Thursday, July 31, 2008

Blue Cross Waives Copays for Retail Health Clinics

EAGAN, MN -- Blue Cross & Blue Shield of Minnesota is waiving copayments for health plan members who use retail health clinics.

The objective is to encourage plan members to use the retail clinics—which cost less than physician’s office visits, hospital emergency room or urgent care centers—for treatment of simple medical conditions, such as sore throats, ear infections and seasonal allergies, or to obtain routine vaccinations.

Retail clinics are typically staffed by physician’s assistants or nurse practitioners and are located in grocery stores, pharmacies or discount stores.

MP: Another example of market-based, market-driven health care reform that didn't require a government takeover of health care.

Exxon Posts Record $32.36 Billion Tax Payment

CNN's headline: "Exxon posts record $11.68 billion profit."
According to CNN, Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter.
That profit works out to $1,485.55 a second.

Buried in the story we also find that "In addition to making hefty profits, Exxon also had a hefty tax bill. Worldwide, the company paid $10.5 billion in income taxes in the second quarter, $9.5 billion in sales taxes, and over $12 billion in what it called 'other taxes.'"

MP: In other words, Exxon Mobil paid (or at least collected) $32.361 billion in taxes in the second quarter, which works out to $4,114 in taxes per second. Another way to look at it - Exxon paid (or collected) almost $3 in taxes ($32.361 billion) for every $1 in profits ($11.68 billion), see chart above.

The Blogger As D.J.

Think of a blog as competing with both Google and Wikipedia, among other aggregators. But with Google and Wikipedia you must choose the topic. A good blog writer can randomize the topic for you, much like a good DJ controls the sequence of the music.

~Tyler Cowen on Marginal Revolution

Company Docs, Company Medical Clinics Are Back

The company doctor is back.

In a climate of deepening health-care woes, company-based medical centers are winning dozens of fresh converts. These include the North American units of Toyota and Nissan, Harrah's Entertainment, and Walt Disney Parks & Resorts. Pharmacy chain Walgreen, which also operates nearly 200 small clinics for customers at its retail stores, sees so much growth in on-site medical centers that in May it snapped up Take Care Health.

A recent study by benefits-consulting firm Watson Wyatt Worldwide found that 32% of all employers with more than 1,000 workers either have an on-site medical center or plan to build one by 2009. "We're talking about a microcosm of health-care reform," says Hal Rosenbluth, president of Walgreen's health and wellness division. "Companies can take control and understand their health-care costs."

Full BusinessWeek article here.

NCPA summary here.

Comment: While politicians in Washington and the two presidential candidates dream up the next grandiose government healthcare reform to address rising healthcare costs, the most effective, affordable and convenient market-based healthcare solutions might be right around the corner at your employer's on-site medical center, or right around the corner at your local Kroger, Walgreens, Meijers, CVS, Target or Wal-Mart.


WASHINGTON -- The U.S. economy doubled its speed in the spring, driven by higher exports, falling imports, and rising spending by consumers given tax rebates meant to neutralize the housing slump. Gross domestic product rose at a seasonally adjusted 1.9% annual rate April through June, the Commerce Department said Thursday in the first estimate of second-quarter GDP (see chart above, recessions shaded).

H.S. Graduation Rate in Detroit Only 20% for Black Males, And It's Even Worse for White Males: 17%

The chart above is from the recently released study "Given Half a Chance: The Schott 50 State Report on Public Education and Black Males.'' From the report:

1. The "good news" is that Detroit is one of the most successful school districts in the country at successfully getting black males to stay in school and graduate from high school at a higher rate than white males (see chart above). The bad news is that the high school graduation rate for black males in Detroit is only 20% (1 out of 5), and for white males only 17% (about 1 out of 6).

2. Michigan (33%) is the worst state in the nation when it comes to graduating black male students from high school (national average is 47%), and Detroit Public Schools (20%) has the second-lowest rate for big-city school districts (Indianapolis is lowest at 19%).

3. North Dakota has the highest graduation rate for black males at 89% (versus 84% for white males), followed by Vermont at 88% (versus 75% for white males), and Maine at 85% (versus 75% for whites).

Drill, Drill, Drill: U.S. Production Today Same as '48

According to data from the Energy Information Adminstration for crude oil field production in the U.S., our current annual domestic production of about 1.873 billion barrels of crude oil (5.132 million barrels per day) is about exactly the same as oil production 60 years ago, back in the 1947-1949 period (see graph above). Real GDP today is about 7.2x higher than it was in 1948, and yet we're producing the same amount of domestic oil.

Bottom Line: Don't blame the speculators for high oil prices, blame restrictions on domestic oil production. Let's drill, drill, drill.

HT: Thanks to Michael A. Higley

Overexpansion: New Starbucks Opens Newest Location In Rest Room Of Existing Starbucks

Starbucks, the nation's largest coffee-shop chain, continued its rapid expansion, opening its newest location in the men's room of an existing Starbucks.

"Coffee lovers just can't stand being far from their favorite Starbucks gourmet blends," said Chris Tuttle, Starbucks vice-president of franchising.

