Monday, July 13, 2009

Taiwan's Educational, Employment Gender Gap; The Mancession Goes Global

TCS DAILY -- A major problem facing Taiwan is that boys there do not perform nearly as well as girls in reading. As an educational researcher, I have been trying to understand why.

Research shows that students who view reading as a pleasurable activity tend to read more frequently. Research also shows that reading more frequently is one of the best ways to improve reading skills. It's not surprising, then, that the average reading score for Taiwanese fourth graders on the most recent Progress in International Reading Literacy Study was 13 points higher for girls (compared to boys), and the average reading score for Taiwanese 15-year-olds on the most recent PISA was 21 points higher for girls (than for boys).

Since 1998, more Taiwanese women have been enrolled in higher education than men. The proportion of educated women has increased each year while the proportion of educated men has decreased. The research is clear: greater reading skills equates to greater success in school. The consequences are also clear: if something isn't done to improve boys' reading skills in Taiwan, then fewer and fewer boys will continue on to higher education.

As jobs that require little education have increasingly diminished, more and more men have become unemployed. Since 1996, male unemployment rates in Taiwan have been significantly higher than those of females. This unemployment rate gender gap has widened over the years and is partially responsible for Taiwan's unemployment rate hitting a record high this year (see chart above).

MP: The
gender degree gap and the mancession are apparently not isolated to the U.S., they are both becoming global phenomena.

Want 30% Savings for Healthcare Costs? Here's How

More and more companies are putting health care clinics in the workplace. That can mean big savings. Some studies show businesses can cut health care costs by up to 30%.

~National Public Radio

MP: More than 1,000 companies, like Rockwell Aviation (featured in the NPR story), offer on-site health care clinics, and they are expected to serve 10-15% of the working population within the next few years. So while President Obama and politicians in Washington dream up the latest grandiose government health care reform to address rising healthcare costs, the most effective, affordable and convenient healthcare solutions might be right on location at your workplace health care clinic.

Why Isn't The Stimulus Stimulating? LAGS

The problem is that Obama was always much too optimistic about how quickly stimulus spending could have an effect. As I warned in a January column, it takes far more time for it to impact the economy than most people think. Moreover, not all government spending is necessarily stimulative, and the parts of the stimulus package that provide real stimulus are among the slowest to come online.

According to CBO Director Douglas Elmendorf, by the end of fiscal year 2009, which ends on Sept. 30, about a third of the least stimulative spending will have been spent vs. only 11% of the highly stimulative spending. Even at the end of fiscal year 2010, we will have spent only 47% of the highly stimulative spending. By the end of fiscal year 2011, more than a quarter of the stimulative spending will still remain unspent.

Some years ago, I did a study of every anti-recession program in the postwar era. I found that they invariably impacted on the economy too late to really help. There were many reasons for this. First, economists were slow to see a recession coming and often didn't see one at all until we were already well into it.

Then it took time to convince policymakers to do something and get legislation enacted. By the time a countercyclical program was signed into law, the recession was always over. Consequently, the stimulus stimulated when the economy was already on the upswing. The result was that these programs stimulated inflation more than they stimulated jobs and growth.

Many years ago John Maynard Keynes warned against using public works for stimulus for precisely this reason--they are too hard to reverse once the need for them has passed. With many economists already warning about inflation coming back in the near future, the ultimate legacy of the stimulus bill may be to make it harder to tighten fiscal policy when it will be needed.

Bottom Line: Most of the fiscal stimulus spending will likely impact the economy when it isn't really needed, i.e. after the economy has already started to recover. If we have positive economic growth yet this year in the third (.60% real GDP) and fourth quarter (1.9%) like economists are predicting (WSJ survey, see chart above), and 2.6% real GDP growth next year, the fiscal stimulus will be stimulating an economy in recovery, i.e. an economy that doesn't need stimulus.

