Tuesday, June 15, 2010

The Jones Act and The Power of Unions

"Two days after Katrina struck the Gulf Coast, Homeland Security Secretary Michael Chertoff got approval for a blanket waiver of the Jones Act so that oil and natural gas could be brought into the area on non-approved ships. Meanwhile, President Obama and others continue to insist that such a blanket waiver is "not needed at this time."

Who is benefiting from this law's enforcement? One major beneficiary is organized labor. Ships that meet the requirements of the Jones Act are crewed by unionized labor and granting waivers to it would bring lower-wage labor into competition with those nice union jobs, potentially threatening them. One theory is that President Obama does not want to risk alienating the labor vote by waiving the Jones Act even for a short period of time. President Bush had no such concerns as labor wasn't going to vote for him anyway."

~Steve Horwitz

ASA Staffing Index: 23.6% Growth From 2009

"The American Staffing Association (ASA) Staffing Index estimates weekly changes in the number of people employed in temporary and contract work. ASA developed the index to provide a current measure of staffing industry employment trends."

For the week of May 31, the ASA Staffing Index is 23.6% above the same week last year, and this marks the seventh consecutive week of year-to-year growth of above 20%, the 16th consecutive week of double-digit annual growth, and the 22nd straight week of positive growth compared to the same week in the previous year.

Temporary help employment tracked by the ASA is considered to be an accurate leading indicator of employment trends. According to the ASA, temporary job increases typically lead gains in broader employment growth by three months when the economy is emerging from a recession, and the continuing strength in temporary hiring signals future employment growth for the U.S. economy.

Reason.tv: Matt Ridley, The Rational Optimist

Matt Ridley discusses rational optimism, why pessimism sells, and how things keep getting better all the time.

Interactive Map: Where Americans Are Moving

Interesting interactive map of U.S. migration patterns in 2008 from Forbes.  Red lines represent outflow, black lines are inflows.  Check out the difference between LA and Detroit (lots of red) vs. Atlanta and Dallas (lots of black). 

Empire State Index Pos. for 11th Month

From the NY FED's Empire State Manufacturing Survey:

"The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved in June.  The general business conditions index inched up to 19.6, slightly above its May reading of 19.1. The index has now been above zero for eleven consecutive months, indicating an ongoing expansion in business activity. The new orders index rose modestly, to 17.5, and the shipments index climbed to 19.7. The unfilled orders index was negative for a third consecutive month, at -1.2. The delivery time index rose more than 16 points to 9.9, suggesting that delivery times lengthened in June. The inventories index remained near zero after posting positive readings in March and April, indicating that inventory levels have stabilized.

Future indexes remained firmly in positive territory, although the readings, like last month's, suggest that respondents' optimism had fallen slightly from the relatively high levels reached in prior months. The future general business conditions index declined for a second consecutive month, edging down a little more than a point to 40.7."

The Good Old Days Are Now

Offered for sale in the 1964 Radio Shack Catalog:

David Henderson at Econlog points to an interesting website that has an online archive of Radio Shack catalogs back to 1939.  David comments, "Choose any date earlier than 10 years ago and you get a feel for just how much our standard of living has increased. The items are generally what we regard as junk--and they're expensive."

One example from the 1964 catalog is the "Moderately priced, excellent stereo system" pictured above for $379.95.  That doesn't seem too expensive, except that those are 1964 dollars, and the average wage then was only about $2.50 (data here).  Measured by the cost of work time required at the average hourly wage, that "moderately priced" stereo would have required about 152 hours of work (almost an entire month, ignoring taxes) in 1964 to earn enough income to purchase the stereo equipment. 

Working 152 hours at today's average hourly wage of about $19, the average American today could earn almost $3,000, and could purchase something today that is infinitely superior to the 1964 stereo (an entire home theater system with a large-screen TV, a few laptop computers and iPods for the entire family?).  Or we could alternatively say that today's consumer only has to work about 5-6 hours to earn enough income to purchase an iPod, nowhere close to the 152 hours worked by a consumer in 1964, for a personal stereo system that most would prefer to the 1964 model.  

Here's one other way to see how expensive that stereo system was in 1964: Working at the minimum wage of $1.15 per hour in 1964, it would take 330 hours of work for a teenager to earn enough income to purchase that stereo system (almost the entire summer working 30 hours per week for 11 weeks).  Today a teenager working at the minimum wage of $7.25 could earn enough income in about two days to purchase an iPod.    

Considering how expensive stereo equipment was back in the 1960s (the $380 model was considered "moderately priced" so there were probably many much more expensive models), it probably makes sense that Radio Shack offer many "do-it-yourself" kits to build your own stereo equipment (and later kits for computers). In today's world of iPods and affordable computer and electronic equipment, who would even think of buying a kit to build your own stereo system or computer?

Monday, June 14, 2010

Worst Yet: Disapprove: 49.9% Approve: 45.9%

Source: Pollster.com

3 Days After Explosion, Dutch Gov't. Offered Help; Administration Response: Thanks But No Thanks

Houston Chronicle -- "Three days after the explosion of the Deepwater Horizon in the Gulf of Mexico, the Dutch government offered to help. It was willing to provide ships outfitted with oil-skimming booms, and it proposed a plan for building sand barriers to protect sensitive marshlands.

The response from the Obama administration and BP, which are coordinating the cleanup: “The embassy got a nice letter from the administration that said, ‘Thanks, but no thanks,'” said Geert Visser, consul general for the Netherlands in Houston. Now, almost seven weeks later, as the oil spewing from the battered well spreads across the Gulf and soils pristine beaches and coastline, BP and our government have reconsidered.

Federal law has also hampered the assistance. The Jones Act, the maritime law that requires all goods be carried in U.S. waters by U.S.-flagged ships, has prevented Dutch ships with spill-fighting equipment from entering U.S. coastal areas."

