Saturday, March 01, 2008

A City Growing, A City Dying

From 4-Block World.

See related CD post here.

The Coming Death of Indian Outsourcing?

From Forbes Magazine:

Forbes recently published some scary statistics on wage inflation in India. (See "Indian Employees Enjoying Swift Pay Hikes.") Salaries rose 15.1% in 2007, up from 14.4% the previous year. The 2008 forecast: 15.2%. This would be the fifth consecutive year of salary growth above 10%.

Add to that the appreciation of the rupee against the weakening dollar (11.5% in 2007), and its impact on the labor arbitrage market.

Is the death of Indian outsourcing all that far off?

Assuming a 15% year-to-year salary hike rate, and a 2007 cost advantage of 1:3 in favor of India, if U.S. wages remain constant, India’s cost advantage disappears by 2015. Then what?

(HT: Mad Toothfish)

Resource Economist Julian Simon on YouTube

Economist Julian Simon foresaw the falling natural resource prices, increased world oil supply, and decline in farmland prices. His view of population economics is unique and persuasive. In this 6-part series now available on YouTube, Julian Simon discusses resources, environment, population growth and his analytical methods. Watch Part 1 above.

(HT: Drew Suder)

McCain:Free Trade; Clinton, Obama: Intervention

The charts above (click to enlarge) are from Cato Institute's "Free Trade, Free Markets: Rating the Congress," an interactive web site that allows users to examine how Congress and its individual members have voted on bills and amendments affecting the freedom of Americans to trade and invest in the global economy.

You can search by individual member of Congress, or by a particular bill, or by party breakdown on a particular bill, see below:

Bottom Line: When it comes to the voting records of the main presidential candidates on free trade, John McCain is clearly a "Free Trader," Hillary Clinton is clearly an "Interventionist," and Obama is leaning towards being an "Interventionist." It's also the case that Republicans as a group have a much stronger free trade voting record than Democrats on most bills. With either Clinton or Obama in the White House, we can probably expect more protectionism and less free trade.

Inconvenient Weather: Welcome to the Ice Age

The ice is back.

Gilles Langis, a senior forecaster with the Canadian Ice Service in Ottawa, says the Arctic winter has been so severe the ice has not only recovered, it is actually 10 to 20 cm thicker in many places than at this time last year.

OK, so one winter does not a climate make. It would be premature to claim an Ice Age is looming just because we have had one of our most brutal winters in decades.

But if environmentalists and environment reporters can run around shrieking about the manmade destruction of the natural order every time a robin shows up on Georgian Bay two weeks early, then it is at least fair game to use this winter's weather stories to wonder whether the alarmist are being a tad premature.

From the article "Forget global warming: Welcome to the new Ice Age," in Toronto's National Post

Friday, February 29, 2008

25th Month of Real Disposable Income Growth

According to today's BEA report, real disposable personal income increased by 1.23% in January compared the same month a year ago (see chart above).


1. January marks the 25th consecutive month of positive growth for real disposable personal income.

2. Although there has certainly been a slowdown in the growth of real disposable income over the last 5 months, it's not necessarily an indication of recession. Notice in the graph that there was a period in 2002-2003 when real disposable income was growing at below 1% in 6 out of 9 months, and several months in 2005 with negative growth, and neither period was recessionary.

R.I.P. Buddy Miles

George Allen "Buddy" Miles passed away late last night in Austin, Texas after a long fight with congestive heart disease.

Live clip above of "Them Changes," by Buddy Miles and Jimi Hendrix at the Fillmore East on January 1, 1970.

Global Hockey Competition: N.H.L. vs. Russia

NYTimes -- Alexei Yashin (pictured above) joined a growing movement among Russian hockey players, government officials and business leaders. They are seeking to reclaim a sport viewed here as a national tradition that has been crippled, many say, by the pilfering of hockey stars over the last decade and a half by the N.H.L.

Now, say these hockey patriots, it is Russia’s turn to have the best. The country’s professional league expects to catch and surpass the N.H.L. as the world’s premier hockey league. To do that, it must keep its best homegrown talent at home — or lure it back home.

Thursday, February 28, 2008

Election Odds: Obama Now Almost a 6:1 Favorite

From trading on for politicial futures contracts:

2008 Democratic Nomination:
P (Obama) = 85%
P (Clinton) = 15%

ND: Leading the US in Exports AND Protectionism?

BISMARK, ND -- North Dakota ranked top in the nation for export growth in 2007, according to U.S. Commercial Service reports. The state's exports totaled $2 billion in 2007, up 34% from its $1.5 billion in exports in 2006; nationally, export growth was 12% more than the previous year.