As Bruce Bartlett points out in
in this article, there has not been a successful stimulus package since WWII that actually provided stimulus with the correct timing. Because of the lags associated with: a) recognizing the economy was slowing down, b) designing and legislating a fiscal stimulus program, and c) waiting for the fiscal stimulus to have an impact on job creation, etc. there has never been a successful fiscal stimulus, at least in terms of successfully impacting an economy at the time when it is most needed.

Sunday, July 12, 2009

Michael Moore vs. John Stossel

LOS ANGELES Michael Moore's latest documentary now has a title - and a theme that resonates with recession-weary audiences. Moore's look at the consequences of big business will be called "Capitalism: A Love Story." The documentary is due in theaters Oct. 2. Distributor Overture Films said "Capitalism" examines the disastrous effects of corporate profiteering.

"It will be the perfect date movie," Moore said. "It's got it all - lust, passion, romance and 14,000 jobs being eliminated every day. It's a forbidden love, one that dare not speak its name. Heck, let's just say it: It's capitalism."

John Stossel responds: "Michael Moore Gets It Wrong."

Minimum Wage, Maximum Stupidity

The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That's the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.

Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?

~Peter Schiff

Saturday, July 11, 2009

Energy Expert: Oil Will Fall to $20 a Barrel

Respected energy economist Philip Verleger makes case that oil will fall to levels not seen in over a decade.

HT: Craig Newmark

Consumer Spending

From Visual Economics, a graphical representation appears above (click to enlarge) of Consumer Expenditures in 2007, using data from the Bureau of Labor Statistics.

Note that total spending on food ($6,133), clothing ($1,881) and housing ($16,920) represented 50% of consumer expenditures and 30% of income before taxes in 2007. In 1997 by comparison, 51.1% of consumer expenditures were spent on food, clothing and housing, and 44.6% of income before taxes was spent on food, clothing and housing (data here).

New World Currency?

July 10 (Bloomberg) -- Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin (pictured above) of a “united future world currency.” “Here it is,” Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.”

The coin, which bears the words “unity in diversity,” was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said. The question of a supranational currency “concerns everyone now, even the mints,” Medvedev said. The test coin “means they’re getting ready. I think it’s a good sign that we understand how interdependent we are.”

Mpls-Area Home Sales Increase 12th Straight Month

Update on this CD post, from today's Star Tribune article "A Few Good Signs for Housing" (print edition headline):

Pending home sales in the Twin Cities metro area in June were up 33.7% from this time last year, to 5,183. That number was the highest for the month of June since 2005, and marked 12 consecutive months of year-to-year increases, the Minneapolis Area Association of Realtors reported Friday.

In the Twin Cities, the housing market is showing slow improvement. Closed sales for June were up 20%, but more than 40% of those sales were the result of foreclosures or "short sales," where the lender agrees to a sale for less than the amount of the mortgage. Still, the percentage of home sales that were the result of foreclosures or short sales was down from 59.7% in January.

"The fact that short sales and foreclosures are coming down as a percent of total home sales is a good sign that could lead to at least a short-term bounce in housing values," said Scott Anderson, vice president and senior economist at Wells Fargo & Co. in Minneapolis.

ECRI: End of Recession is Near, Recovery Imminent

NEW YORK (Reuters) - A gauge of future U.S. economic growth edged higher in the latest week, sending its yearly growth rate to a two-year high that suggests a near-term end to the recession, a research group said on Friday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 118.5 for the week ended July 3 from a downwardly revised 117.4 in the prior period, which ECRI initially reported at 117.6 (see bottom chart above, data here). The index's annualized growth rate plowed further into positive territory to a two-year high of 5.4 percent from 3.9 percent the week prior, which was revised lower from 4.0 percent (see top chart).

It was the highest annual growth rate the gauge has seen since the week to July 20, 2007, when it read 5.7%. ECRI Managing Director Lakshman Achuthan holds that recovery is imminent before the year's end, as long as economic data continues to weaken at a slower pace. "It is increasingly evident that, despite widespread misgivings based on backward-looking economic data, the end of recession is at hand," said Achuthan.