Markets in Everything: Box-Office Futures

LA TIMES -- "Box-office futures have passed a final regulatory hurdle, clearing the way for the first bets to be placed in the near future, and overcoming objections by Hollywood that sought to block it.

In a 3-2 vote, the Commodity Futures Trading Commission on Monday afternoon approved a contract created by the company Media Derivatives that would allow traders to bet on the gross receipts that a movie pulls in during its opening weekend.

Media Derivatives already won CFTC approval for the exchange on which these contracts would be traded – the Trend Exchange -- but it needed the CFTC to sign off on the contract in order to allow traders to begin placing positions."

HT: Steve Bartin

More on the Jones Act

Frontal Assault on the 30-Year Fixed Rate Mortgage

A few weeks ago, I had a CD post "Should We End the 30-Year Fixed-Rate Mortgage?", as a follow-up to a discussion Arnold Kling started.  Now the WSJ has a related article today "Radical Ideas From a Federal Housing Bureaucrat," about Patrick Lawler, chief economist of the Federal Housing Finance Agency and his "frontal assault on the most sacred element in U.S. housing-policy dogma: the 30-year fixed-rate mortgage loan, providing the right to refinance at any time, with no prepayment penalty." Here's more from the article:

"Americans are very attached to their 30-year fixed-rate freely prepayable mortgages. They like not having to fuss about the possibility of 28% interest rates in 2032, even though most of us will move or die long before then. They love to refinance every time rates drop and then brag to their neighbors about how much they are saving per month. What they don’t stop to realize often enough is that they are paying a very large price for that privilege– twice.

1. Mortgage rates are higher than they otherwise would be. That’s because lenders and mortgage investors must build in protection for the risk that we will prepay and stick them with a lower yield than they were anticipating. Mr. Lawler estimates that Americans pay at least an extra 0.25 to 0.50 percentage point in rates because of this option to prepay without penalty. They also pay another premium-–sometimes a percentage point or two–for having a long-term fixed rate. Over 30 years, that translates into some real money, but no one ever mentions that when bragging to the neighbor.

2. Our nation has created the likes of Fannie, Freddie and the FHA to facilitate these oddball 30-year fixed-rate loans, which aren’t normally provided by the private market. For a long while, that seemed like a free lunch. Fannie and Freddie, we were told, were far better able to handle those complex risks than we dumb consumers ever could. But since the government had to rescue Fannie and Freddie in 2008, the taxpayers’ tab for this indigestible lunch has swollen to $145 billion, and it’s still rising. So that’s the second time we’ll pay for our irrational love of American-style mortgages – only this time, we all pay, not just mortgage borrowers.

Meanwhile, other wealthy nations–notably Canada–do without our kind of mortgages and yet somehow manage to have homeownership rates similar to ours. They do not pretend that there are risk-free ways to buy houses on credit."

MP: Actually, the homeownership rate in Canada (69 percent) is higher than in the U.S. (67.2 percent).

HT: Sprewell

Truckonomics: Truck Sales Shift Into High Gear

The retail sales report for May was generally considered to be a disappointing sign that the economic recovery was stalling, as consumers unexpectedly "ratcheted back spending on everything from cars to clothing in May," according to the WSJ.  But on both a year-to-year basis, and year-to-date basis, vehicle sales are booming, rising by 19.1% in May this year vs. May last year, and by 16.6% year-to-date compared to 2009 sales through May (data).  So we maybe shouldn't give up yet on the American consumer, and here's a report about robust consumer spending in May on an important economic indicator: trucks (see related CD post here):
NEW YORK (AP) – "If you want a hint about the economic recovery, follow that truck. Pickups are a kind of rugged indicator of the nation's financial health. When times are good, contractors buy more of them to carry tools around for landscaping and lumber to build homes. Weekend haulers also gravitate to them even though cars get better mileage.

And lately sales have started shifting into a higher gear. Americans bought 151,000 pickups last month, 19 percent more than a year ago. Sales of full-size pickups, especially popular among contractors and builders, grew even faster.  This year, pickup sales have been gaining momentum. Through May, Americans bought 11 percent more than they did in the first five months of last year and the sales pace has been accelerating."

Sunday, June 13, 2010

What Do Protectionism, Union Power and Jones Act Have to Do with the Cleanup in the Gulf? A LOT

1. "The Merchant Marine Act of 1920 is a United States Federal statute that regulates maritime commerce in U.S. waters and between U.S. ports. Section 27, also known as the Jones Act, requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. The purpose of the law is to support provide protectionism for the U.S. merchant marine industry."
2. David Warren:  "We learned a simple thing this week: that the BP clean-up effort in the Gulf of Mexico is hampered by the Jones Act. This is a piece of 1920s protectionist legislation, that requires all vessels working in U.S. waters to be American-built, and American-crewed.  So while, for instance, the U.S. Coast Guard can accept such help as three kilometres of containment boom from Canada, they can't accept, and therefore don't ask for, the assistance of high-tech European vessels specifically designed for the task in hand."

3. Howard Portnoy: "In order to accept offers of help, which have come from Belgian, Dutch, and Norwegian firms that claim to possess some of the world’s most advanced oil skimming ships, Obama would need to waive the Merchant Marine Act of 1920 (also known as the Jones Act).  So why not simply waive the act? Other presidents have under similar circumstances. George W. Bush waived the Jones Act following Hurricane Katrina, allowing foreign ships into Gulf waters to aid in the relief effort. 
The explanation of Obama’s reluctance to seek this remedy is his cozy relationship with labor unions. Joseph Carafano of the Heritage Foundation is quoted as saying: “The unions see it as … protecting jobs. They hate when the Jones Act gets waived, and they pound on politicians when they do that. So … are we giving in to unions and not doing everything we can, or is there some kind of impediment that we don’t know about?"

