Monday, July 23, 2007

A Weak Dollar Ain't All Bad

If you—or your mutual fund—own shares in large American corporations, you're a winner in the weak-dollar sweepstakes. Based on data culled from 238 constituents of the Standard & Poor's 500 Index, S&P analyst Howard Silverblatt concludes that the typical member of the index garnered 44.2% of its sales outside the United States in 2006. Translating cash received from those sales into weaker dollars puts some fizz into earnings. Last week Coca-Cola's stock bubbled to a 5-year high after it reported a fantastic quarter. Foreign sales accounted for 65% of Coke's beverage business. Other American companies profiting from this trend include McDonald's (65% of sales overseas) and IBM (56%).

From "The Sinking Dollar Has An Upside" from Danial Gross at

MP: Other advantages of a weak dollar for U.S. investors:

1. The weak dollar has made U.S. stocks (and real estate) more attractive to foreigners, resulting in especially strong foreign purchases of U.S. securities, helping support higher U.S. stock prices (and real estate prices in some markets).

2. U.S. investors holding foreign foreign stocks or international mutual funds have benefited from the appreciation of most major foreign currencies against the U.S. dollar, which has raised the dollar value of U.S.-owned assets abroad.

How To Sing The Blues

Check out "A Primer on Singin' The Blues," including:

Blues cars: Chevys, Fords, Cadillacs and broken-down trucks. Blues don't travel in Volvos, BMWs, or SUVs. Most Blues transportation is a Greyhound bus or a southbound train. Jet aircraft an' state-sponsored motor pools ain't even in the running. Walkin' plays a major part in the blues lifestyle. So does fixin' to die.

Blues can take place in New York City but not in Hawaii or any place in Canada. Hard times in Minneapolis or Seattle is probably just clinical depression. Chicago, St. Louis, and Kansas City are still the best places to have the Blues.

Breaking your leg cause you skiing is not the blues. Breaking your leg 'cause a alligator be chomping on it is.

Acceptable Blues beverages are: a) Cheap wine; b) Whiskey or bourbon; c) Muddy water; d) Nasty black coffee. The following are NOT Blues beverages: a) Perrier; b) Chardonnay; c) Snapple; d) Slim Fast; e) Mocha Latte.

Persons with names like Michelle, Amber, Debbie, and Heather can't sing the Blues no matter how many men they shoot in Memphis.

Trying to Define a Foreign Car Will Drive You Crazy

To: Local UAW #659 in Flint, Michigan
From: Carpe Diem Blog
RE: Parking Policy Clarification

From your
Consumer Buying Guide for 2007 Cars and Trucks on the UAW website, these 11 vehicles are built by UAW workers in the U.S. for foreign car companies:

Mazda Mazda 6
Mitsubishi Eclipse
Mitsubishi Eclipse Spyder
Mitsubishi Galant
Toyota Corolla
Isuzu i-Series Truck
Mazda B-series Truck
Mitsubishi Raider Truck
Toyota Tacoma Truck
Mazda Tribute SUV
Mitsubishi Endeavor SUV

Q: Do these 11 vehicles qualify as "foreign made autos" that would be towed from your lot?

From your website, these 18 vehicle are produced by UAW workers in Canada:

Buick Lacrosse
Chevrolet Impala
Chevrolet Monte Carlo
Chrysler 300
Dodge Charger
Ford Crown Victoria
Mercury Grand Marquis
Pontiac Grand Prix
Chevrolet Equinox SUV

Chrysler Pacifica SUV
Dodge Magnum SUV
Ford Edge SUV
Lincoln MKX SUV
Pontiac Torrent SUV
Suzuki XL7 SUV
Chevrolet Silverado Truck

GMC Sierra Truck
Ford Freestar Van

Q: Since Canada is a foreign country, do these 18 vehicles qualify as "foreign made autos" that would be towed from your lot?

Just wondering if you could help clarify this confusing situation of vehicle production in a global economy and parking policies that ban "foreign made autos."

Professor Perry

Sunday, July 22, 2007

A Year Without "Made in China": Not a Good Idea

A new book "A Year Without "Made in China": One Family's True Life Adventure in the Global Economy" chronicles how writer Sara Bongiorni and her family tried to live for a whole year without buying anything produced in China. You can listen to an NPR review of the book here.

As one could easily predict, the Bongiornis spent a lot of money and a lot of time intentionally trying to avoid products made in China for a year, and were relieved when their self-imposed protectionist embargo ended. And that was just a one country embargo, imagine if their self-imposed embargo included all foreign countries!

Trade = Technology = Progress = Outsourcing

"From an economic point of view, outsourcing work overseas is exactly the same thing as discovering a new technology; there is no fundamental difference between having your MRI data analyzed by an Indian over the Internet and having your MRI data analyzed by clever new software that runs directly on your laptop. If technology makes us richer, than so must trade. If you cheer for progress, then you must cheer for trade."

~Steven E. Landsburg in his new book "More Sex is Safer Sex: The Unconventional Wisdom of Economics"

MP: To carry Landsburg's analysis one step further: If you support protectionist trade policies, then logically you must also be against progress and technology in general, and should also support legislation that would inhibit progress and retard technology.


