Tuesday, November 24, 2009

Price War Brews Between Amazon and Wal-Mart; Cutthroat Competition is a Consumer's Best Friend

Wal-Mart, the mightiest retail giant in history, may have met its own worthy adversary: Amazon.com. In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics.

The tussle began last month as a relatively trivial but highly public back-and-forth over which company had the lowest prices on the most anticipated new books and DVDs this fall. By last week, it had spread to select video game consoles, mobile phones, even to the humble Easy-Bake Oven, a 45-year-old toy from Hasbro that usually heats up small cakes, not tensions between billion-dollar corporations.

Last Wednesday, Wal-Mart dropped the price of the oven to $17, from $28, as part of its "Black Friday" deals. Later the same day, Amazon cut its price, which had also been $28, to $18. "It’s not about the prices of books and movies anymore. There is a bigger battle being fought," said Fiona Dias, executive vice president at GSI Commerce, which manages the Web sites of large retailers. "The price-sniping by Wal-Mart is part of a greater strategic plan. They are just not going to cede their business to Amazon."

Chart of the Day: Medical School Graduates

The chart above displays the gender breakdown for medical school graduates back to 1961 (data here), showing the dramatic shift over time towards gender equality. In 1961, men outnumbered women by more than 17 to 1 (94.5% to 5.5%), and by 2006 it was almost evenly split between male and female graduates (51.3% male vs. 48.7% female for 2009).

Life Is Getting Measurably Better for Many People Here and Abroad; There's A Lot to Be Thankful For

From today's Wall Street Journal, "20 Advances to Be Thankful For":

News about health often focuses on the negative: scary new flu viruses, incurable diseases, dashed hopes for miracle drugs. Maybe that's because we have such high expectations that doctors and scientists can fix anything. But amid all that bad news—not to mention the acrimony over health-care reform—it's easy to overlook how much progress has been made in recent years. Here are 20 health-care advances to give thanks for this Thanksgiving (see four of the 20 below):

1. Life expectancy in the U.S. reached an all-time high of 77.9 years in 2007, the latest year for which statistics are available, continuing a long upward trend (see chart above, data here). (That's 75.3 years for men and 80.4 years for women.)

2. Fewer Americans died in traffic fatalities in 2008 than in any year since 1961, and fewer were injured than in any year since 1988, when the National Highway Traffic Safety Administration began collecting injury data. One possible reason: Seat-belt use hit a record high of 84% nationally.

3. The death rate from cancer, the second-biggest killer, dropped 16% from 1990 to 2006. That reflects declines in deaths due to lung, prostate, stomach and colorectal cancers in men, and breast, colorectal, uterine and stomach cancers in women.

4. Death rates dropped significantly for eight of the 15 leading causes of death in the U.S., including cancer, heart disease, stroke, hypertension, accidents, diabetes, homicides and pneumonia, from 2006 to 2007. (Of the top 15, only deaths from chronic lower respiratory disease increased significantly.) The overall age-adjusted death rate dropped to a new low of 760.3 deaths per 100,000 people—half of what it was 60 years ago.

MP: Not sure exactly what happened, but it looks life expectancy really took a dive during the Great Depression, dropping by almost five years from 63.3 years in 1933 to 58.5 years by 1936.

Fourth Monthly Increase in Case-Shiller Price Index

Washington -- The Standard & Poor's/Case-Shiller home price index of 20 major cities rose only 0.3% to 144.96 in September, but it was the fourth straight monthly increase (see bottom chart above, first time since early 2006 of four consecutive increases). The seasonally adjusted index is now up more than 3% from its bottom in May, but still 30% below its peak in April 2006.

Guess Who's Coming to Your Thanksgiving Dinner?

According to the American Farm Bureau Federation, the average cost for a Thanksgiving feast for ten lies at $42.91 in 2009. The menu items for a classic Thanksgiving dinner used for their survey include turkey, bread stuffing, sweet potatoes, rolls with butter, peas, cranberries, a relish tray of carrots and celery, pumpkin pie with whipped cream, and beverages of coffee and milk. Of that, of course, the turkey is the largest cost factor at an average price of $18.65 for a 16-pound bird. Because Thanksgiving is a celebration, for our calculations, we also factored in five bottles of wine at an average price of $7.35, which brings the total cost of the average Thanksgiving feast to $79.67.

But not all of that reflects the actual cost of your meal – a large chunk of it is taken by the government in some form or another:

On top of the direct excise taxes on the wine, there are taxes paid by the farmers, winemakers, manufacturers, wholesalers, distributors and shippers, retailers, warehouses. To be more specific, out of what the consumer pays, the producers and sellers must pay federal income taxes, state income taxes, federal payroll taxes, unemployment insurance taxes, workmen’s compensation taxes, state franchise taxes, local property taxes and any local income taxes. All told, for a Thanksgiving feast for a family of ten, the government takes a bite of 40.91%, or $32.59.

~Americans for Tax Reform

From Treasury: Invitation to Financial Bloggers

A little late, but a newsworthy report from the NY Times (11/15/2009):

Mr. Geithner, the Treasury secretary, was among the senior officials who talked with bloggers at an outreach session on Nov. 2. The two-hour round table was held on background, meaning that the bloggers could describe the sessions, but not attribute quotes to specific officials. Lengthy posts about financial system reforms — and the bloggers’ disagreements with the Treasury’s strategies — ensued. New-media scribes have gradually made their way inside most governmental institutions over the years, but the meeting was the first for bloggers at the Treasury.

Andrew Williams, a spokesman for the Treasury who assembled the event, said that Mr. Geithner had “long valued the blogosphere” and mentioned that during Mr. Geithner’s tenure as the president of the New York Federal Reserve Bank, he had requested a daily compendium of relevant blog posts. Another reason for the outreach, Mr. Williams said, is that the blogs are influential, especially because they are read by reporters at more traditional outlets.

Markets in Everything: Vacant House Parties

SANDY SPRINGS, Ga.Some of the most elegant addresses in all of Atlanta are found in this wealthy enclave. Sprawling mansions that occupy 2- to 10-acre lots are home to some of the city's most prominent residents.

They were shocked last month when a massive Halloween party exploded in their midst. More than 1,000 people jammed the streets around the brick-and-rock mansion, paying $20 apiece for admission and riding shuttle buses from the parking lot of a nearby Publix grocery, police say.