HT: Joe Lais

More Gender Bias? 85% of Op-Eds Written by Men

The Problem: "Women are far from achieving parity on the editorial pages of America: Between 80 and 90 percent of a newspaper's opinion essays—often called "op-eds"—are written by men."

The Solution: "Since women currently do not submit op-eds with anywhere near the frequency that men do, we target and train women experts in all fields to write for the op-ed pages of major print and online forums of public discourse. The mission of the OpEd Project at Stanford University is to bring about a sea change in our national conversation, which is currently overwhelmingly dominated (85%) by men."

OECD Leading Index Hits 31-Year High in April

The OECD released data on Friday showing that its Composite Leading Indicator Index for 28 member countries reached a 31-year high in April (see chart above, data here). Having increased now for 14 consecutive months starting in March of last year, the OECD Composite Leading Indicators reached 104.0 in April of this year, the highest reading since March 1979, 31 years ago.

Although there were monthly declines reported for one non-OECD country (China) and small monthly declines in seven OECD members (France, Greece,  Hungary, Italy, Korea, New Zealand and Norway), there were increases in the other 21 OECD countries (including the U.S.), the Euro area as a group, the G7 countries, NAFTA members, OECD-Europe, and the non-OECD countries Brazil, India, Russia, Indonesia and South Africa.

Overall, this is a positive report for the OECD Leading Indicators in April, and further strengthens the case that the V-shaped economic recovery currently underway around the world will continue into the future.

What a Difference 66 Years Makes: UAW-Ford Contracts: 1941 (24 pages) vs. 2007 (2,215 pages)

1941 UAW-Ford Master Contract
2007 UAW-Ford Master Contract: 22 pounds, 9 inches
From today's Detroit News:

"For a snapshot of how labor-management relations have changed in Detroit's auto industry, just compare the UAW-Ford contracts of 1941 and 2007, as University of Michigan economics professor Mark Perry did last year (in this CD post).  The 1941 pact was a tiny 24-page booklet that fit in the palm of a hand (see top photo above). In 2007, the agreement was 2,215 pages and weighed 22 pounds (see photo above).

That's what happens after a half-century of mutual distrust. When neither side trusts the other to implement the basic bargain, thousands of procedural do's and don't's get baked into contracts.  The result: a rote, rigid, paint-by-numbers way of doing business in Detroit that proved darn near fatal in a 21st-Century world where flexibility and speedy decision-making are critical. Only the government rescue of GM and Chrysler and the Alan Mulally-led turnaround at Ford saved the Detroit Three and the UAW from the scrap heap."

Read more here.

Update: The 2007 UAW-Ford contract weighs in at 22 pounds, and the measured height is 9 inches (about twice the height of the Coke can in the picture above), according to a CBS news report available here (audio may not work).  

Saturday, June 12, 2010

12 Ways the Sex Trade Has Changed the Internet

From PC World: "The sex industry is behind many innovations that today's Netizens can't live without, as well as some nasty bits we wish had never existed, including:

1. Online Payment Systems.  The next time you buy something at Amazon or another online retailer, marveling at the ease and security of e-commerce, don't just thank Jeff Bezos, thank Richard Gordon. In the mid-1990s Gordon founded Electronic Card Systems, which pioneered credit card transactions for a wide range of disreputable sites, according to the New York Times.

2. Streaming Content.  Before CNN.com or YouTube started filling the Internet with streaming video, X-rated sites were pumping out videos of adult stars doing what comes naturally (or not), over and over and over.

3. 3G Mobile Services. Pocket porn is the new frontier. Just as adult content helped push the propagation of cable and DSL connections, mobile porn will undoubtedly arouse demand for high-speed 3G data services."

It's not all good though, we can thank curse the porn industry for spam, malware and pop-ups, read the whole list here.
HT: Juandos

New Research on College Teaching Evaluations

Greg Mankiw links to this article in the Journal of Polit Economy "Does Professor Quality Matter? Evidence from Random Assignment of Students to Professors" (available here), following are some excerpts:

"In primary and secondary education, measures of teacher quality are often based on contemporaneous student performance on standardized achievement tests. In the post-secondary environment, scores on student evaluations of professors are typically used to measure teaching quality. We possess unique data [10,534 students who attended U.S. Air Force Academy from the fall of 2000 through the spring of 2007] that allow us to construct a third measure of teacher quality that captures student performance differences in mandatory follow-on classes that are part of an established course sequence. We compare metrics that capture these three different notions of instructional quality and present evidence that professors who excel at promoting contemporaneous student achievement teach in ways that improve their student evaluations but harm the follow-on achievement of their students in more advanced classes.

Results show that there are statistically significant and sizable differences in student achievement across introductory course professors in both contemporaneous and follow-on course achievement.  However, our results indicate that professors who excel at promoting contemporaneous student achievement, on average, harm the subsequent performance of their students in more advanced classes. Academic rank, teaching experience, and terminal degree status of professors are negatively correlated with contemporaneous value added, but positively correlated with follow-on course value-added. Hence, students of less experienced instructors who do not possess a Ph.D. perform significantly better in the contemporaneous course, but perform worse in the follow-on related curriculum.

That is, students appear to reward higher grades in the introductory course, but punish professors who increase deep learning (introductory course professor value-added in follow-on courses). Since many U.S. colleges and universities use student evaluations as a measurement of teaching quality for academic promotion and tenure decisions, this latter finding draws into question the value and accuracy of this practice. Our findings raise concerns about the use of either contemporaneous value-added or student evaluations as signals of teaching quality."

