Stephen Maxie writes:  Last August, my wife and I welcomed our third daughter into the world. It’s wonderful to be the parent of three girls. There is one significant drawback, however: having to field the question, over and over again, from (mostly) well-meaning people: “So are you going to try for a boy now?” There are several solid reasons we are calling it a day in the reproduction department. But if we were interested in having a fourth child, “trying for a boy” would not be the motivation. The idea is preposterous. Having a string of children of one sex does not presage the arrival of a baby of the opposite sex. Each pregnancy brings the same odds of having a boy or a girl, regardless of how previous pregnancies turned out: about 1 in 2.

The inkling that eventually odds come to favor having a baby of the other sex is an application of the “gambler’s fallacy.” This mistake is often explained with the example of coin tosses. Let’s say you flip a fair coin 5 times and it ends up “heads” each time. Many people watching this unbroken string of unlikely flips would bet good money that the sixth flip will bring “tails.” Heads can’t go on forever! What are the chances that there would be six heads in a row? Answer: on the sixth flip, there are even odds of getting heads or tails, just as there were for the first five flips. You’d be a fool to place a big bet on tails—or on heads, for that matter—for any individual coin toss.

In the long run, with millions or billions of flips, a fair coin will produce increasingly even numbers of heads and tails. The numbers will show something very close to a 50/50 split.  But when you’re dealing with only a few handfuls of flips, the law of small numbers applies: seemingly unlikely strings of coin flips are not that improbable after all. In our example, there is a probability of 1/64 that six flips of a fair coin will result in heads each time (that’s 1 over 2 to the sixth power). Those odds aren’t great; they come out to about a 1.6% chance. The gambler’s fallacy is to look at those meager odds and conclude there is a 98.4% chance the sixth flip will be tails. But here’s the fundamental problem: the probability of the first five flips coming up heads is now 100 percent. They have already happened! The only question is what will happen with the next flip, and those odds are, again, 50/50. Here is another way to look at it: any permutation of six coin flips—all heads or all tails or three heads and three tails or one tails and five heads, e.g.—has a probability of 1/64. So it’s just as likely—and just as unlikely—that six flips of a coin will produce six heads, or three tails and three heads—or any of the other 62 possible permutations.

When we zoom in on a string of one or two dozen flips, then, we are likely to find some series of flips that don’t look so random. Such non-random-seeming strings are to be expected from time to time. And this principle holds outside the realm of coin flips; it applies to purportedly amazing coincidences you might experience in your life.

It’s clear how a gambler can suffer from this fallacy: he can lose big money. If you throw all your chips on black in a game of Roulette after the ball has landed on red 10 times in a row because it couldn’t possibly wind up there an eleventh time—well, you have a good chance of walking home empty-pocketed. On August 18, 1913, scores of French gamblers left the Monte Carlo casino bereft after falling victim to this mistake: the Roulette ball landed on black 26 times in a row that day; during the run, everybody was betting that the wheel would even itself out and turn to red. But of course the wheel had no memory of its previous spins. Only the irrational bettors thought that previous spins had anything to do with how the next spin would turn out.

A new piece of research shows there are weighty implications of this cognitive bias well beyond the casino floor. In next Friday’s Praxis, I will discuss evidence that judges, loan officers and baseball umpires tend to succumb to the gambler’s fallacy in their decision making—dramatically expanding the damage the fallacy can cause to innocent bystanders.

Dani Rodrik writes:  A specter of job-killing technology is haunting the world.  How this challenge is met will determine the fate of the world’s market economies and democratic polities.

When the new industrial working class began to organize, governments defused the threat of revolution from below by expanding political and social rights, regulating markets, erecting a welfare state that provided extensive transfers and social insurance, and smoothing the ups and downs of the macroeconomy. In effect, they reinvented capitalism to make it more inclusive and to give workers a stake in the system.

Today’s technological revolutions call for a similarly comprehensive reinvention. The potential benefits of discoveries and new applications in robotics, biotechnology, digital technologies and other areas are all around us and easy to see. Indeed, many believe that the world economy may be on the cusp of another explosion in new technologies.

