EYE TEST

Count every F in the following sentence.

FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS.

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!

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.

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.

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?

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.

Illusion

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.

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.