MP: One interpretation of this might be that students reward "easy" professors with higher teaching evaluations and punish "hard" or "demanding" professors with lower teaching evaluations while taking classes in college.  But when they're sitting (and sweatin') for the CPA exam a few years later, their ex-post teaching evaluations would likely be reversed, and they would experience delayed appreciation for their "hard" accounting professors and delayed regret for their "easy" accounting professors. 

The Sexist SAT Test is Rigged Against Girls

Did you know that the College Board's SAT test is a sexist, pro-boy, anti-girl test that is intentionally rigged to favor girls because:

1. It's got “masculine-themed" questions that increase boys’ scores relative to girls.

2.  The absolute worst test format for females (resulting in low scores) is the multiple choice format. Thus, the College Board has rigged the SAT in favor of boys by formatting almost all the questions in the format that they know will lower girls’ scores the most.

3. It's got a "sexist guessing penalty" that favors risk-taking boys over rule-following, obedient girls. 

4. The sexist time limit lowers girls' test scores. 

I'm NOT making this up, read more here.

Update: Thanks to KipEsquire in the comments for pointing out that the College Board's Board of Trustees is headed by a woman, and has slightly more women (16 members) than men (15 members). 

Where Can I Fly for $400?

Cool website: At Kayak, you can enter your airport and approximate travel dates, and specify the maximum amount you want to spend, and you'll see a map of destinations within your budget. You can also specify your desired activities (golf, beach, gambling, etc.), spoken languages, and average temperature.  Here are the results for travelling from Washington DC in Fall 2010 on a budget of $400 -you can get as far away as Colombia, Panama, Costa Rica, Jamaica, Puerto Rico, etc. 

Friday, June 11, 2010

Record High North Dakota Oil Production in April

North Dakota continued to set more new records in April for monthly oil production (data here), see previous CD post here.  The following are new, all-time record highs set in April:

Daily Oil Production: 284,348 barrels in April; 2.53% increase from March, 44.56% increase from April 2009, 100% increase from February 2008.

Wells Producing:  4,576; 1.4% increase from March, 14.7% increase from April last year.

Daily Oil Per Well: 62 barrels, 26.53% increase from April 2009. 

Markets in Everything: Breast Milk on The Internet

"Talk about milking it for all it’s worth.  A 26-year-old nursing mom from England who discovered that she had more than enough breast milk for her baby started bottling and selling the excess over the Internet. She now has 10 regular customers who pay her 15 pounds (about $23) for one-half cup of breast milk, according to the Daily Mail."

Consumer Confidence Highest Since Jan. 2008

The University of Michigan Consumer Confidence Index reached a 29-month high in June of 75.5, an increase of almost two full points from 73.6 in May, and the highest reading since January 2008 of 78.4 in the second month of the recession.  The recovery in consumer confidence through June is consistent with the pattern of consumer confidence levels following the recessions of 1980, 1981-1982, and 1990-1991.  See Bloomberg report here.

Huge Gender Disparities: Prisoners and Deaths

In 2006, 93.1% of U.S. prisoners were male vs. 6.9% female (data here), meaning that there were 1,350 men in prison for every 100 women (see chart above).  Interestingly, that is almost exactly the same gender distribution for occupational deaths in the U.S. for 2008 - 92.7% male vs. 7.3% female (see chart below, data here).  Another fact is that 90% of motorcycle fatalities in 2005 were males (see chart below, source). 

I think it's safe to say that there are huge gender disparities in criminal tendencies and risk-taking behaviors.

Q: Should gender equity be a goal here?

Retail Sales Fell in May by -1.6%, Helped by -7% Drop in Gas Prices; 7th Straight Pos. Annual Gain

Gas prices fall in May by 7%
Retail gas prices fell in May by -7% (see top chart above, data here), leading to a -3.3% decline in consumer spending at gasoline stations in May.  The -8% decline in gas prices from $2.94 in early May to $2.73 per gallon at the end of the month was the largest monthly decline in gas prices since a -20% drop in December 2008.  The -7% drop in gas prices and corresponding savings at the pump for consumers was part of the reason for the -1.6% decline in retail sales in May, compared to April, based on data in today's release from the Commerce Department.

On an annual basis, consumer spending was up by 6.9% in May, marking the seventh straight month of positive annual increases starting in November of last year, following 14 straight months of year-to-year declines from September 2008 to October 2009 (see middle chart above).  As both the middle chart (annual percent change in sales) and bottom chart (retail sales in dollars) indicate, there is a lot of "noise" or monthly variations in retail sales, so the -1.6% drop in May should be considered with that in mind, especially given the largest monthly decrease in gas prices in 17 months. 

But here's how it's getting reported by AP in a story titled "Unexpected decline in retail sales fans recovery fears": "Retail sales plunged in May by the largest amount in eight months as consumers slashed spending on everything from cars to clothing. The big drop raises new worries about the durability [and strength] of the economic recovery." 

The AP report does briefly mention gas prices: "Gasoline stations sales were down 3.3 percent, a drop that reflected in part lower gasoline pump prices during the month."  But they fail to mention that it was the largest monthly decline in gas prices since 2008, and that lower gas prices and lower spending at gas stations is a POSITIVE factor for consumers, not NEGATIVE. 

Finally, auto sales increased by 3.74% in May according to the BEA (data here), at least in terms of unit sales, so it's interesting that the Census retail sales report is showing a -1.7% decline in May spending on motor vehicles (of course, it could be higher unit sales for lower priced cars?).

Update: Now an even more recent AP story this morning reports that "Consumer sentiment strongest since January 2008." 

In my opinion, any "worries about the durability and strength of the economy recovery" might make a good headline or news story, but are unwarranted and unsupported by the data.  

New Update from First Trust: "It’s important to focus on “core” retail sales, which excludes autos, building materials, and gas. These sales increased 0.1% in May. That’s right, increased, bringing the total gain over the past year to 4.5% and with May an annualized 3.1% above the first quarter average."

