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.

HT:
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

Fireworks

CHECK IT OUT.

Cars.com 2009 American-Made Car Index: Detroit Automakers Have Only 5 of Top 10, Fewest Ever

Cars.com'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.

~Economist
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
mjperry@umich.edu.

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.

~FOX NEWS

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