Tuesday, April 03, 2007

A Million Classical Musicians Bloom in China


From the NY Times article "Classical Music Looks Toward China With Hope:"

Three decades ago, the Communist Party was trying to wipe out Western classical music, but now deems it an essential component of the “advanced culture” it vows to create to make the country a true great power.

With the same energy, drive and sheer population weight that has made it an economic power, China has become a considerable force in Western classical music. Conservatories are bulging. Provincial cities demand orchestras and concert halls. China now has 30 million piano students and 10 million violin students.

The hardware side has also exploded. As of 2003, 87 factories made Western musical instruments. By last year the number had grown to 142, producing 370,000 pianos, one million violins and six million guitars. China dominates world production of all three.

MP: NY Times columnist Thomas Friedman proposed "The Golden Arches Theory of Conflict Prevention," observing that no two countries with a McDonald's franchise had ever gone to war with one another. Perhaps a variation of this is the "Classical Music Theory of Conflict Prevention" - no two countries that both embrace classical music will ever go to war with each other.

(HT to Bob Houbeck.)

Income Inequality by Position, MLB

I recently wrote about the increasing income inequality for MLB here, showing an increasing share of total income over time for the top 1%, 5% and 10%. Further analysis shows increasing income equality by position from 1988 to 2006, it appears that most of the income gains over time have gone disproportionately to first basemen and third basemen. Notice for example that:

1. In 1998, the average first baseman made 1.38 times as much as the average second baseman, and by 2006 that ratio had increased to 2.55 times.

2. Between 1998 and 2006, the average salary for first basemen increased 8.61 times, compared to an increase in average salary of only 4.66 times for second basemen.

3. First basemen in 1988 made 48% more than catchers (lowest paid position), and in 2006 first basemen made 155% more than the lowest paid position (second basemen).

4. The overall salary range by position increased significantly from 1998 ($362,000 to $537,000) to 2006 ($1,816,000 to $4,632,000).

Speculation: To the extent that income inequality has increased for both the general population and in MLB (and other pro sports) over time, it is possibly a natural phenomenon resulting from an increasingly competitive, globalized environment? Perhaps the greater the intensity of the competitive process, the greater the degrees and level of competence, resulting in a natural increase in income inequality?

For example, wouldn't we expect income inequality to be greater in the 21st century than in the 18th century?

Coming Soon: WiFi In The Sky

From today's WSJ: U.S. airlines will start offering in-flight Internet connections, instant messaging and wireless email within 12 months, turning the cabin into a WiFi "hotspot." Carriers are expected to start making announcements around the end of the summer, with service beginning early next year.

My only question is, why didn't this happen years ago?

USA Today: Plastic Bag Ban is Full of Holes

San Francisco is the first city to ban plastic shopping bags - the city's Board of Supervisors approved legislation to outlaw plastic checkout bags at large supermarkets in about six months and large chain pharmacies in about a year. The stores are encouraged to use bags made of recyclable paper. Read more here.

From USA Today, comes an editorial in today's edition "Plastic-bag ban full of holes: San Francisco’s scheme sounds good, until you hear the costs." For example:

1. Plastic bags cost a penny each, paper costs about a nickel, and compostable bags can run as high as 10 cents each.

2. Compared to plastic bags, paper bags require four times as much energy to produce, and 85 times as much energy to recycle paper bags.

3. Paper bags generate 70% more air pollutants and 50 times more water pollutants than plastic bags.

4. Paper takes up nine times as much space in landfills and doesn't break down at a substantially faster rate than plastic does.

Spinach Farmers: Harvesting Cash

"Spinach might not seem to have anything to do with military operations. But there it is, in an emergency supplemental bill to fund the wars in Iraq and Afghanistan: $25 million for California spinach growers.

The war bill illustrates the axiom that guides the nation's agricultural policy: namely, that any principles of good government, common sense and fiscal sanity must always be abandoned in the cause of shoveling federal dollars at American farmers. Its $4 billion for disaster relief, together with millions for peanut storage, sugar-beet production and the Milk Income Loss Contract Program, isn't unusual, except for the fact that it was used to buy votes for a pullout from Iraq. For House Speaker Nancy Pelosi, apparently, all geopolitics is local, and some of her members are happy to lose a war if they can win a subsidy."


From the commentary "Fighting for Subsidies" by Rich Lowry.

The Angry Grammar Nazi

An angry caller to the SF Chronicle is really upset about the March 19 headline "Four-year anniversary draws protests," because it really should be "4th Anniversary." Check out the actual angry podcast call to Phil Bronstein, the editor of the SF Chronicle.

For another angry call from the same irate caller about the use of the phrase "pilotless drone," click here.

Monday, April 02, 2007

Poor Countries Overregulate Business

One of the main reasons that poor countries are poor and remain poor is because of excessive regulation of business (see graph above - high income countries have significantly less regulation than poor countries).

