Monday, July 06, 2009

Markets in Everything: Attic Junk Worth $1m

NEW YORK (Reuters) - A woman who inherited some Chinese carved jade from her father has scored the first $1 million appraisal from experts on the U.S. television program "Antiques Roadshow," the producers said on Monday. In a record for the show, four pieces of Chinese carved jade and celadon from the Chien Lung Dynasty (1736-1795), including a large bowl crafted for the Emperor, were given a conservative auction estimate of up to $1.07 million.

"For 13 years, we've been hoping to feature a million-dollar appraisal on 'Antiques Roadshow;' it's been our 'Great White Whale,'" executive producer Marsha Bemko said. "We're thrilled that, despite this year's slow economy, 'Roadshow' finally captured this elusive trophy," she said in a statement released by Boston-based production company WGBH, which licensed the format from the British show of the same name produced by the BBC.

On both shows, members of the public bring in items to be appraised by professionals in the hope of discovering that junk from the attic is actually a valuable treasure.

Markets in Everything: Stand and Fly for Cheap

UK TELEGRAPH -- The low-cost airline Ryanair would charge passengers less on "bar stools" with seat belts around their waists. Michael O'Leary, the chief executive, has already held talks with US plane manufacturer Boeing about designing an aircraft with standing room.

HT: Russell Harris

Markets in Everything: Live Bait Vending Machines

Spotted in Calhoun, TN near the Hiwassee River

HT: Eric Holcombe

Europeans Warn Against Government Healthcare

ASSOCIATED PRESS -- "I would warn Americans that once the government gets its nose into health care, it's hard to stop the dangerous effects later," said Valentin Petkantchin, of the Institut Economique Molinari in France. He said many private providers have been pushed out, forcing a dependence on an overstretched public system.

"The minute you make health insurance mandatory, people start overusing it," said Dr. Alphonse Crespo, an orthopedic surgeon and research director at Switzerland's Institut Constant de Rebecque. "If I have a cold, I might go see a doctor because I am already paying a health insurance premium."

Government influence in health care may also stifle innovation, other experts warn. Bureaucracies are slow to adopt new medical technologies. In Britain and Germany, even after new drugs are approved, access to them is complicated because independent agencies must decide if they are worth buying. When the breast cancer drug Herceptin was proven to be effective in 1998, it was available almost immediately in the U.S. But it took another four years for the U.K. to start buying it for British breast cancer patients.

"Government control of health care is not a panacea," said Philip Stevens, of International Policy Network, a London think-tank. "The U.S. health system is a bit of a mess, but based on what's happened in some countries in Europe, I'd be nervous about recommending more government involvement."

Real Healthcare Reform: Competition and Choice

The choice facing us now is not between Obama's plan for healthcare micromanaged by the government or doing nothing. Rather, it is a choice between government control, regulation and rationing on one hand, and free markets, choice and competition on the other. That is the real healthcare debate.

So what exactly would a free-market approach to reform look like? Quite simply, it relies on those time-tested building blocks of marketplace efficiency: competition and choice.

1. We need to move away from a system dominated by employer-provided health insurance and instead make health insurance personal and portable, controlled by the individual rather than government or an employer. Employment-based insurance hides much of the true cost of healthcare to consumers, thereby encouraging overconsumption. It also limits consumer choice, because employers get the final say in what type of insurance a worker will receive.

2. Changing from employer-provided to individually purchased insurance requires changing the tax treatment of health insurance. The current system excludes the value of employer-provided insurance from a worker's taxable income. However, a worker purchasing health insurance on his own must do so with after-tax dollars. This provides a significant financial reward for those who have employer-provided insurance. That should be reversed.

3. The other part of effective healthcare reform involves increasing competition among both insurers and health providers. Current regulations establish monopolies and cartels in both industries. Today, for example, people can't purchase health insurance across state lines. And because different states have very different regulations and mandates, costs can vary widely depending on where you live.

4. We also need to rethink medical licensing laws to encourage greater competition among providers. Nurse practitioners, physician assistants, midwives and other non-physician practitioners should have far greater ability to treat patients. We also should be encouraging such innovations in delivery as medical clinics in retail outlets.

~Michael Tanner, senior fellow at the Cato Institute, in the Sunday Los Angeles Times


Cartoon of the Day

Sunday, July 05, 2009

Jobless Claims as Percent of Labor Force Fall for 3rd Month in a Row, First Time Since Early 2006

With June employment data now available, the graph above of Initial Jobless Claims as a Percent of the Labor Force (1975-2009) has been updated to reflect the June labor force of 154,926,000 and the June average for initial unemployment claims (618,187.5 for the 4-week moving weekly average). That measure of initial jobless claims adjusted for the size of the labor force shows that we are currently above the levels of the last two recessions (1990-1991 and 2001), but still far below the levels of the previous three recessions in the mid-1970s and early 1980s.

For current initial jobless claims to reach the peaks of the 1970s and 1980s of about .60% (see chart above), we would have to have initial jobs claims today of about 929,000, or 50% above current levels. By this measure of the employment situation, it seems unlikely we'll get anywhere close to the recessionary levels of the 1970s and 1980s.

Toyota Is The Most American Car Company

The Toyota Camry is more American than the Ford F-150, at least according to's annual American-Made Index. The findings further muddy the Buy American debate that rages across the country. Toyota Motor Corp. also is the most American car company, according to the rankings of the index in terms of U.S. content in its cars and trucks.

~Today's Detroit News (HT: Lee Coppock)

Do those signs above mean that the "most American car" in the U.S. would be towed?

PJ O'Rourke: Why Politicians Love Trains, Hate Cars

There's something romantic about trains, but try getting the tracks to come to your house. When it comes time to unload the groceries, the romance of the train ends immediately.