Thursday, June 10, 2010

The Two Americas: Private vs. Public Workers

According to this report from the BLS released yesterday, state and local governments spent an average of $39.81 per hour in March 2010 to compensate public-sector employees ($26.25 in wages and $13.56 for benefits). Total employer compensation costs for private industry workers averaged $27.73 per hour ($19.58 for wages and $8.15 for benefits), see chart above. 

Bottom Line: Government employees are compensated 44% more on average per hour than private-sector employees, with 34.1% higher monetary wages and 66.4% more in benefits.  On an annual basis, government workers make almost $80,000 on average with benefits (assuming a 40-hour week for 50 weeks), $24,000 more per year thatn the  average private-sector worker ($55,460 annual compensation). 

And one of the biggest differences between private and public employees is the "retirement" portion of benefits.  Government workers are paid $3.16 in retirement benefits for each hour worked, and almost 90% of these retirement benefits are in the form of "defined benefits" and the other 10% are for "defined contribution."  In contrast, private sector employees receive only $0.96 in retirement benefits for each hour worked, and more than 57% of this coverage is for "defined contribution" and less than 43% for "defined benefits." 

The fact that retirement benefits for public workers are more than three times as generous as those paid to private sector workers, and the fact that almost all pension programs for government workers are "defined benefits," helps explains why the fastest growing group of millionaires is..... government workers.

Most Disgusting Part of Oil Spill: Demon Ethanol

"The most disgusting aspect of the blowout in the Gulf of Mexico isn't the video images of oil-soaked birds or the incessant blather from pundits about what BP or the Obama administration should be doing to stem the flow of oil. Instead, it's the ugly spectacle of the corn-ethanol scammers doing all they can to capitalize on the disaster so that they can justify an expansion of the longest-running robbery of taxpayers in U.S. history.

The blowout of BP's Macondo well has given the corn-ethanol industry yet another opportunity to push its fuel adulterant on the American consumer. And unfortunately, the Obama administration appears ready and willing to foist yet more of the corrosive, environmentally destructive, low-heat-energy fuel on motorists."

Read more here of Robert Bryce's article in Slate.com.

Colonoscopy: $9,000 in the U.S.; $350 in Costa Rica

Video segment about a retired Detroit meteorologist, with a high deductible for his health insurance, who turned to medical tourism in Costa Rica for a common procedure. Quotes for a routine colonoscopy in the U.S. were as high as $9,000 (and as low as $2,000), but only $350 in Costa Rica.

Scottish IQ Test Supports Larry Summers

I prepared the chart above for an article AEI's Christina Sommers is working on.  The graph displays the IQ test results from the article "Population Sex Differences in IQ at Age 11: The Scottish Mental Survey 1932," based on "80,000+ children—almost everyone born in Scotland in 1921—tested at age 11 in 1932."

Main conclusion of the article: "There were no significant mean differences in cognitive test scores between boys and girls, but there was a highly significant difference in their standard deviations ( P < .001). Boys were over-represented at the low and high extremes of cognitive ability."

As the chart shows, boys outnumbered girls both for: a) IQ scores below 95 and b) IQ scores above 115.  Further, the share of boys increased going out towards both ends of the distribution, so that boys represented 57.7% of the highest IQ scores of 140 (136 boys for every 100 girls) and 58.6% of the lowest IQ scores of 60 (142 boys for every 100 girls). 

The authors speculate that their findings might "explain such cognitive outcomes as the slight excess of men achieving first class university degrees, and the excess of males with learning difficulties.

This evidence also supports what former Harvard President Larry Summers said (and for which he was fired):

"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."


The SAT Math Test: It's Rigged to Favor Boys?

From an email I received yesterday:

"Regarding the sexist Tierney article in the New York Times (featured Tuesday on CD), there's lots of evidence showing that a much larger part of boys' test scores is due to tricks. Studies show males take more risks than females, and the SAT rewards taking a risk by guessing when you don't know the answer. Thus, the SAT is rigged to favor boys this way because it rewards riskier test-takers and boys are more riskier than girls. Girls' unwillingness to risk getting a penalty for a wrong guess has been shown to significantly reduce their scores (Gender Bias in College Admissions Tests, Research by FairTest (January 14, 2009).

And of course the test favoritism shows when students actually try to apply their knowledge. That's why boys who get the same test scores perform worse than girls in college. For example, a 1995 University of CA, Berkeley study found that females with identical academic indexes as males earned higher grades in every subject including math and physical sciences. The report concluded that schools should add 140 points to the women's index because the SATs underpredicted their ability.

The SAT is rigged in many ways to favor boys. For example, the ETS did a study that found that girls' SAT scores improved dramatically when the time limit was removed but boys’ scores remained about the same. Since when the time pressure is removed, girls perform much better, the test is obviously testing things other than actual knowledge. This can be changed and the College Board is aware if it, but they have refused to make this minor change that would dramatically improve girls' scores in comparison to boys' scores. Thus, the people in charge of the test knowingly do things that favor boys."


Wednesday, June 09, 2010

Don't Believe the Double-Dippers

From Cato's Alan Reynolds in Thursday's WSJ:

"Using statistical trickery to convert a weak job market into an imminent recession has become a bipartisan political strategy. Robert Reich and other big government Democrats play the "double dip" card to peddle more deficit spending on refundable tax credits and transfer payments. Conservative Republicans often become double-dippy for very different reasons—to argue (quite plausibly) that hundreds of billions in "stimulus spending" has proven counterproductive so far, contributed to the debt, and will eventually lead to higher taxes.

Those who want to know what is going on must sift through all of this bipartisan gloom to distinguish between: 1) agenda-driven dire warnings and 2) the boring reality of a sluggish recovery being partially paralyzed by ominous threats of punitive taxes and onerous regulation."

