VP Odds on Intrade

Current Intrade.com odds for GOP VP (last trade):
Romney: 25.2%
Pwalenty: 25%
Ridge: 10%
Palin: 10%

Current Intrade.com odds for Dem VP:
Bayh: 27.8
Biden: 25%
Clarke: 17%
Kaine: 13.9%

Olympic Medal Inequality

So far, the top 20% of the teams earning at least one medal (12 out of 59) have earned 78.4% of the gold medals in the 2008 Summer Olympics, and 71% of the total medal points.

Dollar Summer Rally Continues

The U.S. dollar index (major currencies) ended the week at close an 11-month high, the highest level since mid-September 2007 (see graph above).

The Republicans Are Coming..... to the Twin Cities

Top 10 Interesting Facts about the most plugged-in gathering in Republican history, and its host cities of Minneapolis-St. Paul for the 2008 Republican National Convention (September 1-4):

1. This is the first time since 1928 that the candidate pool doesn't include an incumbent president or vice-president (for at least one party).

2. There will be 15,000 members of the media at the convention, second only to the Olympics in size.

3. When NY hosted the Republican convention in 2004, YouTube didn't even exist. This year, the convention has its own pages on Facebook and MySpace, and its own YouTube channel.

4. In 2004, only a dozen bloggers were granted press credentials to cover the convention. This year, 200 bloggers will be granted access.

5. The Twin Cities have 57 museums; only Chicago and Washington, D.C. have more.

6. St. Paul has more higher education institutions per capita than any city except Boston, with 10 colleges and universities within the city limits.

7. Downtown Minneapolis is home to 33,000 residents, more than the downtowns of Dallas, Denver, Houston, Indianapolis and Sacramento combined.

8. Minneapolis-St. Paul have more theater seats per capita than city outside of New York.

9. St. Paul's Summit Avenue has the longest stretch (5 miles) of Victorian mansions in the country.

10. Minneapolis has the fourth most active jazz scene in the country, right after L.A., New York and Chicago.

Source: Northwest Airlines World Traveler Magazine, Aug. 2008

Corporate Taxes Are Harmful for Growth

Unfortunately, U.S. has second highest corporate tax rate among OECD countries.

TAX FOUNDATION -- In a blockbuster new study titled "Tax and Economic Growth," economists at the OECD studied the effects of various types of taxes on the economic growth of developed nations and found that "corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes."

The main recommendation of the study is that if countries want to enhance their economic growth they would do well to move away from income taxes - especially corporate income taxes - toward less distortive taxes such as consumption-based taxes. The key to creating a growth-oriented corporate income tax system is to impose a reasonably low tax rate with few exemptions.

The study is particularly timely in light of the new OECD rankings of corporate taxes among the 30 OECD nations. It shows that the U.S. continues to have the 2nd highest overall corporate tax rate among industrialized countries. Only Japan has a higher overall rate (see chart above, see full list of countries here).

America The Uncompetitive

TAX FOUNDATION -- Amid rising concerns about the state of the U.S. economy, new data compiled by economists at the OECD shows that for the 17th consecutive year the average rate of corporate taxes in non-U.S. countries fell while the U.S. corporate tax rate stayed the same. As a result, the overall U.S. corporate tax rate is now 50% higher than the OECD average (see chart above showing US tax rate of 39.3% vs. 26.2% for non-US OECD).

The U.S. continues to have the second-highest combined federal-state corporate tax rate among industrialized countries at 39.3%. Only Japan has a higher overall corporate tax rate at 39.5%. By contrast, the average corporate tax rate among OECD countries has fallen a full percentage point in the past year, from 27.6% to 26.6%. Ireland's 12.5% corporate tax rate remains the lowest among OECD nations.

The release of these two OECD studies could not have come at a better time for the current political debate over how to move the U.S. economy forward. A U.S. corporate tax rate 50 percent higher than the OECD average should be a wake-up call to Washington, especially when combined with the empirical evidence that corporate taxes are the most harmful tax on economic growth. The question remains for the presidential candidates, What is your plan to restore American competitiveness?

The WSJ has a related editorial today, which concludes that "Every month that goes by without tax reform, America is a relatively less attractive place to do business. Over the past 18 months, nine of the 30 most developed nations and 20 countries world-wide -- from Israel to Germany to Turkey -- have cut their corporate tax rates. Nations are slashing rates to attract capital and jobs from the U.S., and the tragedy is that our politicians keep making it easy for them."