Politicians love trains. Why? Because they can tell where the tracks go. They know where everybody's going. For policiticians it's all about control and power. Politicians hate cars because cars make people free. Not only free in the sense that they can go anywhere they want, which bugs politicians, but they can move out of the political districts that the politicians represent.

Politics itself is nothing more than an attempt to achieve power and prestige without merit. That's the definition of politics.

~P.J. O'Rourke on "Where Was The Government With Studebaker

Saturday, July 04, 2009

Will D.C. Taxi Industry Become a Cartel Like NYC?

WASHINGTON EXAMINER -- The District’s open, all-are-invited taxicab industry is so saturated with drivers that the entire enterprise is threatened, according to a D.C. Council member who has filed a bill to cap the number of cabs allowed on city streets. Councilman Jim Graham introduced legislation to limit the number of taxicabs in D.C. through either a medallion system, like ones used in New York City and Chicago, or a certification system.

The soaring number of taxicab operators in D.C. -- roughly 8,000, most of whom own their own cars -- is a "pressing and urgent problem," Graham said. There are more licensed drivers in D.C. per capita than any place in the world, he said, and new applicants continue to take the required class, giving them access to the driver exam administered by the D.C. Taxicab Commission. A glut of drivers could jeopardize the chances of any cabbies making an adequate living, Graham has said.

New York City's medallion system, established in 1937 during the Great Depression in response to a ballooning number of unregulated taxis, artificially capped the number of cabs on the road, to what is now about 13,000. The medallion program, however, made it very difficult for the average New Yorker to join the industry as an owner: The May 2009 price for an individual medallion, those held by owner-operators, was $568,000. The cost of a corporate medallion was $744,000 (see chart above, medallion prices have more than doubled since 2004).

MP: Isn't this an example of a "pressing and urgent problem" that would easily solve itself without government intervention, and a problem that will probably be made significantly worse with government intervention? That is, if there really is an excess supply of taxis in D.C. relative to the demand for taxis, that surplus will be automatically corrected and eliminated by firms/drivers exiting the industry in response to low prices and low/negative profits.

Just like a shortage of taxis would be automatically corrected by firms entering the industry, attracted to the "smell of profits" created by the high prices. As long as the taxi industry has easy entry for new firms, and easy exit for existing firms, which seems to be the case, any surplus or shortage of taxis will automatically be eliminated.

By restricting the supply of taxis with costly medallions, that regulatory action will create a government-enforced taxi cartel, with an artificially low number of taxis and artificially high prices. Membership fees to join the cartel will became extremely expensive (more than half a million dollars to join the NYC Taxi Cartel), and the average person will be priced out of the cartel.

Coyote Blog

Power To The People in Cuba. Sometimes

The Ghost of Power Cuts Past has returned across my country (Cuba). The inconvenient blackouts so common in the nineties have returned because of the international crisis and the dysfunctional Cuban economy. We'd come to believe they were ancient history, overcome by the so called Energy Revolution driven -- five years ago -- by Fidel Castro himself.

~Cuban blogger Yoani Sanchez, "The Ghost of Power Cuts Past Returns to Cuba"

MP: Maybe this is a version of one of the realities of socialism, which is that the people living under socialism pretend to work and then the government returns the favor and pretends to pay them. In this version, the Cuban people pretend to pay for their electricity, or pretend to work for their electricity, and the government pretends to provide electricity. Or not.

Macho Run Amok and Excessively Compensated Is Giving Way to Macho Unemployed and Undirected

The era of male dominance is coming to an end. Seriously.

For years, the world has been witnessing a quiet but monumental shift of power from men to women. Today, the Great Recession has turned what was an evolutionary shift into a revolutionary one. The consequence will be not only a mortal blow to the macho men’s club called finance capitalism that got the world into the current economic catastrophe; it will be a collective crisis for millions and millions of working men around the globe.

Consider, to start, the almost unbelievably disproportionate impact that the current crisis is having on men—so much so that the recession is now known to some economists and the more plugged-in corners of the blogosphere as the “he-cession.” More than 80% of job losses in the United States since November have fallen on men, according to the U.S. Bureau of Labor Statistics (see chart above of male vs. female jobless rates). And the numbers are broadly similar in Europe, adding up to about 7 million more out-of-work men than before the recession just in the United States and Europe as economic sectors traditionally dominated by men (construction and heavy manufacturing) decline further and faster than those traditionally dominated by women (public-sector employment, healthcare, and education). All told, by the end of 2009, the global recession is expected to put as many as 28 million men out of work worldwide.

Indeed, it’s now fair to say that the most enduring legacy of the Great Recession will not be the death of Wall Street. It will not be the death of finance. And it will not be the death of capitalism. These ideas and institutions will live on. What will not survive is macho. And the choice men will have to make, whether to accept or fight this new fact of history, will have seismic effects for all of humanity—women as well as men.

Make no mistake: The axis of global conflict in this century will not be warring ideologies, or competing geopolitics, or clashing civilizations. It won’t be race or ethnicity. It will be gender. We have no precedent for a world after the death of macho. But we can expect the transition to be wrenching, uneven, and possibly very violent.

~"The Death of Macho," by Reihan Salam in Foreign Policy


CHECK IT OUT. 2009 American-Made Car Index: Detroit Automakers Have Only 5 of Top 10, Fewest Ever's American-Made Index highlights the cars that are built here, have the highest amount of domestic parts — with eligible models having parts-content ratings of 75% or higher — and are bought in the largest numbers by Americans.