Friday, July 10, 2009

Twin Cities Area Real Estate Market Rebounds

It's sure looking like the real estate market in the Twin Cities reached bottom earlier this year and is in a period of solid recovery, according to the June report from the Minneapolis Area Association of Realtors. Consider the following:

1. After falling pretty consistently for months during the last two years, the median home price in the Twin Cities area has increased by almost 17% since February, and by $25,000 in dollar terms (see chart above, click to enlarge). From April to June this year the median price increased by $20,500 compared to only a $500 increase last year from April-June.

2. Pending sales in June are up by 33.7% from the same month last year.

3. Closed sales in June are 20% higher than June 2008.

4. The average sales price in the Twin Cities area increased by $23,275 from April to June this year, compared to a $1,419 increase during the same period last year.

5. The current 7.3 months supply of inventory is more than 3 months lower than last year at this time (10.6 months).

6. The current Supply-Demand Ratio (SDR) of 4.90 homes for sale per buyer is 32.6% lower than last year's SDR of 7.27 homes per buyer. (Note: The SDR is calculated by comparing the number of homes for sale at the beginning of each month with the number of total pending sales for the month. The higher the SDR, the more supply there is relative to demand.)

Browser Marketshare for Microsoft Internet Explorer Falls from 80% to 66% in Two Years

According to The Economist, Microsoft Internet Explorer now has only a 66% market share for Internet web browsers, down from 80% two years ago, and probably the lowest level ever (see chart above). For Carpe Diem readers, only about 50% are using IE (6.0, 7.0 or 8.0), 35% are using Firefox/Mozilla, and 15% are using Safari (see chart below).

Hey, weren't we supposed to be worried about 10 years ago that Microsoft was an evil monopolist, and wasn't
it prosecuted for bundling Internet Explorer with its Microsoft Windows operating system, which was supposedly unfair because it restricted the market for competing web browsers?

Congressional Reality Check: The Laws of Supply and Demand Are NOT Optional

As if the recession hasn’t been rough enough on those near the bottom of the economic food chain, fresh bad news is on the way. Beginning July 24 (two weeks from today), the federal government will be making it more difficult for employers to hire low-skilled and unskilled American workers. Thanks to an ill-advised law enacted with bipartisan support in 2007, the cost of providing an entry-level job to individuals with few skills or minimal experience will be going up by more than 10 percent. Those who cannot find a job paying at least $7.25 an hour will not be permitted to work. Welcome to the latest chapter of America’s minimum-wage folly.

Those who press for a higher minimum wage often claim that making entry-level jobs more expensive won’t reduce the number of entry-level jobs. Were the government to compel a 41 percent increase (see graph above showing the 41% increase in the minimum wage from $5.15 in 2006 to $7.25 this year) in the price of gasoline or movie tickets or steel, every rational observer would expect a drop in the demand for gasoline, movie tickets, or steel. Yet when it comes to the minimum wage, politicians and journalists somehow persuade themselves that making workers more expensive won’t reduce the demand for workers.

But that’s exactly what it does. Artificial price floors - mandatory minimum prices set higher than what the market will bear - generate surpluses. Minimum-wage laws are no exception. The price floor imposed by the government on the supply of low-skilled labor results in a labor surplus, which is just another way of saying higher unemployment.

The laws of supply and demand are not optional. They weren’t enacted by Congress and Congress can’t override them. Minimum-wage laws don’t make low- and unskilled Americans more productive, more experienced, or more desirable. They merely make them more expensive - and more likely, therefore, to be unemployed.

It is bad enough that Congress and the president would deliberately price so many workers out of the market. What is worse is that they claim to be helping the poor when they do so (see cartoons below, both by Henry Payne of the Detroit News).

~Jeff Jacoby in the Boston Globe

Evian Ad: Roller Babies

Thomas Sowell on the "Affordable Housing Crusade"

Economist and Hoover Institution senior fellow Thomas Sowell, author of "The Housing Boom and Bust," discusses the economics of the housing boom on the National Review Online (NRO) TV program "Uncommon Knowledge."