MP: Below is a Tax Foundation chart (click to enlarge) showing how the McCain and Obama tax plans compare to each other, and to the current tax law. Note that McCain would cut the corporate tax to 25% while Obama would leave it at 35%.

Private Health Care: Canada (.69%) v. US (11.6%)

S&P TSX Composite Index for Canada

S&P 500 Composite Index for U.S.

A regular CD reader from Canada (Andrew Greene) passes along the comparison above of the S&P/TSX Composite Index for the Canadian stock market versus the S&P 500 Index for the U.S. stock market. Notice the difference in health care sectors between the two composite market stock market indexes: it's only .69% of the Canadian market index versus 11.64% of the U.S. stock market.

Andrew wanted "Americans to have the chance to see the effect on homegrown health care innovation when health care is nationalized with policies like ours. It's pretty simple really. Nationalize health care and all the health care companies in the country will simply move somewhere else. Pretty powerful stuff."

With Core Inflation At 2.5%, Inflation's Not a Worry

According to Brian Wesbury and Bob Stein, "Inflation is the leading menace to the US economy."

Although I usually agree them, I don't see inflation as much of a menace right now. The core CPI inflation on an annual basis was 2.5% in July, barely above the 10-year average of 2.21%, below the levels close to 3% between mid-2006 to early 2007, and way below the 4.58% average since 1970 (see graph above).

In my opinion, unless and until the core CPI inflation starts to rise, inflation ain't a big problem. For example, inflation WAS a huge problem in the 1970s and early 1980s, but it was when CORE CPI INFLATION was rising by double-digits, not just oil, energy and food prices. By definition, inflation is a phenomena when ALL prices, in general and on average, are rising, NOT just food and energy. With core inflation so low and stable, I don't see how inflation can be a menace. And with oil prices plummeting and the dollar soaring, look for August inflation, both overall and core, to moderate.

Obama Delares War On Two-Income Families, Would Impose a Punitive Marriage Tax Penalty

The Obama campaign has at long last lifted the veil of mystery that has surrounded the Democratic presidential candidate's tax increase plans. Mr. Obama's two economic advisers, Jason Furman and Austan Goolsbee, have an op-ed piece in today's Wall Street Journal, and it isn't pretty.

To begin with, they propose bringing back the 39.6% top income tax bracket, an increase from the 35% current top rate. On top of that, he'd impose a new payroll tax on those top earners of 2% to 4%, bringing their marginal tax rate to as high as 43.6%. Add to that the top New York City income tax rate of 3.648% and the top New York State income tax rate of 6.85%, and the nominal marginal income tax rate mounts to a staggering 54%. Because Mr. Obama proposes to put the capital gains and dividend tax rate at 20% even for the "rich" — a mere 33% increase over the current 15% rate — expect to see plenty of high earners scurrying to find creative ways of structuring their income as capital gains or dividends rather than as earned income.

Meanwhile, the most astonishing sentence in the op-ed is this one: "His plan would not raise any taxes on couples making less than $250,000 a year, nor on any single person with income under $200,000." It amounts to a declaration of war on two-income families, a marriage penalty of punitive proportions.

If those two single persons with income just under $200,000 get married, Mr. Obama is going to hammer them with a huge tax increase. If the second earner, who in many cases is the woman, is going to have to give 54% of what she earns to the government, she might as well stay home with the children. Mr. Obama may be able to get away with symbolic slights to women, such as not picking Senator Clinton as vice president. But punishing them with confiscatory taxes for participating in the workforce at a high income level moves the slight into the realm of substance.

~NY Sun Editorial

House Sells for $1 in Detroit

DETROIT -- One dollar can get you a large soda at McDonald's, a used VHS movie at 7-Eleven or a house in Detroit.

The fact that a home on the city's east side was listed for $1 recently shows how depressed the real estate market has become in one of America's poorest big cities. And it still took 19 days to find a buyer.

The home, at 8111 Traverse St., a few blocks from Detroit City Airport, was the nicest house on the block when it sold for $65,000 in November 2006, said neighbor Carl Upshaw. But the home was foreclosed last summer, and it wasn't long until "the vultures closed in," he said. "The siding was the first to go. Then they took the fence. Then they broke in and took everything else."

