Friday, June 22, 2007

Food Prices Soar Thanks To "Big Corn"

From Thursday's IBD:

Rising demand for greener energy began competing in earnest with the food supply in the last year or so. That sent per-bushel corn prices soaring to around $4 a bushel from a historical average closer to $2.

Those higher costs also trickled down to beef, milk, fruit and a host of other staples. May food prices rose 4.7% from a year earlier, according to the latest consumer price index. The cost of eating out rose only slightly less.

The Agriculture Department said consumer food prices will rise 3% to 4% this year, notably faster than last year's 2.3% gain.
Tighter world grain supplies on top of extra ethanol demand could send those numbers even higher.

Quote of the Day: Faculty Ideologues

The story about the Duke athletes and District Attorney Nifong was not simply a riveting drama. It was in its searing way an educational event, not just about prosecutorial ambition run amok, but about a university world -- reflective of many others -- where faculty ideologues pursued their agendas unchecked and unabashed. Here was a nearly successful legal lynching, applauded by a significant chunk of the Duke faculty, proud to display their indifference to questions of guilt or innocence.

~Dorothy Rabinowitz in today's WSJ

Thursday, June 21, 2007

Backyard Stonehenge: Amazing Video!

Watch an amazing Discovery Channel video of a Michigan guy near Flint, a retired construction worker named Wally Wallington, who thinks he has cracked the method used to build Stonehenge - working in his backyard. In the video, he stands a 19-ton concrete monolith upright all by himself using nothing but wood, some rocks, sand, and a garden hose. He also uses a variation of his technique to move a pole barn by himself more than 300 feet!

Here is the Discovery Channel link (you'll have to watch a 30-second commercial).

Here is the link to the same segment on YouTube.

Quote of the Day: Environmentalism as Religion

"I don't recycle my trash because my time is too precious for me to spend it sorting such items into different containers. I never criticize those who do recycle, but environmentalists point accusing fingers at us nonrecyclers. In environmentalists' eyes, those who unquestioningly disregard the value of one resource (time) in order to spend it on the conservation of other resources (wood, plastic and glass) are righteous while those of us who value and conserve time are sinners."

~George Mason University economist Don Boudreaux in today's
Pittsburgh paper.

As the late, great blues artist Clarence "Gatemouth" Brown sang, "My time is expensive, baby. I'm tryin' to make it last." Gatemouth clearly understood opportunity cost, and probably didn't recycle.

Wanna Bet? Political Futures Contracts At Intrade

Hillary Clinton's falling chances of becoming president in 2008:

Fred Thompson's rising chances to be the Republican candidate:
Graphs above are based on actual political futures contracts trading in the "Prediction Market" at in Ireland, during the last 30 days.

Intrade currently offers about 100 futures contracts for the 2008 elections in the U.S.

Remedial Economics for Bill Gates?

Harvard economist Robert Barro writing in the WSJ, and ABC 20/20 reporter John Stossel writing in his weekly column both think that Bill Gates need some remedial economic education on free markets and wealth creation.

Barro: "Bill Gates is the richest man in the world, but he may not understand the vital role wealth creation plays in society."

Stossel: "Dropping out of college didn't stop Bill Gates from making tons of money, but it kept him from classes where he might have learned about the beauty of spontaneous market processes."

A Freaky Freakonomics Update

If you read the book "Freakonomics," you'll know who Roland G. Fryer is (how about that suprise ending!), and you'll probably be interested in this story about him in today's NY Times, reporting on his new position as "chief equality officer" for the NYC public schools. If you haven't read the book yet, I recommend it.

Read the Freakonomics blog post here.

Outsourcing Destroys Jobs? 10m U.S. Jobs in 6 Yrs.

From yesterday's IBD editorial "Outsourcing Myths":

The media love victims. So when industries began moving jobs once done here to low-cost labor havens like India and China, pundits and reporters portrayed it as a devastating blow to America's traditional working class.

In 2005's "Outsourcing America," TV's Lou Dobbs warned that outsourcing was "nothing less than a direct assault on hard-working middle-class men and women in this country."