The  bulk of these new technologies are labor-saving. They entail the replacement of low- and medium-skilled workers with machines operated by a much smaller number of highly skilled workers.

A world in which robots and machines do the work of humans need not be a world of high unemployment. But it is certainly a world in which the lion’s share of productivity gains accrues to the owners of the new technologies and the machines that embody them. The bulk of the workforce is condemned either to joblessness or low wages.

Indeed, something like this has been happening in the developed countries for at least four decades. Skill and capital-intensive technologies are the leading culprit behind the rise in inequality since the late 1970s. By all indications, this trend is likely to continue, producing historically unprecedented levels of inequality and the threat of widespread social and political conflict.

The key is to recognize that disruptive new technologies produce large social gains and private losses simultaneously. These gains and losses can be reconfigured in a manner that benefits everyone. Just as with the earlier reinvention of capitalism, the state must play a large role.

Consider how new technologies develop. Each potential innovator faces a large upside, but also a high degree of risk.

These risks are especially high at the dawn of a new innovation age. Achieving the socially desirable level of innovative effort then requires either foolhardy entrepreneurs – who are willing to take high risks – or a sufficient supply of risk capital.

Imagine that a government established a number of professionally managed public venture funds, which would take equity stakes in a large cross-section of new technologies, raising the necessary funds by issuing bonds in financial markets. These funds would operate on market principles and have to provide periodic accounting to political authorities (especially when their overall rate of return falls below a specified threshold), but would be otherwise autonomous.

Designing the right institutions for public venture capital can be difficult. But central banks offer a model of how such funds might operate independently of day-to-day political pressure. Society, through its agent – the government – would then end up as co-owner of the new generation of technologies and machines.

The public venture funds’ share of profits from the commercialization of new technologies would be returned to ordinary citizens in the form of a “social innovation” dividend – an income stream that would supplement workers’ earnings from the labor market. It would also allow working hours to be reduced.

. An innovation state, established along the lines sketched above, would reconcile equity with the incentives that such investment requires.

Bradley Klapper writes:  The Obama administration is putting a large dent in the U.S. embargo against Cuba as of Friday, significantly loosening restrictions on American trade and investment.

The new rules also open up the islland to greater American travel and allow U.S. citizens to start bringing home small amounts of Cuban cigars after more than a half-century ban.

Thursday’s announcement of new Treasury and Commerce Department regulations are the next step in President Barack Obama’s plan to re-establish diplomatic relations with Cuba. They come three days after U.S. officials confirmed the release of 53 political prisoners Cuba had promised to free.

Only Congress can end the five-decade embargo. But the measures give permission for Americans to use credit cards in Cuba and U.S. companies to export telephone, computer and Internet technologies. Investments in some small business are permitted. General tourist travel is still prohibited, but Americans authorized to visit Cuba need no longer apply for special licenses.

With the new regulations public, the focus shifts to American businesses and the Cuban government. Some changes could take months as U.S. firms analyze the risks and benefits of moving into a complicated new market. And the Cuban government has said nothing publicly about how it will regulate new trade with the United States. Foreign companies currently deal almost entirely with state-owned firms that are notoriously slow, inefficient and short on cash.

Cuba will likely be more open to a surge in new travelers than to other potential effects of the loosened rules.

But Cuban hotels generally fall short of international standards and those with better food and service are almost always fully booked during the winter high season.

Casting a shadow on potential deals is the possibility of litigation by Cuban-Americans and U.S. firms whose property was confiscated in Fidel Castro’s 1959 revolution and may try to sue companies entering into business with the Cuban government. In Washington, Congress may also seek to erect barriers to new investment.

Thomas Donohue, the head of the U.S. Chamber of Commerce  said it was better for the U.S. to sell computers, smartphones and cars to Cuba than to cede such business to countries like Russia and China. Still, the embargo as a whole appears unlikely to fall anytime soon.