From the study "Doing Business in 2004: Understanding Regulation" by the World Bank's International Finance Corporation:

Number of days to start a new business:
Australia: 2 days
Venezuela: 141 days
Haiti: 203 days
Suriname: 694 days

Time to enforce a simple commercial contract:
Netherlands: 39 days
New Zealand: 109 days
Singapore: 120 days
India: 1420 days
Guatemala: 1459 days

Cost of enforcement for a simple commercial contract:
Austria, Canada and UK: Less than 1% of the disputed amount
Sweden: 5.9% of the disputed amount
U.S.: 7.7% of the disputed amount
Indonesia: 126.5% of the disputed amount
Congo: 157% of the disputed amount

Time to close a business and go through bankruptcy:
Ireland: 4 months
Japan: 5 months
Brazil: 4 years
India: 10 years

Conclusion: The optimal amount of regulation is not none, but is significantly less than what is currently found in most countries, especially poor ones.

Carpe Diem Moves Up in Rankings: 6 Months Old

Due to a huge spike in daily traffic towards the end of March (see chart above), Carpe Diem moved way up in the monthly "Traffic Rankings for Major Business and Economics Websites," which just came out today from Gongol.com based on March web traffic. Carpe Diem ranked #22 for "average daily pageviews" and #17 for "average daily visits. March also marked the 6th full month for Carpe Diem - the first posting was on September 20, 2006!

Thanks for your interest in Carpe Diem, and please let me know if you have any suggestions - feel free to send me your ideas for interesting links, stories, news, articles, research, graphs, etc.

Quote of the Day: How To Grow Out of Poverty

“Poor people grow out of poverty when their governments create an environment in which educated workers and capitalists have the physical and legal infrastructure that makes it easy to start businesses, raise capital, and become entrepreneurs, and when they subject their people to at least some competition from beyond – because companies and countries with competitors always innovate more, better and faster.”

~Thomas Friedman, "The World is Flat"

Predatory Lending, What About Banks and VISA?

Annual percentage rate (APR) on a 2-week payday loan = 390%.

APR on a VISA or Mastercard credit card with late fees = 700%.

APR cost of a bounced check at a commercial bank = 1,300%.

Congress and many state legislatures are now promising a crackdown on the "payday" loan industry for "unscrupulous" and "predatory" lending. But if payday lending is such a consumer rip off, no one has explained why these stores have become so popular. There are some 25,000 payday stores across America, and in many small towns the payday loan store is now as commonplace as the local post office.

This looks like another illustration of how to hurt working Americans in the name of helping them.

From today's WSJ editorial "Mayday for Payday Loans."

Sunday, April 01, 2007

Maybe This Is Why Americans Are So Fat?

And just how fat are Americans compared to people in other countries? Check out this graph below (click to enlarge):

Globalization of MLB

"Consider the Seattle Mariners. Their Opening Day lineup Monday will feature seven foreign-born players and two Americans -- Richie Sexson and Raul Ibanez.

Consider the New York Yankees, a team that can presumably afford the best talent on the planet. That team has Hideki Matsui and Kei Igawa (from Japan), Chien-Ming Wang (Taiwan), Robinson Cano (Dominican Republic), Bobby Abreu (Venezuela), Mariano Rivera (Panama) and Jorge Posada (Puerto Rico). Those stars complement their American idols Derek Jeter, Johnny Damon and Alex Rodriguez."

From the article "The Changing Face of Baseball" in today's Mpls-St. Paul Star Tribune.

Q: Wouldn't the anti-globalization protectionists like Lou Dobbs argue that foreign baseball players are "taking away jobs from Americans?"

A Final End to Blue-Collar Aristocracy?

The NY Times has an article today about 81,000 of the highest-paid blue-collar workers in the world who took buyouts from GM, Ford and Chrysler, in the largest exodus of workers from a single American industry in decades.

Read "The End of the Line as They Know It" here.

Saturday, March 31, 2007

Unemployment Rate Inequality

Income inequality gets a lot of attention these days, see a recent NY Times article here.

What doesn't get much attention is "unemployment rate inequality," by educational attainment, which is HUGE (see graph above). There is a persistent 5.24% gap between the jobless rate for those with less than a high school degree (average = 7.65%) and those with a college degree or higher (average = 2.41%).

The $10,000 Cowboy Boot: Lucchese Full Alligator


Lucchese Classics, hand-made American alligator belly boots (both top and bottom), made in the USA with farm raised American alligator. Price: $9,499.99, available here.

Let's Stop China's Foreign Aid to U.S. Consumers

News Report: "The US government is planning to announce a new tariff policy targeting state-subsidized goods in non-market economies, adding that the move is expected to lead to new duties on a wide range of Chinese exports. The report said the test case for the new policy was brought by US paper company Newpage before the Commerce Department.

U.S. industries from steel to consumer goods are now expected to bring forward similar action against imported goods benefiting from state support such as government grants, bailouts and low-interest loans."

Translation: The Chinese government, using tax dollars supplied by Chinese citizens, has been subsidizing American consumers and companies by giving government grants and low-interest loans to Chinese manufacturers, which allow them to sell their exports to Americans at low prices. Although these low prices raise the standard of living of many American consumers and businesses, U.S. businesses competing against Chinese producers would like Americans to pay higher prices for Chinese goods, so that they can compete more effectively.

In other words, we should use the political process to end the practice of China subsidizing American consumers and businesses, and force them to charge us higher prices. We should stop China's generous "foreign aid" to American consumers and businesses.

Question: What if Chinese producers received such generous grants and subsidies from the Chinese government that they were able to ship products here for free? Why should we object?

Friday, March 30, 2007

Economic Translations

News Headline: "US to impose penalty tariffs on China."