Among the top export destinations for North Dakota were Canada, which represented 49% of the market, Mexico, Belgium, Germany, Russia, Ukraine and Australia. The top exports were skid steer loaders, motor vehicle parts, agricultural tractors, wheat, oil, sunflowers, machinery and crops, according to reports.

Dept. of Commerce International Trade Administration: Since the North American Free Trade Agreement (NAFTA) was signed in 1993, North Dakota’s combined exports to Canada and Mexico have increased 83%.

WSJ Washington Wire -- North Dakota Sen. Byron Dorgan endorsed Barack Obama, saying the fact that Obama “has always opposed NAFTA” was a major factor in his endorsement.

National Association of Manufacturers)

Google Chief Economist Hal Varian on Data Analysis

Google's Chief Economist Hal Varian Answers Questions on the Freakonomics blog:

Q: What jobs would you recommend to a young person with an interest, and maybe a bachelors degree, in economics?

A: If you are looking for a career where your services will be in high demand, you should find something where you provide a scarce, complementary service to something that is getting ubiquitous and cheap.

So what’s getting ubiquitous and cheap? Data. And what is complementary to data? Analysis.

So my recommendation is to take lots of courses about how to manipulate and analyze data: databases, machine learning, econometrics, statistics, visualization, and so on.

(HT: Newmark's Door)

A few more:

Q: PC or Mac?

A: Linux.

Q: How close to “perfect information” can you get in your position at Google?

A: I sit one office away from our CEO, so I would say “about 12 feet.”

Sesquipedalian Spark, Polysyllabic Exuberance

R.I.P. William F. Buckley Jr., 1925-2008

Washington Post: "Erudite Voice of the Conservative Movement"

NY Times: "William F. Buckley Jr., 82, Dies; Sesquipedalian Spark of Right"

Reason Magazine 1983 Interview: "I share about 90 percent of the views of most libertarians"

Government Crackdown on Good Samaritans

INDIANA, PA -- Denise George never thought she was breaking the law. Living on the outskirts of Dayton, she didn't think twice about helping her Amish neighbors — whose religion prevents them from owning vehicles — make a trip or two into town during the week for supplies and other reasons.

That is, until she got a cease-and-desist letter from the Pennsylvania Public Utility Commission informing her that her actions were illegal.

HT: Reason

Wednesday, February 27, 2008

Upbeat Economic News: It's Not All Gloom & Doom

HELENA -- With Montana’s unemployment rate at an amazingly low 2%, finding qualified workers for Helena employers is the biggest challenge facing the city’s employment agencies.

SYDNEY -- Australia's seasonally-adjusted unemployment rate fell to a record low of 4.1% in January from 4.3% in December, according to the Australian Bureau of Statistics.

HONG KONG -- Hong Kong's financial chief said Wednesday he will cut salary and corporate taxes and abolish duties on beer and wine after a booming economy pushed the city's budget surplus to a record high.

SEATTLE -- The unemployment rate in Washington fell to a near-record low of 4.5% in January, in part thanks to the creation of 5,800 new jobs last month.

TAIPEI -- The unemployment rate came in at 3.8% in January, down from 3.83% in December, and the lowest jobless rate for January in seven years.

RIO DE JANEIRO -- Brazil's economy is estimated to have grown by as much as 5.3% last year, its highest rate in three years, as booming commodity exports and a stable currency helped Brazil record a $40 billion trade surplus. Inflation came in under 5%, and employment and foreign investment have reached record highs.

20 Ways Wal-Mart Clinics Will Affect US Healthcare

Big-box behemoth Wal-Mart has ventured into the healthcare realm, offering low-cost, walk-in clinics in more and more of its stores every day. Although Wal-Mart medicine may not sound like a great idea at first, these clinics can bring good changes to the health care industry, like insurance-free care, eased emergency rooms, and more widespread treatments.

Continue reading "20 Surprising Ways Wal-Mart Clinics Will Affect US Healthcare."

Flawed WSJ Editorial: Wages Are a Price, Too

From today's WSJ editorial "Inflation May Be Worse Than We Think" by David Ranson:

The graph above shows how rapidly the purchasing power of income declines from an ongoing inflation of 4%. After nine years, an income of $100,000 is worth only $70,000. After 17 years its purchasing power has been cut in half, and after 30 years by about 70%. The cumulative loss of purchasing power if inflation persists above 4% is an awesome prospect that is surely going to be unacceptable.

Comment: David Ranson is way off-base on his inflation analysis and has made a serious and fundamental error: he has assumed that income remains constant for 30 years and all other prices increase annually by 4%. That's pure nonsense and nitwitery.

Reason? Wages are just another price, the price of labor. And inflation affects all prices, including wages, see chart below:

From 1964 to 2008, average hourly earnings have increased at almost the same rate as the Consumer Price Index, suggesting that Mr. Ranson's graph, adjusted for wage increases at the rate of inflation, would look like this:

Inflation may or may not be a problem, but to assume that prices go up but wages don't IS a real problem for this WSJ editorial.

