almost $4 billion to develop its business, and to its backer, Harbinger Capital Partners, a hedge fund run by Philip Falcone, a politically connected billionaire.LightSquared could turn to the courts to challenge the regulator, but the firm may not want a costly...

IN TOKYO’S posh Ginza shopping district the Apple Store is packed, but the nearby Sony showroom is as lifeless as a mausoleum. In recent days the largest Japanese gadget-makers said they expect to lose a combined $17 billion in the financial year 2011. Panasonic alone expects to lose $10 billion. Meanwhile South Korea’s Samsung enjoyed profits of $15 billion and America’s Apple hauled in $22 billion.Since 2000 the big five Japanese electronics firms have lost two-thirds of their value (see chart). What ails them? High costs and a strong yen don’t help. Nor does a recent legal change that bars them from claiming certain tax credits they had counted on. But the sickness runs deeper.Too many Japanese firms make similar things. No fewer than eight crank out mobile phones; more than ten make rice-cookers and six make televisions. The overlap is inefficient: it duplicates research and development, reduces economies of scale and destroys pricing power.Companies often stay in markets where they cannot compete. This wastes huge amounts of capital. Rather than sticking to what they do best, they bleed their strong...

A wise thief tries not to draw attention to himself IN THE film “Superman 3”, a lowly computer programmer (played by Richard Pryor, pictured) embezzles a fat wad of money from his employer. The boss laments that it will be hard to catch the thief, because “he won’t do a thing to call attention to himself. Unless, of course, he is a complete and utter moron.” Just then the thief screeches into the car park in a brand new red sports car, radio blaring.In the real world, embezzlers are seldom so obvious. The traditional way to snare them is to hire an accountant to scrutinise accounts for anomalies. But this is like looking for a contact lens in a snowdrift. So firms are turning to linguistic software to narrow the search.Rip-offs tend to occur in what gumshoes call the “fraud triangle”: where incentive, rationalisation and opportunity meet. To spot staff with the incentive to steal (over and above the obvious fact that money is quite useful), anti-fraud software scans e-mails for evidence of money troubles. Phrases like “under the gun” and “make sales quota” can indicate that an employee...

GERMAN autobahns are unlike motorways elsewhere—on some you can drive as fast as you like. Germany’s car industry is also in a class of its own. Its three big premium brands, BMW, Mercedes-Benz and Audi (part of Volkswagen), are working flat-out to meet demand for their beautifully engineered, stylish motors. The emerging world’s new rich love them. Germany’s domestic car market is doing nicely, too: sales grew by 9% last year. The contrast with the rest of Europe is stark. Car sales fell by 2% in France, 11% in Italy and 18% in Spain last year. And status-conscious consumers in China are not interested in cars that are merely pretty good. So Europe’s volume—ie, non-premium—carmakers are in trouble. France’s Peugeot-Citroën, Italy’s Fiat and Opel-Vauxhall (the European arm of GM, America’s biggest carmaker) have all seen their European sales fall...

BILL HICKS, a comedian, used to joke that there must be a “ledge beyond the edge”. How else could the survival of Keith Richards be explained? What goes for rock stars also appears to go for Greece, which has been on the brink of a second bail-out package for weeks.Deadlines have already been missed. A meeting of the Eurogroup of finance ministers, scheduled for February 15th, at which the terms of a deal were supposed to have been endorsed, was postponed the day before. Euro-zone ministers wanted more details of proposed spending cuts as well as written assurances that Greek politicians won’t renege on the deal once a general election, pencilled in for April 8th, is over. Greece has consistently missed its targets to date; trust among its troika of rescuers—euro-zone governments, the IMF and the European Central Bank (ECB)—that it will stick to a new agreement is low.The delays may reflect the brinkmanship that is part of any tough negotiation. Greece is short of cash but not of bargaining chips. Without fresh bail-out money, it faces a chaotic default on its public debt. That might provoke wider...

“PM2.5” seems an odd and wonkish term for the blogosphere to take up, but that is precisely what has happened in China in recent weeks. It refers to the smallest solid particles in the atmosphere—those less than 2½ microns across. Such dust can get deep into people’s lungs; far deeper than that rated as PM10. Yet until recently China’s authorities have revealed measurements only for PM10. When people realised this, an online revolt broke out. Such was the public pressure that the government caved in and PM2.5 data are now being published for Beijing and a handful of other cities.But what of the rest of China? At the moment, only PM10 data are available. However, officialdom’s hand may soon be forced here, too. Though pollution data are best collected near the ground, a plausible estimate may be made from the vantage-point of a satellite by measuring how much light is blocked by particles, and estimating from those particles’ chemical composition the likely distribution of their sizes. And a report prepared for The Economist by researchers at Yale and Columbia universities, and Battelle Memorial Institute, under the auspices of Angel Hsu of Yale, does just that. It draws on data from American satellites to map out PM2.5 pollution across the entire country. ...

Imagine what it looks like to a fly “HOW the zebra got his stripes” sounds like the title of one of Rudyard Kipling’s “Just So” stories. Sadly, it isn’t, so the question has, instead, been left to zoologists. But they, too, have let their imaginations rip. Some have suggested camouflage. (Charles Darwin pooh-poohed that idea, pointing out that zebra graze in the open, not amid thick vegetation where a striped pattern might break up their outlines.) Others suggest they are a way to display an individual’s fitness. Irregular stripes would let potential mates know that someone was not up to snuff. One researcher proposed that stripes are to zebra what faces are to people, allowing them to recognise each other, since every animal has a unique stripe-print. Another even speculated that predators might get dizzy watching a herd of stripes gallop by.There is, however, one other idea: that stripes are a sophisticated form of fly repellent. It was originally dreamed up in the 1980s, but never proved. Now, a team of investigators led by Gabor Horvath of Eotvos University in Budapest report in...

FOR as long as humans have romanced each other, others have wanted to meddle. Whether those others were parents, priests, friends or bureaucrats, their motive was largely the same: they thought they knew what it took to pair people off better than those people knew themselves.Today, though, there is a new matchmaker in the village: the internet. It differs from the old ones in two ways. First, its motive is purely profit. Second, single wannabe lovers are queuing up to use it, rather than resenting its nagging. For internet dating sites promise two things that neither traditional matchmakers nor chance encounters at bars, bus-stops and bar mitzvahs offer. One is a vastly greater choice of potential partners. The other is a scientifically proven way of matching suitable people together, enhancing the chance of “happily ever after”.The greater choice is unarguable. But does it lead to better outcomes? And do the “scientifically tested algorithms” actually work, and deliver the goods in ways that traditional courtship (or, at least, flirtation) cannot manage? These are the questions asked by a team of psychologists...