So desperate was the bank owner to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer's closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000.

MP: There are currently 182 properties listed in Detroit for less than $1,000, including several more for sale at a list price of $1, and 7 houses for $100, 3 for $200, etc.

ExxonMobil CEO Defends High Profits: Exxon Spends $1 Billion Per Day To Run Its Business

ExxonMobil CEO and chairman Rex Tillerson defended his company's staggering $11.7 billion in profits for the second quarter, saying that the company's earnings reflected the magnitude of its business operation.

"I saw someone characterize our profits the other day in terms of $1,400 in profit per second. Well, they also need to understand we paid $4,000 a second in taxes, and we spent $15,000 a second in cost," Tillerson told ABC News' Charles Gibson. "We spend $1 billion a day just running our business. So this is a business where large numbers are just characteristic of it."

King Dollar Summer Rally:Index Hits 10-Month High

The U.S. dollar index (major currencies) reached a 10-month high today at 74.4614, the highest level since October 9, 2007.

New Online Service for Hedging Weather Risk

The potential market for weather risk coverage is huge, since as much as 70% of American businesses are impacted by weather in some way. While the risks for companies like agricultural firms are obvious, businesses from movie theaters—which see ticket sales slump on sunny days—to transportation companies and clothing manufacturers are affected by the weather. It's estimated that $2 trillion to $3 trillion of the United States' nearly $14 trillion G.D.P. is weather-sensitive.

Businesses have long bought insurance against weather-related damages; more recently, they have been able to buy weather futures contracts on exchanges like the Chicago Mercantile Exchange, but the offerings are largely linked to temperature and are unwieldy and expensive for smaller companies.

As businesses contemplate losing massive amounts of money from events like droughts and hurricanes, the new online service WeatherBill (company slogan: "Get Paid for Bad Weather") hopes to carve out a market in the growing field of weather-related risk-management products, offering what are essentially weather futures contracts to companies with an internet-era twist. The contracts pay off automatically without any kind of claims process based on objective weather measurements like the inches of rain a given area receives.

HT: Brian Ruppert

Silly Senators, Corn Is For Food

A new Reason.tv video examines the financial and environmental costs of ethanol

Politicians are going crazy for ethanol, touting it as a cure-all that will reduce both pollution and our dependence on foreign oil. But a new Reason.tv video shows ethanol subsidies are costing taxpayers a massive $8 billion this year and that as much as 60 percent of the increase in world food prices can be blamed on biofuel subsidies.

“Ethanol is bad for taxpayers, bad for the environment, and horrible for the world’s poor,” Nick Gillespie, editor of Reason.tv, declares in the video.

We are paying more for beef, milk, and eggs because the ethanol craze has increased demand for corn, driving up prices and diverting corn that used to go towards food products and feeding livestock. “We are in the midst of a world food crisis. Several million people are on the edge of starvation because we are turning food into fuel. The amount of corn that it takes to produce a 20 gallon tank of ethanol could feed one person for an entire year,” Reason magazine Science Correspondent Ronald Bailey says.

And those far-reaching environmental benefits that politicians promised? It turns out they were wrong. “Ethanol is much worse for the environment than gasoline,” states Bailey. “As some studies suggest, you put more energy into producing ethanol than you get out of it when you burn it.”

The Case for Dumping the BA Degree

Outside a handful of majors -- engineering and some of the sciences -- a bachelor's degree tells an employer nothing except that the applicant has a certain amount of intellectual ability and perseverance. Even a degree in a vocational major like business administration can mean anything from a solid base of knowledge to four years of barely remembered gut courses.

The solution is not better degrees, but no degrees. Young people entering the job market should have a known, trusted measure of their qualifications they can carry into job interviews. That measure should express what they know, not where they learned it or how long it took them. They need a certification, not a degree.

~Charles Murray in today's WSJ

Employment Dynamics Suggest No Recession in '07

The BLS released its quarterly Business Employment Dynamics study today for the fourth quarter of 2007, reporting that the number of job gains from opening and expanding private sector establishments was 7.65 million, and the number of job losses from closing and contracting establishments was 7.333 million, for a net job gain of 317,000 from October to December 2007.

