Tuesday, April 24, 2007

Wal-Mart: Equal Opportunity "Crusher"

Wal-Mart opponents (WakeUpWalMart, WalMart Watch, Lets Stop WalMart, etc.) get a lot of public sympathy and support by accusing Wal-Mart of "crushing Mom and Pop stores," although it's really the local consumers who "crush the Mom and Pop stores" by shopping at Wal-Mart for low prices. See my article on how "consumer greed" for low prices puts high-priced downtown merchants out of business when Wal-Mart comes to town.

An article in Business Week "How Wal-Mart's TV Prices Crushed Rivals," says that "it is becoming apparent that Wal-Mart's calculated decision to break the $1,000 barrier for flat-panel TVs last November triggered a disastrous financial meltdown among some consumer-electronics retailers over the past four months."

The Business Week article illustrates the fact that Wal-Mart's should be given credit for being a non-discriminatory "equal opportunity crusher," because its low-price strategy crushes higher-priced large, "greedy," multinational corporations like Best Buy, Circuit City, CompUSA, FAO Schwartz, and Winn-Dixie just as it "crushes" high-priced downtown merchants and Mom and Pop stores.

Bottom Line: Consumers benefit from Wal-Mart: a) directly from Wal-Markt's own everyday low prices, AND b) indirectly from the competitive pressure Wal-Mart puts on its rivals, both small and large, to lower their prices - or go out of business.

Michigan: One-State Recession

From Stateline.org: The drumbeat of bad economic news out of Michigan keeps pounding.

The Great Lakes State has lost jobs for six consecutive years, Michigan’s longest run of workplace shrinkages since the Great Depression. Automakers are laying off tens of thousands. Pharmaceutical giant Pfizer is closing up shop in Ann Arbor and Kalamazoo. The state ranks among the top three in the country for home foreclosures and mortgage delinquencies.

Analysts at Comerica Bank, which is moving its headquarters from Detroit to Dallas, say Michigan is stuck in a “one-state recession.”

The state’s political leaders are under pressure to soften the economic blows, but the downturn in the economy means there’s less money in state government’s coffers to fight back.

The state is nearly broke and is bracing for a possible partial shutdown in May. Gov. Jennifer Granholm (D) and Republicans legislators in charge of the state Senate are at odds over how to turn the ship around. The governor stresses investing more in education and job training to develop a talented work force, funded by a new tax on services, while GOP leaders are calling for tax cuts and a leaner state government to lure more business.

Harry Potter and the Mystery of Inequality

From Alex Tabarrok on Marginal Revolution:

The same forces that have generated greater inequality in writing - the leveraging of intellect, the declining importance of physical labor in the production of value, cultural and economic globalization - are at work throughout the economy. Thus, if you really want to understand inequality today you must first understand Harry Potter.

Along the same line of reasoning, I would suggest that there there would be significant and increasing income inequality over time if you looked at these ratios today vs. 10, 20 or 50 years ago:

1. Average professional athlete's salary vs. the average wage for the person working in the box office in the stadium, or the average wage of someone selling peanuts or beer in the stadium.

2. Average salary of professional athletes vs. the average wage for the housekeeping staff where they stay when travelling on the road, or the average wage of the flight attendants on the athletes' flights.

3. Average salary of a top movie star and the average wage for the person working for the caterer on the movie set or the average wage of the light crew.

4. The average salary of a top TV star like Letterman or Oprah and the average wage of the ushers working for the show.

As Alex concludes, The average writer's income hasn't gone up much in the past thirty years but today, for the first time ever, a handful of writers can be multi-millionaires and even billionaires. The top pulls away from the median.

Conclusion: Increasing income inequality does not necessarily mean that the average writer, or the average worker (ticket taker, peanut salesman, light crew, caterer) is doing worse off. Most of the handwringing about rising income inequality seems to be based on the fixed-pie fallacy - that one party can gain only at the expense of another. The fact that J.K. Rowling is a billionaire doesn't come at the expense of other writers.

The Global Warming Warrior

The website SmokingGun.com has posted Cherly Crow's tour rider and comments: "When the global warming warrior hits the road, her touring entourage (and equipment) travels in three tractor trailers, four buses, and six cars. Now that's a carbon footprint!"

(HT: Dan Mitchell)

Amazing Videos

Watch this amazing video of an insane kid who jumps off a roof, does a back flip, and lands in a swimming pool.

And practice makes purr-fect, watch this video of the piano-playing cat.

Monday, April 23, 2007

Good News for 2007 College Grads

1. Starting salary offers to new college graduates continue to rise, especially for business majors, reflecting the positive job market for Class of 2007 graduates according to a new report from the National Association of Colleges and Employers (NACE). Starting salaries for business grads showed one the biggest increases from last year, rising by 7.5% to $44,048. The average salary for economics graduates ($53,500) was the highest-paid business degree, followed by finance ($47,877), accounting ($47,421), and marketing ($41,285). Liberal arts graduates were offered $31,333 on average, 1.2% more than last year.

2. From the WSJ, "Employers are paying the typical four-year college graduate 75% more than they pay high-school grads. Twenty-five years ago, they were paying 40% more."