Shockingly Low Male HS Grad Rates in Detroit:32%

According to a study by the Education Policy Center at Michigan State University:

Percent of Detroit students who graduate in 4 years: 31.9%

Percent of female students who graduate in 4 years: 39%

Percent of male students who graduate in 4 years: 25%

Read the Detroit New article here.

Assorted Links

Thomas Sowell: Venezuela is currently giving us a lesson on the consequences of price controls. The government of leftist President Hugo Chavez has imposed price controls -- and seems to be surprised that lower prices have lead to reduced supplies, even though price controls have led to reduced supplies in countries around the world and for thousands of years.

Walter Williams: The worst thing the West can do to Africa is to give more foreign aid. For the most part, foreign aid is government to government. As such, it provides the financial resources that enable Africa's grossly corrupt and incompetent regimes to buy military equipment, pay off cronies and continue to oppress their people. It also provides resources for the leaders to live lavishly and set up "retirement" accounts in foreign banks.

The worst thing the West can do to Africa is to give more foreign aid. For the most part, foreign aid is government to government. As such, it provides the financial resources that enable Africa's grossly corrupt and incompetent regimes to buy military equipment, pay off cronies and continue to oppress their people. It also provides resources for the leaders to live lavishly and set up "retirement" accounts in foreign banks.

John Stossel: How many shootings at schools or malls will it take before we understand that people who intend to kill are not deterred by gun laws? Last I checked, murder is against the law everywhere. No one intent on murder will be stopped by the prospect of committing a lesser crime like illegal possession of a firearm. The intellectuals and politicians who make pious declarations about controlling guns should explain how their gunless utopia is to be realized.

Tuesday, February 26, 2008

Wal-Mart Puzzle: Why Is It Thriving?

According to Daniel Gross at, Wal-Mart's stock is at a 2-year high (see chart above) because:

1. Wal-Mart sells necessities, not discretionary items. The overwhelming majority of its sales are not impulse buys. Even in a recession, most people don't drastically reduce their spending on staple groceries, light bulbs, or diapers.

2. In a pinched economy, consumers are embracing their inner skinflint. And Wal-Mart is a penny pincher's paradise.

3. The economic-stimulus package President Bush signed earlier this month seems to have been designed to help Wal-Mart. It funnels cash to individuals making less than $75,000 or to families making less than $150,000, many of whom might shop at Wal-Mart. $300 really isn't enough to put a dent in a payment for a new car or to pay off a mortgage, but it might be enough to spur a shopper to throw a few extra goodies into the Wal-Mart shopping cart.

4. As the U.S. economy idles, the rest of the world is still growing quite rapidly. And Wal-Mart finally has meaningful international sales to report. In 2003, international sales were just 16.7% of overall revenues. But thanks to aggressive expansion in Mexico, China, and elsewhere, Wal-Mart has become an increasingly multinational corporation. In the 12 months that ended in January 2008, international sales rose 17.5% and constituted 24.2% of overall sales.

Free Cubans by Dropping Trade Restrictions

Fr. Robert Sirico, president of the Acton Institute in Grand Rapids, MI argues in today's Detroit News that if we really want to make Castro squirm in his hospital room and help revive the museum-like economy of Cuba, the U.S. should lift trade restrictions.

Markets in Everything: Rent Out Your Driveway II

Last July, I had a CD post about, a U.K. company which "enables property-owners to rent out their empty driveways and garages to drivers needing somewhere to park."

After its success in London and the U.K., the company recently launched its service in the U.S.:

Press Release:, a successful British-based website designed to connect drivers with open parking spaces, announced today that it will launch the service in the United States. The site is run by Anthony Eskinazi, a 24-year old entrepreneur from London, England (pictured above), whose modern innovation has changed the way people find parking.

By connecting people who want to rent out or sell their under utilized parking spaces with those who are looking for convenient and cheap parking, offers a modern, high tech response to what is typically thought of as a low tech challenge.

From an email I received from Anthony: "With the credit crunch hitting hard at this moment in time, we feel that for those who live in areas where the demand for parking is high, our service will offer homeowners a great opportunity to make an additional income from their property."

See the first listings for
parking spaces in Boston.

Monday, February 25, 2008

Smoking Bans Can Be Hazardous to Your Health?

From "Economics: Public and Private Choice" by Gwartney, Stoup, Sobel and Macpherson:

Guidepost #6 to Economic Thinking: "Economic actions generate secondary effects in addition to immediate effects."

Pitfall #2 to Avoid in Economic Thinking: "Good intentions do not guarantee desirable outcomes."