1. Republican/libertarian Ron Paul, Texas Congressman and candidate for president, is featured in today's NY Times Magazine article "The Antiwar, Anti-Abortion, Anti-Drug-Enforcement-Administration, Anti-Medicare Candidacy of Dr. Ron Paul."

2. UC-Berkeley economist and now Chief Economist at Google (where he will build a team of economists, statisticians, and analysts to assist the company in “marketing, in human resources, in strategy, in policy related stuff”) Hal Varian is featured in an interview in the WSJ titled "Economics According to Google."

Saturday, July 21, 2007

The New Racism: Xenophobia and Protectionism

"Both major political parties (and most of the minor ones) are infested with protectionist fellow travelers, who would discriminate on the basis of national origin no less virulently that David Duke or any other overt racist would discriminate on the basis of skin color. But if racism is morally repugnant - and it is - then so is xenophobia (fear or dislike of foreigners), and for exactly the same reasons."

~Steven E. Landsbug, from the chapter "The New Racism" in his new book "More Sex is Safer Sex: The Unconventional Wisdom of Economics"

MP: The xenophobic sign above is posted in the parking lot of the UAW Local #659 in Flint, Michigan. As I queried in a comment on a previous post on this topic (and about this sign) last September, is there really any difference between a sign that says "No Mexicans allowed on this property," and "No cars built by Mexicans allowed on this property?" From a moral standpoint, I really don't think there is any difference. If you object morally to blatant discrimination and racism against people of Mexican or Chinese origin, then you can't logically support protectionism or discrimination against products made by Mexicans or Chinese.

(Corrected) As Landsburg points out, "If it's OK to enrich ourselves by denying foreigners the right to earn a living, why shouldn't we enrich ourselves by invading peaceful countries and seizing their assets? Most of us don't believe that's a good idea because we believe human beings have human rights, whatever their color and wherever they live. Stealing assets is wrong, and so is stealing the right to earn a living (with protectionism), no matter where the victim was born."

Friday, July 20, 2007

Michigan Jobless Rate Rises in June, Highest in US

Michigan's June unemployment rate of 7.2% is the highest of any state in the country, according to the BLS, and is more than a full percentage point higher than the next highest joblesss rate of 6.1% in Ohio. Mississippi has the third highest rate at 6.0%. Read more here.

12 States Set Record Low Jobless Rates in 2007

State unemployment rates for June 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 (see 18 states in red in the map above). The states of Arizona (3.4%), New Mexico (3.2%), and Texas (4.1%) all recorded historical record low unemployment rates in June 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: 3.4% in June 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: 3.2% in June 2007
New York: 4.0% in March 2007
Pennsylvania: 3.8% in March 2007
Texas: 4.1% in June 2007
Utah: 2.3% in February 2007
Washington: 4.4% in April 2007
W. Virginia: 4.0% in January 2007

Thursday, July 19, 2007

Outsourcing Display Ad Production to India

Media backoffice specialist "Express KCS," with offices in India, the U.K. and the U.S., provides world-class offshore display ad production to newspapers and magazines, including the Fresno Bee, San Jose Mercury News, and Minneapolis-St. Paul Star Tribune (soon).

Rich Farmers Harvesting Cash, Hooked on Subsidies

For decades, American taxpayers have provided tens of billions of dollars in federal farm subsidies ($35 billion between 2003-2005) to some of the largest and wealthiest farm businesses in the nation.

According to this report, "Farm subsidies have been distributed to Fortune 500 companies such as John Hancock Life Insurance ($2,849,799) and Westvaco ($534,210); as well as celebrity hobby farmers like David Rockefeller ($553,782) and Ted Turner ($206,948). Even Members of Congress who vote on farm legislation have received subsidies, such as Sen. Charles Grassley (R-Iowa, $225,041) and Rep. John Salazar (D-Colo., $161,084)."

And if you think small farmers also benefit, think again.

"Small farmers are harmed the most by farm subsidies. Excluded from most subsidies, they must endure the lower crop prices, higher farmland costs and industry consolidation that result from subsidies to agribusiness."

Michigan farmers received about $247 million in direct payments from the federal government in 2006, according to this report. But now get this:

With corn prices above $3 a bushel this summer and occasionally reaching as high as $4, growers are worried that the U.S. House Agriculture Committee could approve a new five-year farm bill that trims federal farm subsidies.

Farmers are now "porkaholics," addicted to subsidies!

Our Broken Corporate Tax Code

We now have, on average, the second-highest statutory corporate tax rate (including state corporate taxes), 39%, compared with an average rate of 31% for our top competitors -- the democratic, market-oriented nations that form the Organisation of Economic Cooperation and Development (OECD). (See chart above from 2003, click to enlarge. Note that Germany's rate is now slightly lower at 38%.)

Ireland, for example, has engineered its own economic miracle, in large part due to a reform program that cut corporate tax rates to a level one-third that of the U.S. And the trend continues. Germany will reduce its total rate from 38% to 30% in 2008. France, Japan and the United Kingdom have signaled they may also lower their corporate rates. China, though not an OECD member, has recently passed legislation that will unify domestic and foreign corporate taxes at rates substantially below the OECD average. This trend raises a crucial question policymakers should be asking: Are these countries learning a lesson that we have forgotten?

