Tuesday, September 01, 2009

10 Worst Teaching Mistakes

Like most faculty members, we began our academic careers with zero prior instruction on college teaching and quickly made almost every possible blunder. We’ve also been peer reviewers and mentors to colleagues, and that experience on top of our own early stumbling has given us a good sense of the most common mistakes college teachers make. In this column and one to follow we present our top ten list, in roughly increasing order of badness. Doing some of the things on the list may occasionally be justified, so we’re not telling you to avoid all of them at all costs. We are suggesting that you avoid making a habit of any of them.

Top Ten Worst Teaching Mistakes.

The Government Can

Thanks to Pete Friedlander.

51.5% vs. 42.8%: The Gap is Narrowing

Source: Real Clear Politics (9/1/2009)

It's Still Not Great, But Even Michigan's Economy Is Starting To Show Some Signs of Improvement

Comerica Bank's Michigan EconomicActivity Index improved two points in July, to a level of 75. Compared to its cyclical low, the Index is now up five points, or 7%. Year-to-date, the Index averages 73, down 14 points from the 2008 average.

"Our Index got a big boost from auto production in July," said Dana Johnson, Chief Economist at Comerica Bank. "In all likelihood, gains in auto productionand auto sales will continue to push our Index higher in the next couple of months reflecting, in part, the highly successful cash-for-clunkers program. More generally, Michigan businesses should see stronger demands for their products as the national recovery takes hold."

The Michigan Economic Activity Index equally weights nine, seasonally-adjusted coincident indicators of real economic activity. These indicators reflectactivity in the construction, manufacturing and service sectors as well as job growth and consumer outlays.

Originally posted at Carpe Diem.

It's Over (The Recession)

(Tempe, Arizona) -- Economic activity in the manufacturing sector expanded in August, following 18 consecutive months of contraction, and the overall economy grew for the fourth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business. The report was issued today by Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee.

"The year-and-a-half decline in manufacturing output has come to an end, as 11 of 18 manufacturing industries are reporting growth when comparing August to July. While this is certainly a positive occurrence, we have to keep in mind that it is the beginning of a new cycle and that all industries are not yet participating in the growth. The August index of 52.9 percent is the highest since June 2007. The 4 percentage point increase was driven by significant strength in the New Orders Index, which is up 9.6 points to 64.9 percent, the highest since December 2004. The growth appears sustainable in the short term, as inventories have been reduced for 40 consecutive months and supply chains will have to re-stock to meet this new demand."

MP: The 17.1 point increase in the ISM Manufacturing Index from February t0 August is the strongest six-month gain in more than 25 years, since July 1983. The August gain in the ISM Index to a level above 50 provides another piece of evidence that the recession has ended.

Originally posted at Carpe Diem.

Retail Clinics Save 32% vs. MDs & Urgent Care (81% vs. Emergency Depts.), With Higher Quality Care

US News Health Day -- Walk-in retail clinics staffed by nurse practitioners provide high-quality care for routine illnesses, a new study has found.

Writing in the Sept. 1 issue of the Annals of Internal Medicine, study author Dr. Ateev Mehrotra said that retail clinics -- which are typically staffed by nurse practitioners and found in drug stores and other retail chain stores such as Target and Wal-Mart -- provide a good standard of care for sore throat, ear infections and urinary tract infections. Mehrotra is an assistant professor at the University of Pittsburgh School of Medicine and a policy analyst at Rand Health.

"I'm interested in how we deliver new forms of health care," said Mehrotra, who compared data from retail clinics, doctors' offices, urgent care centers and hospital emergency departments. "There's been a lot of discussion about the quality and effectiveness of these clinics; I wanted to find out more. From the patients' perspective, their appeal is twofold. They're convenient and they provide significant cost savings."

Retail clinics have become increasingly widespread in recent years. One such operation is CVS's MinuteClinic, the focus of Mehrotra's research. MinuteClinic staffers treat minor illnesses and injuries, and provide vaccinations and various health and wellness services. Customers can walk in without an appointment, and the clinics are open seven days a week. Most visits take no more than 15 minutes, and costs vary from $30 to $110, according to the MinuteClinic Web site.

According to Mehrotra, one-third of Americans live within a 10-minute drive of a retail clinic, and more than 6,000 of these clinics are expected to open across the United States within five years. Surveys of patients who received care at retails clinics have been positive, he added.

From the results section of the full article:

Overall costs of care for episodes initiated at retail clinics were substantially lower than those of matched episodes initiated at physician offices, urgent care centers, and emergency departments ($110 vs. $166, $156, and $570, respectively. Aggregate quality scores were similar in retail clinics, physician offices, and urgent care centers (63.6%, 61.0%, and 62.6%).

MP: In other words, for some routine health care, retail clinic costs are 81% below emergency rooms, and about 32% below physician offices and urgent care centers, with slightly higher quality scores than physician offices and urgent care centers.

Could Obama and all members of Congress receive copies of this study?

Update from Time Magazine, "
Drive-Thru Medical: Retail Health Clinics' Good Marks":

There are roughly 1,000 clinics now operating in the U.S., offering acute care for such routine problems as throat infections and earaches as well as providing diabetes and cholesterol screenings, routine checkups and vaccinations. The fees are low — and conspicuously posted; nearly all of the clinics treat both the insured and uninsured, and there is little or no waiting time. With 50 million Americans lacking health insurance and family budgets collapsing under the weight of medical costs, what's not to like about the clinics?