"Eventually, Starbucks rest rooms everywhere will sell coffee," CEO Howard Schultz said. "But that ambitious scheme is at least five years down the road. In the meantime, we plan to open an additional location in this Starbucks' ladies' room within months, and are already drafting plans for a fourth restaurant along the corridor leading from the main seating area to the rest rooms. At some point a 'Star-bucks Express' window will eventually open in the walk-in closet of the men's room Starbucks."

From The Onion, written back in 1998, foretelling some of Starbucks future problems with overexpansion.

Wednesday, July 30, 2008

Incentives Matter

From Steven Levitt at Freakonomics:

Why do mortgage brokers get paid everything up front when they originate a deal?

This sort of contract gives brokers terrible incentives. They just want to get a deal done. It matters very little to them whether the borrower eventually defaults or not.

Chris Harris offers a simple solution to the problem: instead of paying mortgage brokers a lump sum when the deal closes, have them pay a small amount out of every mortgage payment. That way, the mortgage brokers will have a disincentive to initiate high-risk mortgages that are likely to default.

MP: This example of incentives reminds me of a story about the transportation of convicts from the U.K. to Australia during the late 1700s and the early 1800s. Private companies were paid to transport the convicts/prisoners, and the first payment schedule was based on the number of prisoners who boarded ships in the U.K. As you might imagine, there was no direct incentive to deliver living prisoners to Australia, and many of them died during the trip, due to overcrowding, lack of food and water, unsanitary and unsafe conditions, untreated diseases, etc.

The payment schedule later changed, and was subsequently based on the number of living prisoners delivered to Australia. The incentives changed, and the outcome improved: fewer prisoners died during transport.

Greenpeace Founder Comes Full Circle on Nuclear

BETHESDA, MD -- Dr. Patrick Moore, a founding member of Greenpeace, reconsiders the global benefits of nuclear energy in the latest edition of Says Dr. Moore, now chairman and chief scientist of the Vancouver-based consultancy Green Spirit Strategies, the protest against nuclear energy that began in the 1970s was "so focused on nuclear weapons and nuclear war that we lumped all things nuclear in the same category as being evil. We made the mistake of not recognizing that nuclear energy was a beneficial use, that it was a clean energy source that does not produce greenhouse gas and air pollution like the fossil fuels do."

Watch video here of interview with Moore.

HT: Clover Aguayo

World Internet Usage Stats

The chart above (click to enlarge) is from Internet World Stats, showing the latest Internet usage data. Some interesting, though maybe not surprising, findings:

1. North America has the highest Internet penetration rate in the world of 73.6%, 1.5x the 48.1%penetration rate of Europe.

2. Africa has the lowest Internet penetration rate in the world: 5.3%.

3. The Middle East has the highest percentage growth in Internet usage from 2000 to 2008: 1,177%.

4. Asia has the highest number of Internet users.

5. There are now almost 1.5 billion Internet users worldwide.

Bring Nuclear Back Home

If ever there was a question about the need for nuclear power, it has certainly been dispelled now with the rising cost of fossil fuels.

The high price of oil, natural gas and coal should be a wake-up call to all regions of the country that the era of boundless use of cheap fossil fuels is over — and that nuclear power will need to play a larger role in supplying electricity to homes, business and industry.

The U.S. pioneered the development of nuclear energy, and had the first major nuclear program. Most other leading industrial countries have continued developing their nuclear programs since the last nuclear plant order in the U.S. — primarily using U.S. technology.

Today we have the means — and more important, an urgent need — to bring that technology back home.

Read full article here in IBD.

Gas Falls Below $3.40 in Oklahoma


Statistical Tests Shows Greater Male Variance

The table above is from the new study in Science Magazine "Gender Similarities Characterize Math Performance" (abstract free, $10 for full study) recently discussed here on CD, in the WSJ, and on Marginal Revolution.

From p. 494-495 of the study: "The hypothesis that the variability of intellectual abilities is greater among males than among females and produces a preponderance of males at the highest levels of performance was originally proposed over 100 years ago. The variance ratio (VR), the ratio of the male variance to the female variance, assesses these differences. Greater male variance is indicated by VR > 1.0. All VRs, by state and grade, are >1.0 (see table above). Thus, our analyses show greater male variability, although the discrepancy in variances is not large (bold italics added)."

Actually, I don't think
that is true, I think the difference in male-female variances IS very large, and is stastistically significant at the highest possible level of significance (.001 level). Here's why:

The statistical test for differences in variance is conducted by comparing the variance ratio to the critical values in an F-test table (test explained here and here), adjusted for sample sizes. Comparing the Variance Ratios in the table above (from 1.11 to 1.21) to the critical F-value of 1.06 for the .001 level of significance with large sample sizes > 1000 (F-table here), suggests that ALL of the variance ratios in the table above are statistically significant at the .001 level of significance.

In other words, the variance of male intelligence (based on standardized math tests) is significantly greater than the variance of female intelligence at even an early age (second grade), at the highest possible level of statistical significance (.001), and the statistically significant difference in male-female variance actually gets greater over time.

Bottom Line: The authors of the study apparently made a conclusion based on "eyeballing the data" ("the discrepancy of variance is not large"), when a statistical F-test of differences in variance shows that the discrepancy of variance is actually VERY LARGE, and is statistically significant at the .001 level (meaning that there is only a 1-in-a-1000 chance that we would find these results purely by chance, and a 99.9% chance that we have established a statistical difference in variances).