3. The current (March) unemployment rate for college grads is only 1.8%, a 6-year low.

The Ultimate Resource

From Free To Choose Media, the same group that produced the "Power of Choice: The Life and Ideas of Milton Friedman," comes a new doccumentary program titled "The Ultimate Resource: Free Markets - People Making Their Own Decisions," inspired by the work of economist Julian Simon and his book "The Ultimate Resource." From the press release:

Free Market incentives are spectacularly changing lives over much of the world. In the last 25 years, hundreds of millions of people-- 400 million in China alone-- have climbed out of the dire poverty of living on less than $1 per day. It is the largest movement out of poverty in human history.

This documentary is the story of what can happen when ordinary people around the world are given the tools to help themselves. "The Ultimate Resource" is people-- skilled, spirited and hopeful people, who are using their wills and imaginations for their own benefit, and, inevitably, they will benefit the rest of the world, as well.

Watch a 3-minute preview here on YouTube. The full documentary premiers tomorrow night, Tuesday, April 24, at 10:00 P.M. EST on HDNet.

There is No Wealth Factory

Wealth is not a product or commodity. There is not some factory out there manufacturing wealth that will someday run out. Wealth is not a service that ends when the shop closes for the night. Wealth is simply a measure. Having more of it does not mean your neighbor has less. Having more of it does not mean you took it from someone else. It is instead a reflection of who we are; our talents, our choices, our opportunities, how hard we have applied ourselves, and, often overlooked, the economic system that underlies the nation in which we live. In other words, unless fraud or some other nefarious scheme is in place, obtaining wealth is not a zero-sum game.

~Your Getting Rich Costs Me Nothing by Thomas W. Washburne at the Mackinac Center for Public Policy in Midland, MI

Sunday, April 22, 2007

Increasing Income Inequality in Higher Education

In 1985-1986, an assistant professor of business (finance, accounting, marketing) earned 48.5% more on average than an assistant professor of English, according to the American Association of University Professors' 2006-07 Report on the Economic Status of the Profession. In the 2005-2006 academic year, the average assistant professor of business earned more than twice as much as an assistant professor of English nationwide (see chart above, click to enlarge).

Like the general public, the AAUP is so concerned with income inequlity that its salary report this year is titled "Financial Inequality in Higher Education," which states that "Financial inequality is growing in U.S. higher education. We observe increasing differences between the endowments of rich and poor institutions, between the salaries of college and university presidents and their faculties, between the salaries of athletic coaches and professors, and between well and poorly compensated faculty members. This economic inequality has the potential to negatively affect higher education."

The AAUP doesn't say exactly how increasing income inequality would "negatively affect higher education," and doesn't say exactly what should be done about it, but at least it does recognize the significant contribution of
opportunity cost in explalining salary differentials between disciplines like business and English.

Note also that except for business and economics, and to a lesser extent computer science, and psychology, pay in most disciplines relative to English has been fairly constant, even high-opportunity cost disciplines like engineering and law.

Greg Mankiw).

Earth Day Reading

Today is Earth Day. According to Reason Magazine, if you must read one Earth Day story, it should be its 2000 cover story (the 30th anniversary of Earth Day), "Earth Day, Then and Now: The Planet's Future Has Never Looked Better." A few excerpts:

Three decades later (in 2000), the world hasn't come to an end; if anything, the planet's ecological future has never looked so promising. With half a billion people suiting up around the globe for Earth Day 2000, now is a good time to look back on the predictions made at the first Earth Day and see how they've held up and what we can learn from them. The short answer: The prophets of doom were not simply wrong, but spectacularly wrong.

There's much to celebrate on the 30th anniversary of Earth Day. Indeed, one of the chief things to get happy about is that the doomsters were so wrong. Civilization didn't collapse, hundreds of millions didn't die in famines, pesticides didn't cause epidemics of cancer, and the air and water didn't get dirtier in the industrialized countries.

As far as affluence goes, it is clearly the case that the richer the country, the cleaner the water, the clearer the air, and the more protected the forests. Additionally, richer countries also boast less hunger, longer lifespans, lower fertility rates, and more land set aside for nature. Relatively poor people can't afford to care overmuch for the state of the natural world.

Another good article for Earth Day reading is the classic "Recycling is Garbage" by NY Times writer John Tierney, who writes that "Rinsing out tuna cans and tying up newspapers may make you feel virtuous, but recycling may be the most wasteful activity in modern America: a waste of time and money, a waste of human and natural resources."

And one more: George Mason economist Don Boudreaux's excellent article "I Recycle:" In fact, market prices compel us to recycle when recycling is appropriate—and to not recycle when recycling is inappropriate.

David Friedman on Obesity and Rising Incomes

From Milton Friedman's son David Friedman's blog, his latest posting "Obesity: A Conjecture."

Humans evolved in an environment where food was costly, fat scarce, sweetness a useful signal that fruit was ripe. We are designed by evolution to put on weight when we can as a precaution against future famines and to favor fat and sugar when we can get them. In a world where food is inexpensive and plentiful we are inclined to overeat, in particular to eat more fat and sugar than is good for us.