Starting Friday, U.S. companies will be able to export mobile phones, televisions, memory devices, recording devices, computers and software to a country with notoriously poor Internet and telecommunications infrastructure. Internet-based communications will fall under a general license. The new rules “immediately enable the American people to provide more resources to empower the Cuban population to become less dependent upon the state-driven economy,” White House spokesman Josh Earnest said Thursday.

The U.S. is now “one step closer to replacing out of date policies,” Treasury Secretary Jacob Lew said Thursday.

Other changes include:

—The elimination of limits on how much money Americans spend in Cuba each day or what they spend it on.

—Permissible use of U.S. credit and debit cards.

—Travel agents and airlines can fly to Cuba without a special license.

—Insurance companies can provide coverage for health, life and travel insurance policies for individuals residing in or visiting Cuba.

—Financial institutions may open accounts at Cuban banks to facilitate authorized transactions.

—Investments can be made in some small businesses and agricultural operations.

—Companies may ship building materials and equipment to private Cuban companies to renovate private buildings.

Further down the road, Washington envisions reopening the U.S. Embassy in Havana and carrying out high-level exchanges and visits between the governments. Secretary of State John Kerry could travel to the island later this year.

Columbia’s turnaround.   A quarter century ago, the Latin American nation was nearly a failed state, overrun by drug lords. Even today, after the drug cartels have been largely suppressed, a war with leftist guerrillas has become the longest armed conflict in the world – lasting more than a half century. More than 220,000 people have been killed and more than a tenth of the population remains displaced.

Such troubles, which include high corruption and a big gap between rich and poor, might have left an entire people feeling down. Not so in Colombia.

In 2012, the United Nations ranked it third on a “happiness” index. A Gallup poll last year put Colombia in the top 10 of countries in which people like what they do each day and have supportive relationships. And Forbes magazine cites it as one of “10 coolest places to visit in 2015.”

Yet coolness, love, and happiness might not be enough to explain Colombia’s recent successes and reform efforts. A 2014 survey by the Pew Research Center ranks it the highest country on a few key character traits. Colombians stand out in believing that “getting ahead” takes a combination of hard work and education.  Even more telling is that Colombians rank very high compared to other emerging economies in not believing that “success is determined by outside forces.”

These traits of resilience may help explain why Mark Schneider of the International Crisis Group predicted last week that “the only good news” on the world state in 2015 may be a peace agreement in Colombia’s long war.

Talks between President Juan Manuel Santos and the Colombian Revolutionary Armed Forces, known as FARC, began in 2012. The two sides have reached a couple key agreements. But the hardest parts – how to reintegrate militias and provide reparations to some 6 million victims – are not yet resolved. Even after an agreement, it might take years to reduce the poverty and injustices that first drove the rebellion.

Still, much of Colombia, especially the former drug-addled city of Medellín, is thriving despite the war. Instead of being home to drug barons like Pablo Escobar, Medellín now sports impressive infrastructure, such as a long escalator and cable cars up hillside slums to help connect the poor and rich. The city’s culture of entrepreneurship is creating a Silicon Valley of Latin America.

Colombia has long stood out in Latin America. It was the region’s first democracy. Bogotá was once the “Athens of South America.” Now it has the strongest and fastest-growing economy, ranking in size behind Brazil and Mexico. With aid from the United States, it has curbed much of its major drug trafficking.

It still needs land reform and a better human rights record to uplift its most marginalized people. During his reelection campaign last year, Santos promised to move his country from a “culture of fear” toward a “culture of fair play, of decency, of respect towards institutions.”

A nation that has been at war for 50 years, he says, has to start early to heal the wounds of war. The victims of the conflict have a seat at the peace talks, as Santos has insisted, because they are more willing to forgive and more willing to be generous.

Adam Minter writes:  Rare earths aren’t the world’s sexiest commodity. The 17 elements are notoriously difficult to extract from the ground and have brazenly obscure names. (Don’t make the classic rookie mistake of confusing yttrium with yttribium.) But what they lack in branding, they certainly make up for in utility and ubiquity: they’re essential to products as wide-ranging as wind turbines, smartphones, high tech weapon systems and a fishing reels.