NBA Gets an A+ For Diversity From An Institute That Gets An F for Diversity of Its Top Management

The chart above is based on data from the "The 2010 Racial and Gender Report Card: National Basketball Association," released today by the University of Central Florida's Institute for Diversity and Ethics in Sports.  The overall grade this year for the NBA was an A for "Race" (same as last year), with a grade of A+ for the sub-category "NBA Players." 

According to a news article titled "NBA gets an 'A' for diversity" from ESPN, "The NBA still leads the way in sports diversity."

Compared to the overall population, whites, Hispanics and Asians are significantly underrepresented in the NBA by margins that aren't even close, e.g. whites are 75% of the population but only 18% of the NBA players, and the same huge disparities exist for Hispanics and Asians.  For all three groups, their numbers in the NBA would have to increase between 4-5 times for their representation in the NBA to be proportional to the general population. On the other hand, blacks are overrepresented by more than a factor of six compared to their share of the general population.  

Q: Just wondering, if this outcome gets a score of A+ for diversity, what would a score of F would look like?? 

In case you're wondering who's in charge of the Institute of Diversity and Ethics at UCF, it's run by two white guys who are listed as the organization's top administrators (see photo below).  What grade do they give their own organization, especially for the category of "Top Management" (one of the categories they use for the NBA)?  Would that be an F for being 100% white male?

8 Reasons College Tuition Is Next Bubble to Burst

Reason #1: Tuition has been increasing at double triple the rate of inflation.

"On average, college tuition has increased at around 8 percent per year, which means the cost of college doubles every nine years. Because colleges know that students will simply borrow more money to cover tuition increases, colleges have been relying on steady tuition hikes to solve all of their money problems. If this continues a college degree will soon cost as much as a house."

Read more here.

MP: Actually, tuition has been been increasing annually (7.88%) at more than three times the rate of inflation (2.37%) since 1978, see chart above.  The article points out that "unlike the housing bubble, in which foreclosure and bankruptcy allowed people to have a fresh start, the college tuition bubble will haunt young people for life unless bankruptcy laws change" (since student loans are not dischargeable in bankruptcy). 

OIL: It's a Blessing, Not An Addiction and It's The Single Most Flexible Substance Ever Discovered

"Of course there are problems created by oil, as the Deepwater Horizon calamity so heartbreakingly demonstrates. But most things of great value come with downsides. There are 40,000 traffic fatalities in the United States each year, but no rational person suggests doing away with cars, trucks, and highways. Airplanes sometimes crash and boats sometimes sink, but air and sea travel are not derided as “addictions’’ we need to break. Deaths due to hospital infections, medication errors, or unnecessary surgery number in the scores of thousands annually, but who would recommend an end to medical care?

There is no denying the drawbacks associated with oil, but its advantages are equally undeniable. American wealth, progress, and autonomy — the most dynamic and productive economy in history — would be impossible without it. What we have isn’t an addiction, but a blessing."

~Jeff Jacoby, "Oil Fuels Better Lives"

NY Fed Model: No Chance of Double-Dip in 2011

On Monday, the New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" with treasury yield data through May 2010, and the Fed's recession probability forecast through May 2011 (see top chart above). The NY Fed's model uses the spread between the yields on 10-year Treasury notes (3.42% in May) and 3-month Treasury bills (0.16% in May) to calculate the probability of a U.S. recession up to twelve months ahead (see details here).

The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month. For May 2010, the recession probability is only 0.17% (about 1/6 of 1%) and by a year from now in May of next year the recession probability is even lower, at only 0.12%.

According to the NY Fed Treasury Spread model, the recession ended sometime in middle of 2009, and the chances of a double-dip recession through May of 2011 are essentially zero.

The Evolution of the Cell Phone: 1985 to Today

HT: Nick Schulz

Help Wanted: 400,000 Truck Drivers

NEW YORK (CNNMoney.com) -- "Can't find a job? Maybe it's time to take your search on the road. The U.S. trucking industry will need to hire about 200,000 drivers by the end of this year, and will need to add another 200,000 by the end of 2011, according to the state of logistics report from the Council of Supply Chain Management Professionals."

HT: Lyle Meier

Another Tax Lesson from Pro Boxing

In April I had a post about "How Kennedy Tax Cuts Changed Pro Boxing," which generated a lively discussion about taxes with more than 60 comments.  Now there's a new story about professional boxing, with some important lessons about taxes.  From the New York Post:

The first boxing event at the new Yankee Stadium last Saturday was a "major success" according to Yankees Chief Operating Officer Lonn Trost, but that doesn't mean boxing will become a regular feature of the Stadium.

Availability of Yankee Stadium is an issue, but not nearly as big an issue as taxes. According to Trost, the tax on a fighter's purse is significantly higher for non-residents of New York than it is in other states, which would make it difficult to bring a match like the proposed superfight between Floyd Mayweather, Jr., and Manny Pacquiao to Yankee Stadium.

"Cotto and Foreman could come here for the first fight because the boxers felt they wouldn't be overtaxed because they're residents," Trost said. "We'd love to do Mayweather-Pacquiao, but I believe both of them are non-residents and the tax could be as much as 13 percent on the purse, where the tax out in Vegas is zero. That's a big difference."

Here's some excellent commentary from Jonathan Tobin, "High Taxes Drive Away Industries … and Boxers":

"While liberal advocates for higher taxes routinely claim they are doing so to help ordinary New Yorkers, they ought to consider that in making it unattractive for fighters to perform here, they are actually robbing the people from the South Bronx and elsewhere in the city who work in the many jobs created every night Yankee Stadium is open. The failure to bring more such exhibitions to the city illustrates the simple truth that, once again, liberal economics has scored a technical knockout on the economic well-being of working-class New Yorkers."