The Halloween party was the latest of several in Sandy Springs in which empty mansions are rented for huge parties that draw complaints from neighbors. The Sandy Springs party planner was charged only with disorderly conduct, a misdemeanor, because he had permission from the property manager to host a party.

Monday, November 23, 2009

Sideways Discrimination: An Important Lesson

Steven E. Landsburg has argued in his book Fair Play and now on his new blog that it’s generally acceptable (morally and legally) for tenants to discriminate against landlords, and workers to discriminate against employers, but not vice-versa.

Here's how he explains it in
Fair Play:

Let me illustrate with a stylized example economists love so much. Mary owns a vacant apartment; Joe is looking for a place to live. If Joe disapproves of Mary's race or religion or lifestyle, he is free to shop elsewhere. But if Mary disapproves of Joe's race or religion or certain aspects of his lifestyle, the law requires her to swallow her misgivings and rent the apartment to Joe.

Or: Bert wants to hire an office manager and Ernie wants to manage an office. The law allows Ernie to refuse any job for any reason. If he doesn't like Albanians, he doesn't have to work for one. Bert is held to a higher standard: If he lets it be known that no Albanians need apply, he'd better have a damned good lawyer.

These asymmetries grate against the most fundamental requirement of fairness--that people should be treated equally, in the sense that their rights and responsibilities should not change because of irrelevant external circumstances. Mary and Joe--or Bert and Ernie--are looking to enter two sides of one business relationship. Why should they have asymmetric duties under the antidiscrimination laws?

When the law is so glaringly asymmetric, one has to suspect that the legislature's true agenda is not to combat discrimination on the basis of race, but to foster discrimination on the basis of social status. By holding employers and landlords to a higher standard than employees and tenants, the lawmakers reveal their underlying animus toward employers and landlords.

We've heard a lot--and I suspect more than enough (in the sense that nobody any longer has anything new to say on this subject)--about reverse discrimination, where the law distinguishes unfairly between blacks and whites. But we've heard far too little about sideways discrimination, where the law distinguishes unfairly between, say, landlords and tenants.

More recently on his blog:

If you don’t want to live in an Albanian-owned building or an work for an Albanian employer, that’s your right (no matter how strongly we might strongly disapprove of your attitude). By analogy, then, it might seem that landlords and employers should have the same right to discriminate.

Now clearly the situation is not that simple; landlords and employers are not the same as tenants and employees. But the question is: Are they not the same in any way that is morally relevant? The most frequently cited difference (in my experience) is that landlords and employers tend to have more market power than tenants and workers. Putting aside the question of whether that’s true, it can’t possibly be a full justification for treating landlords and employers differently, and here’s why: There are plenty of instances where we don’t think that market power takes away your right to discriminate. Extremely attractive people have a lot of power in the dating market, but I think it’s safe to say that almost nobody thinks the most beautiful among us should be forced to date Albanians, or to prove that they choose their partners according to some objective criterion other than national origin.

So if you think it’s OK for tenants to discriminate but not landlords, you’ve got to face the question: What is the ethically relevant distinction here? It’s clearly not market power, so what, if anything, is it? I do not deny that there might be a good answer to that question, but I must admit I can’t imagine what it would be.

MP: I presented this dilemma in an economics class once about ten years ago at the University of Michigan-Flint to provoke some discussion on the economics of discrimination, and made the mistake of using blacks in the example instead of Albanians, and was accused by a black student of being racist - the emails and anti-racist literature that I received went on for several weeks. It reminds of the Norwegian proverb "Experience is the best teacher, but the tuition is high."

More Health-Care Lessons from India

From the Salon.com article "How I Got Well in India for $50: My cheap, fast and effective treatment in New Delhi reminded me of everything wrong with American healthcare":

I had anticipated getting sick in India. What I hadn't anticipated was that India's treatment would turn out to be so good. And cheap. Unless you happen to be one of the hundreds of millions of Indians who are poor and don't live in a major metropolitan area. The Indian healthcare system is an anarchic hodgepodge, with little insurance, little regulation and a range of services offered by hundreds of government-run, trust-run and corporate hospitals. The care it produced for me was fast, effective, courteous and cheaper than American medicine, even when adjusted for the lower cost of living.

The cost to see the doctor (a gastroenterologist, for a bacterial infection)? $6. The pharmacy bill was about $1. Total cost, $7, with no insurance company involvement whatsoever.

In some ways, the Indian system is like the U.S. system before the spread of private insurance -- that extra layer of bureaucracy is still not a major factor in Indian healthcare costs. Private insurance costs help explain why the U.S. spends a greater percentage of its GDP on healthcare than the European democracies. The Indian system of health insurance also works differently, in a way that holds down costs. Those Indians who do have private insurance pay their bills out of pocket -- to doctors who don't charge much because of all the competition -- and then get reimbursed. The insurance companies aren't the ones setting the rates or acting as the middle man.

Almost 25,000 doctors graduate from India's medical schools every year. Because there is so much competition, doctors and hospitals are forced to keep their prices low to get patients. Residents, who go to medical school straight from high school, only make the equivalent of a few hundred dollars a month. An average surgeon's salary would be around $8,000 per month.

HT: Colin Grabow

India's $2k Open-Heart Surgery, Henry-Ford Style

BANGALORE (WSJ) -- Dr. Devi Shetty, who entered the limelight in the early 1990s as Mother Teresa's cardiac surgeon, offers cutting-edge medical care in India at a fraction of what it costs elsewhere in the world. His flagship heart hospital charges $2,000, on average, for open-heart surgery, compared with hospitals in the U.S. that are paid between $20,000 and $100,000, depending on the complexity of the surgery.

The approach has transformed health care in India through a simple premise that works in other industries: economies of scale. By driving huge volumes, even of procedures as sophisticated, delicate and dangerous as heart surgery, Dr. Shetty has managed to drive down the cost of health care in his nation of one billion.

His model offers insights for countries worldwide that are struggling with soaring medical costs, including the U.S. as it debates major health-care overhaul.

~From the article "The Henry Ford of Heart Surgery In India, a Factory Model for Hospitals Is Cutting Costs and Yielding Profits."

Health Care Hoops: The Public Option

Home Sales at Highest Level and Months Supply of Inventory at Lowest Level, Both Since Feb. 2007

Highlights from today's report on existing home sales:

1. Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1% to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5% above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

2. The inventory of existing homes for sale in October fell to 3.57 million homes, the lowest level in more than a year. At the current sales pace, there is now a 7.0 months supply of existing homes, which is the lowest level since February 2007, more than two and a half years ago (see top chart above). Compared to the peak of 11.3 months supply of inventory in April, October's 7.0 months supply represents a reduction of 4.3 months.