Chances are, if you've been fed a steady diet of this, you think outsourcing is a disaster. Well, you've been seriously misinformed. Outsourcing is in fact a big contributor both to recent productivity growth and to rising incomes for average workers in the U.S.

One of the most obvious falsehoods about job outsourcing is that it raises unemployment. Huh? Since 2001, during which criticism of outsourcing has hit a crescendo, U.S. businesses and entrepreneurs have created 9.9 million new jobs (see chart above, click to enlarge). The current jobless rate of 4.5% is below the average in any of the last four decades.

This is nothing new. It's free trade. As Adam Smith wrote in "The Wealth Of Nations" in 1776, "It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than buy." That goes for outsourcing, too.

How to Fix Politics

1. Give everybody 2 votes per election, 1 for your own district and 1 for any other district of your choice, to increase political accountability. If a Michigan senator gets too much pork for his home state, the suppliers of those dollar (voters in other states) can express their opinion at the polls.

2. Redraw the boundaries of congressional districts based on alphabet, instead of geography. Congressperson #1 would represent people with last names starting with AA through AE, #2 would represent AF through AH, etc., making it harder to bring home pork to a particular region.

3. Adjust federal income tax rates in each congressional district by the amount of spending your representative has voted for - the more spending, the higher the taxes in your district. That would sure help solve the "rational ignorance" problem.

4. Abolish withholding, and make ALL taxes due on April 15, including sales taxes, and provide an itemized statement of how much each taxpayer is actually paying for defense, agricultural subsidies, e.g. ethanol subsidies, etc.

From the chapter "How To Fix Politics," in economist Steven Landsburg's excellent book "More Sex is Safer Sex."

I'd add one more idea: Change voting day from the first Tuesday in November to the first Tuesday in April following April 15.

It's Deja Vu All Over Again

1. It has caused public respect for the law to plummet.
2. Even honest
police officers face hostility from the public because of a frivolous and unfair policy.
3. Because the profits are so high, many poor people find selling it an an attractive alternative to honest, legal work.
4. Immigrants and blacks face greater scrutiny and higher sentences than whites.

Sound the Drug War? It's actually about Prohibition from
John McWhorter's article in today's NY Sun:

We look back at Prohibition chuckling that people had to endure what they did for the prissy, puerile notion that no one should be able to have a drink. Yes, alcohol can be addictive. In excess, it harms health. It often ruins lives. Nevertheless, today, we assume that the response to those things hardly is to call for a dry America.

But when it comes to the war on drugs, most of America almost is robotically accepting of the idea that even talking about ending it is "politically unfeasible."

In fact, this passive position on the war on drugs represents a catastrophic failure of imagination, compassion, and plain common sense on the part of this great nation. It will look as grievously ridiculous in the history books as Prohibition does now.

Think of Nicholas Cage's alcoholic character in "Leaving Las Vegas" and Jamie Foxx's heroin-addicted role as Ray Charles in "Ray." Why, precisely, does the latter justify a policy that tears at the fabric of American society just as Prohibition did, and shows no more signs of success — even after having existed for decades longer? What might we learn from other countries' drug policies? Might we stress rehabilitation over interdiction?

Wednesday, June 20, 2007

Quote of the Day: Love Affair with Ethanol in D.C.

We already are paying thrice for Washington's love affair with corn-based fuel, in the form of: 1) higher taxes, 2) higher gasoline prices and 3) higher food prices. Yet because of the prodigious amounts of energy and fertilizer used in its cultivation, corn-based ethanol provides little or no net reduction in CO2 over the gasoline it displaces.

~Holman W. Jenkins, Jr. in today's WSJ article, "Pork, the New Green Meat"

Big Oil vs. Big Food/Big Corn

What does Congress do when we have soaring prices for gas and oil, and record profits for oil companies? They propose "windfall profits" taxes, price controls, and "price gouging" laws to prevent "unconscionable pricing."