Tuesday, July 29, 2008

Most Favorable, Least Favorable Business Climates

"A View from Corporate America: Winning Strategies in Economic Development Marketing" is the fifth installment in a series of surveys of senior U.S. executives and their advisors. Similar surveys were conducted by DCI in 1996, 1999, 2002 and 2005.

From the 2008 report, the six states with the most favorable business climates are Texas (highest ranking), North Carolina, Geogia, Florida/Tennessee (tie) and Nevada.

Among executives who named Texas as having a favorable business climate, the factors mentioned most frequently are: Tax climate (31%); Labor/Workforce (Cost and availability) (29%) and Pro-business climate (26%). Among those who named North Carolina as having a favorable business climate, the factors mentioned most frequently are: Labor (Education levels, cost) (30%); Pro-business climate (22%); and Low costs (19%), mirroring the reasons provided by those who named Georgia: Labor (Low cost, good quality) (32%); Pro-business climate (29%) and Low costs (29%).

The five states with least favorable business climates are Califorinia (lowest ranking), New York, Michigan, New Jersey and Massachusetts.

California was cited for having “too much regulation and an anti-business climate” by 58% of respondents, while 37% mention “high costs” and 28% said “taxes.” Among those who named New York as having a “least favorable” business climate, the factors mentioned most frequently are taxes (65%), costs (32%) and anti-business regulation/climate (23%). Michigan’s poor economy (34%), high taxes (31%), and unions (17%) earned it a position in this list.

Train Travel Makes a Comeback: Sold Out Trains

Amtrak has reported that nationwide ridership was up 12% annually in June, when 2.5 million passengers rode.

Ridership on Amtrak's Northeast corridor increased over 3.2% annually in June. A look at the most recent numbers for fiscal year 2008, which covers October through June, reveals an even sharper increase in ridership compared to the same nine months in 2007. From October through June, over 5.6 million passengers traveled the Northeast corridor, from Washington to Boston, versus 5 million during the same period last year, representing an 11% increase (and coming
despite increased fares). Travel on Acela (pictured above), the Northeast-only express service, increased by 8%, from 2.4 million to 2.6 million riders.

On the Northeast corridor it is not unusual to find a large number of trains to be sold out each day.


See Greg Mankiw's related Cross-Price Elasticity of Demand X

"Civil" "Servants"

PARIS -- French face prosecution for "insulting" civil servants.

Isn't the problem that "civil servants" usually aren't very "civil," and they're not very "servile?"

Emotionally Powerful, But Undefined Terms

Some of the most emotionally powerful words are undefined, such as "social justice," "a living wage," "price gouging" or a "fragile" environment, for example. Such terms are especially valuable to politicians during an election year, for these terms can attract the votes of people who mean very different-- and even mutually contradictory-- things when they use these words.

~Thomas Sowell

I'd add a few more terms like anything with the word "fair" in it, e.g. "fair trade," "fairly traded," "fair wage," "fair trade coffee," etc.

Update: In the comments, Fred adds "Level playing field," another good one.

Monday, July 28, 2008

Through $4 Gas, Consumers Find Religion: Record Decline in Driving, Record Level of Conservation

The Federal Highway Administration reported that travel during May 2008 on all roads and streets in the nation fell by -3.7% compared to the same month last year. May marks the seventh consectutive month of traffic volume decline compared to the same month in the previous year. Travel YTD through May in 2008 fell by -2.4% compared to 2007.

There was never more than a single monthly decline in traffic volume until 2006, a few examples of two consectutive monthly declines 2006 and early 2007, but never in the history of these data was there ever a period of more than a 2-month consecutive decline until now, and therefore the 7 consecutive monthly decline in miles driven is a record, and represents the most significant adjustment to driving behavior in recent history.

On a moving 12-month total basis, traffic volume in May fell to a three-and-half year low of 2.966 trillion miles, the lowest level since January of 2005 (see chart above), and this measure has fallen in each of the last seven months. Further, the 16 billion mile decrease in May's moving 12-month total was the largest monthly decrease on record, going back to 1983, and marks
the most significant moving 12-month decrease in miles driven in at least the last 25 years.

High gas prices are working - consumers are changing their behavior by driving less and conserving gasoline. In fact, high gas prices have probably done more to change behavior and inspire conservation of fossil fuels than all of the Earth Days, and all of the efforts of groups like the Sierra Club, combined? Consumers have "found the religion of environmentalism and conservation" through high gas prices.

Amen, brothers and sisters.

100 Billion Dollar Zimbabwe Notes Selling on Ebay

In Zimbabwe, a 100 billion dollar Zimbabwe note isn't even enough to buy a loaf of bread, and is equal to only about $1USD (see related CD post here). But on Ebay, the 100 billion Zimbabwe notes (pictured above) are selling for as much as $71, see completed Ebay auctions below:

From The Economist, a chart of the highest-denomination banknotes in history - the 100 billion Zimbabwe dollars ranks #4:

Thank God We Haven't Considered Price Controls

You get long lines at the pump, like the one above in Washington, D.C. in 1973, with more than 30 cars waiting to buy gas. See more photos from the Washington Post here, taken during the oil crisis in 1973 when OPEC imposed an oil embargo against the U.S. and other nations, and the U.S. imposed price controls as a "solution."