Quote: "The United States announced in an unprecedented decision Friday to impose penalty tariffs on China to offset government subsidies, as it grapples with a massive trade deficit with the world's most populous nation."

Headline translation: "US to impose penalty tariffs on U.S. consumers and companies buying products from China."

Quote translation: "The Unites States announced on Friday that it would impose penalty tariffs on American consumers and businesses buying products produced in China."

Communism vs. Slavery, Slavery Wins

In 1842, Cuba's slaves had daily rations of:
8 ounces of meat
4 ounces of rice
16 ounces of starch
4 ounces of beans.

By contrast, when Castro started rationing food in 1962, Cubans got:
2 ounces of meat
3 ounces of rice
6.5 ounces of starch
1 ounce of beans

(Note: Most of these ration amounts have continued, see Table 1 in this document.)

Conclusion: Living under a communism can be worse than slavery.

Read more here in today's IBD.

German Unemployment Hits Six-year Low

German unemployment reached a six-year low in March, as the job picture in Europe's leading economy continued to improve, see this news story and this other news story.

Notice in the graph above that:

1. The U.S. economy, even during its worst years for unemployment (2002 and 2003 during the "jobless recovery" following the 2001 recession) does better than the German economy during its best years.

2. There has been a persistent gap, averaging 3.3% over the last six years, between U.S. and German unemployment rates.

The Great Ethanol Swindle


1. While a boon to Midwestern corn farmers and big ethanol producers like Archer Daniels Midland (see chart above: ADM vs. SP500), ethanol has been bad news for the driving public. Ethanol costs more than gasoline, so adding it to gasoline increases fuel prices at the pump.

2. There is a 51 cent per gallon tax credit to ethanol producers. Other incentives include payments to corn farmers and subsidies for small ethanol producers. These add up to $5.1 billion to $6.8 billion per year—roughly $1.00 per gallon of ethanol. ("Ethanol is made by mixing corn with tax dollars.")

3. Ethanol lowers fuel econ­omy because a gallon of ethanol has only two-thirds of the energy content of a gallon of gasoline.

4. Ethanol can’t be sent in an energy-efficient way through pipelines like gasoline can, because it would be contaminated by moisture. Ethanol must be shipped instead by trucks, barges and railroads, which uses lots of fossil fuels. So the more ethanol we move, the more fossil fuel we use.

5. Ethanol use at current levels has also led to sky­rocketing corn prices as the available supply is split between food and fuel uses. This has led to higher prices for corn products and things such as corn-fed meat (see chart above).

6. The current ethanol mandate will supplant only 1.1% of petroleum imports by 2012, without taking into account the petroleum inputs in ethanol production and use. Once these inputs are taken into account, that figure falls by half to about 0.5%.

7. Eliminating tariffs and regula­tory barriers to lower-cost sugar ethanol imports from Brazil and other produers would expand access to global sources, thereby lowering prices. Predictably, such proposals have provoked strong opposition from the domestic corn lobby.

Despite all of these problems with ethanol, what is the political solution? More ethanol.

From the Heritage Foundation's "The Ethanol Mandate Should Not Be Expanded."

Taxi Controversy in the Twin Cities

Minneapolis-St. Paul is home to the nation's largest Somali community, and more than 600 airport taxi drivers in the cities are Somali, most of them Muslim. About 100 passengers each month are denied transportation because the Somali taxi drivers refuse to haul passengers carrying liquor. Some drivers have also refused to carry blind passengers with guide dogs, on grounds that the Koran says dog saliva is unclean. And some Muslim store cashiers in the Twin Cities have refused to scan pork products, alleging this also violates their faith.

Read more about the controversy in Linda Chavez's article "Intolerance in the Twin Cities."

Thursday, March 29, 2007

Income Inequality Increases for MLB - Who Cares?

Increasing income inequality gets a lot of attentions these days, see today's NY Times article Income Gap Is Widening, Data Shows: "Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows."

What if the statement read "Income inequality among professional baseball players grew significantly in 2006, with the top 1 percent of professional baseball players — those with incomes of more than $16,000,000 — receiving their largest share of total MLB payroll income since 1928, analysis of newly released payroll data shows." Would anybody be that concerned? Would anybody care?

Using the USA Today Database for MLB salaries going back to 1988, I am able to show in the chart above that income inequality has increased significantly from 1988 to 2006. For example, in 1988, the top 25% of professional baseball players earned 63.55% of all baseball income, and by 2006 the share of income of the top 25% of ballplayers was 72.04% of all income. The share of the bottom 50% fell from 12.33% in 1988 to only 8.04% in 2006.

Suppose that the income share of the top 1% of professional ballplayers at 6.70% of all baseball income in 2006 was the highest since 1928. Questions:

1. Would that increasing income inequality for professional baseball players matter?

2. If increasing income inequality among highly-paid professional athletes doesn't matter, why should it matter for the general population?

Good Press, Bad Public Policy to Tax Oil Companies

From today's Detroit News, my article "Penalizing Oil Companies Ends Up Hurting America,"

"Major U.S. oil companies already spend more on energy research and development (including biofuels and other renewable energy sources) than they earn in profits. That's on top of huge capital investments to meet our nation's growing demand for oil and natural gas.