The Toyota Camry, once an American-Made Index presence, hasn't appeared on this list since 2007. Not only does it return for 2009, it's displaced Ford's F-150 as the only leader this list has had since we began compiling it in 2006. Three others joined the list, two of which — the Ford Taurus and Toyota Venza — have never been on the AMI before, and Detroit automakers claimed just five of the 10 spots. That's a record low for them.

MP: "Foreign" automakers captured half of the top ten spots for American-made cars in 2009:

#1. Toyota Camry (pictured above)
#4. Honda Odyssey
#6. Toyota Sienna
#7. Toyota Tundra
#10. Toyota Venza

Ray Charles: America The Beautiful

Ray Charles in 1991, it doesn't get any better than this:

Friday, July 03, 2009

Stronger Underwriting, Bigger Down Payments

Understanding the causes of the foreclosure explosion is required if we wish to avoid a replay of recent painful events. The suggestions being put forward by the administration and most media outlets -- more stringent regulation of subprime lenders -- would not have prevented the mortgage meltdown regardless of their merit otherwise.

Rather, stronger underwriting standards are needed -- especially a requirement for relatively high down payments. If substantial down payments had been required, the housing price bubble would certainly have been smaller, if it occurred at all, and the incidence of negative equity would have been much smaller even as home prices fell. A further beneficial regulation would be a strengthening, or at least clarifying at a national level, of the recourse that mortgage lenders have if a borrower defaults. Many defaults could be mitigated if homeowners with financial resources know they can't just walk away.

We are at a crossroads where we can undo the damage to the housing market by strengthening underwriting standards in a reasonable way. But to do so political leaders must face up to the actual causes of the mortgage crisis, not fictitious causes that fit political agendas and election strategies.

Stan Liebowitz in today's WSJ

Instead of Adopting Canadian-style Health Care, How About Learning from Its Banking System?

USA TODAY -- Our northern neighbor sometimes seems so similar to the United States that it's hard to tell where the USA ends and Canada begins. Here's one way: Canada is the place with healthy banks, taxpayers unscathed by megabillion-dollar bailouts and no need to overhaul financial regulation because it was done right the first time.

As U.S. officials scramble to prevent a crisis sequel, the ability of Canadian banks to navigate the current financial storm is earning global plaudits. The World Economic Forum in October ranked the country's financial institutions No. 1 in the world for solvency. U.S. banks came in 40th, two rungs behind Botswana.

Thursday, July 02, 2009

The Great Mancession of 2008-2009 Continues As A New Jobless Rate Gender Gap is Set in June

The BLS data released today show that the 2.4% difference between the adult male unemployment rate (10.0%) and adult female unemployment (7.6%) in June is the largest male-female jobless rate gap in the history of BLS data back to 1948 (see chart above of the monthly unemployment rates since 2006).

Further, the 2.4% adult male-female jobless rate gap sets a new record for the largest gap in either direction. There was a 2.3% female-male jobless rate gap in 1967 and again in 1978 when female unemployment rate was higher than the male rate, and a 2.3% male-female jobless rate gap in April and May of this year, but the male-female 2.4% gap in June is the highest on record (BLS data goes back to 1948).

In other words, the current jobless rate gap is historically unprecedented; there has never been a time since at least WWII when there was such an imbalance in unemployment rates by gender. Welcome to the Great Mancession of 2008-2009.

Athletes and Their Agents Don't Set Ticket Prices

CD regular reader Jim Moore writes in an email:

"I don't know if you're interested in reader-provided links, but there's an excellent little economics tutorial in the WSJ today (Wednesday) by Allen Barra, "
Sports Salaries Show What We Really Value," page A11."

Here's at least part of that economic lesson:

The athletes and their agents don't determine the price of tickets, souvenirs and food. Not even the owners determine them. In general, you are the ones who set the prices for T-shirts and baseball hats.

It may take a while but eventually, if baseball management has overpriced its commodities, consumers -- that's you, the fans -- will show them their error and the prices will come down. If you are willing to pay their prices that means they set the right prices after all.

MP: It's similar to the economic reality that oil companies do NOT set oil prices or gas prices, it's market forces that ultimately determine market prices.

By the way, I am always interested in reader-provided links, ideas for posts, articles, suggestions, news items, blog items, etc., etc. Many CD posts have been based on reader-provided material, so please feel free to send along interesting items at any time to

Canada: Boom in Private Health Care Business

Private for-profit clinics are a booming business in Canada -- a country often touted as a successful example of a universal health system. Facing long waits and substandard care, private clinics are proving that Canadians are willing to pay for treatment.

"Any wait time was an enormous frustration for me and also pain. I just couldn't live my life the way I wanted to," says Canadian patient Christine Crossman, who was told she could wait up to a year for an MRI after injuring her hip during an exercise class. Warned she would have to wait for the scan, and then wait even longer for surgery, Crossman opted for a private clinic.

As the Obama administration prepares to launch its legislative effort to create a national health care system, many experts on both sides of the debate site Canada as a successful model. But the Canadian system is not without its problems. Critics lament the shortage of doctors as patients flood the system, resulting in long waits for some treatment. "No question, it was worth the money," said Crossman, who paid several hundred dollars and waited just a few days.


Web Search Volume for Layoffs Falls to 8 Mo. Low

Chart above (click to enlarge) shows the Web Search Volume (that is supposed to track "interest over time") for the term "layoffs," which fell in May to the lowest level since early October.

The chart below shows the alternative
Google Trends search volume and news reference volume for the term "layoffs."

See related CD post on Google Trend searches, and how they can predict economic activity.

It's Doctors and Politics, Not The Market, That Control the Supply of Doctors

The marketplace doesn't determine how many doctors the nation has, as it does for engineers, pilots and other professions. The number of doctors is a political decision, heavily influenced by doctors themselves.