Read more here of Treasury Secretary Henry Paulson's editorial in today's WSJ, aruging for a reduction in U.S. corporate tax rates to help the U.S. economy remain competitive in a world of falling corporate tax rates.

"Two Americas," And They're Both Getting Richer

"The U.S. is a rich nation getting richer. According to Census figures, the average inflation-adjusted income in the top quintile of American earners increased 22% between 1993 and 2003. Incomes in the middle quintile rose 17% on average, while the incomes in the bottom quintile increased 13%." (See chart above, click to enlarge).

In other words, the "rich" are getting rich faster than the "poor" are getting richer. So what?

Read more here it today's WSJ article by Syracuse Professor Arthur Brooks.

Wednesday, July 18, 2007

McDonald's, Starbucks, Wal-Mart, Now Foot Locker

NEW DELHI: New York-based $5.75-billion Foot Locker (FL: NYSE), the world’s leading retailer of athletic footwear and apparel, is firming up its India entry plans. According to sources, the U.S. major has started due diligence for the Indian market and is looking at setting up its first store through a franchisee arrangement early next year.

Lou Dobbs and fellow populist protectionists, Listen Up:

Globalization, outsourcing and trade help the U.S. economy. As the Indian economy grows and expands (partly as a result of globalization and outsourcing), and as the Indian middle class grows larger and more prosperous, Indian consumers can afford more products from American companies like Foot Locker (founded in NYC in 1879), which will help support more jobs in the U.S.

(HT: Sanil Kori)

Blogging's 10th Birthday

From the Wall Street Journal:

It's been 10 years since the blog was born. Love them or hate them, they've roiled presidential campaigns and given everyman a global soapbox. Twelve commentators -- including Tom Wolfe, Newt Gingrich, the SEC's Christopher Cox and actress-turned-blogger Mia Farrow -- on what blogs mean to them.

The daily reading of virtually everyone under 40 -- and a fair few folk over that age -- now includes a blog or two, and this reflects as much the quality of today's bloggers as it does a techno-psychological revolution among readers of news and opinion.

We are approaching a decade since the first blogger -- regarded by many to be Jorn Barger -- began his business of hunting and gathering links to items that tickled his fancy, to which he appended some of his own commentary.

A Global Company Goes Even More Global

From today's WSJ:

"Chinese computer maker Lenovo Group plans to centralize its global advertising operations in Bangalore, part of a move by multinational companies to tap the creative firepower of India's low-cost work force.

Lenovo's India team will help dream up global marketing campaigns aimed at dozens of countries, including the U.S., France and Brazil, though not China.

Lenovo's decision reflects the continuing erosion of the geographic hierarchies that have long ruled the advertising industry.

Lenovo is already an unusually global company. It has a Chinese chairman and an American chief executive, and it rotates its headquarters between Raleigh, N.C.; Hong Kong; Beijing and Paris, depending on where its top executives are at any given time. The India-born chief marketing officer, Deepak Advani, is normally based in Raleigh, but he is spending the summer in India."

MP: What a great example of globalization! Corporations shop globally to find the best talent, and search globally to source production for the greatest value, and American consumers should do the same: engage in guilt-free global shopping for the best products and best value.

Quote of the Day: Free Markets v. Control/Coercion

"Free markets are simply millions upon millions of individual decision-makers, engaged in peaceable, voluntary exchange pursuing what they see in their best interests. People who denounce the free market and voluntary exchange, and are for control and coercion, believe they have more intelligence and superior wisdom to the masses. What's more, they believe they've been ordained to forcibly impose that wisdom on the rest of us. Of course, they have what they consider good reasons for doing so, but every tyrant that has ever existed has had what he believed were good reasons for restricting the liberty of others."

~George Mason Economist Walter Williams

Tuesday, July 17, 2007

Cuba's Dismal "Human Rights" Record

ClustrMap of visits to Carpe Diem blog, none from Cuba:
Top 10 Reasons that Human Rights don't exist in Cuba, from the Human Rights Watch 2006 Report on Cuba:

1. Cuba remains the one country in Latin America that represses nearly all forms of political dissent. President Fidel Castro, during his 47 years in power, has shown no willingness to consider even minor reforms. Instead, the Cuban government continues to enforce political conformity using criminal prosecutions, long- and short-term detentions, mob harassment, police warnings, surveillance, house arrests, travel restrictions, and politically-motivated dismissals from employment. The end result is that Cubans are systematically denied basic rights to free expression, association, assembly, privacy, movement, and due process of law.

2. Cuba’s Criminal Code provides the legal basis for repression of dissent. Laws criminalizing enemy propaganda, the spreading of “unauthorized news,” and insult to patriotic symbols are used to restrict freedom of speech under the guise of protecting state security. The government also imprisons or orders the surveillance of individuals who have committed no illegal act, relying upon provisions that penalize “dangerousness” (estado peligroso) and allow for “official warning” (advertencia oficial).

3. In early July 2006 the Cuban Commission for Human Rights and National Reconciliation, a respected local human rights group, issued a list of 316 prisoners who it said were incarcerated for political reasons. Serving sentences that average nearly 20 years, the incarcerated dissidents endure poor conditions and punitive treatment in prison.

