Professor Mark J. Perry's Blog for Economics and Finance
Saturday, August 22, 2009
More on the Gender Gap for NAEP Test Scores
4. At the 90th percentile of performance, the gap between male and female test scores increases for the economics, mathematics and sciences exams, compared to the gap for all students on those exams. As Dr. T says in a comment on this CD post, "exceptional boys do much better than exceptional girls," and this is a direct consequence of the fact that male test scores have a higher variance (and standard deviation) than female test scores. In other words, even if the mean scores were the same for males and females on these exams, the top 10% of male students would have higher test scores on average than the top 10% of female students.
5. Female students scored 13 points on average higher than males for the reading exam, and 18 points higher for the writing exam, and both differences were statistically significant (1% level or higher).
6. At the 90th percentile, the female-male gap narrows by 2 points for the reading exam (from 13 to 11 points) and by 3 points for the writing exam (from 18 points to 15 points). This could be explained by the greater male variance in test scores for the reading exam (standard deviation of 39 for males vs. 37 for females) and for the writing exam (standard deviation of 35 for males versus 33 for females). Male students are worse on average than females for the reading and writing, but are overrepresented in the upper tails of the distribution (3-4 standard deviations above the mean) compared to females, and this allows males at the 90th percentile to come closer to matching female test scores compared to males at the mean.
Bottom Line: Male high school students outperform female high school students for economics, math and science; and female high school students outperform males students in reading and writing. Additionally, the variability of male test performance (and probably intelligence) is greater than the variability of female test performance, and this applies to ALL of the five subjects. In other words, there will probably always be more male than female geniuses (3-4 standard deviations above the mean) and more male than female idiots (3-4 standard deviations below the mean).
Originally posted at Carpe Diem.
Markets In Everything: Bribes for Ph.D. Degrees
BERLIN (AP) – German prosecutors are investigating about 100 professors across the country on suspicion they took bribes to help students get their doctoral degrees, authorities said Saturday.
According to two publications, students paid between €4,000 to €20,000 ($5,700 to $28,500) to a company, which promised to help them get their doctorate degrees through its extensive contacts within university faculties.
The Neue Westfaelische newspaper reported that "hundreds" of students were involved, and that the company paid professors between €2,000 to €5,000 when their clients had successfully received their Ph.D.s. It was not clear whether the students knew that bribes were being paid.
Originally posted at Carpe Diem.
Big Gender Gaps for 12th Graders on NAEP Exams
Results from the 2005-2006 National Assessment of Educational Progress (NAEP) tests:
For 12th graders taking the Economics subject exam in 2006 (data available here), the mean score for male students was 152 and the mean score for female students was 148, and that gap of 4 points was statistically significant at the 1% level (p = .0071). Likewise, in 2005 there was a statistically significant gender gap in favor of males by 4 points on the Science exam (149 average for males vs. 145 for females), and a statistically significant two point gap for the Math exam (151 average for males vs. 149 females).
In contrast, there was a statistically significant gender gap in favor of females by 13 points on the reading exam (292 mean for females vs. 279 for males), and a statistically significant difference of 18 points in favor of females on the writing exam (162 mean vs. 144).
Stocks for Home Builders Rally to 10-Month High
The iShares Dow Jones US Home Construction ETF seeks investment results that tracks Dow Jones U.S. Select Home Construction index. Among the main holdings are Centex, KB Home, Pulte, Toll Brothers and other home builders. The Home Construction ETF went over 13 yesterday for the first time since October 14, 2008 and reached a fresh 10-month high. Home construction stocks are showing positive signs of recovery, with returns since the first of the year (more than 30%) more than three times the overall market return (less than 10%).
Record Low ETF Expense Ratio = .07%
With expense ratios of only 0.07%, the Vanguard Total Stock Market ETF (VTI) and the Vanguard Large Cap ETF (VV) hold the record for the lowest expense ratio among the 835 Exchange Traded Funds (ETFs) listed here. That would be only $70 in expenses for an investment of $100,000. Like the street merchants selling souvenirs on Arbat Street in Moscow declare "Our prices are so low, it's almost free."