Markets in Everything: Eye Candy Caddies

Eye Candy Caddies website, where they "make golf gorgeous." Packages start at about $275.

Not everybody likes the idea, the BBC reports that "An owner of a string of golf courses in south-east England has banned the all-female caddy service."

Originally posted at Carpe Diem.

Minimum Wage, Maximum Folly, Minimum Jobs

Milton Friedman: "The minimum wage is a law saying that employers must discriminate against workers with low skills."

New John Stossel video on the minimum wage here.

Monday, August 31, 2009

Hoover's Pro-Labor Policy Caused Great Depression

UCLA -- Pro-labor policies pushed by President Herbert Hoover after the stock market crash of 1929 accounted for close to two-thirds of the drop in the nation's gross domestic product over the two years that followed, causing what might otherwise have been a bad recession to slip into the Great Depression, a UCLA economist concludes in a new study.

"These findings suggest that the recession was three times worse — at a minimum — than it would otherwise have been, because of Hoover," said Lee E. Ohanian, a UCLA professor of economics.

The policies, which included both propping up wages and encouraging job-sharing, also accounted for more than two-thirds of the precipitous decline in hours worked in the manufacturing sector, which was much harder hit initially than the agricultural sector, according to Ohanian.

"By keeping industrial wages too high, Hoover sharply depressed employment beyond where it otherwise would have been, and that act drove down the overall gross national product," Ohanian said. "His policy was the single most important event in precipitating the Great Depression."

After the stock market crash, Hoover met with major leaders of industry and cut a deal with them to either maintain or raise wages and institute job-sharing to keep workers employed, at least to some degree, Ohanian found. In response, General Motors, Ford, U.S. Steel, Dupont, International Harvester and many other large firms fell in line, even publicly underscoring their compliance with Hoover's program. Reluctant to lower wages due to Hoover's entreaties, employers in the manufacturing sector responded by reducing the work week and laying off workers. By September 1931, the manufacturing sector was already hurting: Hours clocked by workers had fallen by 20% (see chart above) and employment by 35%.

Overall, the economy suffered, with the GDP falling by 27%. In a situation in which wages would have been expected to fall, they remained at about 92% of what they had been two years earlier. When adjusted for deflation, they had actually climbed by 10%, Ohanian found. Interestingly, during the dreaded period of deflation a decade earlier, some

manufacturing wages fell 30%. GDP, meanwhile, only dropped by 4%.

The findings are slated to appear in the December issue of the peer-reviewed Journal of Economic Theory and were posted today on the website of the National Bureau of Economic Reasearch as a working paper (full paper here).

Hoover's approach is unlikely to be considered today as a means of responding to economic crisis, but it does illustrate the perils of ill-conceived government policies in times of economic upheaval and confusion, says Ohanian, a macroeconomist who specializes in economic crises.

Originally posted at
Carpe Diem.

Significant Gender Gap on the PSAT Math Test

The table above (click to enlarge) is based on PSAT scores in 2008 for college-bound juniors for males and females taking the mathematics exam, showing the results for the five geographical regions of the U.S. For both males and females, the highest scores were in the Midwest states, similar to the findings for the SAT test results, reported yesterday on the NY Times Economix blog, "Why The Midwest Rules on the SAT."

The results also show a significant gender gap in favor of males for the mean math test scores in all five regions, with mean male test scores ranging from 3.2 points higher in the Midwest (52.2 for males vs. 49 for females)to a low of 2.5 points higher in the South (50 points for males vs. 47.5 for females). In all five regions, the standard deviation of male test scores was higher than the standard deviation of female test scores, confirming previous findings of greater variability in male intelligence/scores on standardized tests.

Male high school students also outperform female students at the highest level of math test performance, i.e. in the range from 75-80 points. For example, 1.6% of male juniors in the Midwest score above 75 points, vs. only 0.50% of female students, for a ratio 3.2 males to 1 females for test scores in the highest range (see last column in table above). The M:F ratios for scores above 75 range from a low of 2.11 males per female in the New England states to 3.2 males per female in the Midwest states.

Originally posted at
Carpe Diem.

Government Spending Creates Wealth? The Most Persistent Economic Fallacy of All Time

At a 1978 lecture, Milton Friedman talks about government spending and explains one of the greatest economic fallacies of all time, essentially another version of Bastiat's "broken window fallacy."

HT: Drew Suder

Originally posted at Carpe Diem.

Sunday, August 30, 2009

Investor Optimism Rises to Highest Level of 2009

PRINCETON, NJ -- Consistent with Gallup's Consumer Confidence measure and the continued strong performance of the equity market, the Gallup Index of Investor Optimism -- a broad measure of investor perceptions -- in August hit a new 2009 high of 9. This represents a 12-point increase from July and is the first time the Index has been positive since June 2008. The Index has improved by 73 points from February's -64 reading -- its lowest level since its inception in October 1996.

Originally posted at Carpe Diem.