4. The Cuban government forbids the country’s citizens from leaving or returning to Cuba without first obtaining official permission, which is often denied. Unauthorized travel can result in criminal prosecution. The government also frequently bars citizens engaged in authorized travel from taking their children with them overseas, essentially holding the children hostage to guarantee the parents’ return. Given the widespread fear of forced family separation, these travel restrictions provide the Cuban government with a powerful tool for punishing defectors and silencing critics.

5. The Cuban government maintains a media monopoly on the island, ensuring that freedom of expression is virtually non-existent. There are currently 23 journalists serving prison terms in Cuba, most of them charged with threatening “the national independence and economy of Cuba.” This makes the country second only to China for the number of journalists in prison.

6. Access to information via the Internet is highly restricted in Cuba (see map above showing visits to this blog, none are from Cuba). In late August 2006 the dissident and independent journalist Guillermo Fariñas ended a seven-month hunger strike in opposition to the regime’s Internet policy. He began the strike after the Cuban authorities shut down his e-mail access, which he had been using to send dispatches abroad describing attacks on dissidents and other human rights abuses.

7. Prisoners are generally kept in poor and abusive conditions, often in overcrowded cells. They typically lose weight during incarceration, and some receive inadequate medical care. Some also endure physical and sexual abuse, typically by other inmates and with the acquiescence of guards.

8. Under Cuban law the death penalty exists for a broad range of crimes. It is difficult to ascertain the frequency with which this penalty is employed because Cuba does not release information regarding its use.

9. Refusing to recognize human rights monitoring as a legitimate activity, the government denies legal status to local human rights groups. Individuals who belong to these groups face systematic harassment, with the government putting up obstacles to impede them from documenting human rights conditions.

10. International human rights groups such as Human Rights Watch and Amnesty International are barred from sending fact-finding missions to Cuba. In fact, Cuba remains one of the few countries in the world to deny the International Committee of the Red Cross access to its prisons.

Cuba Ranks #156 Out of 157 for Economic Freedom

According to the 2007 Heritage/Wall Street Journal Index of Economic Freedom, Cuba has a score of 29.7 (29.7% economically free) out of 100, and ranks 156 out of 157 countries, see the ranked list here. North Korea is #157 with only 3% freedom, and Libya ranks #155 with 34.5% freedom.

Hong Kong ranks #1 with 89.3% freedom, and the U.S. ranks #4 with 82% freedom.

From Cuba's profile in the report: "Cuba is ranked 29th out of 29 countries in the Americas, and its overall score is so low that it is less than half of the regional average.

Highest Tax Increase in History?: 20,000%

"I'm not sure in the history of man, since our forefathers founded the country in 1776, that there's ever been a tax increase of 20,000 percent," said Newman, who runs the Tampa business founded by grandfather Julius Caesar Newman. "They had the Boston Tea Party for less than this."

Find out more here.

(HT: Juandos)

Castro's $1 Billion Net Worth vs. $628 Avg. Income

Elian Gonzalez's home town of Cardenas, but not the block where Elian lives, that was fixed up:
Typical refrigerator in a Cuban home, all food is rationed.
Pictures are from, a website mentioned in today's IBD editorial:

Castro's partying offspring can be seen in photos on Web sites such as He has a lifestyle that's the envy of any billionaire who's ever fantasized about owning his own island.

Castro's net worth of $900 million, compared to the $628-a-year incomes of average Cubans is particularly damning.

Under his 49 years of rule, Cuba has gone from having the highest standard of living in Latin America to either the poorest or second-poorest.

The Heritage Foundation ranks Cuba rock bottom on economic freedom in the region, and second-worst in the entire world, topped only by another communist "paradise,"North Korea.

Monday, July 16, 2007

Economics of Auctions: eBay Provides Rich Data

Before eBay, economists had few ways to test their theories about auctions. They could recruit and test volunteers, but that often meant subjects already knew they were being watched. Some experiments in the mid-1990s involved digital auctions on primitive Internet message boards. But the pool of potential bidders was too small back then to draw any broad economic conclusions.

Now, thanks to eBay, economists can watch and document this 2-­millennium-old idea play out.

Behind the millions of online auctions like Ebay lies a virtual mini-economy flush with raw data. Harvesting this information has fed a new branch of economics, one that has proved again and again that shoppers act in unexpected ways.

Read more here of the Christian Science Monitor article "Why We Do What We Do on eBay: Economists Mine the Online Auction Site to Find Out Why Shoppers Act Irrationally."

From Wikipedia's entry on "
Perfect Competition": eBay auctions can be often be seen as perfectly competitive. There are very low barriers to entry (anyone can sell a product, provided they have some knowledge of computers and the Internet), many sellers of common products and many potential buyers.

(HT: Ben Cunningham)

China to Overtake Germany as #3 Largest Economy

Chinese statistics due this week are likely to show that the country is on track to leapfrog Germany as the third-biggest national economy this year, sooner than expected -- yet another sign of just how quickly the global economic balance of power is shifting.

Overtaking Germany in absolute terms may not be seen as an important triumph to China's leaders, whose priority is raising incomes and living standards that remain far below those of the developed world. And it might not be surprising that a country with 1.3 billion people produces more in a year than Germany's 82 million inhabitants. But passing that milestone could add to increasing anxieties in wealthy nations about China's rise.