Update: All five parts are now available:

Part 1, Part 2, Part 3, Part 4 and Part 5.

Here are some excerpts from an NRO article by Thomas Sowell, based on his book:

Let us go back to square one to consider the empirical consequences of policies in the housing market. Politicians in Washington set out to solve a national problem that did not exist — a nationwide shortage of “affordable housing” — and have now left us with a problem whose existence is as undeniable as it is painful.

Few things blind human beings to the actual consequences of what they are doing like a heady feeling of self-righteousness during a crusade to smite the wicked and rescue the downtrodden. Statistical studies about disparities between blacks and whites in mortgage loan approval rates might be said to have “jump-started” the housing crusades that began in the 1990s.

Politicians and the media led this crusade, with many community activists following in their wake, much like scavengers, able to extract large sums of money from banks and other institutions by raising claims of discrimination, whose power to delay government approval of bank mergers and other business decisions made pay-offs to these activists the only prudent course for those accused.

With rich rewards available — politically, ideologically, and financially — from the “affordable housing” crusade, there were ample incentives to keep this crusade going for years.

HT: Club for Growth

Thursday, July 09, 2009

The Zimbabwean Titanium Trillion Dollar Campaign

The Zimbabwean newspaper, has been driven into exile for reporting on how the Mugabe regime has rigged elections, crushed the opposition, caused poverty, disease and the total collapse of the economy. And now, having been exiled, the regime has slapped a 55% luxury import duty on the paper (as if freedom of speech is a luxury) that makes it unaffordable for the average Zimbabwean. To get the paper into Zimbabwean hands, it needs to be subsidised, and that can only be done by raising awareness, acquiring new customers and driving sales outside Zimbabwe.

HT: Arthur Little

Stirrin' It Up in Flint, Michigan

University of Michigan-Flint professor: Is UAW vehicle profiling legal and fair?

A professor at the University of Michigan-Flint says the decades-old prohibitions at union-owned properties like UAW Local 599 in Flint are outdated because car makers like General Motors and Ford are making parts and vehicles outside the country while companies like Toyota have increasingly built vehicles and parts made by union workers.

Bill Jordan, president of UAW Local 599 (see sign above from the Local 599 parking lot), says Professor Perry's discussion of the gray areas between foreign and domestic vehicles misses the union's larger point about what are often poor conditions for workers outside the U.S. "We have a real problem when people are trying to compete in a market where (in another country) if a worker dies, it doesn't matter. They just replace them tomorrow," Jordan said. "If they would raise their standard of living to match ours ... there would be no problem."

MP: Forget about Mexico, I'm just trying to figure out if Local 599 would really tow a union-made car built in Canada (like a Buick Lacrosse) or a UAW-built car in the U.S. (Toyota Corolla)? And speaking of Mexico, would they really tow a Cadillac Escalade EXT assembled in Mexico?

Hey, I'm all for private property rights and owner-determined rules for their property, I just want to understand the UAW parking lot rules: which cars will be towed and which ones won't?

Lift the Embargo Against Cuba and Drill, Drill, Drill

The 47-year-old trade embargo against Cuba has been shaken by the revelation that drilling for oil and natural gas is about to take place less than 50 miles off the U.S. coast — in Cuban waters. The Cuban government is not only sitting on a potential oil bonanza but it has already awarded oil and gas exploration leases to companies from Canada, China, Spain, India, Venezuela and Norway. And Cuba is negotiating with Brazil's Petrobras, a company with years of experience in deepwater drilling.

If U.S. firms are forbidden by their own government to drill for oil and gas in Cuban waters, then the national oil companies of other countries will benefit while our investor-owned companies watch from the sidelines.

Congress should lift the trade embargo against Cuba. It is a failed economic policy that has stood since the Kennedy administration, but it has hurt ordinary Cubans, while failing to bring about the intended changes in human rights. On the other hand, resuming normalized trade relations could contribute to what everybody wants: a more productive, open and cooperative relationship with Cuba.