The obvious explanation of the increase in obesity is that real incomes around the world have been trending up for decades. Now poor people in the U.S., and increasingly in poorer parts of the world, can afford to eat all the calories they want. Since all the calories they want represents more than what they require, the result is that they get fat.

Watch a map graphic that shows obesity (BMI) rising in the U.S. from 1985 to 2003 (takes a few seconds to load).

In a very interesting previous post, David poses the "restaurant puzzle:" A restaurant provides two different products: Food and a place to eat it. Both are valuable, both are costly to the restaurant. Yet restaurants price only the food. The table is free, however long you use it. Why?

Saturday, April 21, 2007


Count every F in the following sentence.


How many did you count? See the correct answer here.

Quote of the Day

"If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders. We must solve it by some form of decentralization."

~Nobel economist Friedrich Hayek, from "The Use of Knowledge in Society," explaining why a decentralized market system is superior to central planning.

Carpe Diem Exclusive!

Carpe Diem Exclusive: In a previous Carpe Diem exclusive, I reported in January that 15 U.S. states set historical record-low jobless rates in 2006 - nobody else reported this. Well, the labor market news just keeps getting better all the time, now more than 1 out of every 3 states has set a record-low unemployment rate since last July, and yet nobody reports this??

State unemployment rates for March were just released yesterday
by the BLS, and there are now 18 states that have experienced historical record-low jobless rates in the last 8 months since July 2006, and 12 of those states set record-low rates in January, February or March of this year.

Here are the 18 states with historical record-low jobless rates since July 2006:

Alabama: 3.3% in November 2006
Alaska: 5.9% in March 2007
Arizona: 3.9% in March 2007
California: 4.7% in November 2006
Florida: 3.2% in October 2006
Hawaii: 2.0% in December 2006
Idaho: 2.8% in March 2007
Illinois: 4.0% in November 2006
Louisiana: 3.3% in July 2006
Montana: 2.0% in March 2007
Nevada: 4.1% in May 2006
New Mexico: 3.5% in February 2007
New York: 4.0% in March 2007
Pennsylvania: 3.8% in March 2007
Texas: 4.3% in March 2007
Utah: 2.3% in February 2007
Washington: 4.6% in March 2007
W. Virginia: 4.0% in January 2007

A Google News (and Yahoo) search indicates that nobody has yet reported this - shouldn't that be big economic news that more than 1 out of 3 states have set record-low jobless rates since last July?

There are many reports on individual states setting record-low job less rates, click here for
Washington, click here for Montana, click here for Alabama, click here for Alabama, but nothing at the national level about 18 states setting records for jobless rates! Doesn't the White House or somebody want to take credit for this phenomenal record of so many states setting historical low unemployment rates?

Female Economist Wins Prize for First Time

From today's WSJ: The American Economic Association announced Friday that Susan Athey, a 36-year-old professor at Harvard University with professional interests ranging from deepest economic theory to Canadian timber auctions, had won the prestigious John Bates Clark medal, awarded every two years to the nation's most promising economist under the age of 40. No woman had won the medal in its 60-year history.

Around 40% of past Medal winners have gone on to win the Nobel prize in economics, following an average wait of 22 years. Former winners include Nobel laureates such as Paul Samuelson (1947), Milton Friedman (1951), Gary Becker (1967), and other economists such as Paul Krugman (1991), Lawrence Summers (1993) and Steven Levitt (2003).

Penn and Teller on Showtime

Penn and Teller on Wal-Mart: Penn & Teller expose America's love/hate relationship with Wal-Mart and look at the good and bad sides of the biggest employer in the US. They challenge the director of the documentary, "Wal-Mart: The High Cost of Low Price," they reveal union efforts to smear Wal-Mart, and meet a chronically unemployed young mother in Chicago to see how her life changed when Wal-Mart came to town and we look for the silver lining behind third world sweatshops.

Penn and Teller on Gun Control, thanks to Cafe Hayek.

Penn and Teller on Creationism.

Penn and Teller on Big Brother.

Warning: Strong language!

Friday, April 20, 2007

Parking Your Car is Worse Than Driving Your Car

University of Rochester economist Steven Landsburg (author of Armchair Economist) writes in Slate.com today about why parking your car is more environmentally destructive than driving it. Some excerpts:

Feeling guilty about your car's contribution to global warming? The good and bad news is that you and your car have got something far bigger to feel guilty about. My CO2 emissions cause about $50 worth of damage each year. But my parking—on public streets where I take up valuable real estate—imposes far greater costs.

It took until 2006 for someone to notice that the social cost of mandated free and underpriced parking is nothing short of phenomenal, the implied subsidy being comparable to what we spend on Medicare or national defense.

There's a general principle here: We get bad outcomes when damaging the environment carries no penalty. That's why the world has too much pollution and too many cars on the street. It's also why, whenever something exciting happens at the ballpark, everyone stands up to see better and nobody succeeds. We all jump up out of exquisite concern for our own interests and none at all for the damage we inflict on our neighbors.

Update: A controversial new plan is about to be implemented to improve the quality of life in New York City. This weekend Mayor Michael Bloomberg is expected to introduce an $8 congestion fee for drivers who enter Manhattan below 86th Street. Read more here.