We might complain about paying the market price of $4 per gallon, but at least gas is always available with no waiting. Market prices have significant advantages over artificial government prices. Sure gas remained cheap in 1973 in money terms because of price controls, but think of all the time wasted waiting in line! After accounting for the cost of time and aggravation, gas was surely no bargain in 1973.

Lawrence Summers Vindicated By New Study: Male Test Scores ARE More Variable Than Female Scores

Wall Street Journal -- Girls and boys have roughly the same average scores on state math tests, but boys more often excelled or failed, researchers reported. The fresh research adds to the debate about gender difference in aptitude for mathematics, including efforts to explain the relative scarcity of women among professors of science, math and engineering.

The latest study, in this week's journal Science, examined scores from seven million students who took statewide mathematics tests from grades two through 11 in 10 states between 2005 and 2007.

The researchers, from the University of Wisconsin and the University of California, Berkeley, didn't find a significant overall difference between girls' and boys' scores. But the study also found that boys' scores were more variable than those of girls. More boys scored extremely well -- or extremely poorly -- than girls, who were more likely to earn scores closer to the average for all students. The study found that boys are consistently more variable than girls, in every grade and in every state studied (see crude diagram above - showing distributions where mean intelligence is the same, but the standard deviation of male intelligence is greater than female intelligence).

In Minnesota, for example, 1.85% of white boys in the 11th grade hit the 99th percentile, compared with 0.9% of girls -- meaning there were more than twice as many boys among the top scorers than girls.

MP: And it might just be the case that those students who score in the 99th percentile on standardized tests are the future genius-level scholars in math, science, physics and engineering who are able to succeed and get tenure as professors at extremely competitive universities like Harvard, Yale, MIT, etc. In that case, we would expect an over-representation (under-representation) of men (women) in those positions for reasons that have NOTHING to do with discrimination, and everything to do with genetics and the variability of intelligence.

Q: Does this means that Larry Summers gets his job back at Harvard, since he was simply disccussing scientific research like the study above? Or doesn't he at least deserve some apologies?

HT: Clover Aguayo

Political Correctness on Campus

A new study "Ascriptive Justice: The Prevalence, Distribution, and Consequences of Political Correctness in the Academy," by Professor Solon Simmons at George Mason University, is reviewed in Inside Higher Ed (link).

The Inside Higher Ed article includes an interesting chart of "Political Correctness by Discipline," based on faculty interviews, showing these results:

4 Most Politically Correct academic disciplines: Psychology (59%), Sociology (45%), English (42%), History (31%).

4 Least Politically Correct disciplines: Finance, MIS, electrical engineering and mechanical engineering, all 0%.

Discipline with the Lowest Percent of Politically Incorrect Faculty: Sociology (1.8%)

2 Disciplines with the Highest Percent of Politicially Incorrect Faculty: MIS (72%) and Economics (51%)

HT: Ben Cunningham

Venezuela: One of The America's Deadliest Hoods

THE ECONOMIST -- One of Hugo Chávez’s lesser-known feats since taking over as Venezuela’s leader in 1999 is to have presided over a tripling of the annual homicide rate—and that’s according to the official statistics. Last year more than 13,000 people were killed in a country of 27m, producing a murder rate of 48 per 100,000, the second highest in the world (after El Salvador, and almost 8x the rate in the U.S., see chart above). In neighbouring Colombia, a country plagued by guerrilla war and drug violence, the rate was 40 per 100,000.

Only 1 Economic System Exists: Market Captialism; For Mass of Mankind It's A Source of Hope

The 20th century witnessed a war between two economic systems: state socialism and market capitalism. In the socialist system, property was public, competition forbidden, and production planned. In the market system, property was private, competition encouraged, and production determined by entrepreneurs. Faced with the choice of which system was superior, nations hesitated and economists remained divided.

The state of affairs today is entirely different. When the Soviet Union crumbled, the socialist model that it embodied imploded, too—or, more precisely, the Soviet Union fell because the socialist economic system proved unworkable. Now only one economic system exists: market capitalism.

Virtually everywhere, the public sector has given ground to privatization; currency has escaped state control, to be governed by independent central banks; competition has taken wing, thanks to the deregulation of markets and the opening of borders; taxation has become less progressive, so as to encourage entrepreneurs and create jobs.

The results have been breathtaking. Opening economies and promoting trade have helped reconstruct Eastern Europe after 1990 and lifted 800 million people, many of them in China, Brazil, and a now-license-free India, out of poverty. Even in Africa and the Arab Middle East, nations that have embraced capitalism have begun to escape from the terrible underdevelopment that has long plagued them.

Behind all this unprecedented growth is not only the collapse of state socialism but also a scientific revolution in economics, as yet dimly understood by the public but increasingly embraced by policymakers around the globe. The revolution began during the 1960s and has finally brought economists to a broad, well-founded consensus about what constitutes good policy. For the mass of mankind economics has become a source of hope.

From the City Journal article "Economics Does Not Lie: The Dismal Science is at Last a Science—and the World is the Beneficiary."

HT: Thanks to Wright Truesdell for the pointer.

Sunday, July 27, 2008

From 25% to 93% in 110 Days: Odds QII GDP Pos.

Current odds that second quarter real GDP will be positive: 93.5%, up from 25% in mid-April (see chart above, click to enlarge).