According to the BLS, "The Business Employment Dynamics (BED) data series include gross job gains and gross job losses at the establishment level by major industry sector and for the 50 states, as well as gross job gains and gross job losses at the firm level by employer size class. Gross job gains are the sum of increases in employment from expansions at existing units and the addition of new jobs at opening units. Gross job losses are the result of contractions in employment at existing units and the loss of jobs at closing units. The difference between the number of gross jobs gained and the number of gross jobs lost is the net change in employment."

On a percentage basis, gross job gains represented 6.8% of private sector employment in the fourth quarter 2007, and exceeded job losses of 6.5%, resulting in a net .30% job gain (see chart above). The fourth quarter 0.30% job gain followed a -0.20% third quarter loss, the first loss in 16 quarters.

Note that there were four consecutive quarters of job losses during the 2001 recession, and three consecutive quarters of losses greater than -.75% in that year. The BED data for 2007 suggest a possible slowdown in the third quarter, but do not support the possibility that a recession started in 2007.

(Note: For certain quarters in 2002, the net job growth was 0%.)

Real Estate Boom Continues for U.S. Farms

Average Farm Real Estate Value

Maps are from the USDA's National Agricultural Statistics Service. The average farm real estate value has increased by 85% in the last five years, from $1,270 per acre in 2003 to $2,350 in 2008 (see top chart above, click to enlarge). Many Midwest corn and grain states like the Dakotas, Minnesota, Illinois, Indiana and Nebrask have experience double-digit increases in farm values in just the last year (see bottom chart above, click to enlarge).

Strong commodity prices and farm programs, outside investments, favorable interest rates, and tax incentives continue to be the factors that drive farm real estate values to record levels.

Update: With farm real estate values booming, commodity farm prices close to historical highs, and farm profits at record levels (see chart below), this group still needs farm subsidies (e.g. $288 billion 2008 farm bill).

Recycling is Rubbish

The notion that recycling makes economic sense is rubbish.

Some things are profitable to recycle, some things only make sense to recycle when we consider the environmental effects, some things we would be crazy even to try to recycle. Working out what falls into each category should be done by cost-benefit analysis. Add up all the costs, then all the benefits, and see which outweighs the other.

However, there is one cost that no one acknowledges: the time spent preparing items for recycling. No one mentions it because it's done by you, free, in your own home.

~Tim Worstall

Englishman's Castle blog points out that, "The sorting of rubbish can actually now be done very efficiently by large machines at centralized factories. But the green movement insists we do it at home as a penance for our consumerism, almost as if when we needed pins we were forced to make them at home. It is this forbidding of the division of labour that makes us poorer and is symptomatic of the green movement."

See related, classic article "Recycling is Garbage" by John Tierney in the NY Times Sunday Magazine (June 30, 1996).

Free-Market Optimism vs. Statist Pessimism

Why are optimists about the state of the world disproportionately represented by classical liberals, libertarians, and free-market conservatives, while pessimists about the state of the world are disproportionately represented by statists?

Why do left-leaning media such as the New York Times and CNN devote so much ink and airtime alleging that middle-class Americans have made little or no economic progress over the past 35 years and that the planet continues to spiral into imminent catastrophe?

Why, whenever the New York Times’s Paul Krugman and the Washington Post’s Harold Meyerson write (as they do, almost weekly) that ordinary Americans are trapped in a no-growth economic situation by “the rich” and powerful, do market-oriented bloggers respond with data showing that this claim is false?

And why, whenever the Los Angeles Times or The New Yorker publishes yet another “report” allegedly documenting continuing environmental degradation, do so many market-oriented scholars frequently expose these reports as being factually wrong or poorly reasoned, or both?

George Mason economist Don Boudreaux answers those questions here.

USA As Export Superpower; +3% Real GDP in QII '08

From First Trust economists Brian Wesbury and Bob Stein:

The U.S. is becoming an export superpower. The trade deficit declined substantially in June, with exports up 21.1% versus last year, the fastest growth in the past twenty years (see chart above). Largely as a result of this report, the real GDP growth rate in the second quarter is likely to be revised up to about 3% versus the 1.9% originally reported.

What If Gov't. Subsidized Students, Not Colleges?

In my judgment, there is a problem of balance between research and teaching in American colleges and universities. Most of the problem comes from the fact that government subsidies have undermined market forces.