Bottom Line: The national real estate market is gradually recovering as the balance between the supply and demand (measured by the months supply of inventory) has returned to the 2006-2007 levels, suggesting that the worst is definitely behind us.

More on the Gender Gap for SAT Math Test Scores

A previous CD post showed that high school boys outperform high school girls for high SAT math test scores (see chart above, data here). For perfect 800 scores on the 2009 math SAT test, the ratio of boys to girls is 2.22 to 1 (6,928 to 3,124). What makes this outcome even more interesting are the following data from this SAT report from the College Board:

1. Girls are over-represented in the top 10% of high school students by GPA, which is 57% female and 43% male. Girl also outnumber boys in the second tenth of students by high school rank: 54% to 46%.

2. Girls outnumber boys for GPAs of A+ (60% vs. 40%), A (61% vs. 39%), A- (57% vs. 43%), etc.

3. The average number of years of math study is almost identical: 3.9 years for boys and 3.8 years for girls.

4. For students reporting more than four years of math study, the percentages are equal: 50% of boys and 50% of girls.

5. Both 50% of boys and 50% of girls report that calculus is the highest level of high school mathematics taken.

6. More girls than boys took AP Honors math courses, by a ratio of 117 girls for every 100 boys.

Therefore, it would seem that girls are equally prepared, if not more prepared (more AP math classes), than boys for the SAT math test, and yet boys outperform girls measured both by the difference in mean scores (35 point difference in favor of boys) and the over-representation of boys for scores on the high end (2.22 to 1 ratio for perfect scores), and these differences persist over time.

Sunday, November 22, 2009

800 SAT Math Scores: Male-Female Ratio is 2.22:1

The chart above shows the male-female test score ratio for the 2009 SAT math test (data here). For example, for perfect scores of 800, males (6,928) outnumbered females (3,124) by a ratio of 2.22 to 1. In other words, 69% of test-takers who got perfect math scores were males vs. 31% of perfect scores by females. Or we could also say that there were 222 high school boys who got perfect SAT math scores for every 100 high school girls.

The graph further shows that boys outperformed girls at all 23 math test scores between 580-800 (10 point intervals, with male-female ratios of 1.0 or above), and then for math test scores between 200 points and 570, girls outnumbered boys (male-female ratio below 1.0).

Further, the graph shows that the mean SAT math test score for high school boys was 534, and 35 points higher than the mean female SAT math test score of 499. And based on
data here, the standard deviation of male math SAT test scores was 118 (variance of 13,924) compared to the standard deviation for females of 112 (variance of 12,544), for a Male-Female variance ratio of 1.11.

If we are trying to explain the over-representation of males in science, math and engineering departments at MIT and Harvard, especially if that group represents those who score 800 on the SAT math test, the explanation seems pretty clear, convincing and straightforward: males are over-represented by a factor of more 2:1 for SAT math test scores of 800 points.

Bottom Line: Can Larry Summers get his job back as president of Harvard,
for saying basically the same thing?

"It does appear that on many, many different human attributes- height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability - there is relatively clear evidence that whatever the difference in means - which can be debated (MP: Actually for math SAT scores, there is no debate) - there is a difference in the standard deviation, and variability of a male and a female population."

Update: Adjusting for the fact that more girls than boys take the SAT (as suggested in the comments by Dr. T) makes my case even stronger, since 0.974% of boys scored 800 on the SAT math test vs. 0.386% of girls, for a ratio of 2.52 to 1 in favor of boys for perfect math test scores of 800, even greater than the 2:22 to 1 ratio for unadjusted scores (see graph above).

Despite Recession, Innovation Is Alive and Well

Click to enlarge.
From the press release for Booz & Company's 2009 edition of the Global Innovation 1000:

In the face of a severe global recession, the world’s 1,000 largest publicly traded corporate research and development spenders increased R&D budgets in 2008, affirming the critical importance of innovation to their corporate strategies, according to Booz & Company’s Global Innovation 1000, the global management consulting firm’s fifth annual analysis of global innovation spending. R&D spending at these firms rose 5.7% in 2008, a slower rate of growth than the prior year’s 10% increase, but in line with the group’s 6.5% increase in worldwide sales. More than two-thirds of the companies included in this year’s Global Innovation 1000 maintained or increased R&D spending in 2008, even though a third of the companies reported a financial loss for the year.

Judging from the data in this year’s study, the results of the senior management survey, and conversations with executives, the recession’s effect on innovation activity has not been as severe as some observers of the business scene might have anticipated. Innovation has become central to every company’s efforts to compete, and the degree of competition has been in no sense reduced by the downturn; if anything, it has been heightened. Long product development cycles have forced companies to maintain their R&D spending even when revenues decline. And most companies are fully aware of the need to be in position to profit from the coming upturn.

From the study's conclusion "The Downturn's Upside":

Virtually all the companies we contacted noted that they have learned to streamline R&D processes, to make sure their product development filters more effectively reflect economic reality, to make smart bets on advantaged technologies, and to kill weak projects more quickly. All these changes should help them get more from their R&D investments over time. As we head into a better business environment, smart companies will see this recession as a learning experience. Every company should take the time to assess the strengths and weaknesses of its innovation systems and processes. The downturn no doubt revealed some major gaps in innovation capabilities. Fix them now. Doing so right away will pay dividends in terms of speed-to-market, quality of execution, and capacity - both in the coming upturn and well into the future.

The Economy is So Bad That.....

I opened the mail and found a pre-declined credit card.

I ordered a Whopper at Burger King and they asked me, "Can you afford fries with that?"

Exxon-Mobil laid off 25 Congressmen.

The bank returned my check marked "Insufficient Funds" and I had to call them to ask if they meant me or them.

The Mafia is laying off judges.

A truckload of Americans was caught sneaking into Mexico.

Read more here.

Saturday, November 21, 2009

With HSAs, Mammogram Frequency Is A Non-Issue?

The NY Times blog has an article "The Uproar Over Mammography," which links to a WSJ op-ed "A Breast Cancer Preview: The mammogram decision is a sign of cost control to come."

In a world of consumer-driven health care that includes Health Savings Accounts (HSAs), wouldn't this "uproar" be a complete non-issue? In that world, patients spending their own money could make decisions on their own, in consultation with their physician, about the timing and frequency of their mammograms.