Thursday, April 19, 2007

Will Farrell in "The Landlord"

Check out this hilarious video clip of Will Farrell in "The Landlord."

Detroit Free Press

From my commentary in today's Detroit Free Press "Don't Buy Into Myth on Price Gouging:"

People assume that oil companies control gasoline prices, but the economic reality is that they don't. Even the biggest oil companies don't set prices for gasoline, diesel or jet fuel, any more than farmers set the price of corn, soybeans or milk. Oil prices, like prices for all world commodities, are set by competitive international market forces.

And yet oil companies are constantly accused by politicians of "price gouging," and a House Energy and Commerce subcommittee is pushing for federal regulation of oil prices that would end up harming U.S. consumers and increasing our dependence on foreign oil.

There is a great deal to be gained by allowing market forces to drive down gasoline prices when there are supply disruptions, and a lot to be lost if we foolishly enact price gouging legislation.

Pro-Con, Progress-Congress II

From today's WSJ, an excellent commentary titled "Gasbags" by two former Texas Congressmen (Bill Archer and Chalres Stenholm), who apparently understand basic economics (see excerpts below), in contrast to Rep. Bart Stupak (D-MI), sponsor of the Federal Price Gouging Prevention Act, who could use some remedial economic lessons about price controls.

1. "Government intervention to control prices, reduce demand or increase supply, however temporary, will create more instability in the marketplace, not less."

2. "The reality is that there has never been a legitimate finding that gasoline price increases were caused by any manipulation of the markets."

3. "History and basic economics teach us that price caps result in shortages in the market and hardships for consumers."

4. "Even when price controls have been designed carefully and included very specific rules defining legal prices and specific enforcement mechanisms, they have proven to be failures of enormous consequence."

See a previous post on the same topic.

Chemistry Research: Information Age Style

Folding@home is one of the world's largest "distributed computing projects" and is designed to perform computationally intensive simulations of protein folding and other molecular dynamics simulations. It was launched by Stanford University's Chemistry department in 2001 "to understand protein folding, misfolding, and related diseases."

According to the listing in
Wikipedia, "Folding@home does not rely on powerful supercomputers for its data processing; instead, the primary contributors to the F@H project are many hundreds of thousands of personal computer users who have installed a small client program. The client will run in the background utilizing otherwise unused CPU power, or run as a screensaver only while the user is away."

To date, 50 scientific research papers have been published using the project's work, and there are about 200,000 participants worldwide (see map above, click to enlarge) who run software to collaborate and band together to make one of the largest supercomputers in the world.

Thanks to University of Michigan-Flint student Anna Stanczyk, who presented this to my Senior Honors Seminar class yesterday.

Prague, Warsaw, Bucharest: Europe's Bangalores

From today's NY Times, an interesting article "Eastern Europe Becomes a Center for Outsourcing:"

The U.S. may turn to India to fill many of its call-center jobs and the like. But Western Europe is turning more frequently these days to its own backyard, transforming a few urban centers of the former Communist bloc into the Bangalores of Europe.

American companies are cashing in as well. In recent years, I.B.M., Dell and Morgan Stanley, among others, have outsourced services to Eastern Europe, or helped other American companies do so.

What is unusual about Eastern and Central Europe is that their most advanced cities offer a potent mix of attributes that even Bangalore cannot rival: a highly educated, multilingual pool of talent in an increasingly affluent consumer market — all barely a stone’s throw from its prime clients.

Wednesday, April 18, 2007

Outsource Your Medical Care to India or France

Vancouver-based MedSolution helps Americans and Canadians "explore global health options" and connects patients with international hospitals as a reaction to the exorbitant prices of health care in the United States, and the increasingly long wait lists of Canada and the United Kingdom.

Notice on the chart above (click to enlarge) that it costs $100,000 for heart bypass in the U.S. and only $7,000 in India, a 93% savings; a hip replacement here costs $40,000 vs. $5,800 in India, an 85% savings, etc. For those afraid of India, even going to Europe can result in a 50% savings vs. the U.S. for procedures like hip replacement, knee replacement and heart bypass in France.

Quote of the Day

If someone comes along and offers you an opportunity superior to any other that you have, is "exploitation" an appropriate term to describe that offer?

Put more concretely, if a U.S. company pays a Cambodian $3 a day, when his next best opportunity -- digging through trash at a nasty dump -- yields 75 cents a day, has that company made him worse off or better off? If your answer is "better off," how can "exploitation" be an appropriate term to describe the transaction?

~George Mason economist Walter Williams' latest column

US: The World's Dream Factory

We hear a lot about the "disappearance of the middle class," and general economic "gloom and doom," even though the jobless rate is at a 6-year low of 4.4%? But we don't always hear so much about the incredible economic opportunities that exist today, and the many amazing stories of successful entrepreneurs in the U.S.

Like ex-con and former prison cook Jeff Henderson (pictured above), who has a new book out about his rise from convicted LA cocaine dealer to executive chef of the Bellagio Café in Las Vegas, titled "Cooked: From the Streets to the Stove, from Cocaine to Foie Gras;" it's now a NY Times bestseller.

For several excerpts from the book, see the Freakonomics blog, "How the Crack Dealer Became a Chef."