Capitalism: A Love Story

Peter Schweizer: Michael Moore is constantly trying to prove his and the Left's moral superiority, so he says things about himself that are patently not true. He's pathological about it. How else to explain that he's loudly proclaimed no less than three times that he doesn't invest in the stock market because it's morally wrong while quietly picking up shares in a whole host of companies. A portfolio that includes Halliburton, Boeing, and HMOs doesn't fit the bill so he lies about it. I think he assumed that no one would poke around and investigate. When it comes to the MSM he was correct in making that assumption. He never responded to my questions. I'm dying to know how he explains away this one.

Moore professes to hate capitalism ("the last evil empire" he's called it) but practices it in spades. Moore condemns people for their racism and claims to support and practice affirmative action, but has a lousy record of hiring minorities. He outsources post-production film work to Canada so he can pay non-union wages. I could go on and on. I would ask his fans: is this really a sincere person?

From the back cover of Peter Schweizer's book "Do As I Say (Not As I Do): Profiles in Liberal Hypocrisy":

Originally posted at Carpe Diem.

Era of Citing Adults for A Victimless Crime Is Over?

DENVER - A city panel in charge of overseeing marijuana possession crimes in Denver recommended on Wednesday that the fine for possession be set at $1. If Denver's presiding judge accepts the recommendation from the Denver Marijuana Policy Review Panel, the fine would be the lowest in the entire nation for marijuana possession.

"By setting the fine at just $1, we are sending a message to Denver officials that the era of citing adults for using a less harmful drug than alcohol is over. It's simply not worth the city's time or resources," said panel member and SAFER Executive Director Mason Tvert, who coordinated the successful Denver marijuana initiatives.

Originally posted at Carpe Diem.

Youth Jobless Rate Hits Record July High of 18.5%

BLS -- The youth unemployment rate (the unemployment rate for 16 to 24 year olds) was 18.5% in July 2009, the highest July rate on record for the series, which began in 1948 (see chart above).

Additionally, the male (19.7%) - female (17.3%) jobless rate gap of 2.4% in July 2009 for youth was the highest male-female gap since 1954 (2.5%), and 1949 (2.8%), see chart below.

Bottom Line: Between the economic slowdown and the 24% increase in the minimum wage over the last years, the 16-24 year old group is having a rough summer. And it's especially bad for males in that age group, who are feeling the effects of the "mancession" along with males in other age groups.

Originally posted at Carpe Diem.

Maximum SS Taxes Have Increased 4X Since 1970

The chart above is based on Social Security Administration data here for maximum taxable Social Security earnings, and here for the tax rates for Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) and Medicare's Hospital Insurance (HI), and shows the maximum annual taxes payable from 1937 to 2009. The annual tax amounts have been adjusted for inflation using the CPI data available here, and are shown above in 2009 dollars for the total annual contributions that come from both employees (50% of the total) and employers (50% of total).

Note that since 1970, the maximum taxes paid annually for Social Security and Medicare has more than quadrupled from $4,000 to more than $16,000.

Originally posted at Carpe Diem.

"Kennedy" Once Meant Supply-Side Tax Cutter

His name was Kennedy. He was the preeminent figure in the Democratic Party. And he was a resolute supply-side tax-cutter.

“It is a paradoxical truth,’’ he once told the Economic Club of New York, “that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.’’ What he had in mind, he said, was “an across-the-board, top-to-bottom cut in personal and corporate income taxes.’’

Those were not the words of Senator Edward Kennedy. The speaker - in December 1962 - was President John F. Kennedy (see video above), and his ringing call for tax cuts was no anomaly.

Four months earlier, JFK had called high tax rates a danger to “the very essence of the progress of a free society.’’ In his 1963 State of the Union message, his first priority was “the enactment this year of a substantial reduction and revision in federal income taxes.’’ In the speech he was scheduled to deliver on Nov. 22, 1963, Kennedy planned to report proudly: “We have proposed a massive tax reduction, with particular benefits for small business.’’

In recent days, Ted Kennedy has been justly acclaimed as a lion of the Democratic Party. But how different the party mourning Kennedy today is from the one that nominated him in 1962.

~Jeff Jacoby in
today's Boston Globe

Originally posted at Carpe Diem.

Quote of the Day: You Tell Me The Rules.....

Most of economist Armen Alchian's work in property rights can be summed up in one sentence:

"You tell me the rules and I’ll tell you what outcomes to expect."

Originally posted at Carpe Diem.

How Long Does A Top Athlete Work For $100,000?

According to the latest figures from the U.S. Census Bureau, it takes an average U.S. citizen a shade under four years to earn $100,000. Alex Rodriguez does it in six pitches.

Ben Roethlisberger of the Pittsburgh Steelers may have him beat. If you include his signing bonus, Mr. Roethlisberger brought in 100 grand for every 3.6 snaps he took in 2008 (many of which were hand-offs). But at least he helped his team win a Super Bowl. Cleveland Cavaliers forward LeBron James played 3,054 minutes in the 2008-09 regular season and made $100,000 every time he passed the 21.2 mark.

Read more.

Originally posted at Carpe Diem.

Markets in Everything: Coupons on Your Cell Phone

Coupons You Don’t Clip, They're Sent to Your Cellphone

Originally posted at Carpe Diem.