~It's Time to End the Cuban Trade Embargo

Ethanol Continues to Be Oversold As Magic Potion

Corn-derived ethanol has been heralded as the magic potion that can drive us to the promised land of energy freedom while at the same time slowing global warming and helping America’s farmers. To that end, the ethanol industry is urging Congress to increase the share of ethanol required in gasoline to 15 percent from 10.

This is not a surprising request, considering that the industry’s facilities are 20% idle and that several large ethanol refiners have recently filed for bankruptcy, despite a 45-cent-per-gallon tax credit and a high tariff to limit imports of sugar-based ethanol from Brazil and other countries.

Like most alternative fuel sources, the potential contribution of ethanol has been oversold. It has been estimated that converting the entire U.S. corn crop to ethanol would yield energy equal to a mere 12% of our gasoline consumption.

~Bernard Weinstein, professor of economics at University of North Texas,
in the Fort Worth Star-Telegram (HT: NCPA)

Cartoon of the Day

Note: If the opposite of "pro" is "con," then what's the opposite of "progress"?

Markets in Everything: U Miami Paying Accepted Law Students $5K to Defer Admission One Year

At a time when law-school graduates are facing greater debt and fewer job opportunities, the University of Miami School of Law has offered to pay accepted students to stay away—at least for a year. The school's unusual offer, which followed an unexpectedly high number of acceptances for this fall's entering class, comes during a period of soul searching in legal education about just how many lawyers the nation needs and whether educators have an obligation to paint a realistic picture of students' prospects for landing jobs that would justify taking out loans of $70,000 or more.

At the University of Miami, a higher-than-expected yield prompted Dean Patricia D. White to send accepted students an e-mail message last month offering $5,000 scholarships if they deferred their admission for a year and completed at least 120 hours of public service by next June. Doing so would also improve their chances of winning the school's three-year, $75,000 public-interest scholarship, she said.

At least 10 new law schools are on the drawing board around the country, in addition to the 200 already accredited by the American Bar Association. At the same time, the demand for legal services has dropped during the economic recession, prompting hundreds of firms to lay off lawyers, cut salaries, and delay the start dates of new associates. As law schools continue to churn out graduates, the resulting bottleneck could make the competition for jobs even more fierce.

Law Schools Mull Whether They Are Churning Out Too Many Lawyers" in today's Chronicle of Higher Education (subscription may be required)

MP: Maybe with fewer restrictions on new medical schools, we could have the same "problem" with "too many doctors"? One way we might know that we have a doctor surplus is when they start advertising that they will make housecalls again, like in the old days?

Jobless Claims Drop Steeply To a 22-Week Low

The Department of Labor reported today that initial claims for unemployment insurance fell by 52,000 to a much lower-than-expected 565,000 (seasonally adjusted) for the week ended July 4, from 617,000 the previous week. It was the lowest level of weekly claims since January. Analysts polled by Reuters had forecast claims to drop to 605,000 from a previously reported 614,000.
The 4-week moving average of 565,000 claims (adjusted to smooth volatility in the data) also fell to the lowest reading since January, reaching a 22-week low (see chart above).

Wednesday, July 08, 2009

U.S.: Medical Innovator; Europe: Free Rider

Most all the world pays a marginal cost for drugs, medical devices, and procedures that does not come close to repaying the development effort that went into those products. Further, most of the world has regimented medical systems that have very strong immune systems against any sort of innovation. As a result, almost all medical innovation occurs and is paid for in the United States, with the rest of the world acting as a free rider. Sure, some Swiss or Japanese firms still develop a few drugs, but most of those efforts are still justified by profits in the US market.

~Coyote Blog

The U.S. is still driving quite a bit of product innovation. Our messy, organic, wasteful, unfair, irrational system allows experimentation, and Europe cherry picks the best results. If we stopped doing this, their system would stop looking so good.