By and large, the government subsidizes colleges, not students. Federal and state financial support, although based on the enrollment of each student, goes to the university, and the university administration allocates it. If the government actually subsidized students, the payoff from undergraduate teaching would be higher, because students would seek to spend their subsidy dollars at schools emphasizing undergraduate education and not at schools emphasizing research.

In other words, the current public university system makes it very difficult for students to cast dollar votes for excellence in teaching.

I do think that research helps one become a better teacher, particularly at the graduate level. But the marginal payoff of research is low for most faculty members. The creative energies of those who are interested in tenure and larger raises are directed toward knocking out more articles, even if few read them. Would this be the case if the government subsidies followed the student and students were free to choose among colleges? I don't think so. Student dollars would go more toward good teaching and less toward esoteric research.

~Florida State economist and textbook author James Gwartney speaking at a recent forum on "Are Research and Teaching Friends or Foes?" with three other economists.

HT: Pete Boettke

If You Tax Something, You Get Less of It, Part II

Exhibit A: Maryland's $2 a pack cigarette tax, see yesterday's post.

Exhibit B: Chicago's new bottled water tax, which has brought in just $2 million since going into effect on January 1 through the end of May, far off track for the $10.8 million Chicago city officials hoped it would raise this year, according to the Tax Foundation. As one retailer said, "There's no reason someone is gonna pay $1.20 extra in taxes for a $4 dollar case of water in Chicago when they can go to the suburbs to buy it without that tax."

Mayor Daley blamed the disappointing tax revenues on "the weather." Reminds me of how the Communists in the Soviet Union and China used to cite "bad weather" for the significant reductions in production after collective farms were imposed. I vaguely remember some story about the Soviets going from being a grain exporter before its farms were collectived by Stalin in the late 1920s and early 1930s, to having "50 straight years of bad weather" as the excuse for the disappointing production levels and even starvation resulting from Communist collectivization.

HT: Travis Walker

The Great Teenage Depression: Minimum Wage Scheduled to Increase By 41% in Two Years

Teenage unemployment (16-19 years old, seasonally adjusted) for July (20.3%) was at the highest level in more than 15 years (see chart above, data here). It seems like that would be pretty newsworthy, but it received almost no media attention.

A Google News search for "teenage unemployment 20.3" resulted in only 11 news reports, and only a few of those stories linked the historic level of teen joblessness to one of the most obvious factors: the 41% percent increase in the federal minimum wage, from $5.15 to $7.25 per hour, scheduled to take place in three steps between July 2007 and July 2009 (the second increase, to $6.55 per hour, just took effect in July 2008).

For example, the Minneapolis StarTribune had two reports on the July 20.3% jobless rate for teens (here and here), but blamed it on the country's "economic malaise" and "economic downturn," without a single mention of the increase in minimum wage.

The only newspaper report that linked the 20.3% teen unemployment rate to the increase in minimum wage was a story in the LA Times, which quoted David Resler, economist at Nomura Securities:

"The July jump in the federal minimum wage rate appears to have had the predicted impact on teen employment: The higher required rate enticed more teens into the job market to search for a smaller number of jobs on offer."

In the blogosphere, there was notably more discussion linking the 20.3% teen jobless rate to the minimum wage increase, see

Political Calculations, American Thinker, Market Power, and EclectEcon.

Bottom Line: Demand curves slope downward, whether it's the demand for gasoline, the demand for cigarettes, or the demand for unskilled workers. We can argue about price sensitivity, elastic demand vs. inelastic demand, availability of substitutes, etc., but higher prices or wages result in a reduction in the quantity demanded. That is, we can argue about the slope, but the slope of the demand curve is always negative.

Higher wages for unskilled workers = fewer jobs for unskilled workers = higher unemployment rates for unskilled workers. Period.

Update: Thanks to Ironman for the new post title.

Sri Lanka Sees Gresham's Law Come Alive

Sri Lanka is melting its coinage and minting less valuable coins amidst booming commodity prices and rising inflation at home, continuing a tradition of monetary debasement that dates back to ancient monarchies. Central Bank Governor Nivard Cabraal says the monetary authority is cutting the cost of the coin issue by melting existing coins and re-striking new and lightweight ones.