Value of U.S. Currency in Circulation

Note the difference in life expectancy between $1 bills (1.8 years) and $5 bills (1.3 years, less than the $1 bill) and $100 bills (7.4 years).

From Visual Economics.

Listen to bluesman Little Walter sing about them "
Dead Presidents."

Originally posted at Carpe Diem.

Saturday, August 29, 2009

Weather Supercomputer Predicts Climate Change, But Ironically It's One of Britain's Worst Polluters

The machine pictured above was hailed as the 'future of weather prediction' with the ability to produce more accurate forecasts and produce climate change modelling. However, the Met Office has now been named as one of the worst buildings in Britain for pollution - responsible for more than 12,000 tons of carbon dioxide a year. It says 75% of its carbon footprint is produced by the super computer, meaning the machine is officially one of the country's least green machines. Green campaigners say it is "ironic" that a computer designed to help stave-off climate change is responsible for such high levels of pollution.

Originally posted at Carpe Diem.

Markets In Everything: A U.S. Call-Center That Pays $100K a Year And Has Doubled Workforce in Ohio

BUSINESS WEEK -- Consider iQor, a call center and business process outsourcing company based in Columbus, Ohio, that's increased revenues at a 40% clip for the past four years. It's done this primarily by expanding its U.S. operations. IQor also gives its U.S. employees universal health insurance, and pays salaries and bonuses that are nearly 50% above industry norms.

Call centers and back-office work in all but the most specialized areas have been rapidly moving off U.S. soil. iQor, on the other hand, has 12 locations in the U.S. that house nearly half its 11,000 employees, including in such all-American cities as Columbus, Buffalo, and Greensboro It also has operations in Canada, India, the Philippines, and U.K. The best of iQor's front-line call-center workers make more than $100,000 per year, and that's not a typo. During the past four years, iQor added nearly 3,000 jobs in the U.S., making it the company's fastest growing region.

iQor Continues Growth in Columbus, Doubles Employment in Less Than Two Years

COLUMBUS, OH, August 10, 2009 – iQor, Inc., a global provider of business process outsourcing (BPO) services is continuing to hire Agents at its Columbus Center of Excellence. Current plans include hiring as many as 100 Agents in the next two months. The Columbus Center now has over 800 employees.

MP: Despite the U.S. recession and a worldwide economic slowdown, here's an example of a successful U.S.-based company that has continued to expand its global operations, especially in the U.S., and has continued to hire American workers at attractive salaries during "the worst economy since the Great Depression."

Thanks to Arthur Little.

Originally posted at Carpe Diem.

Coupon Queen: $279 of Groceries For Only 39¢

Mom Feeds Family For Under $10 A Week

Isn't this just the epitome and apotheosis of "consumer greed?"

Originally posted at Carpe Diem.

New Age of Cheap Energy Approaches: A Tribute to the Virtues of Markets, Free Trade and Capitalism

UK Telegraph -- We have all become so used to reading that the end of the world is nigh that we tend to close our eyes and stick our fingers in our ears when there is evidence to the contrary. So you have probably missed one of the biggest pieces of good economic news to emerge recently: energy prices are coming down, in some cases to record lows. Furthermore, even if prices start to recover, they are not likely to return to the ridiculous levels of 2008 any day soon.

This is excellent news, of great import. The trend for gas and electricity bills is downwards; diesel is back at the same price as regular gasoline; the world is practically choking on natural gas, and is potentially awash with oil. The main international natural gas price has this week fallen to a record low, due to a surplus of new resources from North America (see chart above). Even the stubbornly high oil price has dropped.

How come natural gas prices have fallen so much? To understand why, you need to get up to speed on the exciting phenomenon of so-called tight gas. This, after coal, could perhaps be the world's most prolific energy source. Hitherto, we have relied on conventional deposits of natural gas. But tight gas is locked into difficult rock formations, such as shale, and in the past couple of years the industry has found low-cost ways of fragmenting those rocks in order to get at the gas, particularly in America. The result is that US gas reserves have effectively doubled, almost unnoticed; and the same technology can be readily applied in Canada, Australia, Asia and even parts of Europe.

As we go into the autumn, US gas storage units are almost full to bursting. Facilities once designed to import are being turned around for export. When it comes to gas, America is the new Russia. And for the rest of the world, tight gas equals one thing: freedom. How has this amazing development come about? Well, my friends, it is the market at work. The high prices of the past decade incentivized a scramble for new technology and projects which are now producing.

An era of cheap and abundant energy will be a much-needed tribute to the unfashionable virtues of markets, free trade, and capitalism.

MP: As the chart above shows, inflation-adjusted natural gas prices have fallen by 80% since the peak in 2005, and are now close to the prices that prevailed in the 1990s. In addition to the significant benefits of falling natural gas prices, another advantage to natural gas is that there is "no OPEC cartel to dominate it," as the article points out.

HT: Arthur Little

Originally posted at Carpe Diem.

Markets in Everything: College-Themed Caskets

Taking School Spirit to the Grave

NEW YORK -- If you thought school spirit meant just plastering your college bumper sticker on your car, think again. These days, devoted alumni and fans of their college team can show their undying school spirit — in a college-themed casket.