At the top of the list for ETF expense ratios is one of the Claymore ETFs at 1.78%.
LA Shipping Volume Shows Some Improvement
Although still below levels from a year ago, shipping volume at the Port of Los Angeles has shown some recent improvements, with increases in four of the last five months (see chart above), and a 39% rebound in July's volume compared to the February low.
Updated: Top chart above shows seasonally adjusted data, with increases in three of the last five months.
Manufacturing Output Per Worker Hits Record High
As I reported several days ago that manufacturing employment had fallen below 12 million jobs for the first time since 1941, and that manufacturing jobs as a percent of total employment fell below 9% (see chart above), the lowest percentage ever in BLS history (back to 1939).
The chart below shows manufacturing jobs and manufacturing output, using BLS data on manufacturing employment (data here) and Federal Reserve data on the dollar value of manufacturing output (data here), monthly back to 1972. The general trend over the last 40 years is clear: the U.S. has been producing more and more manufacturing output with fewer and fewer workers.
Friday, August 21, 2009
MSCI World Stock Index Reaches New 10 Mo. High
Despite Rising Gas Prices, The Onset of Economic Recovery Is Driving Higher Traffic Volume in June
The graph above shows traffic volume for all roads in the U.S. (data here) on a moving 12-month basis from January 2005 to June 2009, along with gas prices at various times between December 2007 and June 2009 (data here). For 16 consecutive months between December 2007 and March 2009 the 12-month moving traffic volume fell (shaded area in graph), consistent with the 17 consecutive months starting in November 2007 of percentage decreases in monthly miles driven compared to the same month in the previous year, see CD post here.
It's interesting that gas prices during this period of falling traffic volume ranged from as high as $4.06 in July 2008 to as low as $1.68 in December 2008 and traffic volume continued to fall. Traffic volume increased slightly in April of this year for the first time since November 2007, and increased again in June by 2 billion miles, the highest monthly gain since October 2006.
Hypothesis: The demand for gas and driving are highly inelastic with respect to gas prices, but are highly sensitive to general economic conditions. Falling gas prices from $4.06 per gallon last summer to $1.68 by last Christmas wasn't enough to stimulate driving, but the onset of an economic recovery in June was enough of a stimulus to finally increase traffic volume, despite rising gas prices in each month this year.
Originally posted at Carpe Diem.
ECRI: The Great Recession Is History
NEW YORK, Aug 21 (Reuters) - A gauge of future economic growth made steady gains in the latest week, sending its yearly growth rate to a fresh 26-year high and suggesting a strong recovery is already in motion, a research group said on Friday. The index's annualized growth rate ticked up to 17.5 percent after hitting a 26-year high of 14.3 percent last week, which was also revised higher from 13.4 percent.
It was the highest yearly growth rate the index has seen since the week to July 29, 1983, when it was 17.8 percent.
"It is high time to break from the herd of pessimistic analysts, who will continue to bemoan economic weakness long after the Great Recession is history," said Lakshman Achuthan, Managing Director at ECRI.
Bank Index Hits 8-Mo. High, Up 153% from March
The KBW Bank Sector (BKX) Index is a capitalization-weighted index composed of 24 geographically diverse stocks representing national money center banks and leading regional institutions including Bank of America, Citigroup, Comerica, JP Morgan Chase, Wells Fargo, etc.
The KBW Index closed today at an 8-month high of 47.12, the highest close since early December 2008. From the bottom in early March, the KBW Index is up by a whopping 153% (see chart above). Yet another sign that the U.S. financial sector is healing, and another sign of general economic recovery taking place in the U.S. economy and financial markets.
Originally posted at Carpe Diem.
Canadians Visit U.S. to Get Health Care
DETROIT FREE PRESS -- Hospitals in border cities, including Detroit, are forging lucrative arrangements with Canadian health agencies to provide care not widely available across the border.
Agreements between Detroit hospitals and the Ontario Ministry of Health and Long-Term Care for heart, imaging tests, bariatric and other services provide access to some services not immediately available in the province, said ministry spokesman David Jensen. The agreements show how a country with a national care system -- a proposal not part of the health care changes under discussion in Congress -- copes with demand for care with U.S. partnerships, rather than building new facilities.
