LOS ANGELES — Using a computer simulation model for predicting the way economic shocks are transmitted from country to country, two Australian researchers have simulated the trillion-dollar economic consequences of the next great flu pandemic.
Warwick McKibbin and Alexandra Sidorenko of the Australian National University summarize the scary news: "While we are in some ways better prepared to deal with a public-health emergency on this scale than we were a century ago, the integrated nature of the global economy — the dependence on global markets for goods, services and capital — may leave us more vulnerable to a pandemic′s accompanying economic shocks."
Other highlights from the latest Review:
- When the basic business model of the music business changes faster than you can download an MP3, it′s no wonder record companies are at sea in a world of turbulent technology and tastes. Who, for example, predicted that pop stars would come to rely on concert ticket sales as a far greater source of income than CDs? Marie Connolly and Alan Kreuger of Princeton University outline the peculiar factors revolutionizing the music business, including superstar effects, the return of payola in new forms and the dramatic rise in concert ticket prices.
- Robert Looney of the Naval Postgraduate School in California deconstructs Hugo Chavez′s grandiose vision for Venezuela and its dependence on sky-high oil prices to stay afloat. Among the lesser-known realities of Chavistanomics: Its dependence on the once-tamed military to turn utopian socialism into a workable economic system capable of surviving the next dip in energy prices.
- Giovanni Peri of the University of California, Davis, lays out the simple (though often ignored) economics of immigration. And it bears little resemblance to what the radio talk show hosts think: "The irony here is that while competition from new immigrants does reduce wages in some segments of the labor market, the evidence suggests that a great majority of American workers benefit from the influx."
- James Barth of the Milken Institute and Gerard Caprio of Williams College explain why China′s immature financial system is the Achilles′ heel of the post-communist economic miracle. "Since 1978, the economy has grown at an annualized rate of 9.4 percent — three times the global average, leading to an eight-fold increase in per-capita income," they write. "However, as might be expected, growth accomplished by layering a market economy on top of the old centrally planned one has left key institutions straining to catch up."
Also in this issue:
- An insider′s look at the global economy, offered by Michael Milken′s roundtable discussion with Nobel Laureates Gary Becker, Kenneth Arrow and Myron Scholes at the Milken Institute′s 2007 Global Conference in Los Angeles.
- An excerpt from Slate′s Moneybox columnist Dan Gross′s Pop: Why Bubbles are Good for the Economy.
- Demographer William Frey′s charticle on what he calls the "racial generation gap" in America.
The Milken Institute Review is sent quarterly to the world′s leading business and financial executives, senior policy makers and journalists. Its editor is Peter Passell, former economics columnist for The New York Times.