"I don't think any of us can deny the experience education has played in our lives," said Scott Walston, president of Collegiate Memorials, which sells the caskets for 46 schools throughout the country. "When families choose the casket, they're setting the stage to conjure up memories to celebrate who the person was."

Originally posted at Carpe Diem.

Markets in Everything: Direct Purchase of Drugs

WSJ -- Walgreen Co. will offer prescription drugs directly to Caterpillar Inc. for workers and retirees starting Jan. 1, expanding an unusual approach to cutting corporate health-care costs and improving efficiency.

When Caterpillar is buying drugs, the agreements will allow it to bypass pharmacy benefits managers, or PBMs, the managed-care companies that most large employers use to administer prescription-drug programs for employees. Caterpillar will negotiate pricing directly with Wal-Mart and Walgreen instead of paying a PBM to handle that part of the business. Savings will come through lower prescription drug costs for Caterpillar.

The Caterpillar approach, which comes at a time of heightened uncertainty about the future of health care in the U.S., could serve as a template for other large companies to manage their drug plans in more cost-effective and transparent ways.

MP: Another example of how competitive market forces, not government intervention, result in lower health care costs.

Originally posted at Carpe Diem.

Friday, August 28, 2009

Best Six-Month Stock Market Rally Since 1933


From the early March lows, the Dow Jones Industrial Average has seen a spectacular rise of about 45%, marking the best six-month stock market rally since January of 1933 (see chart above).

HT: Drudge Report.

Originally posted at Carpe Diem.

ECRI: Double-Dip Recession "Out of the Question"

NEW YORK (Reuters) - A weekly measure of future U.S. economic growth slipped in the latest week, though its yearly growth rate surged to a 38-year high that suggests chances of a double-dip recession are slim. The Economic Cycle Research Institute said its Weekly Leading Index for the week to August 21 fell to 124.4 from 124.9 the prior week. But the index's annualized growth rate soared to a 38-year high of 19.6% from 17.4% the prior week. It was the WLI's highest yearly growth rate reading since the week to May 28, 1971, when it stood at 20.5% (see chart above).

"With WLI growth continuing to surge through late summer, a double dip back into recession in the fourth quarter is simply out of the question," said ECRI Managing Director Lakshman Achuthan, reinstating the group's recent warning to ignore negative analyst projections. Achuthan has recently projected that the recovery is moving at a stronger pace than any the United States has seen since the early 1980s.

HT: Al Bellenchia
Originally posted at Carpe Diem.

Markets In Everything: Hourly Car Rental Takes Off

FORTUNE -- For drivers who already share movies via Netflix and stream music rather than buying CDs, the idea of sharing a car is the natural extension of a hip, financially smart, and environmentally conscious urban lifestyle.

After all, drivers who give up their cars and switch to Zipcar say they save an average of $600 per month. Car sharers report reducing their vehicle miles traveled by 44%, according to Susan Shaheen of the University of California at Berkeley, and surveys in Europe show CO2 emissions are being cut by up to 50% per user.

You can now find Zipcars in most major U.S. cities, including Seattle, San Francisco, Atlanta, Chicago, and New York, and in college towns like Ann Arbor and Chapel Hill, as well as in Britain.

Perhaps the clearest indication of how big the car-sharing market could become is the entrance of rental giants such as Hertz (HTZ, Fortune 500), Enterprise, and U-Haul. Hertz launched a service in December in New York, London, and Paris that freely copies Zipcar, right down to the forest-green tones of its website and emphasis on a caring "community" of users.

Originally posted at Carpe Diem.

Compared to Canada, The U.S. Has Way TOO Many Banks: Bank Failures Might Be Good for the U.S.

With more than 8,000 banks, does the U.S. have too many banks? The comparisons to Canada below provide some perspective. According to Wikipedia, Canada has a total of 72 banks, and that number is very high by historical standards.

From 1920 to 1980,
Canada had only 11 banks. By May 2006, that number had increased to more than 60 in the wake of regulatory changes permitting the entry of foreign competitors.

In contrast, the U.S. currently has
almost 8,200 banks, or about 114 banks for each one bank in Canada, see chart below.

Of course, the U.S. population (304 million) is much higher than Canada's (33 million), so the chart below shows the number of banks per million persons in each country, and the population-adjusted number of banks in the U.S. is still more than 12 times larger than Canada (27 banks per million in the U.S. compared to 2.2 banks per million in Canada).

Bottom Line: Maybe the U.S. has too many banks, and the recent bank failures are a positive development for the U.S. economy and banking system. Weak, failing banks can't facilitate the flow of credit in the economy, and the banking system is better off without those banks. Keep in mind that the assets, loans and deposits don't disappear when a weak bank fails, those assets, loans and deposits are usually taken over by a larger and/or stronger bank.

See the FDIC's list here of the 81 banks that have failed in 2009, and notice that in every case the deposits were assumed by another bank, and in most cases either all or most of the assets of the failed bank were purchased by the acquiring bank. It should also be noted that in most cases the assets/loans of the failed bank actually exceed the value of the deposits, although it's not clear how those assets are valued.

Even if we lost another 1,000 banks as some are predicting, we would still have more than ten times the number of banks in Canada, adjusting for the differences in population. We should welcome, not resist the forces of Schumpeterian creative destruction in the banking system.