MP: Where will Americans go if we ever decide to adopt Canadian-style health care?
Historical Examples of Erroneous Health Care Cost Estimates; Don't Trust Those Government Forecasts
From the Joint Economic Committee (JEC) study "Are Health Care Reform Cost Estimates Reliable? History Shows True Costs Are Often Significantly Understated":
Since the end of World War II, major health care reform proposals have generally always cost more—sometimes significantly more—than the highest cost estimates published while the legislation was pending.
The chart above from John Goodman's Health Policy Blog illustrates the eight examples outlined in the JEC report (Table 1: By a Country Mile: Historical Examples of Erroneous Health Care Cost Estimates), including the Medicare DSH program (actual costs were 17X higher than first estimated), the entire Medicare program (actual costs are 9.17 higher than originally projected), etc.
Traffic Volume Increases in June For Third Straight Month, First Time in Almost Three Years
The Federal Highway Administration reported today that travel on all roads and streets increased by +2.0% (0.2 billion vehicle miles) in June compared to June 2008, the largest monthly increase since October of 2006 (see graph above). This was the third consecutive monthly percentage increase in traffic volume compared to the same month in the previous year, following 17 consecutive monthly percentage decreases (see graph above) starting back in November 2007.
Further, the monthly increases in traffic volume in April, May and June mark the first time in almost three years that traffic volume has increased three months in a row. The increase in June traffic volume probably reflects the combination of lower gas prices and a pickup in economic activity.
Rep. Fleming: Congress Should Lead By Example, Enroll Themselves in Post-Office Style Medicine
Representative John Fleming (R-LA): As a physician, I am amazed at the number of bureaucrats in this House who are quick to claim a government-run health care plan is the reform this country needs. In response to this, I have offered House Resolution 615 that will offer members of Congress an opportunity to put their money where their mouth is, and urge their colleagues who vote for legislation creating a government-run health care plan to lead by example and enroll themselves in the same public plan.
Music Goes Digital: Downloads = 35% of Music Sold
Online music sales have grown to more than a third of all music sold in the US, with iTunes making up a full quarter. CD sales remain dominant, but given the trajectory of online sales, that may not last for long.
Music sold through the iTunes Store makes up a full quarter of all music sold in the US, according to a new report from the NPD Group. The market research firm noted that paid digital music downloads have continued to grow since 2007 (from 20 percent to 35 percent this year) with the help of iTunes, Amazon, and Walmart's online offerings, and that digital music sales may even equal CD sales by the end of 2010.
Markets In Everything: Glow in Dark Toilet Paper
U.S. Coin Metal Value Calculator
The website CoinInflation.com calculates the intrinsic metal value of coins, based on current closing prices for zinc, copper, nickel, and manganese prices at the New York Mercantile Exchange (NYMEX). Examples:
The current market value of $100 worth of old pennies (1909-1982 Lincoln pennies, with 95% copper and 5% zinc) is $182.16.
$100 worth of the newer pennies (1982-2009 Lincoln zinc pennies with 97.5% zinc and 2.5% copper) would be worth $46.57.
$100 worth of the current quarters (1965 - 2009 Washington quarters with 91.67% copper and 8.33% nickel) is worth $16.22.
HT: Rolfe Winkler
Obama's House of Three Dozen Czars
Watch Pajamas TV video "Obama's House of Czars" with InstaCzar Glenn Reynolds (Instapundit blog). Once three more czars are appointed to currently unfilled positions, it will bring the total number of czars and czarinas to about 36.
Originally posted at Carpe Diem.
38.6% of Uninsured Households Make > $50k/Yr. and They Choose To Spend Money on Other Things
Despite incessant repetition of the fact that millions of Americans do not have medical insurance, hardy souls who have actually read the mammoth medical care legislation being rushed through Congress have discovered all sorts of things there that have nothing whatever to do with insuring the uninsured-- and everything to do with taking medical decisions out of the hands of doctors and their patients, and transferring those decisions to Washington bureaucrats.