Stigmatizing and penalizing our own oil companies might make for good press but it is bad public policy. It will likely lead to higher energy costs for American consumers, as well as undermine the efforts to reduce our nation's dependence on Middle East oil and strengthen national security."

Why Such Resistance to Free Trade?

More on the "paradox of progress" and "abundance denial" from today's WSJ article: "As Globalization's Benefits Grow, So Do Its Skeptics":

"For the past few years, the world economy has been growing faster than it has for decades, and that growth has been spread across the globe. Yet accompanying this prosperity is mounting skepticism about globalization -- the unfettered flow of goods, services, people and money across borders. The current round of world-trade talks is stalled, and the Democratic Congress is toughening its conditions for blessing Bush-backed trade pacts with Panama, Peru, Colombia, hardly economic powerhouses."

Read more here.

Buy/Sell Indulgences at the Green Church

To read about the history of religious indulgences, click here.

Buy/Sell Anything on Ebay


Wednesday, March 28, 2007

Quote of the Day

"No U.S. president or vice-president has ever visited Bangalore."

~Thomas Friedman, "The World is Flat" (p. 365)

Tax Freedom Day 2007: April 30

The average American will have to work another 33 days in 2007, until April 30 (a total of 119 days), to pay his/her share of federal, state and local taxes this year, according to an annual study released today by The Tax Foundation. That is two days later than last year's Tax Freedom Day of April 28 (see chart above), and represents 32.69% of the average American's 2007 income.

Comparatively, 100 years ago, the average American worked only 19 days, until January 19, to pay the tax burden then of 5%. Today, Americans work longer to pay for government (120 days) than for food, clothing and housing combined (105 days).

Big Three, Big Losses: Declining Market Share


The Big Three continues to lose market share, 15 percentage points over the last 17 years to be exact (71.6% in 1990 to 56.6% today), see chart above. A 15 percent loss of market share translates to more than 2.25 millions vehicles per year that are NOT being produced any more by the Big Three.

That loss of market share also translates into huge losses by the Big Three: Ford lost $12.7 billion in 2006, GM lost $2 billion in 2006 after losing $10.4 billion in 2005, and Chrysler lost $1.5 billion last year. Meanwhile, Toyota, Honda and Nissan continue to gain market share (almost double since 1990 to 33%), and make profits, see the comparison in stocks price above between Toyota (+150% in the last 5 years) and GM (-50% over the same period).

The current 4-year UAW contract expires in September, and negotiations for a new contract will soon be under way. In advance of the contract talks, 2,500 UAW members have just signed a "no-more-concessions" petition, suggesting they won't agree to pay any more of their own health care costs.

From today's Investor's Business Daily, "If the UAW isn't careful, it could kill America's Big Three. The union has made it clear that it will oppose the carmakers' insistence that workers have a larger financial stake in their own health care.

With Ford, GM and Chrysler projecting that they will pay $12 billion this year in health care costs for their U.S. employees, retirees and family members, that seems to be a reasonable request.

The UAW's golden era is over. Unless its leaders and members concede that it's been overtaken by economic reality and begin to act accordingly, the UAW will soon move into its rust years."

Tuesday, March 27, 2007

Airfare Price History

At the website Fare Compare, you can search for airfares, and you can also do a price history analysis back for two years, by many different fare categories (7-day advance, 14-day, 21-day), and by different airlines.

For example, in the graph above (click to enlarge), it displays a one-year history of the lowest airfares from Detroit to Jacksonville, on NWA (blue line) and the lowest fare on any airline (red line). As you can see, the round trip fares over the last year ranged from $125 to $325, and were higher in the fall and spring than the summer and fall. Pretty cool.

Smoking While Driving Banned in New Delhi


In response to almost 2,000 annual New Delhi traffic deaths in dangerous Indian traffic conditions shown in this amazing video, an Indian court has banned smoking while driving in New Delhi, the first measure of its kind in any major city worldwide.

Those caught smoking behind the wheel would pay 1400 ruppees (about $32), a heavy fine by local standards. Offenders caught more than five times would have their license revoked; the same fines apply to using a cell phone.

Existing traffic laws, which have not been updated since their introduction 20 years ago, are going largely ignored, for example seeing 6 people on a motorcycle, barefoot with no helmets, is common in India (see photo above). Read the full story here.

Hat tip to J. Howe.

Who Really Pays?

From Investor's Business Daily: "Far from 'favoring the rich,' as many believe, our tax code is massively redistributionist, sending literally trillions of dollars into low-income homes and far less into wealthy homes. This may be good or bad, depending on your point of view, but the fact is it's happening. And those who argue that recent tax cuts 'benefit the rich' ignore the reality.

The rich are being taxed at ever-higher levels, while more workers at the bottom of the income ladder are paying no taxes at all. As for spending, resources flowing to those at the bottom far outstrip those flowing to those at the top (see graph above).

Today, some 44 million Americans pay no taxes at all. Meanwhile, the upper 5% of all income earners in 2004 paid 57.13% of all taxes, up from 35.01% in 1980. In other words, the U.S. tax code is becoming more progressive, not less.


It's sad enough when a nation punishes its most productive citizens and rewards the least productive. But the real shame is that there are so many myths about taxes and poverty we can't even have an honest discussion about it."