NY Times columnist Thomas Friedman refers to the U.S. as the "world's dream factory" in "The World is Flat," because of the U.S. economy's openness and dynamism, which nutures entrepreneurs more successfully than any place else on the planet (Exhibit A: Jeff Henderson). In how many other countries could a convicted crack dealer become a successful chef with a best-selling book?

Tuesday, April 17, 2007

Trade Works Both Ways, Part II

In a previous post, I wrote about the growing demand in China for luxury cars, including Cadillacs and Buicks, because of the growing wealth, income and prosperity there.

From today's IHT comes an article about GM's plans to ramp up production and sales in India, one of the world's fastest-growing vehicle markets.

"India's rapid economic growth over the past decade has boosted middle-class incomes and driven demand for cars, increasingly drawing the attention of global auto makers."

The Chevy Spark (pictured above) will sell for $7,300 in India (Rs. 309,000) and is a big part of GM's growth strategy in India.

GM will build a new plant in western India to more than double its production to 225,000 vehicles annually, making it GM's third biggest production hub in Asia, after China (850,000 vehicles) and South Korea (700,000 vehicles).

Bottom Line: GM produces, buys, sells and operates globally, and so should its workers and other Americans. Further, GM's significant expansion overseas in China and India suggests that there is no reason for Americans to buy GM and Ford products, over Toyota and Honda vehicles, so that "the profits stay in the country." The profits from GM's U.S. operations are just as likely to be taken out of the country for investment in China and India, as it is likely that Toyota's profits from U.S. sales will stay in the country for investments like the Toyota Tundra truck factory in Texas.

UK Pound Rallies: What A Difference 20 Yrs. Makes

From $1.05/British Pound in February 1985 to $2/BP today, see graph above (click to enlarge) and read about it here.

Wikipedia: Information Age Encyclopedia

Check out the "Virgiana Tech Massacre" listing on Wikipedia. Within 24 hours, there was already an extensive listing including a description of events, a detailed timeline, 100+ references, etc.

Thoughts on Tax Day

1. Why is the IRS called a "service?" Couldn't it have been named a department like Labor, a bureau like the BLS or FBI, a commission like the FTC, an administration like FDA, an agency like EPA, etc.

2. From a previous post: Under the scoring rules of bowling, you get rewarded, not penalized, for being successful. If you get a spare, the scoring system rewards you by adding the pins from the next ball into the current frame, and if you get a strike you get rewarded by adding your next 2 balls into the current frame.

Under our progressive income tax system with 6 tax rates increasing from 10% to 35%, you get penalized, not rewarded, for being successful, productive and entrepreneurial, because the more you earn, the higher the tax rate you pay. The top marginal income tax rate has been as high as 91% in the 1950s and 1960s, and 70% in the 1970s.

If we scored bowling the way we tax income, we would subtract, not add pins for a spare or strike, i.e. penalize successful bowling.

If we taxed income the way we score bowling, we would reward success by reducing the tax burden for the most productive workers, not increasing it.

3. From an editorial by David Strom, president of the Taxpayers League of Minnesota, "The further a person climbs up the economic ladder, the harder the tax code hits them. By taxing higher incomes, the government discourages the most productive members of society from doing what they do best: producing.

Progressive income taxes serve to put a higher and higher burden on those people climbing the economic ladder, and serve to entrench the wealthy at the top. Because as lower- and middle- class workers climb that ladder, bigger barriers are placed in their way. The rich stay rich, while the rest of us work ourselves to the bone to get ahead."

4. A good collection of tax quotes and observations here from American.com.

5. Q: What's the difference between tax avoidance and tax evasion?
A: About 5 years in a federal prison.

Monday, April 16, 2007


Greedy Capitalist Exploitation?

A typical and true story: A huge multinational corporation (MNC) has moved into a low-income area with promises of jobs that pay better than the local average. Actually, those jobs pay below the average for that industry, but the locals do not seem to care.

The MNC says it will hire about 1,500 people and more than 30,000 locals have applied. These are non-union jobs in a union-dominated industry, but the locals seem eager to leave their traditional way of life to grab these opportunities.

The local government joined forces with the MNC in every way. It offered the MNC monetary incentives to come in and take advantage of local workers. Local merchants, eager for U.S. dollars from any source, joined the plot to lure the corporation. Signs of welcome are prominently displayed in businesses throughout the area. Once the MNC agreed to come, local leaders and politicians rushed to take credit. The populace praises them for bringing new jobs. None seem to realize that they have joined into a nefarious scheme that will change forever the life they have enjoyed for generations.

What is the MNC? Honda. Where is the location? Alabama, USA.

Read more here.

Quote of the Day

One question I keep asking home sellers is "Are you committed to price or committed to sell?"

~Flint area realtor Andy Alger, in the Flint Journal article "What Slump? Some Finding Ways to Sell Their Houses"

Partisanship Rankings

According to Lying In Ponds, the most partisan columnists so far this year are:

Paul Krugman, the #1 most partisan Democrat (score of 70, for 180 negative Republican references vs. only 12 negative Democratic references)

Ann Coulter, the #1 most partisan Republican (score of 75, for 176 negative Democratic references vs. only 13 negative Republican references)

In contrast, economist Thomas Sowell has a score of 15 (30 negative Democratic references and 27 negative Republican references), George Will has a score of 14, and David Brooks has a score of 2. The higher (lower) the score the more (less) partisan the columnist.