Recent estimates put the size of China's gross domestic product last year at $2.8 trillion, breathing down the neck of Germany's $2.9 trillion national output for the period. Only the U.S. ($13.2 trillion) and Japan ($4.4 trillion) have bigger economies, according to International Monetary Fund data (see chart above from Wikipedia, figures are slightly different than the WSJ's).

Chinese government data for the second quarter, due out on Thursday, are expected to show that Chinese output grew by around 11% in this year's first half, a rate that economists think China will maintain this year. Even optimistic predictions for German growth, at close to 3%, are no match for that.

Low Cost Indian Medicine: Antidote to High US Cost

From an article in the Times of India, "American Sicko Can Reach Out to India":

There's not a single mention of India in Moore's documentary even as he rails against the American system and its off-the-wall costs.

In 2004, Maggi Grace arranged for her friend Howard Staab, like her a North Carolina resident, to visit India for a heart surgery. Like some 50 million Americans, Staab, an otherwise healthy carpenter, did not have health insurance. A routine exam revealed a serious heart problem. Worse news followed fixing it without insurance cover would cost $200,000.

That's when Grace began hunting on the Internet for a way out and discovered India. Staab and she came to Delhi in September that year and got the mend for less than $20,000, with a trip to the Taj Mahal thrown in.

Grace has related the experience in a forthcoming book called "State of the Heart" to be published by Harbinger. The book's subtitle is "A Medical Tourist's True Story of Lifesaving Surgery in India."

MP: Outsourcing can save lives. And costs.

See previous post here on this topic.

(HT: Sanil Kori)

Sunday, July 15, 2007

Big Three Market Share May Slip Below 50% in July

A year ago, the Big Three had a 56% market share, now it is barely holding a 50% market share (50.2% in June, see chart above), and it may slip below 50% this month.

Here's a TV interview I recorded in Flint last week on the local ABC station about the Big 3 losing market share, and the upcoming contract talks with the UAW.

Saturday, July 14, 2007

"Fair" Share of Taxes; "Fair" Trade vs. Free Trade

The data above (click to enlarge) are from the Congressional Budget Office's (CBO) report Historical Effective Federal Tax Rates, for the year 2004, showing that:

1. The top 20% make 48.8% of after-tax income, make an average of $143,600 after-tax, and pay almost 85% of all federal income taxes paid, at an average rate of 25.1%.

2. The top 1% make 12.2% of after-tax income (average after-tax income of $867,800), and pay almost 37% of all federal income taxes, at an average rate of 31.1%.

3. The average tax rate for the bottom quintile is 4.5% and increases to 31.1% for the top 1%, indicating a highly progressive income tax system.

In today's NY Times article "
Fair Taxes? Depends What You Mean by ‘Fair’," Harvard economist Greg Mankiw poses the question: "Do the rich pay their fair share in taxes? This is likely to become a defining question during the presidential campaign."

Citing some of the CBO data above, Mankiw then comments, "Fairness is not an economic concept. If you want to talk fairness, you have to leave the department of economics and head over to philosophy."

Mankiw makes a good point about fairness being subjective and philosophical, although you'll find no shortage of politicians waxing philosophical about "fairness" when it comes to topics like taxes and trade, especially those who want to raise taxes and erect trade barriers.

For example, whenever you hear politicians or Lou Dobbs talk about "fair trade" instead of "free trade," you'll pretty much be guaranteed that the discussion has left the realm of economic theory and empirical evidence of the benefits of free trade, and ventured off into a philosophical/political discussion justifying using the political process to bestow protectionist trade policy favoring a well-organized domestic, special-interest industry at the expense of consumers, in the philosophical interest of "fairness."

Bottom Line: Any time you hear politicians use the words "fair" or "fairness" in relation to tax policy, look out for higher taxes, and any time you hear those words in regards to trade, look out for protectionist trade policy.

CD Milestone: 100,000 Visits!!

This CD post got posted on Reddit yesterday and moved up to 162 points with 188 comments, and helped generate more than 11,000 visits to CD yesterday (see top chart above), which resulted in the Total Visits to CD passing 100,000 yesterday!

Reddit is a "social bookmarking website," where users post interesting links to websites, blogs, etc., and other users vote on whether or not they like the links.

Virginia's Outstanding Economy

This Global Insight report explains why Virginia's economy is so outstanding, and one of 5 states with unemployment rates below 3% (others are Utah, Hawaii, Montana and Idaho; green states on the chart above, click to enlarge):

Top 10 Reasons Virginia's Economy is Booming:

1. Pro-business reputation
2. Low unemployment insurance and workers' compensation costs
3. Same, low corporate tax rates for the last 35 years
4. Tax credits for creating jobs
5. Right-to-work laws
6. Skilled work force
7. Accelerated permit process
8. Good transportation networks
9. High worker productivity
10. Good telecommunication networks

Michigan, with the highest jobless rate in the country at 6.9% (see the only 2 red states above: Michigan and Mississippi), could learn a few lessons from states like Virginia. The message seems pretty simple: make a state pro-business and the jobs will follow.

Trade is Beneficial, Imaginary Lines are Meaningless

This NY Times article suggests that the vast majority of economists advocate free trade, but recently economists like Dani Rodrik at Harvard have questioned the belief that "more markets and free trade are always good and government regulation is always bad." Rodrik has written extensively on the downside of globalization, which would imply that "wealth-creating" trade protectionism is sometimes preferable to "wealth-destroying" free trade.