Think about oil changes for your car. If the manufacturer recommends oil changes every 5,000 miles, but you decide on a different frequency - say every 3,000 miles or every 10,000 - that's not a problem. Now if your car insurance covered routine oil changes, and then the government introduced "government car insurance reform" with a "public option," then the frequency of oil changes would become an issue and could lead to an "uproar."

But in a world of consumer-driven health or auto care where consumers pay for routine maintenance or health exams, there's no "uproar," since consumers make decisions on the frequency of their oil changes or mammograms, and are directly responsible for the cost.

However, there's just one small problem - Senator Harry Reid wants to "kill consumer-driven health care" with the Senate's health-care "reform" bill (which would assault HSAs), read the WSJ editorial "The End of HSAs."

Approval-Disapproval Gap Drops from 56 Points to 5

According to Gallup, the percent of Americans who approve of President Obama has dropped by 19 points from 68% in late January to 49% currently (new low). During the same period, disapproval increased from 12% to 44% (new high). Therefore, the approval-disapproval gap has shrunk from 56 points in January (68%-12%) to only 5 points now (49%-44%), a new low. Read more here.

Friday, November 20, 2009

The Power of the Blog: Obama Responds to Yoani

Committee to Protect Journalists -- Cuban blogger Yoani Sánchez was astounded this week by President Barack Obama’s decision to respond a written questionnaire Sánchez submitted to the White House. Still recovering from bruises left by a recent vicious attack by state security agents, she told CPJ from her home in Havana: “This is the best way to get better.”

The blogger said that she had tried for months to reach the U.S. president through different channels. Sánchez said she had sent written questions to Obama through a wide range of different people before the White House responded. On her blog Generación Y, where she has posted Obama’s answers to her seven questions, Sánchez explained that the questions were based on issues “that keep me from sleeping,” and were born from her personal experience.

“It was a very pleasant surprise,” Sánchez said, acknowledging that the chances that Obama would reply were minimal. Before responding to the questions, Obama thanked Sánchez for the opportunity to exchange views with her and her readers in Cuba, and congratulated her for receiving Columbia’s University Maria Moors Cabot Award for excellence in Latin American reporting.

“Your blog provides the world a unique window into the realities of daily life in Cuba,” Obama wrote. “It is telling that the Internet has provided you and other courageous Cuban bloggers with an outlet to express yourself so freely, and I applaud your collective efforts to empower fellow Cubans to express themselves through the use of technology. The government and people of the United States join all of you in looking forward to the day all Cubans can freely express themselves in public without fear and without reprisals.”

See my post today on the Enterprise Blog about Yoani Sanchez, where I conclude that:

When the history of Cuba’s freedom movement is written, it’s likely that Yoani Sanchez will be recognized as a national hero and freedom fighter, the equivalent of Lech Walesa in Poland and Vaclav Klaus in the Czech Republic. Yoani Sanchez demonstrates that we should never underestimate the power of one courageous individual with a computer, a blog, and intermittent access to the Internet, or the individual’s power to change the world in the Information Age, especially with a message of freedom and individual liberty. The fact that the president of the United States, who is often recognized as the most powerful person in the world, has praised Yoani Sanchez’s blog and responded to her questions is a remarkable and historical event. Intellectual figures like Milton Friedman, Friedrich von Hayek, and Thomas Jefferson would be proud of Yoani Sanchez and her powerful message of individual freedom in one of the few remaining regimes of totalitarianism left in the world.

Americans Get Their Driving Mojo Back Over the Summer; Largest 4-Month Increase In 5 Years

The chart above shows the percent change in U.S. traffic volume through September (from the same month in the previous year), in a report released today by the Federal Highway Administration (data and report here). After falling for 17 consecutive months starting in November 2007, traffic volume has increased in each of the last four months. The 2.5% September increase is the largest monthly increase since a 3.8% increase in January 2006, and follows increases of 0.7% in August, 2.2% in July and 1.9% in June, and is the first time since the summer of 2006 that traffic volume has increased four months in a row (see chart). The cumulative 4-month June-Sept. increase of 7.3% is the largest 4-month increase since the 10.8% increase through May 2004, more than five years ago.

The chart below displays traffic volume as a moving 12-month total, showing a similar pattern to the percentage monthly increase above. After falling for 16 straight months going back to December 2007, the moving 12-month total has increased four months in a row, and marks the largest 4-month increase in traffic volume (12-month total) since the spring of 2005, more than four years ago.

LA Shipping Reaches Highest Level Since Nov. 2008

SAN PEDRO, CA (Nov. 13, 2009)Containers shipped through the Port of Los Angeles last month increased 10.9% compared to September, making October the strongest month yet for the Port this calendar year (see top chart above). Both containerized imports and exports reached their highest levels for 2009, with loaded outbound containers seeing an 11.8% rise over October 2008 volumes. Still, loaded inbound containers were 8.3% below October 2008 levels (data here).

Despite a reporting period that included a weeklong observance of a Chinese holiday, the total number of Twenty-Foot Equivalent (20-foot containers or “TEUs”) imported and exported through the Port of Los Angeles in October was 647,423
. Total container volumes were 10.9% above September 2009 levels; loaded imports were up 9.6% and loaded exports were up 7.4% over the previous month. Year to date, TEU volume is at 5,606,798, or 15.4% lower than the same 10-month period in 2008.

MP: Container counts at the LA Port have increased in six out of the last eight months, and reached the highest total level since last November. On a year-to-year percent change basis, the 8.34% decrease in October was the smallest decrease in a year, since the 3.98% decrease from October 2007 to October 2008 (see bottom chart above).

Thursday, November 19, 2009

Lou Dobbs Will Appear on Kudlow Report Tonight


U.S. Share of World GDP Remarkably Constant

Somewhat surprisingly, the Economic Research Service of the U.S. Department of Agriculture has some great international historical macroeconomic datasets. According to its website:

The International Macroeconomic Data Set provides data from 1969 through 2020 for real (adjusted for inflation) gross domestic product (GDP), population, real exchange rates, and other variables for the 190 countries and 34 regions that are most important for U.S. agricultural trade.