What does Congress do when we have soaring food prices (see chart above, corn prices have doubled in the last two years, more than twice the 45% increase in gasoline prices), soaring farm land values, and record profits for farmers? They keep giving billions of tax dollars to farmers in the form of subsidies and price supports.

According to this Washington Post article today:

"A House panel voted unanimously yesterday to extend for five years the current system of payments to farmers and rejected a series of proposed changes. The action left in place the system of income supports and guaranteed prices that has cost taxpayers more than $70 billion since 2002."

Yesterday's vote by the House Agriculture subcommittee on general commodities signaled that the farm bloc is geared to defend the subsidies, despite record profits and soaring prices for commodities and farmland."

Mississippi vs. Michigan: Mississippi Is Winning

Although Michigan's unemployment rate improved in May to 6.9% from 7.1% in April, Michigan ranked #51 for the highest jobless rate in the country (Washington, D.C. is included). For about the the last three years, Michigan and Misssissippi have been fighting for the #51 spot for the state with the highest jobless rate in the country, and in most months Michigan has claimed it, except during the 2005 hurricane (see graph above, click to enlarge). For May, Michigan's jobless rate (6.9%) is almost a full percent above Mississippi's rate of 6%, a rate (6%) that Michigan hasn't seen in more than five years.

Michigan's job troubles won't improve anytime soon, economist Joan Crary of the University of Michigan predicted, according to this Detroit New article. She expects the state's jobless rate to average 7.5% in 2008, after hitting an estimated 6.9% rate this year -- the same as 2006. Job losses are expected to continue through next year before possible gains in 2009, though the rate of job losses may be lower than in recent years.

On the other hand, it look like Mississippi's economy will continue to improve moving forward, according to this report in the
Clarion-Ledger: Employment numbers have returned to their high pre-Katrina levels, indicating the healthiest job market since the August 2005 hurricane.

Recent job increases in Mississippi represent "really good growth for any state," not just for one that has suffered as Mississippi has, said state economist Phil Pepper.

Tuesday, June 19, 2007

Quote of the Day: Forcing Poor to Buy Rich Toys

Closing sweatshops and forcing Western labor and environmental standards down poor people's throats in the third world does nothing to elevate them out of poverty. Instead, it forces poor people to buy a lot of rich man's toys, like clean air, clean water, and leisure time. If clean air and leisure time don't strike you as extravagant luxuries, that's because Americans - even the poorest of us - are so rich these days that we've forgotten what true poverty is like. But chances are your great-great-grandparents could have told you what it's like: when you're truly poor, you can't afford things like clean air. Nobody in 1870 America worried about the environment.

~Economist Steven Landsburg, from the chapter "Children At Work" in his book "More Sex is Safer Sex"

Three States Set Record Low Jobless Rates in May

State unemployment rates for May were released today by the BLS, showing that 18 states have set historical record-low jobless rates in the last year, and 12 of those record lows were set this year. The states of Arizona (3.6%), Idaho (2.3%), and Texas (4.1%) all recorded historical record low unemployment rates in May 2007.

Here are the 18 states that have set historical record-low jobless rates in the last year:

Alabama: 3.3% in April 2007
Alaska: 5.8% in April 2007
Arizona: 3.6% in May 2007
California: 4.7% in November 2006
Florida: 3.2% in October 2006
Hawaii: 2.0% in December 2006
Idaho: 2.3% in May 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: 4.1% in May 2007
Utah: 2.3% in February 2007
Washington: 4.4% in April 2007
W. Virginia: 4.0% in January 2007

India Outsourcing Thousands of Jobs, TO the U.S.

The U.S. dollar has depreciated by more than 17% against the Indian rupee over the last 5 years, and by more than 10% over the last year (see chart above, click to enlarge). Result: Outsourcing of jobs and production has increased, but now FROM India TO the US by Indian IT companies like Tata, Wipro (NYSE:WIT) and Infosys (NASD:INFY)! For example, Tata plans to hire 2,000 Americans within three years for jobs IN the U.S.

From India's
The Economic Times: "Indian companies, which are becoming major players in the international arena, are hiring aggressively in the United States, reversing the earlier trend when they always transferred Indians to work in America on temporary visas.