The Dark Side of Ted Kennedy's Legacy

4-Block World.

Nick Gillespie, Reason Magazine -- The legislation for which Ted Kennedy will be remembered is precisely the sort of top-down, centralized legislation that needs to be jettisoned in the 21st century. Kennedy was in fact a man out of time, a bridge back to the past rather than a guide to the future. His mind-set was very much of a piece with a best-and-the-brightest, centralized mentality that has never served America well over the long haul.

Bigger was better, and government at every level but especially at the highest level, had to lead the way. In an increasingly flat, dispersed, networked world in which power, information, knowledge, purchasing power, and more was rapidly decentralizing, Kennedy was all for sitting at the top of a pyramid and directing activity. In this way, he was of his time and place, a post-war America that figured that all the kinks of everyday life had been mastered by a few experts in government, business, and culture. All you needed to do was have the right guys twirling the dials up and down. As thoughtful observers of all political stripes have noted, this sort of thinking was at best delusional, at worst destructive. And it was always massively expensive.

Alan Bock (via Cafe Hayek) -- In the hoopla over the death of Ted Kennedy a good deal of nonsense is being spewed about the nobility of "public service." Ted spent his entire life in public service -- he never had a private-sector job nor did he need one, given the money he inherited. So we are supposed to be grateful that he spent his whole life serving others.

No doubt he saw it that way, but the only way a politician can "serve others" is to take money and other resources from some people to give it to others. Government has no money of its own, only what it can take as plunder from people who create value in the world. When they do so, they may actually be of help to those who are benefited, but the price is reducing the amount of wealth in a society, meaning there is less to go around. That's what "public service" as a politician -- as compared, for example, to a philanthropist, who uses his own money and/or skills and time to benefit others -- amounts to.

Don Boudreaux -- While Kennedy didn’t choose a life of ease, he did something much worse: he chose a life of power. That choice satisfied an appetite that is far grosser, baser, and more anti-social than are any of the more private appetites that many rich people often choose to satisfy. Americans would have been much better off had Ted Kennedy spent his wealth exclusively, say, on the pursuit of sexual experiences and the building of palatial private homes in which to cavort, or to take drugs, or to engage in whatever private dissipations his wealth afforded him.

Instead, Mr. Kennedy spent much of his wealth and time pursuing power over others (and of the garish ‘glory’ that accompanies such power). He did waste his life satisfying unsavory appetites; unfortunately, the appetites he satisfied were satisfied not only at his expense, but at the expense of the rest of us. Mr. Kennedy’s constant feeding of his appetite for power wasted away other people’s prosperity and liberties.

Originally posted at Carpe Diem.

Thursday, August 27, 2009

America's Smallest Bank: Oakwood Bank of Texas

Oakwood Bank, America's smallest bank, has about $3 million in total assets and about $2.13 million in total deposits (bank data here). In contrast, America's largest bank, Chase, has about $1.60 trillion of assets and almost $1 trillion of deposits, more than 500,000 times the size of Oakwood (bank data here).

Originally posted at Carpe Diem.

81 Bank Failures So Far in 2009: It's All Relative

So far this year, there have been 81 bank failures out of 8,195 FDIC-insured institutions, or slightly fewer than 1% of all banks. How does that compare to previous periods of financial stress and episodes of bank failures?

This first graph below shows annual bank failures (data here) from 1930 to 2009, showing the two most serious banking crises, the Great Depression (9,146 bank failures) and the S&L Crisis (2,935 bank failures).

This chart shows bank failures from 1935 to 2009, and puts the 81 bank failures this year in perspective in comparison to the S&L crisis and the second half of the Great Depression.

This chart below shows bank failures since 1970, and puts some further perspective on the 81 bank failures this year, compared to the S&L crisis.

Caveat: This analysis simply shows the number of bank failures per year, and could obviously be supplemented with data on the number and size of bank failures.

Originally posted at Carpe Diem.

Creative Destruction

1. Mobile phones replace alarm clocks.

2. 158 million U.S. Internet users watched online video in July, the largest audience ever recorded. Online video reached another all-time high in July with a total of 21.4 billion videos viewed during the month.

3. Toyota to Close Union Plant in California, the first time Toyota has ever closed a U.S. plant.

Originally posted at Carpe Diem.

Cartoonify Yourself

Create free cartoons from your photos at BeFunky.

Originally posted at Carpe Diem.

Peak-Oil and Biofuels: Both Running On Empty

Michael Lynch, NY Times -- In the end, perhaps the most misleading claim of the peak-oil advocates is that the earth was endowed with only 2 trillion barrels of “recoverable” oil. Actually, the consensus among geologists is that there are some 10 trillion barrels out there. A century ago, only 10% of it was considered recoverable, but improvements in technology should allow us to recover some 35% — another 2.5 trillion barrels — in an economically viable way. And this doesn’t even include such potential sources as tar sands, which in time we may be able to efficiently tap.

Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota. But that may not keep the Chicken Littles from convincing policymakers in Washington and elsewhere that oil, being finite, must increase in price.

This is not to say that we shouldn’t keep looking for other cost-effective, low-pollution energy sources — why not broaden our options? But we can’t let the false threat of disappearing oil lead the government to throw money away on harebrained renewable energy schemes (see WSJ article below) or impose unnecessary and expensive conservation measures on a public already struggling through tough economic times.