The chart above shows the annual shares of real world GDP for four geographical regions (European Union 15, Asia/Oceania, Latin America and the combined share of Africa and the Middle East) compared to the U.S. share of world GDP between 1969 and 2009 (data here). What might be surprising is that the U.S. share of world GDP has been relatively constant for the last 40 years, and is actually slightly higher in 2009 (26.7%) that it was in 1975 (26.3%). It's also interesting that the EU15's share of world GDP has declined from about 36% of world output in 1969 to only 27% in 2009. Further, despite having a large share of the world's oil reserves, the Middle East's share of global output has increased from only 2.23% in 1969 to 3.16% in 2009 (graph shows Middle East combined with Africa).

Bottom Line: World GDP (real) doubled between 1969 and 1990, and has increased by another 60% since then, so that world output in 2009 is more than three times greater than in 1969. We might mistakenly assume that the significant economic growth over the last 40 years in China, India and Brazil has somehow come "at the expense of economic growth in the U.S." (based on the "fixed pie fallacy") but the data suggest otherwise. Because of advances in technology, innovation, and significant improvements in U.S. productivity, America's share of total world output has remained remarkably constant at a little more than 25%, despite the significant increases in output around the world, especially in Asia.

Update: The chart above represents about 91% of the world economy and does not include Canada and the European countries not included in the EU-15.

Leading Indicators Rise for 7th Month to 2-Yr. High

The Leading Economic Index (LEI) increased for the 7th straight month to 103.8, the highest level since the fall of 2007, and the first time in more than five years of 7-consecutive monthly increases (since early 2004).


Six of the ten indicators that make up The Conference Board LEI for the U.S. increased in October. The positive contributors – beginning with the largest positive contributor – were the interest rate spread, average weekly initial claims for unemployment insurance (inverted), stock prices, average weekly manufacturing hours, real money supply and manufacturers’ new orders for consumer goods and materials. The negative contributors – beginning with the largest negative contributor – were index of consumer expectations, building permits, index of supplier deliveries (vendor performance), and manufacturers’ new orders for nondefense capital goods.

Odds for Health Care Reform Fall From 50% to 2%

Last summer the odds for a federal government-run health insurance plan to be approved before the end of the year were around 50%, according to futures contracts traded on Intrade.com. Those odds have now fallen to a contract-low of only 2.2%. Odds for health care reform passing by March 2010 or June 2010 are higher, see details here.

Jobless Claims (Four-Wk. Avg.) Drop for 11th Straight Week to 514,000, Lowest Level in A Year

Weekly jobless claims fell for the 11th straight week to 514,000 (four-week moving average), reaching the lowest level in a year (since November 15, 2008), according to today's report from the Department of Labor (see chart above).

Wednesday, November 18, 2009

Real Estate Recovery in So. California: Home Sales Increase 16th Straight Month, Prices 6th Month

Southern California home sales rose in October as prices showed more signs of firming. The median sale price fell by the smallest amount in two years, the result of a shrinking inventory of homes for sale and government and industry efforts to stoke demand and curtail foreclosures. Last month 22,132 new and resale houses and condos closed escrow in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was up 2.8% from 21,539 in September and also up 2.8% from 21,532 a year earlier, according to MDA DataQuick of San Diego.

October marked the 16th month in a row with a year-over-year sales gain, although last month’s was the smallest of those increases. In October, the median price paid for a Southland home was $280,000, up 1.8% from $275,000 in September but down 6.7% from $300,000 in October 2008. It was the median’s smallest annual decline for any month since September 2007, when the median fell 4% from a year earlier. September 2007 – one month after the current credit crunch hit – marked the beginning of a 26-month streak of year-over-year declines in the median price.

The region’s overall median sale price has risen or held steady on a month-to-month basis ever since it dropped to a more-than 7-year low of $247,000 in April. Last month the median was 44.6% lower than the peak $505,000 median reached during several months in early and mid 2007.

MP: More evidence from October sales data that the real estate market in California has stabilized and is now starting to show continued signs of gradual monthly improvements. With 16 consecutive months of year-to-year sales increases, and now six straight months of price increases, it's looking more and more like a gradual, but solid recovery.

Expanding Coverage = Increased Costs for Current Dysfunctional Health Care System, Less Innovation

Our health-care system suffers from problems of cost, access and quality, and needs major reform. Tax policy drives employment-based insurance; this begets overinsurance and drives costs upward while creating inequities for the unemployed and self-employed. A regulatory morass limits innovation. Deep flaws in Medicare and Medicaid drive spending without optimizing care.

Speeches and news reports can lead you to believe that proposed congressional legislation would tackle the problems of cost, access and quality. But that's not true. The various bills do deal with access by expanding Medicaid and mandating subsidized insurance at substantial cost—and thus addresses an important social goal. However, there are no provisions to substantively control the growth of costs or raise the quality of care. So the overall effort will fail to qualify as reform.

In discussions with dozens of health-care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it. Likewise, nearly all agree that the legislation would do little or nothing to improve quality or change health-care's dysfunctional delivery system. The system we have now promotes fragmented care and makes it more difficult than it should be to assess outcomes and patient satisfaction. The true costs of health care are disguised, competition based on price and quality are almost impossible, and patients lose their ability to be the ultimate judges of value.

Worse, currently proposed federal legislation would undermine any potential for real innovation in insurance and the provision of care. It would do so by overregulating the health-care system in the service of special interests such as insurance companies, hospitals, professional organizations and pharmaceutical companies, rather than the patients who should be our primary concern.

In effect, while the legislation would enhance access to insurance, the trade-off would be an accelerated crisis of health-care costs and perpetuation of the current dysfunctional system—now with many more participants. This will make an eventual solution even more difficult. Ultimately, our capacity to innovate and develop new therapies would suffer most of all.

There are important lessons to be learned from recent experience with reform in Massachusetts. Here, insurance mandates similar to those proposed in the federal legislation succeeded in expanding coverage but—despite initial predictions—increased total spending.

~Jeffrey S. Flier, Dean of Harvard Medical School, in today's WSJ - "Health 'Debate' Deserves a Failing Grade"

Tuesday, November 17, 2009

More Selective Concern on Sex Imbalances

From a new report "Staying Competitive: Patching America’s Leaky Pipeline in the Sciences" from the Center for American Progress:

The “leaky pipeline” for women in the sciences, sometimes referred to as the “pool problem” because of the low number of women in job applicant pools relative to their rates of doctoral degrees granted, has become a point of considerable debate in recent years. Discussions about the reasons for the leaks range from “chilly” institutional and departmental climates to gender bias and discrimination to innate differences in cognition to lack of mentoring to the role of marriage and children.