Wrestlemania 23

Wrestlemania 23 will be held this Sunday, April 1 at Ford Field in Detroit. The event is sold out, all 65,000 tickets, but many are available on Ebay in all prices ranges from $65 to $1950. Notice that the Michigan ticket for $59.99 includes a $80 shipping charge, due to Michigan laws restricting ticket resale prices. In the "Hair vs. Hair" match, either Donald Trump or Vince McMahon will have their head shaved.

Wrestlemania V (1989) flashback: Jake "The Snake" Roberts defeated Andre "The Giant" (with Bobby "The Brain" Heenan) by disqualification, after Andre attacked the special referee "Big John Stud." During the match, Ted "The Million Dollar Man" DiBiase
stole Roberts' snake, "Damien." For several years, Roberts used his snake to gain a psychological edge over André, who had a dreaded fear of snakes (ophidiophobia), and even "suffered" a heart attack on national television over his fear of Jake's snake.

Source: Wikipedia, which has tons of wrestling history and trivia.

Harvesting Cash: Corporate Welfare for the Rich

The Bush Administration wants to reduce the eligibility cap for farm subsidies to an annual adjusted gross income (AGI) of $200,000, from its current level of $2.5 million (top 2.3% of taxpayers).

Today's WSJ editorial "Washington Harvest" asks, "Is it asking too much for Congress at least to cut off subsidies to the richest Americans, many of whom don't even farm for a living?

With all the political and media chatter about "inequality" these days, you'd think this welfare for the rich (farm subsidies) would cause a stir. But this is Washington, where corporate welfare is a bipartisan industry. The lower AGI subsidy cap has turned out to be the most controversial Bush farm proposal and is running into stiff opposition on Capitol Hill. Where are the Democratic class warriors when we need them?"

Monday, March 26, 2007

Quote of the Day II

"It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change."

~Charles Darwin

Quote of the Day

"Intel microprocessor chips are made from just two things - sand and brains."

~Tracy Koon, Intel's Director of Corporate Affairs

Interesting Fact of the Day

Number of universities and colleges in the U.S.: 4,000

Number of universities and college in the rest of the world: 7,800

Money, Time and Energy

From 4-Block World.

More On Taxes

From Jessica Hagy at Indexed.

Sunday, March 25, 2007

Workers Compete Against Other Workers

From "Free Exchange," The Economist's blog:

"The biggest problem that musical artists have is not the recording industry. The main problem musicians face is other musicians. There are too many of them.

The reason almost no musician ever makes much money is that there is a huge excess supply of people who want other people to listen to them sing or play an instrument. When all the primates are vying to get up on stage to impress the other primates, there's little reason to pay the primates much."

Amen. A couple points from a recovering musician:

1. Music is a "tournament labor market," like the market for acting and the market for crack cocaine (see Freakonomics, the chapter "Why Do Drug Dealers Still Live With Their Moms?"), where there are the select few who win the music tournament (Prince, Christina Aguilera, Norah Jones, BB King, Eric Clapton), and then everybody else - the thousands upon thousands of "struggling starving artists" all over the country. Talk about a "disappearing middle class" - music NEVER had a middle class, it has always been a few rich tournament winners and thousands of poor artists trying to make it to the top, with almost nobody in the middle income category.

2. The problem ALL workers face is other workers! There are many effective ways to reduce competition from other workers: form a union to restrict the supply of workers (autoworkers, carpenters, plumbers, electricians, etc) or create occupational liscencing laws to restrict the supply of workers (doctors, accountants, lawyers, barbers, appraisers, etc.).

1040 Form and Instructions in 1913, Only 4 Pages

The very first 1040 Federal Income Tax form from 1913 appears above (click to enlarge). Notice that:

1. Taxes were only paid on income above $20,000, equivalent to $407,000 in today's dollars, at the initial rate of only 1%. (Correction: Income taxes in 1913 were actually assessed on income above the personal exemption of $3,000, equivalent to $61,000 today).

2. The highest marginal tax rate in 1913 was 6%, which applied to income above $500,000, equivalent in today's dollars to about $10 million.

The entire 1040 tax form in 1913, including all forms and instructions, was only 4 pages, click here to view. All instructions in 1913 were contained on a single page, compared to the 2006 1040 Instructions, which run 143 pages long, without any forms.


More On "Abundance Denial"

I posted before on the topics of "Abundance Denial," and the "paradox of progress," which generally describe the phenomenon that even though wealth, prosperity and abundance for the AVERAGE person is at an all-time historical high (both U.S. and globally), the media constantly dwell on minor problems without celebrating the broader, more upbeat context in which they exist.

From Reason Magazine comes a good article "Now for the Good News: Mankind has never been healthier, wealthier or freer. Surprised?" Here is an excerpt:

"Worldwide, life expectancy has more than doubled, from 31 years in 1900 to 67 years today. India’s and China’s infant mortalities exceeded 190 per 1,000 births in the early 1950s; today they are 62 and 26, respectively. In the developing world, the proportion of the population suffering from chronic hunger declined from 37 percent to 17 percent between 1970 and 2001 despite a 83 percent increase in population. Globally average annual incomes in real dollars have tripled since 1950. Consequently, the proportion of the planet's developing-world population living in absolute poverty has halved since 1981, from 40 percent to 20 percent. Child labor in low income countries declined from 30 percent to 18 percent between 1960 and 2003.