By collecting the Nickel/brass and Cupro/Nickel coins in circulation and shipping them to the minter for melting and re-striking, Sri Lanka could now debase the coins with less valuable plated steel coins. Debasing coins has been a traditional tactic of monarchs to steal from the population secretly, before the advent of paper money central banking gave rulers an even better weapon to create inflation and impoverish the population.

The process has been formalized in monetary economics famously as Gresham's Law, named after Sir Thomas Gresham who advised Queen Elizabeth I in 1558 about the bad effects of debasing coins.

Hayek on Maximizing Accidents; Political Success

Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.

The successful politician owes his power to the fact that he moves within the accepted framework of thought, that he thinks and talks conventionally. It would be almost a contradiction in terms for a politician to be a leader in the field of ideas. His task in a democracy is to find out what the opinions held by the largest number are, not to give currency to new opinions which may become the majority view in some distant future.

~From F.A. Hayek, more quotes here.

Take Care Clinics Now Offering $25 Sports Physicals

Take Care Health Systems, a wholly-owned subsidiary of Walgreens (NYSE, NASDAQ: WAG) and one of the largest managers of convenient care clinics, is now offering school and sports physicals for $25 at Take Care Clinics nationwide. Take Care Clinics, located at select Walgreens drugstores, provide high-quality, convenient and affordable health care to all patients 18 months and older.

Falling Gas and Oil Prices

Chart above (click to enlarge) shows gas prices (blue line) falling to 3-month low, and oil prices (red line) falling to 3.5-month low (link).

King Dollar Summer Rally Continues!

Since the most recent low on July 15 of 70.0318, the U.S. dollar index (vs. major currencies) has increased by 6.2% to close today at 74.3478 (see chart above).

FT: Dollar at Crossroads Amid Brighter US Outlook

FT.com --This week will be crucial in determining whether the dollar has broken free from its six-year downward trend, as speculation mounts that the U.S. is in the best position to emerge quickly from the economic downturn.

The dollar index, which measures its value against a basket of six major currencies, put in its best performance for over three-and-a-half years last week and boosted the dollar to its highest level for four months (see chart above).

Ulrich Leuchtmann at Commerzbank said in a note he expected the dollar to rise “like a phoenix.” He said low U.S. interest rates were not a burden on the dollar but an attraction, proof that the Federal Reserve was able to react quicker to turmoil than other central banks.

He said that in a very short period, “sentiment turned by 180 degrees – the market now believes that the US economy once again will be able to leave a crisis behind very quickly.”

Couldn't They Have Predicted This in Advance?

Politicians in Annapolis, MD are scratching their heads wondering what happened to all those chain smokers who were supposed to help balance Maryland's budget. Last year the legislature doubled the cigarette tax to $2 a pack to pay for expanded health-care coverage. Eight months later, cigarette sales have plunged 25% and the state is in fiscal distress again.

Residents of Maryland's Washington suburbs can shop in nearby Virginia, where the tax is only 30 cents a pack, and save at least $15 per carton. The Maryland pols are so afraid this is true that they've made it a crime for residents to carry two packs of cigarettes that weren't purchased in the state. In other words, the state says it's legal to smoke, so long as you use cigarettes that the government can tax and thus become a financial partner in your bad habit. But if you dare to buy smokes across state lines, you can be fined.

ECON 101: If you tax something you get less of it, especially if perfect substitutes are available nearby (like cigarettes in Virginia). Q: Do politicians just not understand simple economics, or do they understand it, but ignore it for political purposes?

Current Subprime Mortgage Stats

The chart above is from NY Federal Reserve data on Nonprime Mortgage Conditions in the United States for June 2008. Based on those data, the chart below shows the current distribution of housing units:
Note that the 3 million subprime mortgages represent only 2.6% of 116 million total housing units, and only 17% of subprime loans (510,000) are in foreclosure or REO. As a percent of total housing units, the subprime mortgages in foreclosure or REO represent less than 1/2 of 1 percent of all housing units (0.44%).

NYFed:Dynamic Maps of Nonprime Loan Conditions

Map (click to enlarge) showing that as of June 2007, 47% of subprime mortgages in California were low or no documentation (highest in the country).

Dynamic map showing that 19.4% of subprime mortgages in Florida were in foreclosure in June 2007 (highest in the country).

More dynamic maps available here from the NY Fed, you can search by 12 criteria (subprime mortgages per 1000 housing units, share of subprime loans that are ARMs, share of subprime loans in foreclosure, etc.), and can search geographically by zipcode. Also, state-level data in Excel is available here.