As for those uninsured Americans who are supposedly the reason for all this sound and fury, there is remarkably little interest in why they are uninsured, despite the incessant repetition of the fact that they are. The endless repetition serves a political purpose but digging into the underlying facts might undermine that purpose. Many find it sufficient to say that the uninsured cannot "afford" medical insurance. But what you can afford depends not only on how much money you have but also on what your priorities are.
Many people who are uninsured have incomes from which medical insurance premiums could readily be paid without any undue strain (see chart above, data here). But they choose to spend their money on other things. Many young people, especially, don't buy medical insurance and elderly people already have Medicare. The poor have Medicaid available, even though many do not bother to sign up for it, until they are already in the hospital-- which they can do then.
Throwing numbers around about how many people are uninsured may create the impression that the uninsured cannot get medical treatment, when in fact they can get medical treatment at any hospital emergency room.
Is this ideal? Of course not. But nothing is going to be ideal, whether the current medical care legislation passes or not. The relevant question is: Are the problems created by the current situation worse than the problems that will be created by the pending legislation? That question never seems to get asked, much less answered.
Thursday, August 20, 2009
Manufacturing Jobs Drop To Lowest Level Since 1941, Below 9% of Workforce for the First Time
As a percent of the total labor force, manufacturing employment fell below 9% in July (see chart below), the lowest level in BLS history (back to 1939).
Market-Based Health Care: Truck Stop Retail Clinics
Designed specifically for over-the-road truck drivers, Roadside Medical Clinic Lab is the nation’s first ever network of retail health clinics designed to meet the growing demand of America’s 3.4 million truck drivers.
While specifically meeting the needs for drivers, Roadside Medical is also driving down the health care costs for the entire trucking industry through regular preventive care, practical lifestyle and wellness programs, and full DOT compliance testing and reporting.
Roadside Medical Clinics are currently operating in Arkansas, Georgia and Tennessee, with more clinics to open soon. See today's press release Roadside Medical Clinic + Lab Expands to 11 Sites in TX, CA, NM, NJ, IN and OK.
Compare Crime Rates in Any Two U.S. Cities
The Law of Demand: There Are No Exceptions or Special Cases, That's Why It's Called a Law
New Minimum Wage Could Mean Few Work Hours for Ball State Students
Ball State University students who are employed with on-campus jobs may work fewer hours this fall due to the increase in wages, a school official said. On July 24, Indiana's minimum wage increased from $6.55 to $7.25 per hour.
"There may be fewer jobs and fewer students hired, or more jobs kept at the minimum wage," Beck said about how the minimum wage increase would affect Ball State this year. "So far, it's too early to tell. The jobs constantly change."
John Knox, student employment coordinator at Ball State, said the same number of students will be hired, but they will be scheduled to work fewer hours."A reason for the fewer hours is because the budget has not increased, so the departments may have to reprioritize spending," he said.
MP: Here's another example of one of the adverse effects of an increase in the minimum wage that will NOT necessarily be captured by a change in the employment level or the unemployment rate for unskilled labor. That is, there could be the same number of workers after an increase in the minimum wage, but they might all be working a fewer number of hours.
The correct, testable statistical relationship is not increases in the minimum wage and the number of unskilled workers employed or the unemployment rate for those workers, but the relationship between increases in the minimum wage and the number of hours worked. The Law of Demand would apply more to the second relationship than the first one, and there will be a negative relationship between the minimum wage and hours worked, even though it won't necessarily translate into a negative relationship between the minimum wage and the number of unskilled workers employed.
Leading Economic Index: Recession Is Ending; Welcome to the Economic Expansion of 2009
NEW YORK, August 20, 2009 -- The Conference Board's Leading Economic Index (LEI) for the U.S. increased 0.6% in July, following a 0.8% gain in June, a 1.2% rise in May and a 1.02% gain in April.
After having fallen steadily since reaching a peak in July 2007, The Conference Board LEI for the U.S. has increased sharply in the last four months, amid widespread strength among its components. As a result, the six-month growth rate in the index has accelerated to its highest rate since the middle of 2004.
