In his February 27th letter, Morgan Stanley Chief Economist Stephen Roach writes "The Internet may well be the ultimate enabler of a new set of socio-economic tensions." Having read this comment right after reading a Wall Street Journal article on ways Chinese web users can circumvent government censor, evidence of the tensions seems widely available. This mindset will be vastly more useful for understanding the vicissitudes of international relations and finance in the next decades than the steady stream of articles that preach the internet as heaven or hell. Developers of network-aware software have a saying that the internet treats censorship as damage and routes around it. I believe this to be true, but believe just as firmly that governments and corporations will continue their attempts to inflict this damage for many years to come.

The Economics Focus column near the back of the Feburary 11th edition of The Economist recommends a new book called The Theory of Corporate Finance by Jean Tirole. The article argues that corporate financial structure (equity vs. debt) does matter, but more deeply, shows that the separation of interests between company agents (officers) and owners (shareholders) carries risks and costs about which economics so far understands very little. In this era of smug, overpaid executives, formalization and publication of the failure of this compensation to align with owner interests stands as a gratifying initial step toward making it stop.

The 5% drop in new home sales seems surprising only, perhaps, to those of us living on the west coast, where the market still seems tight. At the end of the linked article, though, we read "Bucking the national trend, sales in the West posted an 11.3 percent increase in January after a 6.3 percent gain in December." Perhaps the news of higher interest rates takes longer to reach the West? The northeastern news hub (AP, Bloomberg, Reuters) offers no explanations. Can something as simple as "warmer weather, without hurricanes" really explain it?