Although the United States was once a major supplier of rare earths, China has been the world’s primary source since the 1990s.

As recently as 2013 China provided 86 pecent of the world’s rare earths supply and, especially over the past several years, Chinese officials have made no secret of their plans to use their accumulating monopoly power.

In 2009, a senior official in Inner Mongolia, home to China’s most productive rare earth mine, explaind how export controls on rare earths (dating back to 1999) were designed “to attract more Chinese and foreign investors into the region.

When it comes to rare earths, China sees no reason to separate economic goals from political ones.

By 2011, several foreign users of rare earths had relocaed production to China.  Fear and speculation served to drive up prices. For example, cerium — a rare earth often used in aluminum and iron alloys rose from $6 per pound in 2008 to a record of $77 per pound in August 2011.

Alternatives to Chinese rare earths quickly began cropping up, whether via recycling, new mines, alternative materials, or even smuggling. In July 2010, the Colorado-based Molycorp raised $393.8 million in an IPO, the proceeds of which went to re-opening a rare earths mine it had closed the previous decade.

By mid-2011, the combination of conservation, new mine, and alternative materials had produced a price crash from which the rare earth market has yet to recover.  This has forced China to change course:.

Rescinding the export quotas wasn’t a very significant concession.  Demand had fallen off so significantly that the quotas had ceased to be an issue. When the WTO ruled in March 2013 that China’s export controls on rare earths and other industrial metals violated its rules, China did not complain.

China has now consolidated the industry into two state-owned companies.  This should address two main problems in China’s market;  the proliferation of private mines and wildcatters who can and do supply smugglers.

It’s an open question whether Chinese industrial policy can maintain the country’s rare earths primacy — and a return to high rare earth prices — via consolidation.  Even if China doesn’t dominate rare earth mining, it continues to dominate rare earth processing (the dirty, dangerous, energy-intensive and expensive process of turning rare earths into something useful).

Even Molycorp, the company that was meant to be America’s great rare earths hope, sends some of its rare earths to China for processing.  China’s new rare earth conglomerates — which enjoy state-backing to cover their losses — seem likely to continue their dominance for years to come.

Steven Hansen thinks the Indian economy looks strong.  The election of Narendra Modi as Prime Minister in May 2014 has been what many believe a water shed election sweeping in a majority government for the first time since 1984. Narrow cast and religion voting patterns were set aside and the electorate opted to vote for promise of clean and effective governance.  Modi is known for achieving results in his past elected positions – but not known as a great master planner.

The appointment of Indian-American economist Arvind Panagariya to the key post in economic planning for India.  Panagariya is a heavyweight on the stage of international economists.

Modi administration’s performance since May 2014 has been mixed one. Politically reigning in what is called the “Saffron Family” has been tough who have at times worked at odds with Modi administration. Economically the country has stabilized. Inflation is down and India’s manufacturing PMI rose to 54.5 in December, 2014, while in the corresponding period a year ago it stood at 50.7, just above the crucial 50 mark which separates growth from contraction. Many in industry blame the super Hawkish Raghuram Rajan for throttling industrial growth.  Modi has put together a heavy weight team which believes free market economy tempered by social spending to create inclusive growth for the third of the world’s most extremely poor who live in India.

From May 2014 when Modi got elected , the Super Hawk Raghuram Rajan has been running circles round Modi’s administration by keeping tight leash on money.  Many believe that the Central Bank single handedly has almost frozen industry by crying wolf on inflation, completely ignoring the generally deflationary trend worldwide.  In an ironic twist he has been now circled by the heavyweight Pangariya and his crack team who may have better handle on what needs to be done for the Indian Economy. Hopefully we should see the Indian Economy being unfrozen.