Meanwhile, the decline in The Conference Board Coincident Economic Index (CEI) for the U.S. has gradually moderated in recent months. All in all, the behavior of the composite indexes suggests that the recession is bottoming out and that economic activity will likely begin to recover soon.
Says Ken Goldstein, Economist at The Conference Board: "The indicators suggest that the recession is bottoming out, and that economic activity will likely begin recovering soon. The Coincident Economic Index was flat in July – the first time it did not register a decline since October 2008. The Leading Economic Index, which has increased for four consecutive months, suggests that the CEI will turn positive soon."
MP: The four consecutive monthly increases (April, May, June and July) is the first time in five years (summer of 2004) of four straight monthly increases in the Index of Leading Economic Indicators. And the 3.78% four-month increase in the Leading Index from March (97.9) to July (101.6) 2009 is the largest percentage increase in the LEI for a four-month period since the 4.15% increase from October 2001 to February 2002 at the tail end of the 2001 recession.
The strength of the Leading Economic Index suggests that the recession is ending and we can expect economic expansion in the near future. Welcome to the Economic Expansion of 2009.
Originally posted at Carpe Diem.
Philly Fed Indexes Suggest Recession is Ending
The survey's broadest measure of manufacturing conditions, the diffusion Index of Current Activity, increased from -7.5 in July to 4.2 this month. This is the highest reading of the index since November 2007 (see chart above).
Indicators of future activity improved slightly this month and continued to suggest that firms are expecting better conditions over the next six months. The Future General Activity Index remained positive for the eighth consecutive month and increased from 51.9 in July to 56.8 (see chart above).
MP: Notice in the chart above that the levels and trends of both the Current Activity Index and the Future Activity Index in August are looking very much like both of the indexes at the end of the 2001 recession.
Real Estate Recovery in So. California: Home Sales Increase 13th Straight Month, Prices 3rd Month
DQNews -- Southern California homes sold last month at the fastest clip for a July in three years and the fastest pace for any month since December 2006. The median price paid rose slightly from June – marking the third consecutive month-to-month gain – as sales in pricier coastal areas continued to rise and sales of lower-cost foreclosures waned.
A total of 24,104 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 3.6% from 23,262 in June and up 18.6% from 20,329 a year ago (see chart above).
Sales have increased year-over-year for 13 consecutive months. They’ve been driven higher by increased affordability, low mortgage rates, plentiful government-insured FHA financing for first-time buyers, robust investor demand and, more recently, improved access to the “jumbo” financing used to buy more expensive homes.
The median price paid for all new and resale houses and condos sold in the Southland last month was $268,000, up 1.1% from $265,000 in June but down 23% from $348,000 a year ago. July was the third consecutive month in which the median rose on a month-to-month basis.
MP: A 29% increase in home sales compared to July of last year, 13 consecutive monthly increases in home sales compared to the same month in the previous year, and rising median home prices for three months in a row - all signs point to a recovery in the Southern California real estate market.
Back To Nature: Photos of Detroit's "Feral" Houses
I've seen "feral" used to describe dogs, cats, even goats. But I have wondered if it couldn't also be used to describe certain houses in Detroit. Abandoned houses are really no big deal here. Some estimate that there are as many as 10,000 abandoned structures at any given time, and that seems conservative. But for a few beautiful months during the summer, some of these houses become "feral" in every sense: they disappear behind ivy or the untended shrubs and trees planted generations ago to decorate their yards. The wood that framed the rooms gets crushed by trees rooted still in the earth. The burnt lime, sand, gravel, and plaster slowly erode into dust, encouraged by ivy spreading tentacles in its endless search for more sunlight.
Like some of the dogs I've seen using these houses as shelter, these houses are reverting to a wild state, as from domestication, a word derived itself from domesticus (the Latin for belonging to the domus, or house). Now these houses are feralis. They belong only to the dead.
From the Sweet Juniper blog, written by "two more people raising their kids in the most dangerous city in America." Check out the photos of more Detroit feral houses here.
The Law of Demand
1. Investors Snapping Up Downtown Miami Condos
Are the good 'old days of real estate back? It appears so in Downtown Miami.