Application/Case Study:

Boston Globe article: "Smoking Bans Can Be Hazardous to Some People's Health:"

A rigorous statistical examination has found that smoking bans increase drunken-driving fatalities. One might expect that a ban on smoking in bars would deter some people from showing up, thereby reducing the number of people driving home drunk. But jurisdictions with smoking bans often border jurisdictions without bans, and some bars may skirt the ban, so that smokers can bypass the ban with extra driving. There is also a large overlap between the smoker and alcoholic populations, which would exacerbate the danger from extra driving. The authors estimate that smoking bans increase fatal drunken-driving accidents by about 13%, or about 2.5 such accidents per year for a typical county. Assuming a smoking ban is still worth it, the results suggest the need for a more aggressive approach to drunken driving - or a nationwide smoking ban.

Adams, S. and Cotti, C., "Drunk driving after the passage of smoking bans in bars," Journal of Public Economics (forthcoming).

Article Abstract: Using geographic variation in local and state smoke-free bar laws in the US, we observe an increase in fatal accidents involving alcohol following bans on smoking in bars that is not observed in places without bans. Although an increased accident risk might seem surprising at first, two strands of literature on consumer behavior suggest potential explanations — smokers driving longer distances to a bordering jurisdiction that allows smoking in bars and smokers driving longer distances within their jurisdiction to bars that still allow smoking, perhaps through non-compliance or outdoor seating. We find evidence consistent with both explanations. The increased miles driven by drivers wishing to smoke and drink offsets any reduction in driving from smokers choosing to stay home following a ban, resulting in increased alcohol-related accidents.

Sunday, February 24, 2008

5% of Congressional Districts Get 50% of Subsidies

According to the EWG Farm Subsidy Database, fewer than 5% of congressional districts (19 out of 435 districts, or 4.35%) accounted for almost half (49.7%) of crop subsidy program spending in the U.S. between 2003 and 2005.

Fastest Global Diffusion in History: The Cell Phone

From today's Washington Post:

The human race is crossing a line. There is now one cellphone for every two humans on Earth.

From essentially zero, we've passed a watershed of more than 3.3 billion active cellphones on a planet of some 6.6 billion humans in about 26 years. This is the fastest global diffusion of any technology in human history -- faster even than the polio vaccine (see related chart above from The Economist).

And cellphones are the first telecommunications technology in history to have more users in the developing world -- almost 60% -- than in the West. Cellphone usage in Africa has been growing close to 50% annually -- faster than any other region. More than 30 African nations have more cellphones than land lines.

Top 10 Reasons $280B Farm Bill is Bad Legislation

According to the NY Times:

1. The House and Senate bills, each costing about $280 billion over five years, are way over budget and include an array of gimmicky tax increases to make up the shortfall.

2. Even worse, the bills perpetuate an unfair, wasteful program of price supports and direct payments.

3. Half the subsidies would go to farmers in just seven states producing a handful of crops — corn, cotton, rice, soybeans and wheat.

4. Two-thirds of the nation’s farmers would not benefit at all.

5. Subsidies will flow to farm families making as much as $2 million a year.

6. What makes these subsidies even more outrageous is that just when the rest of the country is sliding into recession, commodity prices are booming and big farmers are rolling in clover.

According to the Orlando Sentinel:

7. The largest commercial farmers reap the bulk of the subsidies, while most growers get little or nothing.

8. Subsidies spur overproduction, wasting resources and harming the environment.

9. They impede efforts to open more foreign markets to U.S. products.

10. Subsidies are especially uncalled for now, when biofuel demand has sent farmland values and crop prices soaring.

Remote Robotic Surgery:Outsourced to Bangalore?

Thanks to an anonymous CD reader for this comment:

"As remote controlled robots are utilized more and more to do operations it is conceivable that one day a surgeon in Bangalore, India will perform operations on patients located in a Walmart surgical clinic in Mobile, Alabama. The technology has been here for a relatively long time."

For example, in 2001, surgeons in the U.S. Performed an Operation in France Via Robot.

More recently:

"Northeast Georgia residents needing cardiac surgery will have an innovative new treatment option next year in the region. Officials with Northeast Georgia Medical Center in Gainesville said they have received a $1 million gift from an anonymous donor to purchase a da Vinci Surgical System, which can be operated remotely.

The physician actually sits in a different location and operates through a screen, a robot, that can actually enter the chest cavity or the abdominal area, depending on whether they are doing an abdominal area or doing a heart."

And what about remote robotic surgery for the U.S. soldiers in combat?

WAIKOLOA, Hawaii — "Robotic surgery, which could be performed on patients in remote locations such as Iraq while the surgeon is in another location, is feasible despite needing significant mechanical improvements, a surgeon said here."