This debate was perhaps best brought to national attention in the aftermath of comments by former President of Harvard University Lawrence Summers in 2005, when he referenced theories that women might have less intrinsic aptitude to excel at academic science careers. In fact, research universities across the country and federal granting agencies are routinely confronted with evidence of a leaky or constricting pipeline for women in the sciences.

Data from both NIH and NSF, the two agencies providing the greatest amount of funds to researchers in U.S. universities and colleges, also suggest that the leaky pipeline is not an aspect of the past. As seen in the figure above women comprise a much larger proportion of the predoctoral fellowships given by these agencies than they do postdoctoral fellowships and competitive faculty grants. The drop-off in relative proportion is dramatic, with women comprising 63% and 54% of NIH and NSF’s predoctoral awards in 2007, respectively, but just 25% and 23% of the competitive faculty grants awarded in the same year.

MP: 1. Once again, another mis-characterization of what
Larry Summers actually said:

It does appear that on many, many different human attributes-height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability - there is relatively clear evidence that whatever the difference in means - which can be debated - there is a difference in the standard deviation, and variability of a male and a female population.

In other words, what Summers actually said is that "male intelligence is inherently more variable than female intelligence," which is significantly and distinctly different than saying that "women might have less intrinsic aptitude to excel at academic science careers." Anybody who understands basic statistics and the difference between the mean and standard deviation of a distribution will understand immediately the difference between what Summers said (the standard deviation of male intelligence is greater than the standard deviation of female intelligence) and what others claim he said (women have less intrinsic aptitude to excel in math and science).

2. Isn't it interesting that there is no concern whatsoever that women receive 170 NIH predoctoral awards for every 100 grants awarded to men, and 117 NSF awards for every 100 men, but there is suddenly a selective concern of a "dramatic drop-off" of NIH and NSF awards to faculty. If I understand the rules of gender activism correctly, they go something like this:

Rule A. If women are over-represented (college degrees, SAT scores for reading or writing between 750-800, doctoral degrees in the life sciences, English and foreign languages, etc., scholarly research awards, or tenured professors in education), that is because women are smarter, more motivated or more talented than men. No action, policies or funding required to correct the gender imbalance.

Rule B. If women are under-represented (engineering or math Ph.D.s, SAT math scores between 750-800, tenured math, computer science and physics professors at MIT, etc.) that is because of pervasive, unexamined sexism, which requires action, policies and funding to correct the sex imbalances.

3. The report concludes that "If we delay we simply continue to lose talented scholars [women] from fast-track academic careers in the sciences—to the detriment of our nation’s future."

Here's another solution: Make it easier for all of the foreign doctoral students studying math, science and engineering in the U.S. to stay here after they complete their degrees.

Baltic Dry Index Roars Back: 102.5% Gain in 39 Days

The Baltic Dry Index closed today at 4381, advancing for the 14th straight day, and registering positive gains in 31 out of the last 35 days. From the late-September low of 2163, the benchmark index for freight costs to ship dry bulk commodities such as iron ore, coal and grains has more than doubled in just 39 days, and has reached the highest level since September 24, 2008, almost 14 months ago. The global economic recovery is underway and gaining momentum.

See related post here from Scott Grannis, who says that:

Clearly, the wheels of global commerce are spinning back up. Everything I see is consistent with a global recovery in confidence, in demand, and in production.

Belichick Gets No Respect, Except from Economists

1. "Bill Belichick Is Great" by Steven Levitt

I respect Bill Belichick more today than I ever have. This decision may have hurt his chances for the Football Hall of Fame, but it guarantees his induction into the Freakonomics Hall of Fame.

2. "
Bill Belichick as Frederic Bastiat"

It's pretty evident that the degree of opposition to Belichick's decision amongst the sports public and even so-called football experts is disproportionately high compared to the true probability that Belichick's decision would fail. In fact, a few statistical geeks have even suggested that Belichick made the correct decision under the criterion that head coaches are supposed to use: maximize the probability of your team winning.

The type of response we see to Coach Belichick's decision is too often what we also see in public policy debates: there is a bias for what is seen versus what is not seen.

Update (Wall Street Journal): Somehow in American football, the punt—a clear and unambiguous symbol of surrender and retreat—has become the hallmark of sensible coaching.

Brian Burke, a statistician who has studied the results of fourth-down situations in the NFL, says a team in the Patriots' situation had a 79% chance of winning by going for it (either by converting the fourth-and-two or stopping the opponent thereafter). That compares favorably to a 70% probability of preventing a foe from driving down the field for a touchdown following a punt.

Unemployment, The Movie

Another interactive map showing monthly unemployment rates from December 2007 to September 2009. Watch "Unemployment, The Movie" here.

HT: Taxing Tennessee

Monday, November 16, 2009

Stripped of Its Intellectual Content, "Rainforest Math" Has Serious Implications for U.S. Economy

From the article "Who Needs Mathematicians for Math, Anyway?" by Professor Sandra Stotsky in the City Journal:

As part of his education-reform plan, President Obama wants to “make math and science education a top priority” and ensure that children have access to strong math and science curricula “at all grade levels.” But the president’s worthy aims won’t be reached so long as assessment experts, technology salesmen, and math educators—the professors, usually with education degrees, who teach prospective teachers of math from K–12—dominate the development of the content of school curricula and determine the pedagogy used, into which they’ve brought theories lacking any evidence of success and that emphasize political and social ends, not mastery of mathematics.

A new effort is under way to develop national math standards for K–12. The two organizations running the effort—the National Governors Association and the Council of Chief State School Officers, with support from both the Department of Education and the National Education Association—have not yet invited a single mathematical or science society to ensure that the high school mathematics standards and “college-readiness” standards they propose in fact prepare American high school students for the freshman calculus courses that serve as the basis for undergraduate majors in engineering, science, and mathematics (as well as other mathematics-dependent majors and technical/occupational programs). The effort, which is being pushed very quickly, seems determined to do an end run around the country’s mathematical and scientific organizations and the panel’s recommendations on the major topics for school algebra.

Baseless pedagogical theories mean that the educators’ long-term captive audience—K–12 teachers, most drawn from the middle academic tier of our high school population and the bottom third of our undergraduate population—will know even less about authentic mathematics than they do now. Alas, so will their students. And even if a new Congress or Secretary of Education were to support the panel’s recommendations, it will be essentially business as usual in the public schools so long as math educators, joined by assessment experts and technology salesmen, continue to shape the curriculum. A form of mathematics stripped of much of its intellectual content has obvious repercussions for higher education and the American economy. The math wars, which started in debates about pedagogy, may end in questions about the long-term prospects for American prosperity.