MP: As I pointed out previously in the last post, there are a few basic tax lessons here: 1) If you tax something, you get less of it, and 2) if you cut tax rates, you might get more tax revenues.

HT: Carlo DiPietro

Tuesday, June 08, 2010

What Illinois Can Learn from Texas About Wal-Mart

After opening its first Chicago store on the city's west side in 2006, Wal-Mart has unsuccessfuly attempted to open a second store on Chicago's south side in one of two locations - Pullman and Chathman - which would bring groceries, clothing, retail merchandise, and jobs to a part of the city that is desperate for all of those.  What's standing in the way of economic development, life, hope and jobs for the south side neighborhoods of Chicago?  Organized labor and their political Democratic enablers. 

A recent study reportedly shows that the west side Chicago Wal-Mart created about 300 jobs, but contibuted to a job loss of about 300 from businesses on the west side that closed after Wal-Mart opened in 2006.  But the Chicago Sun-Times presents some pretty devastating criticism in an editoral titled "Anti-Wal-Mart study just doesn't add up":

"Too bad the researchers didn't count the jobs at the new businesses that opened after Wal-Mart's arrival on the West Side. There are roughly 22, according to the local alderman, Emma Mitts, including Menards, Food 4 Less, Aldi, two bank branches, CVS and Burlington Coat Factory. That information wasn't available, the researchers say.

Too bad they also didn't factor in other reasons, unrelated to Wal-Mart, nearby businesses closed. Nor did they compare West Side business closure rates with rates in other similar communities. Again, that information wasn't available. Without this key data, this research is only a starting point -- and nothing close to a definite statement about Wal-Mart's economic impact."

It's worth noting that those lost [approximately 300] jobs paid low wages, an average of $9.02 an hour in 2008, according to the study. That compares with the Chicago Wal-Mart's reported full-time average wage of $11.77."

MP: Even if there was no net gain in jobs from the Chicago Wal-Mart, the cost savings to area shoppers could have been significant from having access to Wal-Mart - an estimated $2,500 annual savings per household in 2006 according to this study.  Additionaly, the state of Illinois experienced significant job losses in general in the three years following the opening of the Chicago Wal-Mart in 2006 (see chart above).  In fact, the number of jobs in Illinois was the same in January of this year as in January of 100, so it's hard to blame Illinois's (and presumably Chicago's) stagnant economy on Wal-Mart.    

And it could certainly be correlation and not causality, but it's interesting to note that one of the states that has seen the most robust job growth over the last decade or more - Texas (see chart above) - has also been one of the states where Wal-Mart has expanded the most, suggesting that more Wal-Mart stores can be consistent with more, not fewer, jobs.  Especially in "right-to-work" states like Texas, where organized labor has less political clout to stop new Wal-Marts, like they do in Illinois.   

See this Dallas News article about Wal-Mart in Texas, where it employs 144,470 workers and had $35 billion of sales in 2009 - to put that amount in perspective, it's more than the Gross State Product of entire states like Vermont, Wyoming, North Dakota, Montana, Alaska, or South Dakota.

Intrade Election Odds > 90%

1. Carley Fiorina: 96%

2. Meg Whitman: 90.1%

3. Sharron Angle: 92.9%

Larry Summers Redux and "Fulfilling the Potential of Women in Science Through Social Engineering"

From John Tierney's column in yesterday's NY Times "Daring to Discuss Women in Science":

"[Former Harvard President Larry Summers] acknowledged that there were many talented female scientists and discussed ways to eliminate the social barriers they faced. Yet even if all these social factors were eliminated, he hypothesized, the science faculty composition at an elite school like Harvard might still be skewed by a biological factor: the greater variability observed among men in intelligence test scores and various traits. Men and women might, on average, have equal mathematical ability, but there could still be disproportionately more men with very low or very high scores.

These extremes often don’t matter much because relatively few people are involved, leaving the bulk of men and women clustered around the middle. But a tenured physicist at a leading university, Dr. Summers suggested, might well need skills and traits found in only one person in 10,000: the top 0.01 percent of the population, a tiny group that would presumably include more men because it’s at the extreme right tail of the distribution curve."

MP: What Summers actually said was: "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."

Actually, there is persistent statistical evidence both that: a) boys outperform girls on the SAT math test (there is a difference in means), and b) there is significant "right tail disparity" on the SAT math test, i.e. boys are overrepresented for math scores on the high end (there is a difference in variability).  

The top graph above (data here) shows the persistent male-female SAT math test gap over time.  The 35-point gap in math test scores in 2009 (average score of 534 for boys and 499 for girls) is basically unchanged from the 36-point test score gaps in 1973 (525 vs. 489) and 1974 (524 vs. 488).  In other words, the male-female SAT math score gap has persisted for decades for a large sample size of more than 30 million American high school students who have taken the SAT since 1972. 

The bottom graph shows the "right tail disparity" for the 2009 math SAT test (data here).   For example, for perfect scores on the math SAT of 800, males (6,928) outnumbered females (3,124) by a ratio of 2.22 to 1. That is, 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 above 1.0), and then for math test scores between 200 points and 570, girls outnumbered boys (male-female ratio below 1.0). Adjusting for the fact that 107,000 more girls (n=818,760) than boys (n=711,368) took the SAT in 2009 makes this evidence even stronger, since 0.974% of boys scored 800 on the SAT math test (6,928 out of 711,368) vs. 0.386% of girls (3,124 out of 818,760), 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.

Bottom Line: Based on math SAT scores, boys score significantly higher on average compared to girls by 30+ points, this gender gap in favor of boys is persistent over four decades, boys are significantly overrepresented for math test scores on the high end, and boys outnumber girls by a ratio of more than 2:1 for perfect 800 scores. 