Here are the positives:

• Reform in Indian banking sector
• Government will not find larger fiscal deficit to quicken the infrastructure spending
• A Hawkish Central Bank led by Raghuram Rajan will have to “bow” to equally heavy weights led by Panariya who are not hawkis
• Taxation Reforms which will be friendly to both domestic and international business
• Manufacturing sector should get a boost

Downside scenarios are sabotaging Modi’s administration good work by The Saffron (Hindu zealots) and the continuous tension on Indo-Pakistan border. We do not make much about the Indo-China rivalry and have on the contrary argued that both will work together.

Nigeria’s film industy produces 50 titles a week.  Most go stragiht to DVD and sell on the streets. What’s called Nollywood is a big business. It contributes about 1.2% to Nigeria’s GDP.  It employs about a million people.  Filmmakers complain that poor regulation of the street markets leaves films open to piracy, and unregulated sales means money for the films doesnt’t reach their pockets.

Most movies are filmed in ten days and seldom cost more than$40,000 to produce.  To improve content and export the films, better quality is necessary.  But that’s difficult with current budgets.  If they can get more money for films, Nollywood will explode.

Jason Njoku founded the first online streaming firm IROKOTV and pays from $8000 to $25000 for limited rights.  Some filmmakers now sell to several online platforms.  Nigerian films are going international. Will this be Bollywood redux?  Nigerian filmmakers are hoping Yes.

It was an interesting year in the world of food and drink.  3D-printed foods are gaining traction. Vermont became the first state to require GMO labels. Greens and gluten-free diets are going mainstream. Consumers are demanding more transparency on food labels.

Here are some novel entrepreneurs.  While working in San Francisco’s financial district one day in 2012, Jason Wang and his colleagues found themselves craving Ikes Place sandwiches for lunch. Problem was, Ikes doesn’t deliver and the trip across town and back would have taken a couple of hours. “We asked ourselves, why can’t the good restaurants deliver?” Wang, recalls. “Why is it the mediocre and generic pizza, Thai, Indian restaurants on every single delivery website?” With this thought, Caviar was born: A premium food delivery service that brings a city’s best cuisine to your doorstep for a flat fee of $4.99. Wang’s site was acquired by Jack Dorsey’s Square for $90 million last August.

Apoorva Mehta is also disrupting the industry with his tech platform and business model, Instacart. Founded in 2012, it is fastest-growing grocery delivery service ever, beating out Webvan and Amazon Fresh. The app allows shoppers to order groceries — from supermarkets like Kroger’s KR -0.54%, Whole Foods and Costco (no membership required). Deliveries typically come in less than half an hour.

One advantage of Mehta’s business model is not having set aside funds for warehouse rentals, maintenance costs, delivery trucks, and full-time manual labor. Most of Instacart’s runners (a.k.a. “green men”) are locals.  It’s a prime example of how efficient the sharing economy model can be.

If booze-delivery is more your type, look no further than the Drizly boys. Founders Nicholas Rellas and Justin Robinson, both 25, decided to focus on something as simple as an app that delivers alcohol. Since the company’s inception in 2012, Drizly has worked with over 150 retailers to deliver beer, wine and liquor to consumers and businesses.

Other standouts include Marianne Barnes, WoodFord Reserve’s Master Taster. Despite having no background in spirits of any kind, Barnes is bucking industry conventions and making her own path. She puts her chemical engineering degree to use every day on the job, relying on science to craft her bourbon, and is the chosen protégé to become WoodFord’s next Master Distiller.

Momofuku Ssäm Bar Executive Chef Matthew Rudofker has been running the kitchen since he was 25, when he held the title of Chef de Cuisine. After just one year of operations, the place has picked up clients like Grant Achatz, Jose Garces, Eataly N.Y.C. and Eataly Chicago and even Moet Hennessey.

At wearable tech maker Jawbone, 26-year-old Laura Borel is Head of Nutrition. The Stanford graduate led the food release, bringing simple and intuitive eating advice to millions Jawbone users. “In a world where most people say eating healthy is more complex than doing their taxes,” says Laura, “simplicity is the way forward.”