From Lying in Ponds: The views of pundits who are excessively partisan cannot be taken seriously (like advertising), because their ulterior motives or uncontrolled biases are certain to frequently contaminate their judgements.

Conclusion: Do not take Paul Krugman or Ann Coulter seriously.

Sunday, April 15, 2007

Progess or Congress?

Q1: What's the opposite of "pro?"

Q2: Based on your answer to Q1, what's the opposite of "pro-gress?"

Exhibit A:

In the wake of hurricanes Katrina and Rita, gas prices spiked due to significant supply disruptions, there were allegations of "price gouging," and Congress mandated that the FTC conduct an investigation. In its
222-page investigation relased last spring, the FTC found no instances of anti-competitive market manipulation that led to higher prices after the hurricanes.

The Department of Energy conducted a separate investigation and it also found no evidence of "price gouging."

Further, the
FTC report outlined its official position that federal gasoline price gouging legislation would cause more problems for consumers than it solves, and that competitive market forces should be allowed to determine the price of gasoline.

In a separate report released in the last week by Charles Rivers Associates, researchers estimated how much price controls would increase the overall welfare losses associated with a supply disruption of the size of that caused by Katrina and Rita. The study estimates that for a supply interruption of that scale, total welfare loss from imposing price controls would have totaled $1.9 billion for the period following the hurricanes.

Never a group to be influenced by factual evidence, nor deterred by economic theory or common sense, Congress nevertheless relentlessly pushes forward for federal legislation that would impose serious criminal penalties for “price gouging." Fines up to $150 million and jail sentences could be imposed on those found guilty of "price gouging." Thanks partly to the Big Corn lobby, ethanol would be exempt.

Pro-gress or Con-gress?

GM Country: Flint, MICHIGAN

Toyota Camry (above) is the #1 selling car in the U.S., but ranks only #26 in the Flint, Michigan area, where the Chevy Impala is the #1 seller, and where 9 of the top 10 cars are GM products.

Interesting article from today's Flint Journal, "Us vs. Them: Our New Vehicle Purchases Set Us Apart from Rest of U.S."

Across the nation, Toyota and Honda battle for the top spots in car sales, but in the Flint area, General Motors cars rule and the Chevrolet Impala is the best-selling car.

Toyota's Camry is No. 1 nationally, but comes in at 26th in the Flint area. Honda's Accord is No. 3 in the nation, but 24th in this area.

In The Flint Journal area, nine of the top 10 best-selling cars and seven of the 10 best-selling trucks wear GM badges.

The difference is because so many area buyers qualify for GM's family discount. Dennis Dunfield, general manager at the Al Serra Auto Plaza in Grand Blanc, said about 80 percent to 85 percent of buyers in this area can qualify for the GM discount, which can take about 10-15 percent off the list price.

The Global Blogosphere

World map of recent visits to Carpe Diem.

Average Investors: Be Grateful for Invisible Hand

Thanks to deregulation, innovation, globalization and competition, there have been some marvelous developments in the securities industry that have significantly benefited average investors, to the point that it would be hard for investors in the 1960s to imagine.

Ben Stein writes in today's NY Times that we should be grateful for these investing innovations:

1. Deregulation of commissions, saving investors millions of dollars in commissions.

2. The rise of index funds, thanks largely to the "greatest friend the ordinary investor ever had," John C. Bogle, founder of Vanguard Funds. (You can listen to a one-hour interview with Bogle on George Mason economist Russ Roberts' Econ Talk - Professor Roberts says "he can't think of anyone whose contribution to our lives is so unappreciated.") After taxes and fees, index funds outperformed 97% of actively managed mutual funds according to one study. If you'd be happy with a LSAT, GMAT or GRE score in the 97th percentile, you should consider index funds. Vanguard currently offers 27 different index funds.

3. Easy access to foreign stocks through mutual funds, ETFs and ADRs. There are now at least 1,000 mutual funds for international stocks and bonds.

The list goes on: discount online trading, free online access to research reports, inflation-protected securities, mutual funds targeted to your retirement year (Vanguard offers 11 different target funds), etc.

Never before in history has the average investor had it better than today - there are more investment choices and lower costs than ever before.

As Ben Stein concludes, "In terms of making it much easier for the ordinary investor to get to safe retirement, the securities business is now incalculably superior to what it once was. It allows us little guys to blast profits out of the sedimentary rock of the stock markets. Let’s be grateful."

It's the invisible hand at work once again.

Saturday, April 14, 2007

Bjorn Borg, Come Home

Wealth taxes used to be de rigueur in Europe, where there are only a few holdouts. France's is between 0.5% and 1.8% on assets above $1 million. In Spain, it's 0.2% to 2.5% on assets above $223,000.

But rather than transferring wealth, wealth taxes transfer the wealthy. In Sweden, tennis star Björn Borg, ABBA's Björn Ulvaeus and Ikea founder Ingvar Kamprad are among the mega-rich who have fled the country, taking their money with them.