Man’s remarkable progress over the last 100 years is unprecedented in human history. It’s also one of the more neglected big-picture stories. Ensuring that our incredible progress continues will require not only recognizing and appreciating the progress itself, but also recognizing and preserving the important ideas and institutions that caused it, and ensuring that they endure."

Who Pays Taxes, and What Do They Get?


Since both taxes and spending affect the well-being of Americans—taxes make people worse off, and government spending on useful things makes people better off—it’s not enough to simply ask which Americans bear the nation’s tax burden. We also need to know which Americans receive the most dollars of government spending. To address that issue, the Tax Foundation just released a study titled "Who Pays America’s Tax Burden, and Who Gets the Most Government Spending?" The analysis shows:

1. America’s lowest-earning one-fifth of households receives $8.21 in government spending for each dollar of taxes paid in 2004. Households with middle-incomes receive $1.30 per tax dollar, and America’s highest-earning households receive $0.41 per tax dollar.

2. Government spending targeted at the bottom 60% of U.S. households is larger than what they paid in taxes in 2004. Overall between $1.03 trillion and $1.53 trillion was redistributed downward from the two highest income quintiles to the three lowest income quintiles through government taxes and spending, year—a fact that’s not obvious by looking at taxes alone.

Policy Conclusions:

Many lawmakers favor sharply progressive taxes and oppose any tax reform plan that cuts the level of tax progressivity—such as a single-rate income tax or a retail sales tax—despite the economic benefits of those tax reforms.

But tax progressivity is only half the picture, and any amount of progressivity can be achieved by some mix of tax and spending changes. That means it’s possible to move toward a flatter, more economically neutral tax code, without reducing the progressivity in the fiscal system. In that case, lawmakers’ opposition to economically efficient tax reforms no longer makes sense.


Saturday, March 24, 2007

Worth a Listen

Smooth jazz guitarist/composer Doc Powell, check out his CD 97th and Columbus.

Pay No Attention to the Crazy Man on TV

I have made several previous posts about Jim Cramer, check here and here, and have suggested people should watch Jim Cramer for entertainment purposes, not for serious investment advice. Slate Magazine's Henry Blodget has a new article about Cramer, where he suggests that Jim Cramer "has committed professional suicide," by admitting that he engaged in trading practices that are questionable at best, possibly illegal?

Aside from those potentially serious ethical and legal issues, an even more important question might be: How well did the performance of a portfolio of Mr. Cramer's stock picks in 2006 stack up against a portfolio of passive index funds? Unfortunately for Cramer's followers, not very well.

According to Mad Money Machine, the return in 2006 for a portfolio of mostly Vanguard Index funds was +20.6%, compared to a -0.20% loss for a portfolio of "Select Jim Cramer Featured Stocks." A $100,000 investment at the beginning of the year would have grown to $120,612 by the end of 2006, compared to only $99,805 for Cramer's picks (see chart above, click to enlarge).

Bottom Line: Watch Cramer for entertainment purposes only, call Vanguard or Fidelity for investment advice on index funds. Or read "Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing," by economist Burton Malkiel, who is a strong advocate of index funds.

Friday, March 23, 2007

As Simple As Possible

Economic science simplified to a 3-variable equation.

1. Prices can only go up if demand increases, or supply decreases. Like rising gas prices.

2. Prices can only go down if demand decreases, or supply increases. Like falling gas prices.

Q.E.D.

History of the U.S. Tax Code, Highest Marginal Rate

Getting ready to pay/file your taxes? If you're in a high income tax bracket, it could be a lot worse, you could be paying 91% like during the 1950s or 70% during the 1960s. The average highest marginal tax rate since 1913 is 60.3%.

Is is any wonder that the economic conditions in the 1930s turned from bad to worse, when the highest income tax rate was raised from 25% to 79% during that decade?

From Hourly Associate to Senior VP at Wal-Mart: Wal-Mart is More Selective Than Harvard University

"Jobs at Wal-Mart are a dead-end cycle that keeps people in poverty," according to Wal-Mart critics like Wendell Chin in this SF Chronicle article. Why is it then that so many people want to work at Wal-Mart? Most new Wal-Mart stores employ 350 employees, and it typically gets 11,000 to 25,000 applications, or about 25 to 75 applications for EVERY AVAILABLE JOB! Even Harvard University gets only about 10 applications for every available position. Think about it, Harvard's acceptance rate is 9.3%, and Wal-Mart's acceptance rate is only 1-3%!

One reason so many people want to work at Wal-Mart is the opportunity for advancement - more than 75% of current store managers started at Wal-Mart as hourly associates.

For example, consider the case of 42-year old Patricia Curran, Wal-Mart's Executive Vice President of Store Operations, and listed by Fortune Magazine as one of the 50 most powerful women in the U.S., along with two other senior Wal-Mart executives. She is also listed here as one of the Wall Street Journal's top 50 Women to Watch for 2006.

At age 20, Ms. Curran started her career at Wal-Mart as an hourly associate in the pets department, and was subsequently promoted to Department Manager, Assistant Manager, Co-Manager, Store Manager, Regional Personnel Manager, District Manager, Operations Coordinator, Regional Vice President, and Divisional Merchandise Manager, and in 2003 to Senior Vice President of Wal-Mart store operations.

I don't think Patricia Curran is living in poverty, and I don't think she would consider her career at Wal-Mart as a dead-end cycle.