And Congress also controls the supply of physicians by how much federal funding it provides for medical residencies — the graduate training required of all doctors.

To become a physician, students spend four years in medical school. Graduates then spend three to seven years training as residents, usually treating patients under supervision at a hospital. Residents work long hours for $35,000 to $50,000 a year. Even doctors trained in other countries must serve medical residencies in the USA to practice here.

Medicare, which provides health care to the nation's seniors, also is the primary federal agency that controls the supply of doctors. It reimburses hospitals for the cost of training medical residents.

The United States stopped opening medical schools in the 1980s because of the predicted surplus of doctors. The Association of American Medical Colleges dropped this long-standing view in 2002 with the statement: "It now appears that those predictions may be in error." Last month, it recommended increasing the number of U.S. medical students by 15%. Florida State University's College of Medicine, the first new medical school since 1982, will graduate its first class this year.

~"Medical Miscalculation Creates Doctor Shortage" in USA Today on March 2, 2005

Thanks to an anonymous commenter on
this CD post

Tuesday, June 30, 2009

Housing Affordabilty Index: 7.2 Point Drop in May From Rising Home Prices: Market Reached Bottom?

The National Association of Realtors' Housing Affordability Index remained high in May (171.6%) by historical standards (see chart above, data here), but fell by 7.2 percentage points from April's record high of 178.8%, mostly because of the increase in the median home price from $166,000 in April to $172,900 in May.
The 7.2 point May decline was the largest monthly drop in the HAI in four years, providing further evidence that the housing market may have reached a bottom. Watch for the HAI to continue to fall this year, as both home prices and mortgage rates rise and the real estate market continues to recover.

Banking Fact of the Day

Number of bank failures this year so far: 45 (FDIC data here, click on "Produce Report").

Total Assets of the 45 failed banks: $36.965 billion

Total Bank Assets of All 8,246 FDIC-insured banks: $13.542 trillion (data here)

Failed Bank Assets as a Percent of Total Bank Assets: .27% (or about 1/4 of 1%)

Bottom Line: The worst of the banking crisis is behind us, the percent last year was 2.69%.

New Vanguard Economic Momentum Index: Economic Recovery is Near, Recession May Be Over

The general improvement in global financial conditions since March has fostered a marked improvement in investor sentiment and led many to inquire when (rather than if) the current U.S. recession will end. Increasingly, market commentary has focused on evidence of “green shoots” that would suggest the rate of economic deterioration is at least slowing. But how can we know that the right signals are being captured, and—more important—how accurate have such measures been in identifying the turning points of past business cycles?

In this brief, we unveil a proprietary Vanguard Economic Momentum Index consisting of more than 70 financial and economic indicators that in the past have anticipated (to varying degrees) the beginning and end of economic recessions. This new index is specifically designed to anticipate turning points in the business cycle, and it differs in important ways from several other widely tracked indexes of leading indicators. As of the end of May 2009, the Vanguard Economic Momentum Index indicated that a U.S. economic recovery likely will begin by the end of 2009.

Figure 1 below (click to enlarge) presents a “dashboard” of the individual components that make up the Vanguard Economic Momentum Index. The components are ranked in descending order based on their historical ability to forecast nonfarm payroll growth. For presentation purposes, they have been assigned colors based on these criteria:

Red: Indicator consistent with future employment losses at an increasing rate.

Yellow: Indicator consistent with future employment losses at a decreasing rate.

Green: Indicator consistent with future employment gains.

Components shaded either green or yellow in Figure 1 are considered evidence of so-called green shoots, since their most recent rate of acceleration is consistent with an eventual economic recovery. Yellow shading reflects a recent improvement in the component’s rate of change (i.e., its rate of decline has slowed, or its “second derivative” has turned positive).

Figure 1 shows a notable recent improvement in various economic and financial indicators, especially through May 2009. Some examples of such components are the S&P 500 Index, the shape of the Treasury yield curve, corporate bond spreads, and certain housing and manufacturing statistics. Encouragingly, the components near the top—those that have been the most anticipatory leading indicators of future economic conditions—have changed for the better ahead of those toward the bottom, although the improvement in individual indicators is far from unanimous.

Figure 2 below (click to enlarge) illustrates that after bottoming in November 2008, the index turned positive in February 2009 and continued that trend into March and April. This sharp reversal brings the index to levels that were associated with past economic recoveries. Indeed, by the end of May, the index was near the highs reached following the deep recessions of the mid-1970s and early 1980s. Based on historical patterns, the index’s climb suggests a high statistical probability that a U.S. recovery will begin by the end of 2009.

MP: Based on the pattern of this index over the last eight recessions, and especially in the four severe recessions of the 1970s and early 1980s, it looks very likely that the current recession might already be over, or will be ending shortly.

HT: Heather Brooks

Markets in Everything: Backyard Urban Farming

MyFarm was started by Trevor Paque, a young mortgage broker, who decided in 2007 to get out of the office and take up farming. Hardly a new idea, but Paque took a new approach. His business plan called for building, planting, and harvesting vegetable gardens in small overgrown, weed-infested patches of soil that many people in San Francisco call back yards.

Pricing for each garden includes $50 for a site analysis to check sunlight and soil; $600 to $1,000 to build raised beds, install drip irrigation, and plant seeds; and $20 to $35 for weekly maintenance and harvesting. As part of the weekly maintenance, the farmer harvests a box of vegetables for the owner. To test the market, Paque posted an ad on Craigslist and within 20 minutes he had 200 responses.

