Saturday, February 24, 2007

Quote of the Day

Economists have long been saying that there is no free lunch but politicians get elected by promising free lunches. Controlling prices creates the illusion of free lunches. ¨

Thomas Sowell, in his recent column
Priceless Politics II.

Friday, February 23, 2007

Clinton: Windfall Profits on the Lecture Circuit

From the Washington Post, Bill Clinton has made close to $40 million in speaking fees since leaving office. On one particularly good day in Canada, Clinton made $475,000 for two speeches, more than double his annual salary as president.

See a list of his speeches and fees here, minimum Clinton fee is $100,000, maximum is $400,000 and average is probably about $150,000 to $175,000.

His income in 2005 was about $8 million from speeches. And you thought CEOs were overpaid!

Thursday, February 22, 2007

Problems with the Govt. Savings Rate

A basic problem with the often quoted personal saving rate is that it mixes together current workers with retirees who should be expected to spend much more than they earn. One academic economist has calculated that excluding retirees from the figures would add about 4 percentage points to the saving rate. Moreover, this error should grow over time as the US ages and healthcare costs (a major purchase for retirees) continue to grow.

Another problem with the saving rate is that when consumers buy durables - think cars, furniture and appliances - the spending is counted right away even though payments will be made over time. Amortizing these purchases would push up the saving rate another 2 percentage points.

From economists
Brian Wesbury and Robert Stein at First Trust Portfolios.

People Trade, Not Countries

It might be a convenient expression to say that the U.S. trades with Japan, but is it literally true? Is it the U.S. Congress and President George Bush who trade with the National Diet of Japan, the Japanese legislature and Prime Minister Shinzo Abe? Or, is it U.S. and Japanese private parties, as individuals and corporations, who trade with one another? When I purchased my Lexus, did I deal with the U.S. Congress, the Japanese Diet, George Bush and Shinzo Abe, or did I deal with Toyota and its intermediaries?

From George Mason economist Walter Williams'
most recent column.

MP: Walter Williams makes an obvious, but often overlooked point, that individual American consumers and individual U.S. companies buy imported foreign products, and private U.S. firms sell and export products and services to private foreign consumers and private foreign companies. When we hear all of the media hysteria about the "U.S. trade deficit" with the rest of the world, or with individual countries like China or Japan, we lose sight of the fact that it was voluntary, individual decisions on a daily basis in the marketplace by U.S. consumers and firms that led to the trade deficit.

Look at the tags and labels on your clothing, and you'll find that you voluntarily purchased clothing produced by workers and private firms in China, Mexico, India, Brazil or Bangladesh, etc., which contributed to the "trade deficit" with those countries, but obviously made you better off. Or if you took a vacation to Canada, Mexico or Europe, that contributed to the "trade deficit" with those countries, but made you better off.

Bottom Lines: 1) People trade, not countries and 2) Restrictions on trade are restrictions on people.

Corporate Social Responsibility: Indian IT Industry

Nobel economist Amartya Sen made a JFK-esque speech asking the IT industry what it had done for India. His point was not that the IT industry isn’t doing anything for the economy at large, but that it should do ‘much more’. Indeed, Sen argues, given that it has benefited from the country’s contributions to its development, the industry should have a ’sense of obligation’ to do much more.

The IT industry’s primary obligation is to its shareholders and customers. It will be doing its bit for the country as long as it does this with efficiency and excellence. Of course, corporations, like citizens may want to do good for the society they are a part of. But they have no moral or legal obligation to do so. In a country where a communal socialist government is not only unwilling to unshackle restrictive labour laws that hurt both employers and employees but is also attempting to impose community-based quotas on private companies, the use of the word obligation must be treated with extraordinary care.

From
The India Economy Blog.

Let Sirius and XM Merge

John Tamny, senior fellow at the Manhattan Institute explains why market competition is often a better and more effective regulator of businesses than government: "Dominant companies in the U.S. like Standard Oil and GM have regularly been knocked from their perches by seemingly insignificant competitors. Former anti-trust target IBM's failure to see the potential of the personal computer led to Microsoft's ascendance with Windows, and much like IBM, Microsoft (targeted by anti-trust forces in the late '90s) failed to see the transformative nature of the Internet in time to stop Yahoo and Google among others."