Exhibit A: Oil Prices, Global GDP, Net Oil Exports

The chart above shows oil prices, net oil exports (data here) and world GDP, quarterly from 2002:Q1 to 2008:QII. The data for OECD world GDP and oil prices are from Global Financial Data (subscription required). Oil prices are on the right scale in $/bbl., and world GDP and net oil exports are on the left scale, both expressed as an index equal to 100 in 2002:QI.

The graph above was inspired by the CFTC report and graph of world GDP and oil production, featured on this CD post. I added oil prices and used net oil exports (from Net Oil Exports) instead of oil production.

Bottom Line: The graph shows that world GDP, net oil exports and oil prices were all increasing at about the same rate from 2002 to early 2006. Starting in about mid-2006, the three series started to diverge as world GDP continued to increase, but net oil exports started to decline. It was at that point of departure in 2006 between global output (GDP) and the global supply of oil that oil prices started to rise significantly (see shaded area).

Although the decline of the dollar and the increase in speculative activity might have played relatively minor roles in the run-up of oil prices, the main contributing factor to high oil prices over the last two years appears to be the supply-demand imbalance that started in mid-2006. With the significant increase in world output and the accompanying increase world demand for oil and energy interacting with a flat and/or falling world supply of oil, there was only one direction for oil prices to go. Up. Nothing mysterious, nothing nefarious, and nothing to do with speculators. Simple supply and demand. Period. In other words, Occam's razor.

Cartoon of the Day

Angry College Students Fight Back

All forms of print publishing must contend with the digital transition, but college textbook publishing has a particularly nasty problem on its hands. College students may be the angriest group of captive customers to be found anywhere.

NYT: First It Was Song Downloads. Now It’s Organic Chemistry.

Ben Stein: Over All, It's Not All That Bad

But how bad is it, really? The economy isn’t at its best. Oil prices are painfully high, foreclosures are really hurtfully high, job growth in many areas is sluggish or worse, and a sector of the credit markets is extremely weak. But over all, it’s not all that bad.

There has not been one down year for the G.D.P. in this decade. There has not been one down quarter, in inflation-adjusted terms, since 2001. Of course, there are truly hard-hit areas around the country. But there are also areas that are booming, in the farming and minerals states and in any area near energy.

What is the future? We will get through all of it. “This great nation will endure as it has endured,” to quote F.D.R. We will then go on to whatever the new problems will be (probably the same as the old problems) and the media will have to find something new to complain about. This is called life.

Today's NY Times

CFTC: Oil Prices Rose Due to Supply and Demand

Charts above are from the July 2008 Interim Report on Crude Oil, from the Interagency Task Force on Commodity Markets. From the Executive Summary:

The Task Force’s preliminary assessment is that current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors. During this same period, activity on the crude oil futures market – as measured by the number of contracts outstanding, trading activity, and the number of traders – has increased significantly. While these increases broadly coincided with the run-up in crude oil prices, the Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.

The world economy has expanded at its fastest pace in decades, and that strong growth has translated into substantial increases in the demand for oil, particularly from emerging market countries. On the supply side, the production of oil has responded sluggishly, compounded by production shortfalls associated with geopolitical unrest in countries with large oil reserves. As it is very difficult to rely on substitutes for oil in the short term, very large price increases have occurred as the market balances supply and demand (see top two charts above).

If a group of market participants has systematically driven prices, detailed daily position data should show that that group’s position changes preceded price changes. The Task Force’s preliminary analysis, based on the evidence available to date, suggests that changes in futures market participation by speculators have not systematically preceded price changes. On the contrary, most speculative traders typically alter their positions following price changes, suggesting that they are responding to new information – just as one would expect in an efficiently operating market.

From p. 14 of the report: The depreciation of the dollar since 2002 has contributed to the rise of the dollar price of oil, but can explain only a portion of the overall run-up. This point is also evident in the bottom chart above, which graphs the spot price of West Texas Intermediate crude oil in several currencies. Clearly, oil prices have risen sharply regardless of the currency of denomination. Moreover, from mid-March through June 2008, the dollar was stable, whereas oil prices increased appreciably.

MP: I think the top chart above says it all. Since 2002, world GDP increased by about 30% and world oil production increased by about 12%. Demand for oil increased significantly, oil supplies were tight, and oil prices rose significantly.


Chart of the Day II: It Could Be Worse

Source: OECD

Chart of the Day: It Could Be Worse

Source: Energy Information Administration

Saturday, July 26, 2008

Cartoon of the Day

HT: Ben Cunningham

The Campaign for Gender Parity Infantilizes Women

The members of Congress and women’s groups who have pushed for science to be “Title Nined” say there is evidence that women face discrimination in certain sciences, but the quality of that evidence is disputed. Critics say there is far better research showing that on average, women’s interest in some fields isn’t the same as men’s.

Women now constitute about half of medical students, 60 percent of biology majors and 70 percent of psychology Ph.D.s. They earn the majority of doctorates in both the life sciences and the social sciences. They remain a minority in the physical sciences and engineering. Even though their annual share of doctorates in physics has tripled in recent decades, it’s less than 20%. Only 10% of physics faculty members are women, a ratio that helped prompt an investigation in 2005 by the American Institute of Physics into the possibility of bias.