To paraphrase Thomas Sowell, Wal-Mart does not pay its associates as much as third-party observers like Wendell Chin would like to see them paid. But how much are third parties like Wendell Chin, who wax indignant, paying them, and how many jobs are they providing? None.

Who Knew? Monopoly's Surprising History

Most people think Monopoly was an overnight success for Parker Brothers, which introduced it in 1935. But the game began 30 years earlier, when a woman named Elizabeth Magie Phillips designed a new way to teach economics.

A proponent of a “single tax” on property (rather than on income and consumption), she designed what she called the “Landlord’s Game” to instruct people about the justice of her economic scheme.

Fans of the game made copies by hand, improving the play as they went. By the time Charles Darrow, generally credited with “inventing” Monopoly, obtained a patent and sold it to Parker Brothers, the game had already been through three decades of beta-testing.

Read
more here.

P.S. Doesn't Parker Brothers have a monopoly on "Monopoly?"

Thursday, March 22, 2007

Economists Can Earn Investment Bankers' Incomes

The average 9-month salary for economics professors at the University of Michgian-Ann Arbor is $155,000, there are 9 professor who make more than $200,000, and the highest paid professor in economics makes $245,000. But high-profile economists like the Professor David Teece at University of California-Berkeley who provide expert testimony can earn $2 million or more a year, according to this front page article in yesterday's WSJ, "An Economist's Courtroom Bonanza."

"We've given economists the chance to earn investment bankers' incomes," Prof. Teece says. "If you're successful with us, it isn't hard to make half a million dollars a year." He estimates that 60 of his associates earned more than $500,000 last year.


Professor Teece's hourly fee? $850.

Drug War Casualties: Prisoner Rape Victims

It is widely accepted that the U.S. “war on drugs” has been both costly and ineffective. Less known is the devastating link between current U.S. drug policies, prison overcrowding, and rape behind bars. In "Stories from Inside: Prisoner Rape and the War on Drugs," a report released today, Stop Prisoner Rape makes clear for the first time how the war on drugs has contributed to the sexual violence that plagues prisons and jails across the country, derailing justice and shattering human dignity.

"Stories from Inside" offers first-hand accounts by 24 prisoner rape survivors, all of whom were sexually assaulted while serving time for a non-violent drug-related offense. The report also offers an overview and analysis of the war on drugs, highlighting how it affects the sentences and prison experiences of hundreds of thousands of Americans and making policy recommendations. Anyone can become a victim of prisoner rape, but non-violent drug offenders who are unschooled in the ways of prison life tend to be targeted, especially when they are housed in cramped cells or in poorly monitored dormitories that were never meant to hold inmates in the first place.

Read more of the SPR press release here, via Jacob Sullum at Reason Magazine.

If there was a single issue that made turned me into a libertarian, the War on Drugs was near the top of the list. If these testimonials of non-violent drug offenders getting raped in prison (3 are from Michigan) don't convince you that the War on Drugs is misguided, senseless and immoral, nothing will.


More on Women in Global Management

According to the 2007 Grant Thorton International Business Report, the percentage of women in senior managerial positions globally has grown slightly from 19% to 22% since 2004. The Philippines comes out top with 50% of managerial positions being held by females, ahead of Brazil (42%) and two other Asian countries - Thailand (39%) and Hong Kong (35%). Lowest in the table is Japan with just 7%, below three European countries Luxembourg, Germany and the Netherlands at 10%, 12% and 13% respectively (see chart above, click to enlarge).

The EU's proportion of women in senior management has remained static at 17%, while NAFTA's figure has increased from 20% to 23%.

Note that the graph in my previous posting based on the The Economist is slightly inaccurate, because it shows the U.S. about 4 percentage points below the global average, when it is actually 1% above the global average of 22%.

Trying to Define American Car Will Drive You Crazy

From USA Today, an interesting article How do you tell which car is more American?:

"Many consumers are increasingly confused. The world is no longer as simple as us vs. them, Detroit against the Asians and Europeans. It's a global industry now, in which all manufacturers are touching their automaking toes on the shores of just about every industrialized nation.

Honda's Ohio-built Accord is 70% domestic parts. Toyota's Corolla is made in a California plant alongside General Motors models.

Ford's hit Fusion sedan is made in Mexico; only half its parts are from the USA or Canada. GM pitches its small HHR sport utility and giant Suburban straight at the American market, but they, too, are built in Mexico. HHR has only 41% American and Canadian parts.

More than three-quarters of the parts in Dodge's new Nitro SUV, which is assembled in Toledo, Ohio, are American or Canadian. But the profits go to Germany because Dodge is part of DaimlerChrysler. Chrysler Group, meanwhile, just became the first major automaker to announce it's going to make small cars for the U.S. market in China."


To see a chart that provides the domestic content of 2006, 2007 and 2008 model vehicles, go here. Notice however that "domestic content" actually includes parts from U.S. AND Canada, because the U.S. government requires that automakers disclose "what percentage of a new vehicles' components are U.S. or Canadian and where the vehicle was assembled." Isn't Canada a foreign country?

To read my article on this topic "Trying to Define a Foreign Car Will Drive You Crazy" go here.

To read another article I wrote on this topic "Vehicle Profiling Has No Place in a Global Economy," which appeared in the Detroit News, go here.

