Mark Perry at Carpe Diem: Colonoscopy: $9,000 in the U.S.; $350 in Costa Rica

Linda Jakobson of the Stockholm International Peace Research Institute reports that potential Arctic sea routes to New York and Europe have attracted the attention of the Chinese: China prepares for an ice-free Arctic:

Because China’s economy is reliant on foreign trade, there are substantial commercial implications if shipping routes are shortened during the summer months each year. Nearly half of China’s gross domestic product (GDP) is thought to be dependent on shipping. The trip from Shanghai to Hamburg via the Northern Sea Route—which runs along the north coast of Russia from the Bering Strait in the east to Novaya Zemlya in the west—is 6400 kilometres shorter than the route via the Strait of Malacca and the Suez Canal... Moreover, due to piracy, the cost of insurance for ships travelling via the Gulf of Aden towards the Suez Canal increased more than tenfold between September 2008 and March 2009.

The prospect of the Arctic being navigable during summer months as a result of climate change has impelled the Chinese Government to allocate more resources to research in the High North. Several Chinese academics have encouraged their government to be aware of the political, economic and military implications of shorter shipping routes and untapped energy resources. However, Chinese officials advocate cautious Arctic policies for fear of causing alarm and provoking countermeasures among the Arctic states.

China’s insistence on respect for sovereignty as a guiding principle of international relations deters it from questioning the territorial rights of Arctic states. Furthermore, China is aware that its size and rise to major power status evoke jitters, but at the same time it is striving to position itself so that it will not be excluded from access to the Arctic.

There are opportunities for small Arctic states (Norway, Greenland/Denmark, Iceland?):

Smaller Arctic Council members have an opportunity to lay the foundation for a unique relationship with China by engaging Chinese officials and academics on Arctic issues—ranging from climate change and maritime rescue operations to commercial shipping routes and resource exploration.

The Financial Times had a story on the report on March 1: China looks to Arctic shipping route.

A great profile on Paul Krugman by Larissa Mac Farquhar in the March 1 New Yorker: The Deflationist. How Paul Krugman found politics.  Every part of this is interesting.  

Why economics?  And especially international economics?

Krugman explained that he’d become an economist because of science fiction. When he was a boy, he’d  read Isaac Asimov’s “Foundation” trilogy and become obsessed with the central character, Hari Seldon. Seldon was a “psychohistorian”—a scientist with such a precise understanding of the mechanics of society that he could predict the course of events thousands of years into the future... He couldn’t predict individual behavior—that was too hard—but it didn’t matter, because history was determined not by individuals but by laws and hidden forces. “If you read other genres of fiction, you can learn about the way people are and the way society is,” Krugman said to the audience, “but you don’t get very much thinking about why are things the way they are, or what might make them different. What would happen if ?”

With Hari Seldon in mind, Krugman went to Yale, in 1970, intending to study history, but he felt that history was too much about what and not enough about why, so he ended up in economics. Economics, he found, examined the same infinitely complicated social reality that history did but, instead of elucidating its complexity, looked for patterns and rules that made the complexity seem simple. Why did some societies have serfs or slaves and others not? You could talk about culture and national character and climate and changing mores and heroes and revolts and the history of agriculture and the Romans and the Christians and the Middle Ages and all the rest of it; or, like Krugman’s economics teacher Evsey Domar, you could argue that if peasants are barely surviving there’s no point in enslaving them, because they have nothing to give you, but if good new land becomes available it makes sense to enslave them, because you can skim off the difference between their output and what it takes to keep them alive. Suddenly, a simple story made sense of a huge and baffling swath of reality, and Krugman found that enormously satisfying....

Krugman went to graduate school at M.I.T. “M.I.T. in the mid-seventies was a sort of Athens of economics—everybody was there,” he says. “And it was a golden age for clever little models.” Krugman took a class with Rudiger Dornbusch and became interested in international macroeconomics. Bretton Woods—the international system of monetary control established by the Allies during the Second World War—had just collapsed a few years earlier, floating exchange rates had turned out to be much more volatile than anybody expected, and figuring out why turned out to be a fantastically interesting puzzle.

Krugman wrote his thesis on exchange rates, but another class, on international trade, inspired him. “There was this kind of platonic beauty to the whole thing,” he says. “I remember going through the two-by-two-by-two model—two goods, two countries, two factors of production. The way all these pieces fitted together into a Swiss-watch-like mechanism was beautiful. I loved it.”...

There's lots of other stuff here: biographical and personal details (how he does his laundry on the road), how his political perspective has evolved, the evolution of his major economic contributions, how mathematical models can mislead, reflections on his professional productivity trajectory, and more. 

Read more: http://www.newyorker.com/reporting/2010/03/01/100301fa_fact_macfarquhar?currentPage=6#ixzz0gqzWy0AW

Edits, March 3, 2010.

Daron Acemoglu and Pierre Yared argue that militaristic states are less likely to engage in trade (NBER Working Paper 15694):

Despite the major advances in information technology that have shaped the recent wave of globalization, openness to trade is still a political choice, and trade policy can change with shifts in domestic political equilibria. This paper suggests that a particular threat and a limiting factor to globalization and its future developments may be militarist sentiments that appear to be on the rise among many nations around the globe today.

The evidence?

We proxy militarism by spending on the military and the size of the military, and document that over the past 20 years, countries experiencing greater increases in militarism according to these measures have had lower growth in trade. Focusing on bilateral trade flows, we also show that controlling flexibly for country trends, a pair of countries jointly experiencing greater increases in militarism has lower growth in bilateral trade.

Jonathan Adams, research evaluation director at Thomson Reuters, said China’s “awe-inspiring” growth had put it in second place to the US – and if it continues on its trajectory it will be the largest producer of scientific knowledge by 2020.

Chinese research in chemistry and materials science is especially strong.

Although its quality remains mixed, Chinese research has also become more collaborative, with almost 9 per cent of papers originating in China having at least one US-based co-author.

Meanwhile the volume of research coming out of India and, especially, Brazil has been growing as well.

Brazil stands out in health, life sciences, agriculture and environmental research. It is a world leader in using biofuels in auto and aero engines.

Russia has been a disaster: 

...on the eve of the Soviet Union’s disintegration, Russia was a scientific superpower, carrying out more research than China, India and Brazil combined. Since then it has been left behind.... Russia produced fewer research papers than Brazil or India in 2008.

This means new methods and products.  And what the Chinese and Brazilians can figure out, we can eventually imitate.  Knowledge capital goods are non-rival; one person's use of an idea doesn't preclude other persons from using the same idea at the same time.  Unlike a road grader.  Most of the the world's growth in per capita income is attributable to technological change.

Patrick Thomas and Tom Barry point out that Santa's Polar operations may violate international trade law: Santa Claus’s Trade Infractions. 

Oliver Griffiths explains why many of the presents Santa delivers were actually "Made in the U.S." or "Made in China,"  Santa, Elves and Comparative Advantage.  Griffiths is rehearsing answers to questions he expects from his children.  My guess is his kids won't ask.

Jonathan Dingel's post from last Christmas suggests the benefits American consumers receive from low taxes on imports: Christmas Tariffs.