~Down On The Urban Farm, by Linda Platts in Perc Reports

Persistent Myths and Fictions in Feminist Scholarship: The "Scholarly" Merchants of Hype

Over the years, the feminist fictions have made their way into public policy. They travel from the women's-studies textbooks to women's advocacy groups and then into news stories. Soon after, they are cited by concerned political leaders. President Obama recently issued an executive order establishing a White House Council on Women and Girls. As he explained, "The purpose of this council is to ensure that American women and girls are treated fairly in all matters of public policy." He and Congress are also poised to use the celebrated Title IX gender-equity law to counter discrimination not only in college athletics but also in college math and science programs, where, it is alleged, women face a "chilly climate."

The president and members of Congress can cite decades of women's-studies scholarship that presents women as the have-nots of our society. Never mind that this is largely no longer true. Nearly every fact that could be marshaled to justify the formation of the White House Council on Women and Girls or the new focus of Title IX application was shaped by scholarly merchants of hype like Professors Lemon and Seager.

~From Christina Hoff Sommers' commentary in today's Chronicle of Higher Education (also at the AEI website here).

Cedar Rapids, Iowa; One Year Later

Sorry for the light posting over the last few days - I've been on a road trip since Saturday, and for the last 24 hours or so many of the Blogger blogs have been unable to accept new posts (it's still not fixed yet, I found a way around it). And I'm now staying at a Trappist monastery in Iowa for a few days (with no Internet access), before driving up to Minneapolis tomorrow to see Dr. John and the Lower 911 Band at the Dakota Jazz Club. I'll be spending the month of July blogging from my hometown of Minneapolis ("returning to my native village," as they say in India).

My first stop was Cedar Rapids, Iowa, where I lived for part of my grade school days, from kindergarten through 6th grade, and I toured the flood area on Sunday, and I was surprised at how devastated the area still looks one year later. The vast majority of the 4,000 homes that were affected are still abandoned, and will probably never get rebuilt (too old, too damaged, too expensive to rehab, no insurance, etc.). Scattered among those abandoned homes are a few that have been rebuilt with residents living there, and a few that are under construction. But it really looks pretty grim in "Iowa's Katrina" neighborhood.

A few visible signs of how badly the area was devastated, besides all of the abandoned homes:

1. There are portable toilets scattered around the worst-hit neighborhoods, I assume for workers, displaced residents, inspectors, etc. in those neighborhoods, many of which must not have water or sewer.

2. The gas station above in the photos, which was under water on June 13, 2008 at the height of the flood. A year later, nothing has changed, including the year-old price on the sign: $3.87 per gallon.

Here's a recent NPR report "Cedar Rapids, Iowa, 1 Year After Record Flood"

Quote of the Day

The problem with socialism is that eventually you run out of other people's money.

~Margaret Thatcher

Saturday, June 27, 2009

More on the Male-Female SAT Math Test Gap

It's well known that for the SAT mathematics test, a) male high school students in the U.S. have higher scores on average than females, b) the gap is large and statistically significant (+30 points), and c) the male-female math test score gap has persisted over time, since at least 1971, and probably much longer (see chart above, data here from the Dept. of Education).

One explantion for the female-male math test score gap is summarized here by Janet Hyde et al.:

In 2007 the SAT was taken by 798,030 females but only 690,500 males, a gap of more than 100,000 people. Assuming that SAT takers represent the top portion of the performance distribution, this surplus of females taking the SAT means that the female group dips farther down into the performance distribution than does the male group. It is therefore not surprising that females, on average, score somewhat lower than males. The gender gap is likely in large part a sampling artifact.

MP: In other words, it is only because more females than male take the SAT exam that males score higher on average than females, and if the sample sizes were more equal, the difference in mean math test scores would disappear.

Consistent with this explanation of the difference in mean math test scores would be the following assumption:

Ceteris paribus, if the number of females taking the math SAT exam relative to males (and female percentage of total) increases over time, the male-female math test score gap should INCREASE over time, since an increasing number of females (and increasing percent of total) taking the SAT should lower female mean math test scores over time relative to male math test scores. Reason? The increasing number of females taking the SAT will "dip further down into the performance distribution" over time.

Census Bureau data, the chart below shows that females taking the SAT exam as a percent of the total increased from 50% in 1975 to 53.6%, as the male percentage has decreased from 50% to 46.4% over that period (see chart below).

According to the reasoning above, as the number of females taking the SAT exam increased over time (along with the percent of total) relative to males, the mean female score should have decreased relative to the male mean score, and the male-female gap should be INCREASING over time, theoretically.

But that is exactly the opposite of what has actually been happening. The chart below shows that the male-female gap has actually been decreasing over time, even as more females took the test relative to males, from a high of 46 points in 1977 to a gap of 33 points in 2008.

Bottom Line: The gender gap appears to be more than just a sampling artifact, since the decreasing male-female math test score gap is exactly the opposite of what the Hyde et al. hypothesis would predict.

Update: Additionally, if the number of females taking the test increases over time, the Hyde hypothesis would also predict a falling mean female math test score over time, when in fact we see the opposite: a rising female mean SAT math test score.

Comments welcome.

Chart of the Day: Med. Equipment, Canada vs. U.S.

Source: Fraser Institute

“Advocates of single-payer health care systems tend to promote the allegedly lower monetary costs, but they ignore the lack of access to medical resources,” said Brett Skinner, Fraser Institute Director of Health, Pharmaceutical and Insurance Policy Research and lead author of the peer-reviewed study: "The Hidden Costs of Single Payer Health Insurance: A Comparison of the United States and Canada."

The study shows that health care in Canada appears to cost less relative to the United States because Canadian public health insurance does not cover many advanced medical treatments and technologies, common medical resources are in short supply, and access to health care is often severely delayed. Obama Care What If Government Ran Health Care?