Professor Don Boudreaux (chair of George Mason's Economics Dept.) responds:

"If it's true that theory and evidence in favor of protectionism are sufficiently strong to warrant economists abandoning their conclusion that free-trade policy is generally sound, then why shouldn't economists -- led by Dani Rodrik -- also start exploring the potential benefits of intra-national protectionism? Surely a scholar not benighted with the free-trade "faith" ought to take seriously the possibility that, say, Tennesseeans could be made wealthier if their government in Nashville restricts their ability to trade with people in Kentucky, Texas, and other states?

Indeed, such an objective scholar should be open also to the possibility that residents of Nashville can be made wealthier if their leaders restrict their ability to trade with people in Knoxville, Memphis, Chattanooga, and other locales in that state.

I suspect that if someone proposed to Dani Rodrik that he explore the wealth-creating potential of state-level protectionism, he would refuse. He would likely (and correctly) say that it's ridiculous on its face to suppose that such protectionism would make the people of Tennessee as a group wealthier over time. If my suspicion is correct, then to what would Rodrik himself attribute his out-of-hand dismissal of the notion that Tennessee tariffs might well make Tennesseeans richer? Would he realize to his chagrin that he is a benighted, faith-based non-scholar? Or would he instead understand that the case for an extensive, market-driven division of labor is so strong -- and that the political border that separates Tennessee from other states is so economically meaningless -- that it would be as pointless for a serious economist to explore the economic potential of Tennessee protectionism as it would be for a serious oncologist to try to cure a patient of cancer by bleeding that patient with leeches."

MP: National boundaries, like state borders, are just imaginary lines on a map, and "economically meaningless." As Don also points out, if we accept that trade between two individuals or firms on the same side of an imaginary line benefit from trade (Michiganders buying Florida oranges), then two individuals on different sides of an imaginary line should also benefit from trade (Michiganders buying Canadian lumber or taking a European vacation). Likewise, if trade protection at the national level can make people better off (tariffs on Canadian lumber), then tariffs at the state level should also make people better off (Michigan tariffs on Florida oranges).

Economists' support of "free trade" is really a support of voluntary win-win "trade" in general, regardless of whether the buyer and seller are on the same side, or different sides, of imaginary lines we call national, state, county and city borders.

Friday, July 13, 2007

Economic Week in Review: Dow Closes Record High

During a relatively light week for economic news, the highlight was Thursday's surging stock market, as the Dow Jones Industrial Average gained 284 points to close at a record high. Elsewhere, the U.S. trade deficit in goods and services swelled to $60.0 billion in May. Other news was mixed, as demand for consumer credit rose, jobless claims decreased, retail sales declined, and business inventories edged higher. For the week, the S&P 500 Index gained 1.5% to 1,553. The yield of the 10-year U.S. Treasury note fell 9 basis points to 5.10%.

Read more here from Vanguard's Economic Week in Review.

Bull Market, Energizer Bunny Economy

Based on futures trading on Intrade:

1. Futures contracts trading for the probability of the U.S. going into recession in 2007 fell below 10% for the first time this year, and is now about 9.2% (see top graph above), down from 35% odds at the beginning of the year.

2. The contracts trading for the DJIA are trading to reflect a 35% probability that the DJIA will clost above 14,500 at the end of 2007 (an increase of 639 points from yesterday's close), up from less than 10% odds in April (bottom graph above).

Big Pharma Save Lives

In Michael Moore's "Sicko," pharmaceutical companies are again demonized on the big screen.

During the past century the lifespan of Americans increased by 30 years (from 44 to 77 years, see chart above, which also shows projected future increases in life expectancy), and almost all of that increase was due to one class of medical products: vaccines.

Children today receive 14 different vaccines by the time they are two years old. Although most people don't know it, nine of those 14 vaccines -- which save about eight million lives a year -- were made by one man. And that man, Maurice Hilleman, spent much of his career at Merck. If he hadn't -- if he'd stayed in academia -- he would never have been able to convert his dedication and brilliance into the products that save our lives. When Michael Moore talked about better health, it would have been nice to have seen Hilleman's image on the screen.

"Sick Propaganda" by Dr. Paul Offit in
today's WSJ

MP: Note that Merck alone spent $4 billion on health care R&D in 2004, Pfizer spent almost $8 billion, and Johnson and Johnson spent $5.2 billion, see the list of
Big Pharma here and their R&D epxenditures.

Thursday, July 12, 2007

Tax Revenues Rising, Budget Deficit Shrinking

New York Sun, "Incredible Shrinking Deficit:

The New York Times's Paul Krugman, in December, wrote that President Bush "plunged the budget deep into deficit by cutting taxes on dividends and capital gains even as he took the country into a disastrous war." Senator Clinton went to the Senate floor in February of this year to speak of the "fiscal recklessness" of the Bush administration, which she charged had contributed to "record deficits." In March, Senator Schumer, who is now the chairman of Congress's Joint Economic Committee, spoke of "budget excesses of the past six years" that have brought us "a mounting debt to the rest of the world."

But as the shrinking figures above show, in fact the deficit is shrinking. When you look at it as a percentage of GDP, the decline is even more striking (see chart above, click to enlarge).