Read more of the article "No Ear Ache: Let Sirius and XM Merge"
here.

20th Century's Most Influential Libertarian

Milton Friedman’s relentless belief in the power of a free people and the justice of a free society had vivid real-world effects. Thanks to Friedman, we are no longer forced into the armed services. Thanks to Friedman’s monetary ideas, the cash in our pockets is worth something close to what it was a year ago. Thanks to Friedman, many more people appreciate the arguments against government policies that are no longer considered as untouchable and unquestionably right as they were before he came along.

Milton Friedman was never a politician. He could never make things happen. He could only attempt to persuade his fellow citizens and their leaders, making himself an exemplar of the virtues of the truly liberal intellectual. Because of him, the world is a freer and better place.

From "The Life and Times of Milton Friedman: Remembering the 20th century's most influential libertarian," in the
March edition of Reason Magazine.

Wednesday, February 21, 2007

Crossing the Border for a Super-Cheap Dentist

Want a cheap dentist? Go to Mexico, read about it here in Slate.

Indian Newspapers Are Booming

Newspaper circulation in the U.S. continues to decline, but in India daily newspapers are booming. Read about it here in The Economist's article "Indian newspapers: Let 1,000 titles bloom."

"India has some 300 big newspapers, with a combined circulation of 157m last year—a rise of 12.9% on 2005."

Quote of the Day

History shows us that freedom works. During 1,000 years of absolute monarchy, feudalism, and slavery, mankind’s average income increased by about 50%. In the 180 years since 1820, mankind’s average income has increased by almost 1,000%. During the last 100 years, we have created more wealth, reduced poverty more, and increased life expectancy more than in the previous 100,000 years. And that happened because of the entrepreneurs, thinkers, creators, innovator who had new ideas, who traveled geographical distances and, more important, mental distances to create new things and who saw to it that old traditions, which would have stopped new creations, would not stop them for long.

Entrepreneurs are the heroes of our world. Despite the risks, the hard work, the hostility from society, the envy from neighbors, and state regulations, they keep on creating, they keep on producing and trading. Without them, nothing would be there.


~Johan Norberg, "Entrepreneurs Are the Heroes of the World," from
Cato's Letter.

Tuesday, February 20, 2007

Forbes Magazine's Best Cities for Jobs

Here's the ranking of the largest 100 metro areas in the U.S. for "best cities for jobs," from Forbes Magazine in its annual survey, and here is the full article. Forbes uses 5 variables: Unemployment rate, job growth, income growth, median household income, and cost of living. It measured the largest 100 metropolitan areas, as defined by the U.S. Census Bureau, and obtained the data from Moody's economy.com.

Top 5 cities for jobs are:
1. Raleigh
2. Phoenix
3. Jacksonville
4. Orlando
5. Wash DC

At the bottom, New Orleans ranks #99 and Detroit ranks #100.

Thanks to Kristin Reardon.

Politics is Priceless

The great allure of government programs in general for many people is that these programs allow decisions to be made without having to worry about the constraints of prices, which confront people at every turn in a free market.

They see prices as just obstacles or nuisances, instead of seeing them as messages conveying underlying realities that are there, whether or not prices are allowed to function. What prices are telling San Francisco is that municipal golf courses cost more than they are worth -- not in my opinion, but in the actions of people who are spending their own hard-earned money. But what politician wants to hear that? Politics is priceless.

~Thomas Sowell,
writing about San Francisco's 6 municipal golf courses, which are all losing money, and the hand-wringing over what to do about it.

Monday, February 19, 2007

Cash of the Future? Your Cell Phone

Mobile phones are becoming an increasingly popular way to make all sorts of payments. In America fans of the Atlanta Hawks have been testing specially adapted Nokia handsets linked to their Visa cards to enter their local stadium and to buy refreshments. Elsewhere schemes are more advanced. You can already pass the day in Austria without carrying cash, credit or debit cards by paying for everything, including consumer goods, with a mobile phone. Worldwide payments using mobile phones will climb from just $3.2 billion in 2003 to more than $37 billion by 2008.