In recent weeks developers have sold hundreds of condos, in a flurry of activity they haven't seen since the peak of the housing market. Some builders are actually running out of inventory. The first building to sell out, Brickell on the River, happened quietly and quickly selling 120 units in just six weeks time.
"It's pretty impressive when you walk into a sales office and you have 20-30 people waiting to see units. Sounds crazy but it's actually happening now," said Andres Asion of Miami Real Estate Group. Before Asion could deposit the checks, he had sold out the entire building; something developers in this area have not been able to do for the past three years.
So how did Asion do it? Price.
They dropped it roughly a $100 thousand under their closest competition. The final prices were half of what units sold for at the peak of the market.
2. Manhattan Hotels Fill Rooms With Low Rates
Hotels in Manhattan also lost business in the financial crisis. But in April, rooms began filling up, sending the occupancy rate back over 80%. In July, 83.3% of the rooms were filled, a 5.6% decline since last year but still the highest occupancy rate in the nation, preliminary Smith Travel data shows.
But to attract business, Manhattan hotel operators have slashed room rates by nearly one-third since last year, to an average of just under $200 a night. “I know I could come across sounding like the convention bureau, but New York really is a good buy right now,” said John A. Fox, a senior vice president at the New York offices of PKF Consulting, a national research and hotel advisory firm.
MP: For real estate, maybe the three most important factors are now price, price and price?
Wednesday, August 19, 2009
48 Vacant Buildings Blight Downtown Detroit
MP: Be sure to check out the interactive map in the article, where you can click on each of the vacant buildings on the map to see photos.
Thanks to Russ Harris.
Average Home Price in Detroit Falls to $11,596 Monthly House Payment Would Be $51.23
According to the Michigan Association of Realtors and Detroit Board of Realtors (data here), the average sales price of a Detroit home fell to $11,596 in July (Year-to-Date), a -40% decline from the $19,596 average home price during the same period last year (see chart above). 2009 year-to-date unit sales increased by 17% to 7,373 homes, compared to 6,315 Detroit homes sold last year over the same period. From the $97,850 peak Detroit home price in 2003, prices have fallen by an amazing 88%. With a 20% down payment on a $11,596 average priced home in Detroit, the monthly payments on a 30-year fixed-rate mortgage at 5.25% would be only $51.23.
For the entire state of Michigan, the average YTD home sales price has fallen by -23.65% to $93,648 through July 2009, compared to last year's average price of $122,660 for the same period. The number of homes sold in the state through July (63,176) of this year increased by 9.16% compared to last year (57,877).
Fighting Health Care Costs: 90-Day Prescriptions at Wal-Mart for Only $10 With Free Mail Delivery
BENTONVILLE, Ark., August 18, 2009 – Following a successful May pilot launch in Michigan Walmart announced that throughout states in the Midwest and Northeast, it is offering its most recent program to drive costs out of health care: a 90-day supply of approximately 300 generic prescriptions, each for $10 via free mail delivery.
From rural communities like Aroostook County, Maine, and Devils Lake, North Dakota, to metro cities such as New York City and Washington, D.C., residents in 22 states and the District will be able to take advantage of this affordable pharmacy program from Walmart by calling 1-800-2REFILL. Additionally, Walmart’s free mail delivery program has no gimmicks, no memberships and no enrollment fees. This announcement signals Walmart’s commitment to help customers save money on prescriptions regardless of whether or not they live close to a Walmart pharmacy location.
Higher Education's Disinvestment in Faculty
Tuition: 4-Year Universities vs. 2-Year Colleges
Using data from the National Center for Educational Statistics, the chart above shows annual price indexes for college tuition at: a) 4-year universities and b) 2-year colleges, both compared to the price index for all goods and services (CPI-U) from the BLS. Although tuition has increased annually at both levels of higher education much higher than the rate of inflation (7.7% for 4-year universities and 6.6% for two-year colleges vs. inflation of 4.3%), the growth in tuition at 4-year universities has increased by more than a full percentage point on average each year since 1976.
It also appears that annual tuition increases at both 4-years and 2-years were pretty similar up until about the mid-1990s, and then tuition started increasing faster at 4-year universities than at 2-year colleges.