Wall Street Journal, "
Down Goes the Deficit:

In 2003, Mr. Bush and Congress cut taxes on investment and high earners, and the happy result has been revenues aplenty.

And buoyant tax revenues are the major reason for this deficit reduction. So far this year tax receipts are up 7.5%, and that follows two years of double-digit increases. Federal tax receipts since 2004 are up by nearly $700 billion -- the largest ever revenue gain over a similar period. Tax collections have been so resilient that many private forecasters and the Congressional Budget Office are predicting a budget deficit well under $200 billion by year's end.

Mapland Graph Test: State Unemployment Rates

Chart above (click to enlarge) is from a new program called MapLand, which works with Excel to create graphs, just trying it out for the first time. Notice that Michigan (6.9%) and Mississippi (6%) are the only states with unemployment rates at 6% or higher.

Pearl's Back

Remember "The Landlord?"

Well, Will Farrell and Pearl are back in "Good Cop, Baby Cop."

And check out "The Landlord Out Takes."

Check out this story in the Washington Post about Pearl and the Funny or Die website.


1. Supply and Demand for NYC Parking Spaces, The Price Is Right at $225,000, NY Times

2. Going to the Mall for an Eye Checkup, Starting at $55, WSJ

3. Pirated Music Helps Radio Develop Playlists, The Upside of Illegal Downloading, WSJ

4. Can't Sell Your House? Try Raising the Price, Expensive Homes Are Selling, NY Times

About Those 50 Million Uninsured

Larry Elder on Sicko:

First, a lack of health-care "insurance" does not mean a lack of health care. Many emergency rooms, by law, provide medical care to anyone who walks in, whether an illegal or legal resident of this country.

Second, when Michael Moore asserts that 50 million Americans lack health care insurance, he most assuredly includes some of the estimated 11 million to 20 million illegal aliens living here. Of people born in America, 86% have health-care coverage. For non-citizens, only 57% have health-care insurance.

Now examine those who lack health-care insurance.

Nearly half go without health insurance only for four months or less, usually while between jobs. Others with employment could easily add health-care insurance through their work for a very small premium, and elect not to do so. Many without health-care insurance consist of young people (18 million uninsured are between the ages of 18 and 34) who consider themselves -- given their youth and good health -- unlikely to face large health-care costs.

Over 14 million of the uninsured, according to the Census Bureau, live in households earning $50,000 or more annually. Over 7 million are in households earning more than $75,000 a year. These people could afford health-care insurance, either out-of-pocket or by making minor adjustments to their lifestyles. A small number of the uninsured include criminals. Should taxpayers provide health care for them, as well?

Wednesday, July 11, 2007

Transformational UAW Deal? Accept Professors' Pay

According to Forbes:

Labor cost per hour, wages and benefits for hourly workers, 2006.

Ford: $70.51 ($141,020 per year)

GM: $73.26 ($146,520 per year)

Chrysler: $75.86 ($151,720 per year)

Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)

According to AAUP and IES, the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).

Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D. (see graph above, click to enlarge), and 52.6% more than the average worker at Toyota, Honda or Nissan.

Many industry analysts say the Detroit Three, and especially Ford, must be on par with Toyota and Honda to survive. This year's contract, they say, must be "transformational" in reducing pension and health care costs.

What would "transformational" mean? One way to think about: "transformational" would mean that UAW workers, most with a high school degree, would have to accept compensation equal to that of the average university professor with a Ph.D.

Detroit: The Supermarket Desert

Detroit -- The lack of major grocery stores has long been a quality-of-life problem in Detroit and one reason some families don't want to live in the city. Now, however, the situation is getting worse as the last two Farmer Jack stores in the city prepare to close by Saturday.

If no grocery stores buy the Farmer Jack locations from the Great Atlantic & Pacific Tea Co., Detroit will be left without a single national chain supermarket, much less a Wal-Mart or Meijer superstore or a Costco-style warehouse store.

Analysts say no other major city in America is such a supermarket desert. And it's not likely to change anytime soon.

Top 10 Reasons Retail Chains Stay Away from Detroit:

1. Profit margins at supermarkets are 1-5%. If shoplifting by customers and employees runs 7-8%, the store is doomed to lose money.

2. High cost of maintaining security for the stores, something most suburban locations don't need.

3. Shopping carts often disappear, at a cost of $300 per cart.

4. Personal safety for employees, with robberies, thefts and assaults both inside and outside the stores.

5. Difficulty finding qualified managers willing to run Detroit stores. Most prefer the suburban locations.

6. Problems seeking qualified workers for the stores. It can be a major undertaking to find employees who can pass reading, writing and math tests along with credit, criminal background and drug tests.

7. And there is a constant turnover of employees at stores in the city. "Its a human resource nightmare," said David J. Livingston, a supermarket expert from Wisconsin.

8. Declining population. No national chain wants to move into an area that is losing population.

9. Lower per-capita income. That means less expenditure on food.

10. Racism and discrimination accusations. If the store raises its prices because of higher costs of doing business, it is often charged with gouging minorities and the poor.

Update: As
Peter Klein points out, shouldn't anti-Wal-Mart groups like Wal-Mart Watch and Wakeup Wal-Mart now be celebrating, and claiming that Detroit residents are much better off without "greedy, community-destroying" Big Box retailers like Wal-Mart?