New Blogs

News from 1930: A daily summary based upon news from the Wall Street Journal from the corresponding day in 1930.

John Stossel's Take: ABC News' Co-Anchor of "20/20" offers his libertarian views on the economy, education, health care and politics.

Friday, June 26, 2009

ECRI Leading Index: First Pos. Growth in 22 Months

NEW YORK, June 26 (Reuters) - A gauge of future U.S.economic growth rose, and its yearly growth rate turned positive, raising hopes that the end of the recession is insight, a research group said today. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index (WLI) rose to a 37-week high of 117.6 for the week ending June 19, from a downwardly revised 117.0 the previous week.

The index's annualized growth rate spiked to a 97-week high of 2.1% from minus 0.6% a week ago. It was ECRI's highest yearly growth reading since the week ended August 10, 2007, when it stood at 3.4% (see chart above).

"Following a 28-week upturn, WLI growth has broken into positive territory for the first time in over 22 months -- an affirmation that an end to the recession is at hand," said Lakshman Achuthan, managing director at ECRI.

Milton Friedman on The Phil Donahue Show, 1979

Part 2 here.

Part 3 here. (Starting at about 1:00 in this segment is the famous part where Milton Friedman "schools" Phil on "greed.")

Part 4 here.

Part 5 here.

In 1979, Milton Friedman appeared on The Phil Donahue Show and discussed The Great Depression, the New Deal, the auto industry, auto (Chrysler) bailouts, greed, Amtrak, auto emissions regulation and airbags, Ralph Nader, tariffs, free trade, price controls and gas shortages, oil companies, etc., and other topics that are still relevant today.

The Volatility Index (VIX) Falls to a 9-Month Low

The CBOE Volatility Index (VIX) closed yesterday (Thursday) below 27 for the first time since September 12 of last year, and reached a new 9-month low of 26.36. From the November highs that peaked at almost 81, the VIX has fallen by more than 67%.

Cartoon of the Day

HT: Marc Mayfield

Consumer Confidence Rises 4th Straight Month for the First Time Since the End of the 2001 Recession

LA TIMES -- Confidence among U.S. consumers rose this month for a fourth straight time, reflecting signs that the worst of the recession has passed. The Reuters/University of Michigan final index of consumer sentiment gained to 70.8, the highest level since February 2008, from 68.7 in May.

Recent reports show some areas of the economy, such as housing and manufacturing, are seeing a smaller pace of decline, consistent with the Federal Reserve's projection this week that the slump is "slowing." Government data today indicated that efforts to revive the economy are allowing consumers to spend even with unemployment at a 25-year high. The data also showed savings surged to the highest level since 1993.

MP: The last time the Michigan consumer sentiment index increased in four consecutive months was the period from October 2001 to January 2002, which signalled the end of the 2001 recession (see shaded area in chart above). The four-month cumulative increase of 14.5 points in consumer sentiment from March to June 2009 (see shaded area in chart) is even greater than the 11.2 point increase in late 2001-early 2002.

Florida Home Sales Increase for 9th Straight Month

ORLANDO, FL (June 23, 2009) – Florida’s existing home sales rose in May – the ninth month in a row that sales activity increased in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors (FAR). Statewide sales showed gains over the previous month’s sales level in both the existing home and existing condominium markets. Also, for the first time in many months, the statewide median sales price in May for existing homes and for existing condos ($144,400) rose over the previous month’s figure ($138,500) by 4.26%.

Existing home sales rose 16% last month with a total of 13,921 homes sold statewide compared to 12,044 homes sold in May 2008, according to FAR (see chart above). Statewide existing home sales in May increased 6.2% over April’s statewide activity.

Florida’s median sales price for existing homes last month was $144,400; a year ago, it was $203,800 for a 29% decrease. However, the statewide existing home median price in May ($144,400) was higher than the statewide median price reported in each of the previous four months ($139,500 in Jan., $141,900 in Feb., $141,300 in Mar. and $138,500 in Apr.).

MP: Just like in California, we now have both rising home sales (units) and rising median home prices in Florida for May, suggesting that both markets have probably bottomed and are now in the early states of recovery.

California Home Prices Increase in May for Third Straight Month; Largest May Increase in History

LOS ANGELES (June 25)Home sales increased 35.2% in May in California compared with the same period a year ago, while the median price of an existing home declined 30.4%, the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.) reported (see chart above).

“With affordability for first-time buyers at a record high, sales of existing, single-family homes continued to remain above the 500,000 level for the ninth consecutive month,” said C.A.R. President James Liptak. “Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates, and first-time home buyer tax credits, may not align again for many years.

The median price of an existing, single-family detached home in California during May 2009 was $267,570, a 30.4% decrease from the revised $384,540 median for May 2008, C.A.R. reported. The May 2009 median price rose 4.2% compared with April’s $256,700 median price.

“The statewide median price rose for the third consecutive month in May, posting the largest monthly increase on record for the month of May, according to statistics dating back to 1979,” said C.A.R. Chief Economist Leslie Appleton-Young. “Nearly all regions in the state reported positive month-to-month changes in median price."

C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in May 2009 was 4.2 months, compared with 8.7 months for the same period a year ago (see chart above). The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

-- California's median price for an existing single-family house rose for the third straight month, a sign that the state's battered real-estate market may be bottoming out.

California's real-estate market, the nation's largest, is seen as a barometer of the U.S. economy. Housing prices soared during the boom, and their plummet during the market's collapse resulted in massive foreclosures and fueled the recession. Economists say the state's housing market will lag behind the nation's in recovering, so any indication of improvement in California bodes well for the rest of the U.S.