Wall Street Journal -- The biofuels revolution that promised to reduce America's dependence on foreign oil is fizzling out. Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board. Biodiesel, a crucial part of government efforts to develop alternative fuels for trucks and factories, has been hit hard by the recession and falling oil prices.

The global credit crisis, a glut of capacity, lower oil prices and delayed government rules changes on fuel mixes are threatening the viability of two of the three main biofuel sectors -- biodiesel and next-generation fuels derived from feedstocks other than food. Ethanol, the largest biofuel sector, is also in financial trouble, although longstanding government support will likely protect it.
Originally posted at Carpe Diem.

Turf War Smackdown: The AMA and MDs vs. DNPs

CHICAGO TRIBUNE -- The University of Michigan-Flint is launching an online doctoral program in nursing this fall. The university says the nurse practitioners it trains will be able to assess and manage medical and nursing problems in a variety of specialties and settings. It says the new degree program is a response to a looming shortage of nurses and doctors. The four-year Doctor of Nursing Practice (DNP) program is aimed at skills needed for advanced nursing practice in primary health care.

And what does the AMA think about the DNP alternative to a "looming shortage of nurses and doctors?"

Delegates at the recent annual meeting of the AMA left little room for doubt when it came to their views on the appropriate role of nurses in patients' medical care. Although nurses -- including those with a terminal degree in nursing -- are welcomed as part of the medical team, physicians still need to take the lead.

Despite strongly worded opposition from national nursing organization representatives who attended the meeting, the delegates adopted a resolution that called for new AMA policy stipulating that doctors of nursing practice, or DNPs, "must practice as part of a medical team under the supervision of a licensed physician who has final authority and responsibility for the patient." The delegates further directed the AMA to oppose a recent move by the National Board of Medical Examiners, or NBME, which earlier this spring announced it would develop and administer a certification exam for graduates of DNP programs.

Originally posted at Carpe Diem.

Markets In Everything: Creative Poodle Grooming

DailyMail -- They may resemble pandas, buffalos and camels - but these animals are actually poodles, all competing for the title of top dog at 'creative grooming' shows across the U.S.

HT: Adam Smith Institute

Originally posted at Carpe Diem.

Spending on Lobbying Doubled From 2000 to 2008

The top chart above shows that spending on lobbying in the U.S. more than doubled between 2000 ($1.56 billion) and 2008 ($3.30 billion), according to the searchable lobbying database of OpenSecrets.org. The bottom chart shows the top 20 organizations that spent the most on lobbying between 1998-2009.

One of the indirect, and often hidden costs of increased government spending, changes in tax policy, or increased government regulation, or even the potential for increased government regulation of industries (pharmaceuticals, health care) or higher taxes (windfall oil profits tax), or the threat of deregulation of industries controlled by trade groups like the AMA, is the cost of potentially wasteful "rent seeking," aka lobbying. From the list of top lobbying spenders, it looks a lot like the industries and companies that had the most to gain or lose from government action (health care, real estate, mortgage, GM, and Exxon) over the last ten years spent the most on lobbying to influence legislation in their favor.

Maybe it's also the case that some of the most heavily regulated industries (health care, health insurance, oil, telecommunications, real estate) spend the most on lobbying. For example, in the largely unregulated high-tech sector, large industry leaders spent relatively small amounts on lobbying in 2008: Dell Computer ($160,000), eBay ($2 million), Amazon ($1.3 million), Google ($2.8 million) and Yahoo! ($2.35 million). Compare those amounts to the heavily regulated and heavily taxed Exxon, which spent $29 million on lobbying in 2008, or more than 10 times more than Google or Yahoo!
Originally posted at Carpe Diem.

Wednesday, August 26, 2009

It's A Sweet Deal for Sugar Growers, But A Sour Deal for Consumers Who Pay Twice World Price

The chart above displays refined sugar prices (cents per pound) using annual data from the USDA for a) U.S. wholesale refined beet sugar price at Midwest markets and b) the world refined sugar price. Due to trade restrictions on imported sugar coming into the U.S. at the world price, the U.S. sugar beet producers have a sweet deal, assisted by their government enablers, who protect them from more efficient foreign sugar growers who can produce cane sugar in Central America, Africa and the Caribbean at half the cost of beet sugar in Minnesota and Michigan. Of course, there's no free lunch, and this sweet trade protection comes at the expense of American consumers and U.S. sugar-using businesses, who pay twice the world price of sugar on average (26.6 cents for domestic sugar from beets vs. 13.1 cents for sugar from cane, see chart).

The cost of most trade protection is largely invisible, but the cost of sugar protection is directly visible and measurable, since the USDA and the futures markets regularly report prices for both domestic sugar and world sugar.

Markets In Everything: Kaiser Microclinics At 50% of the Cost of a Full-Service Hospital

WIRED.COM -- Kaiser Permanente has long relied on a simple strategy of building complete, self-sustaining hospitals—employing 50 doctors or more—in each region it serves. "It's an efficient model," says Michele Flanagin, Kaiser's vice president of delivery systems strategy. "It offers one-stop shopping: pharmacy and radiology and everything you want from health care in one building." But that approach forces patients who don't live near a hospital to drive a long way for even the most routine doctor's appointment.