CD Visits, By Time Zone

Carpe Diem visits, by time zone, from the blog Sitemeter, showing that about 2/3 of the traffic comes from Eastern and Central time zones, and about 85% from the U.S.

Minimum Wage, Maximum Politics

Economist Brad Shiller writing in today's WSJ:

"The federal minimum wage went up on July 1 and hardly anyone noticed. And why should they have? The federal minimum had been stuck at $5.15 since 1997, while average hourly wages had risen nearly 40%. Even entry wages at McDonald's had crept above $7 in the decade of legislative inaction. So the bump from $5.15 to $5.85 was largely a nonevent.

It's no wonder, then, that few workers noticed, much less celebrated last week's hike in the minimum wage. The only people celebrating are the politicians who are already proclaiming how they helped the poor, low-income worker."


2007 Big Mac Index: Burgernomics

For 20 years The Economist magazine has published its "Big Mac Index." Since Big Macs are sold in about 120 countries, they can be used as a yardstick to compare currency values (see chart above, click to enlarge).

According to the 2007 Big Mac Index, the world's most undervalued currency (vs. the dollar) is China's yuan, where a Big Mac sells for the equivalent of only $1.45 (vs. $3.41 in the U.S.). On the other hand, Norway's krone is the world's most overvalued currency - a Big Mac in Oslo will set you back almost $7, more than twice the U.S. price. For 2007, there are 33 currencies like the Chinese yuan that are undervalued, and 13 currencies like the Norwegian kroner that are overvalued.

The Big Mac index has its limits. Burgers can't be traded across borders to arbitrage price differentials, and McDonald's doesn't even sell beef burgers in some countries like India.

Canadians Smoke More Pot Than Even Jamaicans!

Canadians use marijuana at four times the world average, making Canada the leader of the industrialized world in cannabis consumption. The 2007 World Drug Report by the UN Office on Drugs and Crime says that 16.8% of Canadians aged 15 to 64 smoked marijuana in 2006, more than four times the world average of 3.8%. Canadians outsmoked Americans, and even outsmoked Jamaicans by more than 50%!

Brutal Law of Supply and Demand for Machetes: Dead People Can't Vote

The News Agency of Nigeria surveyed prices and found that a good quality machete was now selling for 400 naira ($3) compared with 800 naira ($6) before the April elections, which were marred by politically motivated violence in many states.

Africa's most populous country returned to civilian rule in 1999 after three decades of almost continuous army rule, but violence remains a feature of politics, especially during the build-up to elections.

European election monitors estimated that at least 200 people were killed in politically motivated violence during months of campaigning ahead of the April polls.

(HT: Sidewinder77)

Tuesday, July 10, 2007

New-York Bike-Share Project Starts

In a previous post on CD about communal bike-sharing, I documented the problems of the "yellow bike" program in Lexington, KY.

Now NYC is launching The New York Bike-Share Project, see this Washington Post story.

One reason this program might actually succeed? "It's free for the first week, but cyclists must provide credit card information to ensure they bring the bike back." After that, it appears that a credit card will still be required, and there will be a charge for each use.

Hooked On Whole Language, Even If It Don't Work

"It is safe to say that phonics and its related instructional components are no more popular in the public education establishment than they were five years ago. This despite the fact that the literacy levels of America's schoolchildren range from appallingly low to mediocre by both national and comparative international standards.

For example, nearly two-thirds of America's fourth- and eighth-graders failed to attain scores of proficient in reading in 2005. Poor and minority children fared even worse, with 84% unable to reach the proficiency level.

Despite all this less-than-encouraging data, efforts to teach the elements of reading in a direct and systematic fashion--the phonics method--are derided at most U.S. education schools as "cutting learning up into itty-bitty pieces," or "one-size-fits-all," or "the factory model," say Yvonne Siu-Runyan, an influential proponent of a competing theory of reading instruction known as "whole language." Whole language is favored by such influential entities as the National Council of Teachers of English and the International Reading Association, nearly the entire faculty at the prestigious Columbia Teachers College, and the vast majority of American elementary-school teachers, according to a 2002 poll conducted by the Manhattan Institute."

From the current issue of Weekly Standard's article "Read It And Weep."

MP: In my opinion, the biggest difference between phonics and whole language? Phonics works.

Markets in Everything: Rent Out Your Driveway

"As drivers, we’ve all experienced the growing problem of parking. With resident permit holder bays springing up across the country, car park prices making us wince, and penalty notices landing on windshields at a record rate, parking is becoming ever more restricted, costly and stressful.

At the same time, millions of driveways and car parks – next to major public transport hubs, town centers and theatres for example – stand empty everyday when they could be providing parking to motorists and extra income to homeowners and businesses. What’s missing and needed is something to bring drivers and their vehicles together with property-owners and their garages."

From the website, which connects people who need a parking spot with those who have space to spare – whether on the street or on their driveway. It is a nationwide, free service in the U.K. that allows you to book the same parking space on a regular basis or on a one-time basis. The site allows you to search for parking spaces near your place of employment, restaurants, concert halls and football stadiums.

A sample of prices for London (more than 400 listings): $2-14 per day, $24-60 per week, and $70-400 per month. Although not currently available in the U.S., it might be soon.