~Megan Mcardle

Quote of the Day: Underestimating Markets

Economists have an undeserved reputation for "religious faith" in markets. No one has done more than economists to dissect the innumerable ways that markets can fail. After all their investigations though, economists typically conclude that the man in the street - and the intellectual without economic training - underestimate how well markets work.

~Bryan Caplan in "The Myth of the Rational Voter"

Global Financial Crisis, Mortgage Tsunami, Housing Bubble Can All Be Traced to Federal Government Intervention to Create Affordable Housing

Excerpts from "The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008," a 26-page report released yesterday by the U.S. House of Representatives Committee on Oversight and Government Reform:

The housing bubble that burst in 2007 and led to a financial crisis can be traced back to federal government intervention in the U.S. housing market intended to help provide homeownership opportunities for more Americans. This intervention began with two government-backed corporations, Fannie Mae and Freddie Mac, which privatized their profits but socialized their risks, creating powerful incentives for them to act recklessly and exposing taxpayers to tremendous losses. Government intervention also created “affordable” but dangerous lending policies which encouraged lower down payments, looser underwriting standards and higher leverage.

Finally, government intervention created a nexus of vested interests – politicians, lenders and lobbyists – who profited from the “affordable” housing market and acted to kill reforms. In the short run, this government intervention was successful in its stated goal – raising the national homeownership rate. However, the ultimate effect was to create a mortgage tsunami that wrought devastation on the American people and economy. While government intervention was not the sole cause of the financial crisis, its role was significant and has received too little attention.

The real tragedy of the government’s affordable housing policy is the impact on average Americans, particularly those of modest means. Millions of these borrowers, who were supposed to have been helped by federal affordable housing policy, have now been forced into delinquency and foreclosure, destroying their asset base, their credit, and in some cases their families. For example, Latino homeowners, who once appeared to be among the most frequent beneficiaries of affordable housing policies, are now the victims of the policies that their political representatives in Washington once championed.

The consequences of these policies have also brought the entire global financial system to the brink of collapse, destroying trillions in equity and untold numbers of lives. It is essential to reexamine the borrow-and-spend, high-leverage policies that became prevalent in the mortgage market as a result of well-intentioned-but-reckless decisions made by elected officials on behalf of the American people.

Washington must reexamine its politically expedient but irresponsible approach to encouraging higher levels of homeownership based on imprudently small down payments and too little emphasis on borrowers’ creditworthiness and ability to repay their loans. Without such a return to fiscal discipline and responsibility, we will continue making the same mistakes that led us to the current financial crisis.

HT: Tom Sullivan

Burton Malkiel on Low-Cost Index Investing

What I suggested in 1973 is that investors would be much better off if they had simple, low-cost index funds. But there weren't any index funds in 1973. The first one available for the public wasn't started until 1976, by Vanguard.

We have a lot of information about how index funds have done, as well as the typical actively managed mutual fund. I find that consistently two-thirds of active managers are beaten by the indexes, and those who beat the index in one year are not necessarily the ones who beat it the next year.

Over a very, very long period, sure, there are a few people who have outperformed the index. But you can almost count them on one hand. I still believe -- even more strongly than I did in 1973 -- that most investors would be much better off having at least the core of their portfolio in a low-cost index fund.

~Burton Malkiel interview in Smart Money (HT: Greg Mankiw)

Quote of the Day: Walter Williams on Slavery

Reparations advocates make the foolish unchallenged pronouncement that the United States became rich on the backs of free black labor. That's utter nonsense. Slavery has never had a very good record of producing wealth. Think about it. Slavery was all over the South. Buying into the reparations nonsense, you'd have to conclude that the antebellum South was rich and the slave-starved North was poor.

The truth of the matter is just the opposite. In fact, the poorest states and regions of our country were places where slavery flourished: Mississippi, Alabama, and Georgia while the richest states and regions were those where slavery was absent: Pennsylvania, New York and Massachusetts.

~Walter Williams

For Professor Williams' "Proclamation of Amnesty and Pardon Granted to All Persons of European Descent," click here.