MP: Unit sales increasing in CA + Median home prices increasing in CA + Median number of days to sell a home decreasing in CA + Unsold inventory index (4.2 months) falling to less than 50% compared to a year ago (8.7 months) in CA + Fewer foreclosed properties among those being sold in CA =


Income, Spending, and Saving All Increase in May

WASHINGTON -- Households pushed their savings rate to the highest level in more than 15 years in May as a big boost in incomes from the government's stimulus program was devoted more to bolstering nest eggs than increased spending. The savings rate, which was hovering near zero in early 2008, surged to 6.9%, the highest level since December 1993 (see chart above).

The Commerce Department said consumer spending rose 0.3% in May, in line with expectations. But incomes jumped 1.4%, the biggest gain in a year and easily outpacing the 0.3% gain that economists expected (see chart above).

Thursday, June 25, 2009


Michael Jackson: August 29, 1958 – June 25, 2009

Milton Friedman on The Phil Donahue Show, 1980

Part 2 here.

Part 3 here.

Part 4 here.

Part 5 here.

From 1980, when Milton Friedman appeared on The Phil Donahue Show to promote his new book "Free to Choose," and discussed topics that are still as relevant and current today as they were almost 30 years ago: deficit spending, regulation, Adam Smith, General Motors, bailing out Chrysler, monetary policy, airline mergers, auto safety, windfall profits tax, automobile dealers, subsidies, smoking laws, legalization of marijuana, monopoly, military spending, energy policy, etc.

HT: Peter Parlapiano

Corporate Profits Increased in Q1, Largest in 3 Yrs.

The BEA reported today that corporate profits (data here) increased in the first quarter of 2009 by $128 billion, the largest quarterly increase in more than three years, and the first quarterly increase in more than a year, following 4 consecutive quarterly decreases (see chart above).

More on Math SAT Scores

From the Supporting Online Material for "Gender Similarities Characterize Math Performance," published in Science Magazine, July 2008:

Gender differences in performance on the SAT Mathematics test are widely publicized and contribute to the public’s view that males excel in mathematics, compared with females. In 2007, males scored an average of 533 ± 114 (mean ± SD = 114) on the Mathematics portion of the SAT, compared with an average of 499 ± 111 for girls. For many reasons, these data tell us nothing about gender differences in mathematics performance. Chief among these reasons is sampling. The SAT is taken almost exclusively by college-bound students, and even then, some college-bound students do not take it because their intended college requires some other test such as the ACT. Therefore, there is no well-defined sampling frame that would permit broader generalization. Perhaps more important is the fact that, coupled with the current trend for more females than males to attend college, the SAT is taken by more females than males.

In 2007 the SAT was taken by 798,030 females but only 690,500 males, a gap of more than 100,000 people. Assuming that SAT takers represent the top portion of the performance distribution, this surplus of females taking the SAT means that the female group dips farther down into the performance distribution than does the male group. It is therefore not surprising that females, on average, score somewhat lower than males. The gender gap is likely in large part a sampling artifact.

MP: In an email, Greg Mankiw also made this observation, and so did Junkyard_Hawg1985 in several comments on this CD post. I'm not completely convinced that a difference in sample sizes could account for such a large difference in mean SAT math test scores (+30 points in all years). And that 30+ point male-female math test score gap existed even back in 1971 when the sample size issue was probably reversed: more men probably took the test back then than women, and it was probably the male group that "dipped further down into the performance distribution" than the female group.

But even putting aside the issue of possible gender differences in mean SAT scores, we are still left with the huge gender disparity in math performance at the highest levels, which would have nothing to do with the sample size issue, and would have everything to do with the gender differences in the variability of test performance and/or intelligence.

As the table above shows, males outnumber females by almost 2 to 1 for SAT math test scores above 750, and by 1.6 males to 1 female for test scores between 700-740. For the 650-690 range, males outnumber females by a factor of 1.38 to 1, and for the 600-640 range the ratio is 1:15 males to every female. For all of the other ranges except the bottom one, females outnumber males. So we are still left with the outcome of superior male math performance, at least at the highest levels of achievement, if not on an average basis.

Then what about the issue of complete female dominance over males for the writing portion of the SAT exam, with a significantly higher mean score and overrepresentation at all of the highest score levels?

Street Justice for German Financial Advisor

A group of wealthy pensioners has been accused of kidnapping and torturing a financial adviser who lost about $4 million of their savings.

The pensioners, nicknamed the "Geritol Gang" by German police after an arthritis drug, face up to 15 years in jail if found guilty of subjecting German-American James Amburn to the alleged four-day ordeal.


Government Health Plans Always Ration Care

President Obama objects when people use the word "rationing" in regards to government-run health care. But rationing is inevitable if we simply expand government control without fixing the way health care is reimbursed so that doctors and patients become sensitive to issues of price and quality.

What will be new about government-run health care is the instrument of regulatory control. There will be an omnipotent federal health board. The idea of an omnipotent board that makes unpopular decisions on access and price isn't a new construct. It's a European import. In countries such as France and Germany, layers of bureaucracy like health boards have been specifically engineered to delay the adoption of new medical products and services, thus lowering spending.

In France:

■ Assessment of medical products is done by the Committee for the Evaluation of Medicines.

■ Reimbursement rates are set by the National Union of Sickness Insurance Funds, a group that also negotiates pay to doctors.

In Germany:

■ The Federal Joint Committee regulates reimbursement and restrictions on prescribing, while the Institute for Quality and Efficiency in Healthcare does formal cost-effectiveness analysis.

■ The Social Insurance Organization, technically a part of the Federal Joint Committee, is in charge of setting prices through a defined formula that monitors doctors' prescribing behavior and sets their practice budgets.