In 2007, Flanagin and her colleagues wondered what would happen if, instead of building a hospital in a new area, Kaiser just leased space in a strip mall, set up a high tech office, and hired two doctors to staff it. Thanks to the digitization of records, patients could go to this "microclinic" for most of their needs and seamlessly transition to a hospital farther away when necessary. So Flanagin and her team began a series of trials to see what such an office could do. They cut everything they could out of the clinics: no pharmacy, no radiology. They even explored cutting the receptionist in favor of an ATM-like kiosk where patients would check in with their Kaiser card.

What they found is that the system performed very well. Two doctors working out of a microclinic could meet 80% of a typical patient's needs. With a hi-def video conferencing add-on, members could even link to a nearby hospital for a quick consult with a specialist. Patients would still need to travel to a full-size facility for major trauma, surgery, or access to expensive diagnostic equipment, but those are situations that arise infrequently.

Flanagin believes these clinics will enable Kaiser to add thousands of new members. And they'll do it for less. The per-member cost at a microclinic is roughly half that of a full Kaiser hospital. The first microclinic is set to open in Hawaii early next year.

MP: Would we get this type of cost-saving innovation under government-run health care?

Originally posted at Carpe Diem.

New Homes For Sale At 16 Year Low

WASH POST -- Builders have made huge strides in whittling away at the over supply of homes, which is key to regaining their footing in the market. The builders have instituted dramatic cutbacks in home construction, either voluntarily or because they were forced to after their financing was cut off. The end result is that the raw number of new homes for sale at the end of July was 271,000, the lowest reading since March 1993 (see chart above).

MP: The new homes for sale at the end of July (271,000) is less than half of the peak levels in 2007, and are even below the average since 1963 of 329,300. One more sign of a significant correction in the real estate market, and further evidence that the recession is ending.

Housing Market Emerges From Slump

WASHINGTON/WSJ -- New-home sales climbed more than anticipated in July, staging their fourth straight month of strong gains to add to evidence that the housing market is emerging from its long slump. Sales of single-family homes increased by 9.6% to a seasonally adjusted annual rate of 433,000 compared to the prior month, the Commerce Department said Wednesday.

That was the highest number sold since September 2008 and well above projections for a 1.6% gain to 390,000 by economists surveyed by Dow Jones Newswires. The increase was the fifth in seven months, as buyers are returning to the market in search of bargains. The market for new homes appears to have bottomed in January, when sales hit 329,000 (see chart above).

MP: Commerce also reported that the supply of new homes fell in July to 7.5 months, the lowest inventory of new homes in more than a year (see chart above), and almost 5 months below January's peak reading of 12.4 months, providing more evidence that the real estate slump is ending.

Originally posted at Carpe Diem.

Markets In Everything: Domestic Medical Tourism

BUSINESS INSURANCE -- When Scarborough, Maine-based supermarket chain Hannaford Bros. announced last year that it would begin sending its employees to Singapore for knee and hip replacements to save the company money, it attracted the attention of several hospitals in Boston that offered to match the price. What the company probably did not realize at the time was that it was at the forefront of an emerging market: domestic medical tourism.

Unlike foreign medical tourism, patients don't leave the country. Instead, they travel to another city within the United States to have procedures for up to 75% less than they would pay if they were treated closer to home. One of the primary reasons some U.S. medical facilities are willing to be paid less is that they are generally compensated upfront, before the procedures are conducted, which enables them to avoid the arduous task of seeking reimbursement afterward from insurers and third-party administrators. The facilities also receive a single package price that is negotiated beforehand.

MP: Market competition is a wonderful antidote to rising medical care costs. Even if there's no interstate competition for health insurance (see related CD post), there appears to be a growing market for interstate hospital care.

Originally posted at Carpe Diem.

HSAs: Putting Patients In Charge of the Rationing

Investor's Business Daily -- Health savings accounts (HSAs) are still alive and growing. Not only that, they seem to be working as planned.

From 2007 to 2008, the total cost of premiums and employer cash contributions to HSAs rose by 2.3% for family coverage, less than half the 4.7% rise in premiums for family coverage overall. HSA-linked coverage is also much cheaper than conventional plans. Its average annual total costs to employers and employees, according to Kaiser, were $10,623 for a family plan in 2008 vs. $12,680 for all family plans. This alone means HSAs would help hold overall premium costs down if they continue to get a larger market share.

HSAs reward consumers for price-conscious decisions by giving them a tax-sheltered account to salt away the money they save. Patients get a little richer by choosing generics over brand-name drugs and staying alert to overbilling. Where there's rationing — in the sense of deciding whether this procedure or that drug is worth the cost — it's the patients themselves who make that call.

This is true reform because it fundamentally changes the way people pay for health care. The role of the third-party payer shrinks, and medicine starts returning to what it once was: a two-way relationship between patients and providers.

Originally posted at Carpe Diem.

Baltic Dry Index Update

From Calafia Beach Pundit:
A loyal CD reader has been "jonesing" for an update on the Baltic Dry Index and Scott Grannis provides an excellent "fix," and also reports on several other shipping indexes.

Originally posted at Carpe Diem.