Mobiles are used to buy lots of things in Asia. Earlier this month Visa and SK Telecom, South Korea's leading mobile company, announced the commercial launch of a phone-payments system aimed initially at 30,000 subscribers. In Japan hundreds of thousands of transactions, from buying railway tickets to picking up groceries, already take place every day with customers passing their handsets across a device like that pictured above. Payments are confirmed with a sound like the bell of an old cash register.

From the current issue of The Economist, "A Cash Call: Mobile phones are quickly emerging as ways to pay with electronic cash."

How To Fire An Incompetent Teacher? Not Easy

The series of steps a principal must take to dismiss a public school teach is Byzantine. "It's almost impossible," Klein complains.

The regulations are so onerous that principals rarely even try to fire a teacher. Most just put the bad ones in pretend-work jobs, or sucker another school into taking them. (They call that the "dance of the lemons.") The city payrolls include hundreds of teachers who have been deemed incompetent, violent, or guilty of sexual misconduct. Since the schools are afraid to let them teach, they put them in so-called "rubber rooms" instead. There they read magazines, play cards, and chat, at a cost to New York taxpayers of $20 million a year.

Click on the link here to see a file that shows the dozens and dozens of steps involved to remove an incompetent unionized public shool teacher in NYC. You'll see why principals rarely even try to fire a bad teacher.

Is It Any Wonder the Big 3 Are in Trouble?

1. The number of vehicles per workers are as follows:
Toyota 28 vehicles/worker
GM 25
Ford 22
VW 15
Chrysler 12.5

2. Toyota produces about the same number of cars as GM with 15% fewer workers.

3. Toyota produces roughly twice as many cars per worker as Ford or Chrysler.

Sunday, February 18, 2007

The Sugar Swindle

Americans pay about double the world market price for sugar, a hidden tax that hurts everyone with a sweet tooth. Many beverage and food makers catering to that sweet tooth have long used corn syrup instead of sugar because it's cheaper, but the price of corn syrup is beginning to rise. So now would be a good time for the U.S. government to revisit its destructive farm policies.

This is a classic case of a narrow, vocal lobby — sugar growers — benefiting at the expense of the larger economy. The latest victim of high-priced sweeteners is Atlanta-based Coca-Cola Enterprises Inc., the largest bottler of Coca-Cola products, which announced last week that it would cut 3,500 jobs because of a $1.1-billion loss in 2006. Other soft-drink makers, confectioners and food companies also pay a steep price for the complex system of price supports and import quotas aimed at protecting U.S. sugar growers by insulating them from global market realities.

From today's
LA Times, thanks to Club for Growth.

MP: The current world price of sugar is about 11 cents per pound, and the U.S. price is about 21 cents per pound, because of protectionist U.S. trade policy that protects inefficient domestic sugar beet farmers from more efficient sugar cane farmers in other countries.

Steve Jobs Blasts Teacher Unions

Apple Inc. CEO Steve Jobs lambasted teacher unions today, claiming no amount of technology in the classroom would improve public schools until principals could fire bad teachers.

From the
Houston Chronicle, via Club for Growth.

Realtor Shakeout

The long-awaited shakeout among real-estate agents is finally happening -- much to the relief of those who are sticking with the business and prefer a bit less competition.

When David Lereah, chief economist of the National Association of Realtors, addressed the group's convention in New Orleans in November, he got one of the biggest bursts of applause by predicting there would be fewer Realtors around in a year. Mr. Lereah said in an interview that he expects membership in the trade group to decrease by about 6% to 8% from the record of nearly 1.4 million reached in 2006.


The culling of agent ranks is a reaction to the downturn in housing that started around mid-2005. Sales of previously occupied homes last year declined 8% to 5.7 million, even as the number of agents continued to increase for the year as a whole.

The industry probably has 20-25% more agents than it needs, says Ronald Peltier, CEO of HomeServices of America Inc., a Minneapolis chain that owns brokerages in 19 states.

From the
WSJ article "Amid Slump, Real-Estate AgentsHang Up Their Blazers."