Exhibit A:
During their first math class at one of CUNY's four-year colleges, 90% of 200 students tested couldn't solve a simple algebra problem, the report by the CUNY Council of Math Chairs found. Only a third could convert a fraction into a decimal.

HT: Arthur Little

Welcome to the 2009 Worldwide Bull Market Rally

The MSCI World Stock Market Index has registered gains in 7 out of the last 9 trading days, and closed today at 1175.40, the highest close since October 1, 2008, more than a year ago (see chart above). The World Index has risen 27.7% since the first of the year, and by more 70% from the early March bottom. Welcome to the Worldwide Bull Market Rally of 2009.

Here's one report.

Retail Clinics: "Disruptive Innovation and Improved Value Proposition," The Magic of the Marketplace

From a new study released today by the Deloitte Center for Health Solutions "Retail Medical Clinics: Update and Implications - 2009 Report" (press release here and full study here):

Retail clinic market growth has slowed from an astronomical 350 percent in 2007 to 30 percent in 2008, and it trended negative (-5 percent) in the first five months of 2009. The economic downturn that began in December 2007 had a chilling effect on retailers; conditions also were challenging for private investors backing start-ups in retail medicine.

2009 marks a pause between wave one and wave two of retail clinic growth. Cautious growth is likely to resume from 2010-2011 and then accelerate from 2012-2014. Despite forecasts from a variety of organizations estimating 5,000 clinics by 2010 and perhaps 6,000 by 2012, data suggest those numbers are unattainable in that timeframe. Merchant Medicine, a leading tracker of retail clinic operators, has suggested that the market may, in fact, top out at 4,000 clinics in 2015 (see chart above).

Employer sponsorship of onsite retail clinics is a key factor in their potential growth. By hosting and partially underwriting a clinic’s costs, employers have the potential to reduce employee health costs and lost worker time due to long wait times at physicians’ offices. One forecast suggested that 32 percent of large employers (those with greater than 1,000 employees) will have onsite clinics by 2009 – a total of more than 2,400 sites.


Retail clinics represent a new channel to deliver primary care services more conveniently and at lower cost to consumers. Clinic services are safe and effective, due in large measure to medical management programs that are evidence-based and supported by electronic medical records. As a new entrant, retail clinics represent a threat to many traditional health care industry stakeholders; however, to consumers, health plans and employers they offer an important care alternative with a strong value proposition.

2. The growth and evolution of retail clinics reflect opportunities for disruptive innovation and an improved value proposition for the U.S. health care system.

MP: What an amazing success and growth story, from only 200 retail health clinics in 2006 to possibly 4,000 by 2015, a 10-fold increase in less than ten years! At the same time that Congress debates a government takeover of the health care system, we have market-based health care reform taking place right now in the form of convenient, affordable, quality health care at more than 1,000 retail clinics around the country. Read more here.

Ronald Reagan reminds us:

We who live in free market societies believe that growth, prosperity and, ultimately, human fulfillment are created from the bottom up, not the government down. Trust the people. This is the one irrefutable lesson of the entire post-war period, contradicting the notion that rigid government controls are essential to economic development. The societies that have achieved the most spectacular, broad-based progress are neither the most tightly controlled, nor the biggest in size, nor the wealthiest in natural resources. No, what unites them all is their willingness to believe in the magic of the marketplace.

Sunday, November 15, 2009

Markets in Everything: Selling Lesson Plans Online

NY Times -- Between Craigslist and eBay, the Internet is well established as a marketplace where one person’s trash is transformed into another’s treasure. Now, thousands of teachers are cashing in on a commodity they used to give away, selling lesson plans online for exercises as simple as M&M sorting and as sophisticated as Shakespeare.

Without Market Pricing, Kidney Demand Exceeds Supply 6 to 1, And 1000s Needlessly Die Waiting

From the article "White Collar Reset: Kidney for sale?" by Mark Cohen:

In my last installment, I entertained the notion of opening a medical marijuana store in the New York City suburb my wife and I call home. This week, while we wait for the New Jersey legislature to finalize the legality of that option and as I begin year two in what is now semi-officially the direst U.S. job market since the Great Depression, I'd like to move on to the next previously taboo plan for recapitalizing our household.

I'm considering selling one of my kidneys.

Now, before you say, "Oh, come on, that's absurd!" and immediately skip to the next story about housing starts or crude prices, hear me out for a few seconds. I, too, had my doubts and recognized the potential for a jump-the-shark moment. But that was before I spoke to Dr. Sally Satel, M.D., a resident scholar at the American Enterprise Institute in Washington, D.C., and author of the book When Altruism Isn't Enough: The Case for Compensating Kidney Donors.

While the two statistics admittedly most on my mind when I called Satel were 17.5 and 892 (that's the percentage of underemployed workers in last Friday's job report and dollars in my checking account, respectively), the number always front and center for her is 13. That's the average number of people who die every day in this country awaiting a kidney transplant. Despite decades of work encouraging people to sign donor cards and donate to loved ones, the number of kidney donors last year was less than it was in 2005. Clearly, the current system of appealing exclusively to people's better natures isn't working. What's interesting is how the economic downturn has suddenly created a whole new class of constituents for Satel's more free-market approach.

The more Satel talked, the less selling my kidney seemed like some bizarre, macabre act of depravity, and the more I wondered why the hell I hadn't thought of it before.

I'll put it this way: A hundred thousand dollars (for a kidney) would do a lot more to stabilize our finances than the other items (a Pottery Barn cabinet, a Thomas O'Brien leather club chair, a cowhide rug) currently under consideration for sale around our house. Although I've been bringing in more freelance and consulting work, the checks have been slow to trickle in, and, at any rate, it will likely take months before I figure out how to organize and focus my business to where it comes close to approaching my old salary. The other option up for discussion -- emptying my 401(k) -- now seems more irresponsible and injurious to my future than my new (k)idney plan.

If all this were happening two years ago, my mortgage company would be encouraging me to take out a second mortgage or tap my home-equity line. That's obviously no longer on the table, but is tapping the one truly valuable asset I have left really so much different?

As my mortgage broker used to say about the home-equity line: It's just sitting there. Why not use it?