Also, as the Indian rupee has risen more than 10% against the dollar this year, hiring Americans has gotten cheaper. At the same time, fierce competition for tech talent in India is pushing salaries there up by 12% to 15% per year, although they remain less than a third of those in the US."

In this related
Economic Times article, India is now the #1 job creator on the planet: "India generated 11.3 million net new jobs per year on an average during this period, higher than 7 million in China, 2.7 million in Brazil and 0.7 million in Russia. In contrast, the average was 3.7 million in the OECD area as a whole."

Bottom Line: As India and China's economies grow and prosper, and in the process create jobs, income, and wealth internally, they also become wealthier consumers of goods and services produced in the U.S. (American cars, software, education, travel, etc.) and they help to create jobs in the U.S.

Do we really need the World Bank and IMF when we have the forces of globalization, free markets and international trade (and Wal-Mart) lifting millions of people out of poverty in India and China, creating millions of jobs not just there, but in the US as well!?

(HT: Sanil Kori)

Monday, June 18, 2007

Housing Market Past and Future, In Pictures

Looking forward:
Looking back: Historical year-over-year monthly percent change in the actual home-price figures for selected cities:

Read more here at Yahoo! Finance.

Bottom Line: It's a good time to buy, and it'll get even better over the next year, but it's a bad time to sell.

What Do USA, Liberia and Burma Have in Common?

USA, Liberia and Burma (Myanmar) are the only three countries in the world that do not use the metric system.

Despite Complaints, People Love NY For Crowds

People who live in Manhattan or Detroit might complain about the crowds, but as long as they remain in Manhattan or Detroit it's hard to take them seriously. There are plenty of sparsely populated areas in the United States, and anybody who wants to move there is free to do so. Manhattanites will tell you that they stay in New York because of the theater or the symphony or the job opportunities - but that's just another way of saying they stay in New York because it's crowded.

~Steven Landsburg in More Sex is Safer Sex

Female Millionaires to Outnumber Males by 2020

According to this forecast by the Center for Economics and Business Research in the UK, 53% of millionaires in the U.K. are likely to be female by the year 2020.

Why? According to June 14 issue of The Economist, "Females do better at school and in higher education, and they live longer. Girl power, it seems, never had it so good."

The historical sources of women's wealth—marriage, inheritance and divorce—have been replaced by independent income, business ownership and investments. More than 80% of women now derive their riches from personal earnings, particularly from their own businesses. Divorce, long the engine that propelled women into prosperity, is cited by only 2.9% of those questioned as the main source of their wealth."

The WSJ also reports on this here.

Looking for a Cheap Dentist? Go to Mexico

From today's Washington Post, "Discount Dentistry, South of The Border":

Americans travel to Mexico for stomach surgery, eye exams and routine checkups. But it is the dentistas -- thousands of them strung along the border -- who are in the vanguard in attracting U.S. health consumers.

Mexican dentists often charge one-fifth to one-fourth of U.S. prices (see price list above from this website).

I had a previous related post about this Slate article.

Children Staying Closer to Home

From the UK's Daily Mail an interersting article "How children lost the right to roam in four generations," with the map above of the city of Sheffield, showing the shrinking acceptable roaming areas for children over four generations of the Thomas family.

Via Reason, via Boing Boing.

World's Most Expensive Cities

According to this new Cost of Living Survey from Mercer Human Resources Consulting, Moscow is the world’s most expensive city for expatriates for the second consecutive year, followed by London, Seoul, Tokyo and Hong Kong (see chart above). Here is a list of the top 50 cities.

Mercer’s survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is the world’s most comprehensive cost of living survey and is used to help multinational companies and governments determine compensation allowances for their expatriate employees.

According to
this CNN story, a luxury two-bedroom in Moscow now rents for $4,000 a month; a CD costs $24.83, and an international newspaper, $6.30. By comparison, a fast food meal with a burger is a steal at $4.80.