■ In the past 12 months, the 15 medical products and services that cleared this process spent an average 35 months under review (the shortest review was 19 months, the longest 51).

In short, other countries where government plays a large role in health care aren't shy about rationing. Even Mr. Obama's budget director has acknowledged that rationing reduces costs.

~Scott Gottlieb, "Government Health Plans Always Ration Care," in today's Wall Street Journal via NCPA

As Steve Chapman wrote, "The administration pretends we can get generous government-sponsored coverage for everyone without higher taxes, higher insurance premiums or rationing of health care."

MP: In reality, with government-sponsered health coverage we will probably face a trifecta: higher taxes, higher premiums AND rationing.

Quote of the Day

There's no brand loyalty that the offer of a "penny off" can't overcome it.

~A Marketing Aphorism, and opening quote of Chapter 3: "Demand Analysis and Optimal Pricing," in Managerial Economics by Samuelson and Marks

Troubled Economy Increased Shoplifting Rates in 2008; Consumers and Employees Got More Greedy

LOS ANGELES, CA - Preliminary results of the latest National Retail Security Survey show that retail shrinkage averaged 1.52% of retail sales in 2008, up from 1.44% in 2007. According to the survey, total retail losses increased last year to $36.5 billion, up from $34.8 billion in 2007. According to the survey, the majority of retail shrinkage last year was due to employee theft, at $15.9 billion, which represented almost half of losses (44%).

"While the economy plays a role in the amount of shoplifting around the country, these crimes are mostly the case of greed instead of need," said National Retail Federation's Joe LaRocca. "People aren't stealing to feed their families; they're stealing iPods, handbags, and other discretionary items."

MP: We hear a lot about corporate greed (526,000 Google hits), but don't hear very much about consumer greed (27,300 Google hits), and even less about employee greed (only 1,990 Google hits). But as the story above highlights, many consumers and employees are quite greedy themselves, and they helped themselves to more than $36 billion worth of merchandise owned by the corporations that are so often accused of being "greedy," (or whose managers are accused of "greed").

Even the majority of consumers who don't shoplift, can still in fact be pretty ruthless, cutthroat and disloyal, read about it here.

Wal-Mart Goes Upscale

ASSOCIATED PRESS -- The recession steered a new type of customer to Wal-Mart - deeper in the pockets and suddenly looking for bargains. Now the world's largest retailer has to figure out how to keep that customer when the economy recovers.

So Wal-Mart is bringing in more brand names, ditching scores of other products, and redesigning hundreds of stores to give them wider aisles, better lighting, and better sight lines.

It's more than just a cosmetic upgrade. That new breed of customer also spends about 40% more than the traditional Wal-Mart shopper, and the retailer senses an opportunity to accelerate its growth.

MP: Consumer sovereignty.

Spain Has Spent About $1m Per Green Job; and Has Lost More Than 2 Jobs for Every Green Job Created

WASHINGTON -- The Spanish professor is puzzled. Why, Gabriel Calzada wonders, is the U.S. president recommending that America emulate the Spanish model for creating "green jobs" in "alternative energy" even though Spain's unemployment rate is 18.1%-- more than double the European Union average -- partly because of spending on such jobs?

Calzada, 36, an economics professor at Universidad Rey Juan Carlos, has produced a report which, if true, is inconvenient for the Obama administration's green agenda, and for some budget assumptions that are dependent upon it.

~George Will's column "Tilting at Green Windmills"

The following are key points from the "Study of the Effects on Employment of Public Aid to Renewable Energy Sources":

1. As President Obama correctly remarked, Spain provides a reference for the establishment of government aid to renewable energy. No other country has given such broad support to the construction and production of electricity through renewable sources. The arguments for Spain’s and Europe’s “green jobs” schemes are the same arguments now made in the U.S., principally that massive public support would produce large numbers of green jobs. The question that this paper answers is “at what price?”

2. We find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

3. The study calculates that since 2000 Spain spent €571,138 ($800,000) to create each “green job”, including subsidies of more than €1 million ($1.4 million) per wind industry job. The study calculates that the programs creating those jobs also resulted in the destruction of nearly 110,500 jobs elsewhere in the economy, or 2.2 jobs destroyed for every “green job” created.

"Stimulus" Stimulates Lining Up at the Trough

Even if the "stimulus" package doesn't seem to be doing much to stimulate the economy, it is certainly stimulating many potential recipients of government money to start lining up at the trough. All you need is something that sounds like a "good thing" and the ability to sell the idea.

~Thomas Sowell

Wednesday, June 24, 2009

Significant Gender, Ethnic Differences on Math SAT

The 2008 SAT Math scores (see table above, click to enlarge) reveal statistically significant ethnic differences. Difference-of-means tests (not reported here) reveal that Asians score significantly higher on average than Whites, who score significantly higher on average than American Indians, who score significantly higher on average than Mexicans, who score significantly higher than other Hispanics, who score significantly higher than Puerto Ricans, who score significantly higher than Blacks/African Americans. All differences are statistically significant at the 1% level.

Additionally, gender differences on the math SAT exist for all ethnic groups, see table below. For each major ethnic group (Asian, White, American Indian, Other Hispanic, Mexican, Puerto Rican and Black), the mean score for males on the 2008 SAT exam are statistically significantly higher (1% level) than the mean score for females.

In many cases, the ethnic differences on the SAT math exam outweigh the gender differences. For example, Asian females score significantly higher on average than males of any other ethnic group, white females score significantly higher than males of any ethnic group except Asians, American Indian females score significantly higher than black or Puerto Rican males, and females from all ethnic groups except black/African-American score significantly higher than black males. All significant levels are 1%.

Bottom Line: There are statistically significant ethnic and gender differences on the SAT math exam.