Chinese Stocks Rebound, Close at New Record High

Remember the plunge a few weeks ago that triggered a global sell-off? In Shanghai it was a buying opportunity.

From today's
NY Times World Business section, "After a huge sell-off here just a few weeks ago that helped set off a drop in global financial markets, China’s stock market has rebounded and the Shanghai Index rose to a new record Wednesday of 3057.38." (see chart above).

When the Shanghai composite index plunged 8.8% on February 27, it was simply a temporary setback in a galloping bull market. After all, an 8.8% drop is like having a sale on all stock at an 8.8% discount. When Macy's has a sale, it attracts more customers, so why shouldn't a "stock sale" attract more buyers?

BTW, China had the world’s best-performing stock market in 2006 - the Shanghai Composite Index was up 130%. Share prices are already up 14% in Shanghai so far this year.

Wednesday, March 21, 2007

Global Glass Ceiling

From The Economist: The highest percentage of women in senior management can be found in the Philippines, according to a report by Grant Thornton International, a consultancy. This reflects a tradition of wide participation in society there. Similarly, the egalitarian legacy of communism could explain the high proportion of women near the top of companies in China and Russia.

Quote of the Day II

"It is difficult to get a man to understand something when his salary depends upon his not understanding it."

~Upton Sinclair

A few examples come to mind: unionized public school teachers and school choice/vouchers, UAW workers and globalization, protectionist U.S. sugar beet farmers and the proven benefits of free trade, existing banks and Wal-Mart's pro-consumer attempt to enter banking, etc. Any other suggestions?

Quote of the Day

"The average Wal-Mart customer earns $35,000 a year, compared with $50,000 at Target and $74,000 at Costco.

Wal-Mart's "every day low prices" make the biggest difference to the poor, since they spend a higher proportion of income on food and other basics. As a force for poverty relief, Wal-Mart's $200 billion-plus assistance to consumers may rival many federal programs. Those programs are better targeted at the needy, but they are dramatically smaller. Food stamps were worth $33 billion in 2005, and the earned-income tax credit was worth $40 billion."

~Sebastian Mallaby, Washington Post columnist

People's Republic of Minnesota?

What's going in my home state of Minnesota? First the Minnesota House passes legislation to ban "foreign-made American flags" from Minnesota store shelves. That's pretty well... mercantilist, xenophobic, jingoistic, scary are the words that come to mind.

Now both the House and Senate in Minnesota have introduced bills to control college textbook costs, supposedly to prevent "textbook gouging," and change the way publishers market textbooks.

The bills would require textbook publishers to sell individual books usually marketed in bundles and require them to disclose when they plan to release new editions of textbooks. The bill would also require colleges to publish textbook lists before students register for classes so they can shop around for the best prices (MP: students would select classes, maybe majors, based on the lowest textbook prices??). Bookstores would be required to adopt policies to make affordable texts available to students.

"Three other states - Connecticut, Washington and Virginia - have passed similar laws, and California is considering it," according to the Michigan Daily.

I sense some "price confusion" - Minnesota legislators apparently don't like low flag prices and want to prevent Minnesotans from buying cheap foreign-made flags, but they also don't like high textbook prices, and want to legislate textbook pricing?

Tuesday, March 20, 2007

Houses Cheaper Than Cars in Detroit

Yikes!

"At least 16 Detroit houses up for sale on Sunday sold for less than the $29,000 it costs to buy the average new car." Read more here.

Record Profits or Losses? Doesn't Matter, It's Bad

From 4-Block World.

Yikes!


Tax Cuts Make Tax Code More Progressive

From today's WSJ editorial, "The latest IRS data also show that the wealthiest Americans continue to carry a record share of the income tax load. As the chart above shows, the richest 1% paid 35.6% of all income taxes in 2004, the most recent year in which data are available. The top 10% pay a remarkable two-thirds of all income taxes. The irony is that the Bush tax cuts have made the U.S. income tax code more progressive. But according to John Edwards and other class warriors, that's not enough."

The Tyranny of the Status Quo, Iron Triangle Wins

More on Wal-Mart's announcement that it would withdraw its application, filed with the Federal Deposit Insurance Corporation, to establish an industrial loan company (ILC) in Utah, from American.com:

"For all the supposed sympathy on Capitol Hill for American consumers—and especially “working families”—they don’t count for much when an organized pressure group like the banking industry comes calling. Then, our representatives in Congress become very concerned about such fallacious and unintelligible principles as “the separation of banking and commerce” and are perfectly happy to leave working families behind. From its inception, the “separation of banking and commerce” has been nothing more than a means for banks to protect themselves from competition, and it was invoked again, by people who should (and probably do) know better, to oppose the Wal-Mart application to acquire an ILC. The withdrawal of that application means America’s working families, who are Wal-Mart’s principal customers, will have to pay more for what they buy at Wal-Mart, and should thank their representatives in Congress for this privilege."

In his book "The Tyranny of the Status Quo," Milton Friedman described the "Iron Triangle" as a) special interest groups, e.g. the banking industry, b) regulators, e.g. FDIC, and c) politicians. When consumers and pro-consumer companies, e.g. Wal-Mart, go up against the Iron Triangle, it's often a lot like "three foxes and a chicken taking a vote on what to eat for lunch," (paraphrased from H.L. Mencken).