From today's WSJ editorial "Björn Borg, Come Home."

Quotes of the Day: Milton Friedman

"Fair" is in the eye of the beholder; free is the verdict of the market.

The word 'free' is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with 'freedom.' The word 'fair' is not used in either of our founding documents.

~ Milton Friedman, Wall Street Journal, Mar. 7, 1996

What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.

~ Milton Friedman, Wall Street Journal, May 18, 1961

The Simpsons: Outsourcing and India

The Singhsons: Hilarious Indian version of the Simpsons, featuring Bartinder, Omar, Mar Ji, Mugglie, and Lisajit

The Simpsons: Kiss Kiss Bang Bangalore: The Simpsons Dance in India

Simpsons: Nuclear Power Plant is Outsourced to India

Homer Dresses Up As Lord Ganesha to try to stop Apu's arranged marriage

Bonus: Burger King Outsources

(HT: Sanil Kori)

Friday, April 13, 2007

Tax Quotes

New York Times editorial in 1909: "When men get in the habit of helping themselves to the property of others, they cannot be easily cured of it." AMEN!

Historian Charles Adams: "From the earliest records of civilization, tax laws have taken away liberty more often than foreign invaders."

WSJ's Stephen Moore: "The complexity of the tax code, the cost it imposes on the economy simply to comply with it, and the civilian army of agents needed to enforce it continues to grow like cancer cells attacking the healthy ones. At the same time, common sense reforms like the flat tax or the national sales tax remain politically stalled -- perhaps because there are so many vested interests in keeping it complicated. Even conservative Republican presidential candidate Mitt Romney of Massachusetts recently came out against a flat tax arguing that it might be unfair. To whom? Tax accountants and lawyers? Meanwhile, just last week the Czech Republic announced plans to become the next former communist nation of Eastern Europe to adopt a flat tax. Everywhere this idea is catching hold, except in Washington."

From today's WSJ "Those April Blues" by Stephen Moore.

Protect Us From Tiger Woods?

A powerful and dangerous force has been unleashed on the global economy. It’s a new source of skilled labor that has put American workers at a competitive disadvantage — and no one knows just how many jobs have already been lost because of it. The U.S. is running a huge trade deficit with this force; every year we’re spending millions more on what it produces than it spends on American goods and services. And to top it all off, this entity has built a massive currency reserve, investing large sums of it on U.S. government securities and thus enabling America’s fiscal profligacy.Why, oh why, won’t the U.S. government do something to protect us from . . . Tiger Woods?

You thought I was talking about China, and I was. But I’m also talking about the modern-day golf legend. You see, China and Tiger Woods are a lot alike.

Go here to read more of Donald Luskin's excellent article "Before You Tee Off on China . . .. . . Answer this question: What is China doing that’s any different than what Tiger Woods is doing?"

(HT: Society and Money)

Thursday, April 12, 2007

American Idol Odds

Sanjaya's odds to win American Idol have improved on Intrade.com, rising to 9% currently, from less than 1% a month ago (see chart above - right scale for odds, click to enlarge). Melinda's odds hold steady at about 55% (see chart below), making her the clear favorite to win, based on actual trading in the "prediction market." Current volume is 8700 contracts for Melinda and more than 10,000 contracts for Sanjaya.

Trade Works Both Ways

We hear a lot of complaining about exports from China to the U.S., but don't hear as much about our exports TO China, fueled by the increasing wealth and purchasing power of China's consumers. As China's economy grows, the middle and upper class there will continue to grow, and China will become an increasingly important consumer market, to the benefit of U.S. businesses.

In today's WSJ there is an article
Rich Chinese Fancy Luxury Cars, about the growing demand in China for luxury cars, including Cadillacs and Buicks.

In the 1990s, many in China considered Volkswagens high class. But today, well-to-do Chinese are hankering for Bentleys, Ferraris, Mercedes, Audis, deluxe Cadillacs and even Rolls-Royces, reflecting the nation's growing wealth -- and a new boldness about showing it off.

"The rapid growth of affluence in China and the increasing desire for individuality and expressiveness" are making China "the most dynamic market in the world," says Ulrich Walker, chairman and CEO of DaimlerChrysler's Northeast Asia operations.

Engineers and designers for General Motors Corp. labor to make Buicks and Cadillacs sold in China more luxe than their North American counterparts. Cars have leather upholstery, lacquered wood trim and technical bells and whistles, such as in-seat TVs and remote controls for the audio and video systems. This week, GM launched the Park Avenue sedan, the top of its Buick line, here (see photo above). The price tag: $65,000 and up.

Bottom Line: Exports and imports are two sides of the same coin of international trade.


In a campaign without peacetime precedent, the media-entertainment-environmental complex is warning about global warming. Never, other than during the two world wars, has there been such a concerted effort by opinion-forming institutions to indoctrinate Americans, 83% of whom now call global warming a "serious problem.'' Indoctrination is supposed to be a predicate for action commensurate with professions of seriousness.

From George Will's column today "The Media and Global Warming."