Clinical psychologist Susan Pinker argues that the campaign for gender parity infantilizes women by assuming they don’t know what they want. She interviewed women who abandoned successful careers in science and engineering to work in fields like architecture, law and education — and not because they had faced discrimination in science.

Instead, they complained of being pushed so hard to be scientists and engineers that they ended up in jobs they didn’t enjoy. “The irony was that talent in a male-typical pursuit limited their choices,” Ms. Pinker says. “Once they showed aptitude for math or physical science, there was an assumption that they’d pursue it as a career even if they had other interests or aspirations. And because these women went along with the program and were perceived by parents and teachers as torch bearers, it was so much more difficult for them to come to terms with the fact that the work made them unhappy.”

Ms. Pinker says that universities and employers should do a better job helping women combine family responsibilities with careers in fields like physics. But she also points out that female physicists are a distinct minority even in Western European countries that offer day care and generous benefits to women.

“Creating equal opportunities for women does not mean that they’ll choose what men choose in equal numbers,” Ms. Pinker says. “The freedom to act on one’s preferences can create a more exaggerated gender split in some fields.”

~John Tierney in the NY Times

Home Price Maps

Below is a Trulia Map of the average list price for San Francisco homes by area; dark green area homes are $599k and below, dark brown area homes are $1.4m and above:
Trulia map of average list price for Sioux Falls SD homes; dark green area homes are $116k and below, dark brown area homes are $271k and above (brown):
Here's a Florida map: For more Trulia interactive maps by state or city, by average list price, by median sales price, go here.

HT: Cranky

Detroit: Cheaper To Buy A House Than A New Car

The good news is that home sales in the city of Detroit through June are up by a whopping +46.56% (YTD) compared to last year (5,389 homes sold in 2008 YTD vs. 3,677 last year), but the bad news is that the average price for a home sold in Detroit has fallen by 56% to only $19,448 so far this this year, compared to an average price last year of $44,346 for the January-June period! Compared to the peak of $97,850 for the average Detroit home price in 2003, prices have fallen by 80% (see chart above, values are annual except for 2008, which is YTD, data available here).

Bottom Line: The average priced house in Detroit ($19,448) is cheaper than the average price new car (

Homeownership Rate in Second Quarter 2008 Rebounds By Largest Increase in Four Years

The chart above is based on the Census Bureau's latest release on home ownership rates, and shows the following:

1. The howeownership rate fell below 68% in the last quarter of 2007 (67.8%) and first quarter of 2008 (67.8%) for the first time since early 2002, as part of a four-year downward trend since the 69.2% peak level of homeownership in 2004.

2. The .30% increase in homeownship for the second quarter of 2008 to 68.1% was the first quarterly increase in almost two years (since third quarter 2006), and was the largest quarterly increase in four years (since second quarter 2004).

Bottom Line: If this rebound in homeownership rates continues to reverse the four-year downward trend, it could provide further evidence that we are finally experiencing a bottom to the housing market problems, as suggested by Larry Kudlow (The Media Are Missing the Housing Bottom) and Brian Wesbury ("Pace of existing home sales is very close to a bottom," and "Pace of new home sales has either already hit bottom or is getting very close to the bottom.")

Friday, July 25, 2008

Big Mac Index

The Big Mac Index is The Economist's light-hearted guide to exchange rates. The index is based on the theory of purchasing-power parity, which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just one item, a Big Mac hamburger. The exchange rate that leaves a Big Mac costing the same everywhere is our fair-value yardstick.

Many of the currencies in the Fed's major-currency index, including the euro, the British pound, Swiss franc and Canadian dollar, are overvalued and trading higher than last year's burger benchmark. Only the Japanese yen could be considered a snip. The dollar still buys a lot of burger in the rest of Asia too. China's currency is among the most undervalued, but a little bit less so than a year ago.

Gas Prices Fall Below $3.50 Per Gallon in Kansas

Kansas Gas Prices:
Lowest gas prices currently being reported in:

South Dakota: $3.55

Michigan: $3.57

Minnesota: $3.57

Ohio: $3.49

Kansas: $3.47

MP: These websites show the lowest gas prices reported by gas customers in various states, as of 12:48 EDT today (Friday), and will change as prices change and as customers report new prices.

Want A World Full of Reckless Idiots? A Culture of Bailouts Will Work Pretty Well

The Federal Reserve and government regulators are largely propping up the lifestyles not of the middle class in general, but of various individuals who made choices that turned out badly and prefer not to live with the consequences. These include people who bought houses they now can't afford, executives at banks such as Bear Stearns and people who invested in reckless institutions like Fannie Mae.

Only a small number of these people are blameworthy.

Most simply made reasonable choices that didn't turn out very well. But people make reasonable choices that don't turn out very well all the time, and we don't bail them out. What about the people who bought SUVs just before the prices of those vehicles fell? Should they get bailouts? Should the government reimburse everyone who made the mistake of "upgrading" to Microsoft's Windows Vista?

When you shield people from great risks, you deny them the opportunity to earn great rewards. The culture of bailouts raises the price of risky assets, which makes it harder to get rich by buying them. We all have different risk tolerances, so it's a good thing that the market offers a great range of options.

When you make the riskiest assets less risky (and simultaneously less lucrative), you reduce that range of options. At the same time, you dilute the incentive for shareholder oversight, which leads to lower productivity, lower incomes and lower wages. In the long run, that's no favor to anybody.