Tuesday, July 07, 2009

Markets In Everything: Medical Tourism in S. Korea

SINGAPORE: South Korea revised its law two months ago to allow hospitals to directly seek foreign patients. And this has reaped results, going by the latest statistics. In May, the number of foreigners who visited South Korea for medical treatment jumped by about 40% to 1,061, compared to a year ago. South Korea is the latest country to jump on the medical tourism bandwagon. Under the new law, hospitals can go all out to attract foreign patients, such as paying commissions to agents for referrals. The country has also eased visa regulations for overseas patients.

The global medical tourism sector is expected to grow by 15 to 20% every year. Asia's medical tourism market is worth over $5 billion and will attract over 6 million patients by 2012. South Korea plans to tap on this potential by marketing its accessibility and low cost. Brian Suh, researcher of Global Healthcare Business Centre, Korea Health Industry Development Institute, said: "Korea has good medical skills and easy accessibility, and there's no waiting time."

Top 10 Ways UK Rations Healthcare to Save Money

WALL STREET JOURNAL -- Speaking to the American Medical Association last month, President Obama waxed enthusiastic about countries that "spend less" than the U.S. on health care. He's right that many countries do, but what he doesn't want to explain is how they ration care to do it.

Take the United Kingdom, which is often praised for spending as little as half as much per capita on health care as the U.S. Credit for this cost containment goes in large part to the National Institute for Health and Clinical Excellence (NICE). Americans should understand how NICE works because under ObamaCare it will eventually be coming to a hospital near you. NICE has established the principle that the only way to control health-care costs is for this panel of medical high priests to dictate limits on certain kinds of care to certain classes of patients.

For example:

1. In March, NICE ruled against the use of two drugs, Lapatinib and Sutent, that prolong the life of those with certain forms of breast and stomach cancer.

2. This followed on a 2008 ruling against drugs -- including Sutent, which costs about $50,000 -- that would help terminally ill kidney-cancer patients.

3. In 2007, NICE restricted access to two drugs for macular degeneration, a cause of blindness. The drug Macugen was blocked outright. The other, Lucentis, was limited to a particular category of individuals with the disease, restricting it to about one in five sufferers. Even then, the drug was only approved for use in one eye, meaning those lucky enough to get it would still go blind in the other.

4. NICE has limited the use of Alzheimer's drugs, including Aricept, for patients in the early stages of the disease.

5. NICE rejected the use of Kineret, a drug for rheumatoid arthritis.

6. NICE rejected Avonex, which reduces the relapse rate in patients with multiple sclerosis;

7. NICE rejected Lenalidomide, which fights multiple myeloma.

NOTE: Private U.S. insurers often cover all, or at least portions, of the cost of many of these NICE-denied drugs.

NICE has also produced guidance that restrains certain surgical operations and treatments.

8. NICE has restrictions on fertility treatments.

9. NICE has restriction on procedures for back pain, including surgeries and steroid injections.

10. Several young U.K. women developed cervical cancer after being denied pap smears by a related health authority, the Cervical Screening Programme, which in order to reduce government health-care spending has refused the screens to women under age 25.

Bottom Line: Rationing = Lower cost = lower quality healthcare

HT: Bob Wright

Low Union=High Growth; High Union=Low Growth

From 2003 to 2008,the aggregate gross domestic product (GDP), in constant, chained 2000 dollars, for the states with the lowest share of workers under union monopoly control increased by a healthy 17.3%. In these 10 states, as of 2003 4.7% or less of private employees were forced to accept a union as their monopolybargaining agent. Meanwhile, the real GDP of the country as a whole grew by just 12.7%. And in the 10 states with the highest private-sector unionization, aggregate output grew by just 9.9% -- roughly 57% as much as in the lowest-union-density states (see chart above).

At a time when the country is struggling to pull out of a recession, Congress must not pass any legislation to promote union monopoly bargaining, which has a strong negative correlation with economic growth generally and with job growth in particular. Enactment of S.560 (the Senate version of the proposed anti-worker "card check" legislation) or its near equivalent would mean millions more employees hamstrung by wasteful union work rules and slowdowns that destroy good jobs.