Wednesday, April 11, 2007

The Nature and Causes of the Weath of Nations

Johan Norberg, the Swedish author of In Defence of Global Capitalism, produced a 49-minute documentary for Channel Four Television (UK) in 2003 called "Globalisation is Good." It explains why anti-globalisation campaigners are wrong and how globalisation is a force for good, lifting billions out of poverty.

The doccumentary tells a tale of two countries that were equally poor 50 years ago - Taiwan and Kenya. Today Taiwan is 20 times richer than Kenya. Entrepreneurs thrived in Taiwan because it introduced a market economy and integrated into global trade. In contrast, Kenyans are still desperately poor, because Kenya shut its door to globalization. Kenyans suffer from regulations, corruption and the lack of property rights.

The unequal distribution in the world is a result of the unequal distribution of capitalism - those who have capitalism grow rich, those who don't stay poor.

You can watch it here.

Don Imus, Assorted Links, Unconventional Views

1. "A Dangerous Detour: Cycles of Outrage and Apology Distract Blacks from Confronting Many Big, Chronic Problems," by John McWhorter

2. "
Al Sharpton: Nappy Headed Race Ho?" by Mike Adams

The Culture of "Bitches, Hos, and Niggas" by Michelle Malkin

4. "Free Speech Double Standard" by Cal Thomas

Detroit: Highest Mortgage Delinquency Rate in U.S.

From today's WSJ: The Detroit-Livonia-Dearborn, Michign area leads the nation in the mortgage delinquency rate for the first-quarter 2007 at 6.19%, up from 5.10% in the fourth quarter 2005. See chart above, click to enlarge.

Global Warming, Assorted Links

1. Global Cooling in NYC? Temperatures in NYC have averaged 42 degrees Fahrenheit in April, only one degree warmer than the average for April 1874, the coldest on record.

2. Climate change concert star Madonna accused of hypocrisy, her "Confessions" tour produced 440 tons of CO2 in 4 months, just for the flights between the countries, not taking into account the truckloads of equipment needed, the power to stage such a show and the transport of all the thousands of fans getting to the gigs.

3. Camile Paglia, "Climate change is built into Earth's system, and cooling and warming will go on forever. Man is too weak to permanently affect nature, which includes infinitely more than this tiny globe."

4. "The Great Global Warming Swindle" - UK Channel 4 Documentary Film.

5. Al Gore’s extreme proposals on climate change are smart politics—and bad policy.

Cheap Goods From China Are a "Complication"?

From a USA Today article "Surging Chinese Exports Complicate U.S. Position:"

Even as the Bush administration toughens its approach to trade disputes with China, an export surge from Chinese factories is raising the stakes for high-level talks scheduled next month in Washington. The $46.4 billion first-quarter global trade surplus China reported Tuesday was twice the figure for the comparable period last year.

Thanks to productivity gains, Chinese imports today are on average 3% cheaper in dollar terms than they were in December 2003, according to the Bureau of Labor Statistics.

As the Foundation for Economic Education points out, Only in the crazy world of politics are more inexpensive consumer goods a "complication."

What's so complicated? China produces cheap goods and U.S. consumers and businesses voluntary buy them. Volunatry trade. Win-win. Very simple. Not complicated.

Thomas Sowell explains:

“At least half of the popular fallacies about economics come from assuming that economic activity is a zero-sum game, in which what is gained by someone is lost by someone else. But transactions would not continue unless both sides gained, whether in international trade, employment, or renting an apartment.”

Only in a political fantasy world of trade as a zero-sum game would inexpensive goods produced on the other side of an imaginary line called a national border be considered a "complication."

Tuesday, April 10, 2007

Let's Move Tax Day and Voting Day Closer Together

If you pay your income taxes next Monday, April 16, it will have been 160 days since you last voted on November 7, 2006 (see the graph above), and it will be 204 days until you vote again on November 6, 2007.

The day we pay taxes in April is about as far away from the day we vote for politicians as possible. It's been more than 5 months since the last voting day, and more than six months before the next election, and November is probably the time of the year that we are least likely to be thinking about April 15 and taxes.


1. Let's abolish withholding taxes, and require all taxpayers to write a check once a year for their entire tax liability, like taxpayers did from 1913 to WWII (or make monthly or quarterly tax payments). For someone with $100,000 of adjusted gross income that would mean writing a check to the IRS of about $17,400, and probably another $3,000 or so to the state treasury, depending on the state you live in. This would not only relieve companies and organizations of the costly burden of tax collection for the government, but would significantly increase our "tax awareness."

Here is an exercise about your tax awareness: What is your monthly car or cell phone payment? What is your monthly mortgage or rent payment? Most people know these amounts immediately, because most of us write a check for those expenses. Now, what is your monthly tax liability for federal income taxes, and what is the amount of state income taxes you pay monthly? Most of us have no idea what our tax liabilities are, because we don't write monthly checks for federal and state taxes, employers withhold those taxes and make payments on our behalf.

2. Next we should move Voting Day and Tax Day much closer together, like the same week or same month. We could move Voting Day to mid-April right after we pay taxes, or we could move Tax Day to early November right before we vote.

Having greater tax awareness and voting closer to the day we pay taxes might influence our voting behavior?