Tierney also discusses new pending, federal legislation called “Fulfilling the potential of women in academic science and engineering,” which  if passed would empower the White House science adviser to oversee regular “workshops to enhance gender equity, and increase awareness of gender bias.”  Given the huge gender differences in the math SAT (both in mean and variance), isn't it possible that men are overrepresented in science and engineering because they have greater aptitude in those areas? If that's the case, no amount of federal legislation, short of mandated quotas, will result in the perfect gender parity outcomes that the gender activists seem determined to achieve.

Maybe the legislation should more accurately be called "Fulfilling the potential of women in academic science and through social engineering?

The Bullish Case for U.S. Economy, U.S. Equities

BlackRock Vice-Chairman Bob Doll in today's WSJ:

"There is no question that we face formidable, long-term structural problems that make U.S. stocks less attractive for many investors. But I believe that the spirit of innovation and entrepreneurship that has defined America in past crises will prevail again and propel our markets forward. As such, overweight positions in U.S. equities are more than warranted.

Though housing is weak and debt and deficit levels are rising, compared to the rest of the world the U.S. is in reasonably good shape. Our economic fundamentals are sound: Manufacturing levels are up and interest rates and inflation are low. The broader economy's recovery is also finally translating into meaningful employment improvements—recent employment reports show increases in average hourly earnings and hours worked—and I believe this trend will continue.

When the markets faltered in 2008 and revenue growth stalled, U.S. companies moved decisively to cut costs—unlike their European and Japanese counterparts. Now that recovery has taken hold, businesses are replenishing inventories and rehiring, corporations are expanding exports, and American consumers are responding better than most expected.
Potential risks—trade complications, escalating credit contagion, overly aggressive financial regulation, and tax increases—clearly remain. But for the moment, our nation seems poised to remain a City Upon a Hill."

The Left Flunks Economics 101

From today's WSJ: "Are You Smarter Than a Fifth Grader? Liberals and Democrats do badly on questions of basic economics."

The questions were:

1) Restrictions on housing development make housing less affordable (unenlightened answer: disagree).

2) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree).

3) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree).

4) Rent control leads to housing shortages (unenlightened answer: disagree).

5) A company with the largest market share is a monopoly (unenlightened answer: agree).

6) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree).

7) Free trade leads to unemployment (unenlightened answer: agree).

8) Minimum wage laws raise unemployment (unenlightened answer: disagree).

How did the six ideological groups do overall? From best to worst, average number of incorrect responses (out of 8):

Very conservative: 1.30 out of 8
Libertarian: 1.38
Conservative: 1.67
Moderate: 3.67
Liberal: 4.69
Progressive/very liberal: 5.26

HT: Matt B, The Plaid Pundit

Monday, June 07, 2010

Interesting Fact of the Day

"Among the 19 students who got a perfect score on the ACT science test in the past two decades, 18 were boys."

~John Tierney in today's NY Times

Q: Does that mean that Larry Summers can get his job back as president of Harvard University? After all, according to Tierney, Dr. Summers merely suggested that a tenured physicist or mathematicians at a top university "might well need skills and traits found in only one person in 10,000: the top 0.01% of the population, a tiny group that would presumably include more men because it’s at the extreme right tail of the distribution curve." 

In other words, if male professors greatly outnumber female professors in the math or physics department at Harvard or Yale, it might be because boys outnumber girls by 18:1 for perfect scores on the ACT science exam.  Stated differently, why should we expect perfect gender equity in the math or physics departments at Harvard or Yale, when boys get almost 95% of the perfect scores on the ACT science exam?   

Economic Freedom = 20 Years of Life Expectancy

Life expectancy is almost 20 years longer (79.12 year) in countries with the most economic freedom (Hong Kong, Singapore, New Zealand, Chile, Switzerland, U.S.) than the life expectancy (59.4 years) in those countries with the least economic freedom (Zimbabwe, Myanmar, Angola, Chad, Congo), according to the Economic Freedom of the World 2009 Report from Cato.

Harvard Study: Pork Crowds Out Private Activity

From a study by three Harvard Business School professors titled "Do Powerful Politicians Cause Corporate Downsizing?":

"We show that becoming a powerful Senate or House committee chair results in a significant increase in federal funds flowing to the ascending chairman’s state. Thus, a congressman’s ascension to a powerful committee chair creates a positive shock to his or her state’s share of federal funds that is virtually independent of the state’s economic conditions.

We focus specifically on the 232 instances over the last 42 years where the senator or representative of a particular state ascends to the chairmanship of a powerful congressional committee. During the year that follows the appointment, the state experiences an increase of 40-50 percent in their share of federal earmark spending, and a 9-10 percent increase in total state-level government transfers. The funding increase persists throughout the chair’s tenure and is gradually reversed upon his departure. Because these spending shocks are sufficiently numerous, are spread out across time and different locations, and are economically meaningful, they provide us with significant power to examine the impact of fiscal policy on the private sector."

MP: Wouldn't you think that those increases in federal earmark spending and state-level government transfers would have overwhelmingly positive effects on state economies? Not necessarily, which is why the answer to the question in the paper's title is YES

"We find that fiscal spending shocks appear to significantly dampen corporate sector investment activity. Specifically, we find statistically and economically significant evidence that firms respond to government spending shocks by: i) reducing investments in new capital, ii) reducing investments in R&D, and iii) paying out more to shareholders in the face of this reduced investment opportunity set. Further, we find that when the spending shocks reverse (through a relinquishing of chairmanship), most all of these behaviors reverse. Finally, we also find some evidence that firms scale back their employment, and experience a decline in sales growth.  Our findings demonstrate that new considerations may limit the stimulative capabilities of government spending."