College Tuition Increases and Faculty Salaries
The chart above shows annual price indexes for college tuition, faculty salaries (data from the National Center for Education Statistics) and all consumer prices (CPI-U) from 1978 to 2007, along with the average annual compounded increases for each series. College tuition has increased annually since 1978 at about twice the overall rate of inflation, 7.9% vs. 4.1%. In contrast, faculty salaries have increased annually at only 4.5%, just barely above the overall inflation rate.
Bottom Line: The significant real increases in college tuition over the last thirty years have not been caused by increases in faculty salaries.
Higher Ed Employees: 281% vs. 101% vs. 17%
Here's another look:
Why America Needs "The Rich"
Let's look at what the rich do for the economy. They're overwhelmingly the investors and entrepreneurs that start new businesses. These activities make the rich the economy's leading employers, providing millions of jobs and the payroll that goes with them.
The rich are big spenders, contributing a large share to the consumer demand that keeps the economy percolating. Every dollar they spend becomes income to somebody else.
From telephones and cars generations ago to cell phones and plasma TVs more recently, the rich are also the early adopters of new technologies. They encourage innovation by paying the high prices that cover producers' startup costs. Their money lets companies expand output, driving prices down for middle-class consumers.
Obama can expand the ranks of the rich by choosing policies that encourage honesty over fraud in business, work over entitlement in consumption, productive risk taking over speculation, freer trade over protectionism, and economic dynamism over saving jobs and industries.
The goals should be more entrepreneurs, more investors, more innovation and more of what economist Joseph Schumpeter called "creative destruction." In short, Obama needs policies that expand the economic pie, increase tax revenues and tame the deficit monster: lower taxes, less regulation and smaller government to energize the economy.
~W. Michael Cox editorial in yesterday's IBD
Tuesday, August 18, 2009
And You Thought Medical Care Costs Were High
Gallup Economic Weekly: Spending Hits 2009 High
Click arrow to start video.
PRINCETON, NJ -- Back-to-school spending seemed to show up during the week ending Aug. 16, as self-reported average daily spending hit a new high for the year. At the same time, consumer confidence maintained its new high of the prior week and job creation eased, but only slightly.
Asian Economies On The Rebound
The countries that have so far published second-quarter GDP figures show an impressive bounce. Comparing the second quarter with the first at an annualised rate, China’s GDP grew by 15%, South Korea’s by almost 10%, Singapore’s soared by 21% and Indonesia’s managed a respectable 5%. Other countries in the region are also likely to show a rebound. It is true that output in South Korea and Singapore was still lower than a year earlier, but quarterly changes are more useful for spotting turning points—and this is how growth rates are most commonly measured in America.
The revival in emerging Asia’s industrial production is even more impressive, jumping by an annualised rate of 36% in the second quarter. According to Barclays Capital, emerging Asia is the only region in the world where output has regained its level before the crisis (see chart above). This is largely due to China, where industrial production rose by 11% in the 12 months to July, but all the Asian countries have seen a strong pick-up. In contrast, up to June, America’s production continued to fall.
Zimbabwe's Inflation Was #2: Prices Doubled Daily
The 20th century witnessed 28 hyperinflations (Bernholz 2003: 8). Most were associated with the monetary chaos that followed the two World Wars and the collapse of communism. Zimbabwe’s hyperinflation of 2007–08 represents the first episode in the 21st century and the world’s 30th hyperinflation. As incredible as Zimbabwe’s November 2008 inflation rate was (see Table 1 above), it failed to push Zimbabwe to the top of the world’s hyperinflation league table. That spot is held by Hungary (see Table 2 above).
MP: Note in Table 2 above that at the height of Zimbabwe's inflation in November 2008, prices were doubling every day, which didn't quite reach the record in Hungary of prices doubling every 15 hours.
Reminds me of a story I heard once about how drinking warm beer was one of the "costs of hyperinflation" in either Hungary or Germany. Because all retail prices were supposedly rising by the hour, beer drinkers at taverns would order and pay for all of their beer at the beginning of the evening when prices were low and then drink warm beer all night, instead of buying one cold beer at a time at increasingly higher prices. It's probably an example of a story that is "too good to check out" but why let the facts get in the way of a good story (as Benny points out they probably didn't have refrigeration for beer back then)?