Top 20% of NBA Players Scored 80% of Total Points

In 1906, Italian economist Vilfredo Pareto made the famous observation that 20% of the population owned 80% of the property in Italy, later generalised by Joseph M. Juran and others into the so-called Pareto principle (also termed the 80-20 rule) and generalised further to the concept of a Pareto distribution (see graphs below).
Exhibit A: For the 2007-2008 NBA season, there were a total of 245,811 points scored by 450 players (data here). The top 20% of scorers (led by #1 Kobe Bryant with 2,323 points) had 195,420 points, or 79.50% of the total points, an almost perfect example of a Pareto outcome and Pareto distribution (see chart below).

Bottom Line: Just like income or wealth, points in the NBA are distributed unequally, and it's a natural outcome (Pareto distribution) that 20% of the players get 80% of the points. Does anybody advocate "point redistribution" to achieve a more "fair" outcome of NBA points?

It Might Be the Land of 10,000 Lakes, But You Could Get Fined $1,000 If You Swim Across One

A Minneapolis man went for a swim in Lake Nokomis (pictured above, Minneapolis skyline in background) Tuesday night, only to find Minneapolis Park Police waiting for him when he got out. Officers cited 41-year-old Dr. Tom Kleven for swimming too far.

Kleven, who is training for a triathlon later this year, said he was attempting to swim shore-to-shore around 7:30 p.m.

He said he was half way across the lake when a lifeguard ordered him to turn around. When he got back to shore, Kleven said police were waiting for him.

"We should be allowed to swim in the lake wherever we want to," said Kleven.

HT: Reason

Note: There are no motorboats allowed on Lake Nokomis.

Significant Home Run Inequality, and Economic Lessons About Inequality from Professional Sports

The chart above shows that the share of income earned by the top 5% in 2006 (IRS data here) was 35.9% (the IRS data also shows that group paid 60% of all income taxes). How does that distribution of income in the U.S. compare to the distribution of home runs in Major League Baseball for the top 5% of the players, ranked by number of home runs? Amazingly, it's almost exactly the same.

Using the sortable MLB historical database for years 2007, 1997 and 1987, and analyzing the total number of home runs in those years (4,959, 4,638 and 4,470 respectively), the number of active players in those years (1210, 1159, and 996), and the number of those home runs hit by the top 5% of the players (ranked by home runs in the year), we can determine that the percentage of home runs hit by the top 5% was 35.82% (2007), 36.80% (1997) and 35.5% (1987). In other words, home runs are distributed just about as unequally as income - the top 5% earn a disproportionate share of income, about 36%; and the top 5% of baseball players hit a disproportionate amount of home runs, about 36%.

See previous CD post Olympic medal inequality.

MP: I have a confession to make: I'm not bothered at all by income inequality, Olympic medal inequality, or home run inequality, and in fact I think it's perfectly natural and an outcome that should be expected. Why such a negative reaction from the general public to inequalities of outcome for income, but never for unequal outcomes in professional sports? We don't expect home runs in MLB or points in the NBA or NHL to be distributed equally, so why do we expect income to be distributed equally? And if inequalities of outcome or income increase or decreases over time, so what?

For example, in a previous CD post, I presented the chart below:

Even within most MLB teams there is significant income inequality, which is directly related to the significant inequality in the distribution of athletic talent reflected in the "home run inequality" documented above. And the chart above shows that: a) the income share of the top 25% is fairly similar when comparing the general U.S. population and the 5 MLB teams above, and b) income inequality increased both for MLB and the general public between 1988 and 2007, measured by the income share of the top 25%. Why is that considered a problem, and not perhaps a natural, and expected outcome?

Finally, it should be noted that when it comes to the income of the general population, the income of MLB players, or the distribution of home runs, the top 5% or top 25% in any given year is a different group than the previous year - there is significant and constant turnover. A common misperception is that the top 5% (or top 1% or top 10%) by income is something like a closed, private club with very little turnover - once you get in, you stay there, making it difficult for others to join. But reality is very different - people move up and down the income quintiles or quartiles throughout their careers and lives. The top 1/5/10% is never the same people.

Maybe we can learn some economic lessons about income inequality from professional sports and the Olympics?