~Steven Landsburg in
today's LA Times

MP: If you make the world safe for idiots (and reckless borrowers, investors and executives), you'll create a world full of idiots (reckless borrowers, investors and executives).

The Global Warming Sleight of Hand

From greenhouse scientist Dr. David Evans, consultant to the Australian Greenhouse Office from 1999 to 2005, about global warming:

We scientists had political support, the ear of government, big budgets, and we felt fairly important and useful (well, I did anyway). It was great. We were working to save the planet.
But since 1999 new evidence has seriously weakened the case that carbon emissions are the main cause of global warming, and by 2007 the evidence was pretty conclusive that carbon played only a minor role and was not the main cause of the recent global warming. As Lord Keynes famously said, "When the facts change, I change my mind. What do you do, sir?"

1. The greenhouse signature is missing. We have been looking and measuring for years, and cannot find it.

2. There is no evidence to support the idea that carbon emissions cause significant global warming. None. There is plenty of evidence that global warming has occurred, and theory suggests that carbon emissions should raise temperatures (though by how much is hotly disputed), but there are no observations by anyone that implicate carbon emissions as a significant cause of the recent global warming.

3. The satellites that measure the world's temperature all say that the warming trend ended in 2001, and that the temperature has dropped about 0.6C in the past year (to the temperature of 1980).

4. The new ice cores show that in the past six global warmings over the past half a million years, the temperature rises occurred on average 800 years before the accompanying rise in atmospheric carbon. Which says something important about which was cause and which was effect.

None of these points are controversial. The alarmist scientists agree with them, though they would dispute their relevance.

So far that debate has just consisted of a simple sleight of hand: show evidence of global warming, and while the audience is stunned at the implications, simply assert that it is due to carbon emissions.

In the minds of the audience, the evidence that global warming has occurred becomes conflated with the alleged cause, and the audience hasn't noticed that the cause was merely asserted, not proved.

HT: Ben Cunningham

MP: Dr. Evans joins this long list of skeptical scientists who are questioning the global warming hysteria.

The Economy as A Beehive, NOT A House of Cards

A natural system manages and heals itself. The economic system is no exception. The economy is not a "house of cards," susceptible to collapse as soon as a few cards are dislodged, it's more like a beehive. The future of the hive does not depend on full employment for all the worker bees. In fact, an accident can put many bees out of action without compromising the hive as a whole.

At the micro level, the failure of an institution is often a disaster to those with a personal stake. But from an overall perspective, when one institution becomes insolvent, another can be relied on to pick up its functions.

It's widely assumed that a large enough wave of bankruptcies will bring the economy down. Little or no credit is given to the ability of the economic system to heal itself and find its way back to vitality.

What's excessive now is fear, not debt: Fears of insolvency and private-sector indebtedness are misplaced and harmful. They place obstacles in the way of ill-used capital that seeks to move toward safer and more profitable employment. They plunge the stock market into turbulence. They push government into hasty actions that intrude more aggressively into private choices and decisions. They undercut the market-price system, without which the economy cannot allocate resources productively. Last but not least, these fears trigger the proverbial false alarm in a crowded theater, sending everyone stampeding for the exits.

Editorial in today's WSJ by David Ranson

MP: We operate under a "profit AND LOSS" system, and as painful as they are for some people, business losses and bankruptcies are an important part of the economy - they reallocate resources that are being used unwisely towards productive uses that are more highly valued by the economy at the macro level. When there are business failures, resources (property, plant, equipment, capital, human capital, labor, real estate, land etc.) don't ever disappear, they just get reallocated.

The New Big Three: Entitlements

According to the Heritage Foundation, Entitlements are the greatest domestic challenge the nation faces.

These middle class retirement programs, Social Security, Medicaid and Medicare, cost more than $1 trillion annually (about the same as the entire economic output of Canada, the 13th largest ecoomy in the world, see chart above), and will cause federal spending to jump by half, from 20% of the economy to 35% by 2035. This tsunami of spending is a major threat to limited government because it runs on auto-pilot with automatic increases locked in by each program’s governing laws. While other programs are constrained through annual budgets, entitlements get first call on resources. Other goals such as defense or national security must compete for an increasingly smaller share of what’s left.

This "locked in" spending is steadily undermining the economic future of younger generations who face a debt burden of $175,000 per person. The moral and ethical challenge from the entitlement tsunami is undermining our democratic system as more Americans become dependent on the government and other priorities are automatically preempted.

Thursday, July 24, 2008

Howard Stern on the XM-Siruis Merger

Satellite radio talk show star cites 'gangsterism,' 'communism' for holding up the XM-Sirius merger.

I don’t care if God becomes a Democrat.’ I said, ‘I backed Hillary Clinton, I backed Al Gore, I backed John Kerry. I am done with them.’”


America's 12 Cheapest Cars, Where is the Big 3?

From Forbes, America's 12 cheapest cars (#1 is the Kia Rio, pictured above, base price $10,890). Note that there is only one Big Three vehicles among the 12 cheapest cars, the Chevy Aveo, which is actually built in S. Korea by GM Daewoo.

As consumers switch to cheaper, smaller, more fuel-efficient vehicles, it seems like the Big Three is "missing the boat".... again.... See cartoon below:
HT: Juandos and Spencer.