Originally posted at Carpe Diem.
Rose Friedman, R.I.P.
She will be remembered both as a talented economist and an influential advocate of freedom. Her economic work helped to discredit the idea of government management of the economy, rolling back policies that were hindering wealth creation and thus helping extend the blessings of prosperity to millions around the world. And as a standard-bearer for human liberty, she contributed to the galvanizing of public opinion – especially in the 1980s – against the growing encroachments of intrusive government. She will also be remembered as both the professional partner and beloved wife and friend of her late husband of 68 years, Milton Friedman.
Correct Way To Peel Banana, Even Monkeys Know
First Time in Six Years: Single-Family Building Permits Increase for the 4th Straight Month
New Car Prices Have Been Falling for 13 Years
Using BLS price data, the chart above shows the CPI for all items vs. the CPI for new cars from January 1953 to July 2009, both series are equal to 100 in January 1953. Over this period, general inflation for all prices has averaged 3.78% per year, compared to new car prices, which have increased by less than 2% annually. If new car prices had increased since 1953 at the same rate as prices in general over that period, new car prices today would be more than 2.5 times their current prices.
The chart below focuses on the period from July 1996 to July 2009, which is a period during which the CPI for new cars has actually fallen by .22% per year, compared to prices in general, which have increased by 2.43% annually over the last 13 years.
Bottom Line: New car prices have actually been falling over the last 13 years, and new cars are more affordable today than ever before.
New Cars More Affordable Than Ever in US History?
MP: Isn't it interesting that new cars have become increasingly affordable over time? In 1995 it took almost 31 weeks of family income to purchase a new car, compared to only 22 weeks of family income today, a whopping 29% reduction in the price of a new car, measured in weeks of income. Or we could say that it takes 9 fewer weeks of income today to buy a new car compared to 14 years ago. Imagine what 9 additional weeks of income could buy for a typical family purchasing a new car today, now that that amount of their income doesn't go towards the purchase of the car.
Why have new cars become increasingly so much more affordable over time? It's most likely a combination of: a) falling new car prices (even as quality and standard options have increased), b) lower interest rates for auto loans, and c) rising income. Although Comerica's series here only goes back to 1995, it's probably true that new cars have never been more affordable in U.S. history than today, which translates into a rising standard of living for all Americans.
And yet as economist Stephen Rose wrote in the Washington Post in 2007:
The American middle class is fighting for its life -- or at least that's what Lou Dobbs would have you believe. The CNN anchor's rants about "the war on the middle class" are probably the most prominent examples of such economic doom-saying, but he isn't alone. Democratic presidential candidates pepper their debates with references to the assault; leading liberal thinkers argue that supply-side conservatives captured the Republican Party during the Reagan administration and implemented policies that continue to privilege the super rich today. They tell a compelling tale of middle-class decline. Pity it isn't true.
Best and Worst Cities To Look For a Job
The two best places in the country to find a job are Washington, D.C. (6 job postings per unemployed person) and Jacksonville, FL (3 job openings per unemployed person), according to a new Job Market Competition index put together by job search engine Indeed (see chart above).
The worst place to find a job is Detroit, with 18 unemployed persons for every job posting (see chart below).
Private Farms in Cuba Are Key to Food Shortages
St. Petersburg Times -- Despite being an agricultural nation with plentiful sun, soil and rain, Cuba produces barely 30% of the food it needs, due to an acute lack of resources and the inefficiency of its state farm sector. About 250,000 small family farms and 1,100 cooperatives till only about one-quarter of the land, yet still manage to outperform the state farms, producing almost 60% of crops and livestock, according to official figures.
The Cuban government recently began handing out idle state land to private farmers across the island in an effort to boost food production. Cuba is hoping that private farmers can literally plow the island out of a huge $11 billion trade deficit this year caused by rising food import costs and falling exports. The policy marks a major shift away from inefficient state farms that once occupied the lion's share of the island's agricultural land.