MP: The chart above shows the current number of registered patient candidates waiting for a kidney transplant (
data here) and the number of kidney transplants performed this year from January 1 to August 31 (data here). That's a ratio of 7.3 patients on the waiting list for each kidney transplant performed through August. If we increase the number of transplants for September, October and the first half of November by 1,131 per month (the monthly average for Jan.-Aug. 2009), it would still be a ratio of almost 6 candidates on the waiting list for every kidney transplant.

ECON 101: Congestion, shortages, and surpluses are always caused by a failure to apply market pricing. The market for kidneys is no different in principle than the market for gasoline, Miley Cyrus tickets, old coins, pork bellies or unskilled labor. Since the demand for kidneys exceeds the supply by a factor of 6, it seems obvious that the deadly kidney shortage is artificially created because the current "price" for kidneys is way, way below the market-clearing price, and people will continue to die waiting until some type of market pricing is allowed.

Interestingly, there is actually one country that currently allows various forms of cash compensation for kidneys, and that country has completely eliminated its kidney shortage to the point that nobody dies anymore on a waiting list -
find out here.

The "Good Old Days" Are Now and It Gets Better All the Time, Thanks to Free-Market Capitalism

Click to enlarge.

From the BLS report "100 Years of U.S. Consumer Spending":

1. The material well-being of families in the United States improved dramatically, as demonstrated by the change over time in the percentage of expenditures allocated for food, clothing, and housing. In 1901, the average U.S. family devoted 79.8 percent of its spending to these necessities. By 2002–03, allocations on necessities had been reduced substantially, for U.S. families to 50.1% of spending (see top chart above).

2. The continued and significant decline over the century in the share of expenditures allocated for food also reflected improved living standards. In 1901, U.S. households allotted 42.5% of their expenditures for food; by 2002–03, food’s share of spending had dropped to just 13.2%.

3. Over the 100-year period, expenditure shares for clothing steadily declined. In 1901, the average U.S. household allocated 14% of total spending for apparel. By 2002–03, spending shares for clothing had decreased to 4.2%.

4. In 2002–03, the average U.S. family could allocate about 50% ($20,333) of total expenditures for a variety of discretionary consumer goods and services, while the average family in 1901 could allocate only 20.2%, or $155, for discretionary spending (see bottom chart above).

Conclusion: Perhaps as revealing as the shift in consumer expenditure shares over the past 100 years is the wide variety of consumer items that had not been invented during the early decades of the 20th century but are commonplace today. In the 21st century, households throughout the country have purchased computers, televisions, iPods, DVD players, vacation homes, boats, planes, and recreational vehicles. They have sent their children to summer camps; contributed to retirement and pension funds; attended theatrical and musical performances and sporting events; joined health, country, and yacht clubs; and taken domestic and foreign vacation excursions. These items, which were unknown and undreamt of a century ago, are tangible proof that U.S. households today enjoy a higher standard of living.

MP: As I wrote in a previous post: Teenagers today can afford products today like cell phones with cameras, digital cameras, GPS systems, CD players, DVD players, laptop computers, and iPods that even a billionaire couldn't have purchased 20 years ago. As much as we might complain, just by being alive in the 21st century America, even if you're earning the minimum wage, you've already "won first prize in the lottery of life."

HT: Lyle Meier

Saturday, November 14, 2009

Krugman Excels in Two Widely Disparate Activities

It’s always impressive to see one person excel in two widely disparate activities: a first-rate mathematician who’s also a world class mountaineer, or a titan of industry who conducts symphony orchestras on the side. But sometimes I think Paul Krugman is out to top them all, by excelling in two activities that are not just disparate but diametrically opposed: economics (for which he was awarded a well-deserved Nobel Prize) and obliviousness to the lessons of economics (for which he’s been awarded a column at the New York Times).

It’s a dazzling performance. Time after time, Krugman leaves me wide-eyed with wonder at how much economics he has to forget to write those columns.

~Steven Landsburg

Chinese Food Quiz

1. Which is greater - the combined number of McDonald's, Burger King and Wendy's franchises in the United States, or the number of Chinese restaurants?

2. What is the ratio of Chinese restaurants to McDonald's franchise units in the U.S.?

3. A study by the Center for Culinary Development, a food product development company, asked children between the ages of 10 and 13 about their favorite type of food. Guess what percent said they favored Chinese food compared to the percent that said they favored American food?

Answers here and here.

Bottom Line: Globalization is good.

Markets in Everything: Cell Phone Car Ads in India

MUMBAI: Car makers like Maruti, Hyundai, Tata Motors and others have begun advertising heavily through cellphones which is generating higher buying decisions among Indians this year compared to global buyers. The mobile phone advertisements constitute 31% of buying decisions among Indians while globally this is only 8% according to the latest estimates from Carsonline.

With Universal Coverage, No More Votes to Buy

Once the whole population is covered [by health insurance], there is little political incentive to increase spending on medical care. Once the bulk of costs have been taken over by government, as they have in most of the other OECD countries, the politician does not have the carrot of increased services with which to attract new voters, so attention turns to holding down costs.

~Milton Friedman

MP: How to hold down costs? Think Canada. Long waiting lines, fewer MRI machines and fewer physicians per capita compared to the US, etc.

Friday, November 13, 2009

Majority: Health Coverage Not Gov’t. Responsibility

PRINCETON, NJ -- More Americans now say it is not the federal government's responsibility to make sure all Americans have healthcare coverage (50%) than say it is (47%). This is a first since Gallup began tracking this question, and a significant shift from as recently as three years ago, when two-thirds said ensuring healthcare coverage was the government's responsibility.

MP: Current odds on Intrade for health care reform passing with a public option by December are currently at about 5%.

More on The Case for Insider Trading: Legalize It!

Suppose, for example, that shares of Acme Inc. are now selling for $50 per. Suppose also that an insider knows that Acme’s CEO and CFO have been cooking Acme’s books to make Acme appear to the public to be more profitable than it really is. If that insider can trade on that non-public information — obviously, by shorting Acme stock — the price of Acme stock will start to fall immediately upon the commencement of such insider trading.

Any trader who buys Acme stock after this insider trading commences gets a ‘fairer’ price — a more truthful price — than that trader would have gotten if Acme’s shares were still trading at $50 due to the fact that information about Acme’s true financial state remained private and unincorporated into Acme’s share price.

To the extent that insider trading causes prices to reflect asset values more quickly and more accurately, general investors should be more confident in asset markets and, hence, more likely to invest their earnings in such markets.

Don Boudreaux at Cafe Hayek, following up on his WSJ article "Learning to Love Insider Trading."