Among North American cities, New York and Los Angeles are the most expensive and are the only two to rank in the top 50 of the world's most expensive cities. But both have fallen in their rankings since last year's survey -- New York came in 15th, down from 10th place, while Los Angeles fell to 42nd from 29th place a year ago. San Francisco came in a distant third at No. 54, down 20 places from a year earlier.

Sunday, June 17, 2007

"Gender Gift Gap": Dads Get 71% of What Moms Get

Total Spending
Mother's Day: $16 billion
Father's Day: $9.9 billion

Per Gift (see chart above):
Mother's Day: $139.14
Father's Day: $98.34

Gift Certificates:
Moms: 39.3%
Dads: 29.9%

Dinner or Brunch:
Moms: 61%
Dads: 42.7%

Read more here about the "gender gift gap" here in the Newsweek Business article Playing Favorites.

(HT: Sanil Kori)

What About This Pay Gap? CEOs vs. Celebrities

According to this AP story, CEOs of 386 companies in the S&P500 that filed proxy information in the first half of this year received a combined $4.16 billion in 2006, which is an average compensation of $10.77 million per CEO (see graph above).

Yahoo Inc.'s Terry Semel led the pack with total compensation last year of $71.7 million, according to the AP formula used to analyze those filings, which adds up salaries, bonuses, perks, above-market interest on pay that is set aside for later and what companies estimated the present value to be of restricted stock and options awards on the day they were granted last year.

According to the
Forbes Celebrity list, the top 100 celebrities earned a combined total of $3.286 billion, or an average of $32.86 million per celebrity from June 2006 to June 2007, which according to Forbes "includes dollars earned solely from entertainment income."

Oprah topped the celebrity list with a whopping $260 million in earnings, or more than 3.5 times the highest CEO, followed by Tiger Woods with $100 million in pay.

Do a Google search for "excessive CEO pay" and you'll get about 10,000 hits. Now try a search for "excessive celebrity pay," and you'll get exactly 0 hits.

Another factor to consider when comparing CEOs and celebrities is the amount of time worked per year. Most people would agree that CEOs work full-time, year-round, probably 60-hour weeks, whereas a lot of athletes, musicians and actors (Madonna, Kobe Bryant, Shaq, Bon Jovi) realistically only really work during part of the year. On a per-hour basis, the "pay gap" between CEOs and celebrities would be even greater!

Driving in India is 10X As Dangerous as the USA!

Buyer Behavior blog (Professor Ray Titus in Bangalore India), has a post "Driving in Bangalore/India," about how "accidents on Indian roads have now reached gargantuan proportions," with the following picture:

Ray also provides some tips for driving in India, and I have actually driven in Bangalore with Ray as recently as last March, and I can say from firsthand experience that the man knows how to drive in India!

According to World Bank data, India had 20.3 traffic fatalities per 10,000 vehicles in 2003, which compares to only 1.86 traffic deaths in the U.S. per 10,000 vehicles according to these NCSA data (note the U.S. reports deaths per 100,000 vehicles as 18.59). Therefore, it is more than 10X more dangerous to drive in India than the U.S., measured by traffic deaths per 10,000 vehicles (see graph above).

Watch this amazing video of traffic somewhere in India at an unmarked intersection, and you'll get an idea of how insanely chaotic the traffic situation really is in India, with the crazy mix of cars, trucks, buses, motorcycles, bicycles, auto rickshaws, cows, pedestrians, dogs and even occasionally camels!

(Thanks to an anonymous comment that questioned my previous post, which was based on data from this website that incorrectly shows 185.8 deaths per 10,000 vehicles in the USA instead of 1.86, they must have studied "rainforest math.")

Quote of the Day: Markets Solving Organ Shortage

"Thousands of people die each year for lack of a healthy kidney, while hundreds of millions walk around with spare kidneys they’re unlikely to need. That’s nuts and most people can probably see that it’s nuts. For some reason, most of those people seem reluctant to embrace the one mechanism — the market — that can actually solve this kind of problem."

Economist Steven Landsburg talking to Freakonomics blogger Steven Dubner