Retail Health Care Clinic Updates

1. One of the nation's leading retail health clinics, Take Care Health Systems, recently informed the American Academy of Family Physicians that it would not renew its commitment to the Academy's list of Desired Attributes of Retail Health Clinics. The action fueled AAFP's already heightened concerns about retail health clinics expanding their scope of practice beyond the treatment of simple acute health concerns. Link.

Translation: The family doc cartel is worried about increased competition.

2. Boston Globe -- Some of the state's largest health insurers say they will cover visits to the retail health clinics expected to open in CVS and Walgreens drugstores later this year, making the clinics attractive options for the treatment of everyday ailments.

The endorsement by insurers is likely to turn retail clinics into major healthcare providers in the state because, for many patients, they will be less expensive than hospital emergency rooms, with less waiting time. Under the contracts signed and being negotiated, retail clinic copayments range from $10 to $25, compared with the $50 to $150 copays most insurers assess for emergency room care.

The state's powerful physicians' group, the Massachusetts Medical Society, opposed the clinics when they were proposed by CVS last year, saying they raised concerns about safety, oversight of caregivers, and spread of germs.

Translation: The MMS cartel was actually most concerned about competition.

Wednesday, July 23, 2008

Speculators Are Doing Our Children A Service

It's very hard to guess what the price of oil would be in the absence of speculation, but it's also impossible to imagine what a world without speculation would look like. I certainly agree that we have no good explanation of these prices. Certainly as an explanation by itself, "speculation" makes little sense. Speculators drive up prices only when they believe that future prices will be even higher. Why they'd believe that, I'm not sure.

I do think we should pause to note that if that's what's happening, then the speculators are doing our children a service by conserving oil for a time when it will be very scarce. In other words (if in fact that's what's happening), there are two reasons to applaud higher oil prices -- conservation and environmental issues. But speculators are unlikely to care about the latter. So no matter how high speculators push the price, they're unlikely to push it far enough.

~Steven Landsburg in yesterday's LA Times

Shady Accounting: It's Not Just the Private Sector

In 1938, when Fannie Mae got started, it was originally a government agency endowed with the authority to buy mortgages, in the hope that this would expand the supply of credit to homeowners. It wasn’t until 1968 that Fannie was privatized. (Freddie Mac was created two years later, and was private from the start.) The main reason for the change was surprisingly mundane: accounting. At the time, Lyndon Johnson was concerned about the effect of the Vietnam War on the federal budget. Making Fannie Mae private moved its liabilities off the government’s books, even if, as the recent crisis made clear, the U.S. was still responsible for those debts. It was a bit like what Enron did thirty years later, when it used “special-purpose entities” to move liabilities off its balance sheet.

The New Yorker, via Greg Mankiw.

For Some Products, Prices Have Been Falling

Rising food and energy prices have received a lot of media attention lately, along with concerns about the threat of inflation. The chart above (using BLS data via Economagic) shows a sample of products that have experienced significant deflation in the last ten years (as well as deflation in the last few years in almost all cases), double-digit percentage decreases in all cases except for new cars (-3.4%).

Then considering that average hourly earnings have increased by almolst 40% over the last ten years, the real prices of those products have fallen by an even greater amount, a HUGE amount. In other words, there are many, many products like computers, cameras, new cars, clothing, TVs, appliances, electronics, software, etc. that are significantly cheaper today than ten years ago, especially after adjusting for increases in earnings.

One reason we don't pay much attention to these price decreases is probably that they happen so gradually and consistently over time, so we either a) don't notice the savings, or b) take it for granted and don't appreciate the incredible savings over time in many of the products that we all buy.

Or maybe it's also because we buy computers, TVs, appliances, new cars INFREQUENTLY (every 5 year or more in some cases), and don't notice or appreciate the price decreases the same way we notice price changes for food and fuel that we purchase FREQUENTLY?

But there does seem to be a certain degree of misperception among the general public and media that ALL prices are going up, which is clearly not the case.

Fierce Competition Is Usually The Best Regulator

Yes, the Sirius-XM merger would create a “monopoly” in satellite radio, but a merged Sirius-XM will still face fierce competition. AM and FM radio, podcasts, mp3 players, and cell phone programming all compete against satellite radio for listeners. In the future, mobile Internet radio with programmable stations could easily threaten satellite radio, which is not programmable.

“Regulation” by competition, not by the FCC and DoJ, is what is needed.

Competitive Enterprise Institute, via Cafe Hayek.

MP: Remember that "competition breeds competence."

Private Taxis, Invisible Hand Coming to Cuba

From David Theroux at the Independent Institute:

Is there now a light ahead in Cuba after decades of repressive communist rule? With his brother Fidel now on the sidelines, Cuban President Raúl Castro has recently lifted a nine-year-old ban on private taxis, “potentially legalizing thousands of unauthorized cabbies who cruise its cities in classic American cars (see photo above).”

As the AP reports, Fidel Castro, who imposed the previous ban, had opposed private cabbies as “enriching themselves at the expense of egalitarian goals.” I gather that for Fidel, only a massive, crushing, incompetent, and inherently corrupt State transportation monopoly/bureaucracy would do.

MP: The gradual transition from the clumsy, oppressive visible foot of the government in Cuba to the invisible hand of the market........