Another consequence would be millions of additional workers forced to pay union dues or fees just to keep their jobs. Much of the confiscated cash would be funneled by Big Labor into efforts to elect even more anti-Right to Work, Tax & Spend politicians to Congress. That's why Right to Work members and supporters are preparing for an allout battle to ensure that not just S.560 and H.R.1409 themselves, but all phony card-check 'compromises,' are defeated in Congress this year and in 2010.

National Right to Work Committee President Mark Mix

Canadian Couldn't Wait for Healthcare, Came to US

HT: Club for Growth

Minimum Wage Increase in Two Weeks Will Likely Send Teenage Jobless Rate to a Record High

The current (June) unemployment rate for teenagers of 24% (data here, paid subscription required for full access) is within 1/10 of a percent of the all-time high of the 24.1% teenage jobless rate set back in November and December of 1982 (see chart above). The teenage jobless rate of 24% is more than double the national average of 9.5% for June, and for African-American teens the unemployment rate was almost 38%.

When July employment data become available in early August, watch for the teenage unemployment rate to jump to a new record high. Reason?

-- The federal minimum wage is set to increase later this month as the job market shows signs of further decay. The federal minimum wage will go to $7.25 an hour on July 24 from its current level of $6.55, according to the U.S. Department of Labor. The impact will be felt in 29 states, and many of them plan to match the federal minimum when it goes through.

Seven states already have laws mandating $7.25 minimum pay, while 14 states and Washington, D.C., exceed the new minimum. Employers are required to pay whichever is the highest: Federal or state.

Thomas Sowell on the "Affordable Housing Crusade"

Economist and Hoover Institution senior fellow Thomas Sowell, author of "The Housing Boom and Bust," discusses the economics of the housing boom on the National Review Online (NRO) TV program "Uncommon Knowledge."

Part 1.

Part 2.

Here are some excerpts from an NRO article by Thomas Sowell, based on his book:

Let us go back to square one to consider the empirical consequences of policies in the housing market. Politicians in Washington set out to solve a national problem that did not exist — a nationwide shortage of “affordable housing” — and have now left us with a problem whose existence is as undeniable as it is painful.

Few things blind human beings to the actual consequences of what they are doing like a heady feeling of self-righteousness during a crusade to smite the wicked and rescue the downtrodden. Statistical studies about disparities between blacks and whites in mortgage loan approval rates might be said to have “jump-started” the housing crusades that began in the 1990s.

Politicians and the media led this crusade, with many community activists following in their wake, much like scavengers, able to extract large sums of money from banks and other institutions by raising claims of discrimination, whose power to delay government approval of bank mergers and other business decisions made pay-offs to these activists the only prudent course for those accused.

With rich rewards available — politically, ideologically, and financially — from the “affordable housing” crusade, there were ample incentives to keep this crusade going for years.

HT: Club for Growth

6th Monthly Increase in Used Vehicle Price Index; June Jump Is Largest Monthly Increase On Record

MANHEIM CONSULTING -- Wholesale used vehicle prices moved significantly higher in June. With a reading of 114.1, the Manheim Used Vehicle Value Index is now 5.8% above its year ago level. The adjusted increase in used vehicle values since the beginning of 2009 has been 16.4% (see chart above, click to enlarge, recessions are shaded).

From a previous Manheim Consulting report:

Some analysts have suggested that the rapid rise in wholesale used vehicle pricing is a precursor to an improvement in new vehicle sales and may even point to a recovery in the overall economy.

MP: The 5-point June increase in the Manheim used vehicle value index was the largest single monthly increase in the history of the index back to 1995, and marked the sixth consecutive monthly increase (every month this year), following decreases in 10 out of the previous 14 months (from October 2007 to December 2008).

The year-to-year increases in both May and June follow 17 consecutive months of consecutive year-to-year decreases (Nov. 2007 to April 2009).

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