Replacing What Works With What Sounds Good

"Much of the social history of the Western world over the past three decades has involved replacing what worked with what sounded good. In area after area - crime, education, housing, race relations - the situation has gotten worse after the bright new theories were put into operation. The amazing thing is that this history of failure and disaster has neither discouraged the social engineers nor discredited them."

~Thomas Sowell 

Exhibit A: From personal experience over the last two years in Washington, D.C. I have found that taxis in the city are cheap and ubiquitous, you can often get a cab within seconds, the drivers are usually friendly and helpful, and the fares are frequently run less than $10.  From a consumers' standpoint, I don't know of any other city in America where taxis are cheaper and more available.    

And yet it now looks like the D.C. City Council wants to engage in the practice that Sowell describes by replacing what is working with something that sounds good - restricting the supply of taxis by selling taxi medallions.  

Read about it here in yesterday's Washington Times.

HT: Steve Bartin 

3rd Annual Kauffman Economics Bloggers Forum

I'm in Kansas City attending the Third Annual Kauffman Foundation Economics Bloggers Forum, which will be available by webcast live tomorrow from 8:30 a.m. to 11 a.m. and 1 p.m. to 4:30 p.m. (Central Time).  Here's the schedule and list of speakers.

It's OK to Print. Trees Are Renewable, Recyclable

This is from an article in today's WSJ titled "Save a Forest: Print Your Emails":

"Notice: It's OK to print this email. Paper is a biodegradable, renewable, sustainable product made from trees. Growing and harvesting trees provides jobs for millions of Americans. Working forests are good for the environment and provide clean air and water, wildlife habitat and carbon storage. Thanks to improved forest management, we have more trees in America today than we had 100 years ago."

MP: What a great quote, I'm putting that at the bottom of all of my emails from now on. 

A Solid February Restaurant Performance Report

National Restaurant Association -- "Driven by improving same-store sales and customer traffic levels as well as growing optimism among restaurant operators, the outlook for the restaurant industry improved in February. The National Restaurant Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.7 in February, up 0.4 percent from its January level (see chart above). In addition, February represented the fifth time in the last six months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

In addition, restaurant operators’ outlook for capital spending hit a 40-month high, while their expectations for staffing growth rose to the highest level in nearly four years.

The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 101.9 in February – up from January’s level of 101.8. In addition, the Expectations Index stood above the 100 level for the 7th consecutive month, which signifies expansion in the forward-looking indicators."

MP: This marks the first time since the fall of 2007 that the overall RPI and the Expectations Index have both been above the benchmark level of 100 for three consecutive months.  

Monster Employment Index Increases by 9% in March: 14th Straight Month of Annual Growth

The U.S. Monster Employment Index was released today, here are some highlights:

1. The March index rose to 136 in March, up from 129 in February and up by 9% compared to the year-ago level of 125.  

2. The annual increase in March was the 14th consecutive year-over-year increase in the Monster Index starting in February last year (see chart above).  

3. All 28 metro markets covered by the Monster Index recorded positive annual growth in March, with Detroit (+51%), Philadelphia (+40%) and Chicago (+29%) registering the largest gains. 

4. 14 of the 20 industries covered by the Monster Index increased on an annual basis, as did 17 of the 23 occupational categories.

5. Monster spokesman and VP Jesse Harriott said "The March Index reinforces a consensus from other leading indicators that the labor market is continuing to grow at a measured pace.
“We continue to see the impact of an increased demand for specialized IT talent as well as sustainable recruitment levels for all related healthcare occupations. We are now seeing hopeful signs in the wholesale trade and manufacturing sectors which are historically considered foundations of an improving economy.”

Milton Friedman on Steel, Tariffs, and Trade

HT: Ron H.

The Public Sector Premium for School Principals

Principals in private and public elementary and secondary schools.

Average Salaries, 2007-2008
Age	Public	Private	Public Premium
Under 40	$80,600	$47,300	70.40%
40 to 44	$84,900	$54,800	54.93%
45 to 49	$86,000	$55,000	56.36%
50 to 54	$88,100	$59,500	48.07%
55 or over	$91,500	$63,700	43.64%
Average	$86,900	$58,300	49.06%

In a recent CD post, I featured the public sector premium for full-time elementary and secondary school teachers, which ranges from 14% to 102%, depending on experience and education.  The chart above is based on Department of Education data for the salaries of private and public school principals in 2007-2008 based on age.  Compared to public school principals in the age groups above, private school principals have slightly more experience as principals, slightly less experience as teachers, and are less likely to have advanced degrees (Master's or Doctor's degrees).  So the age group categories above don't control perfectly for education and experience, but still show huge premiums for public school principals of 43% or higher, with an overall average premium of 49%.

Here's one comparison:

Private school principals in the oldest age group "55 or over" have 18.6 years teaching experience on average, 15.4 years experience as principal, and 9.4% have Doctor's degrees.  Public school principals in the youngest age group of "under 40" have 2.9 years experience as principal on average, 7.6 years teaching experience, and 6% have Doctor's degrees.  

And yet the public school principals in the youngest age group with the least experience make $80,600 on average, compared to the private school principals in the oldest age group with the most experience who make $63,700 on average, which represents a 26.5% public sector premium.

Online Labor Demand Now Above December 2007 Levels; First Quarter Layoffs Fall to 16-Year Low

The Conference Board reported today that online advertised vacancies rose in March to 4,454,500, which is the highest number of job openings since May 2007, almost four years ago.  The March increase of 208,800 online jobs advertised follows a 437,600 increase in January, and brings the total increase in online job openings in the first quarter of 2011 to 619,000. 

The 2,725,900 new online job vacancies in March is the highest level since April 2007 for that series, and marks the first time since the recession started in December 2007 that both total ads and new ads are above their pre-recession levels.  

In some other positive labor market news today, Challenger, Gray and Christmas reported today that U.S. employers have announced 130,749 job cuts in the first quarter of 2011, which is 28% fewer than the same period of 2010, and the lowest first quarter total for job layoffs since 1995. 

If these two positive reports are good indications of  improving labor market conditions, we can expect a fairly positive BLS employment report this Friday. 

Feb. Home Sales in Las Vegas Highest Since 2006!

DQ News -- "Las Vegas region February home sales rose to a five-year high, boosted by unusually high levels of cash and investor purchases. The record portion of cash deals represented more than half of all transactions for the third consecutive month, while the percentage of homes bought with a mortgage dropped to the lowest point for any month in at least 17 years. 

Last month 3,879 new and resale houses and condos closed escrow in the Las Vegas-Paradise metro area (Clark County) – the highest sales tally for any February since 2006, when 6,065 sold. Last month’s sales were up 4.9 percent from both January and from February 2010." 

MP: Isn't this evidence that markets are working?  At some point, home prices fall far enough to start bringing buyers back into the market, and sales increase. 

Canada Home Prices: Headed for Steep Correction?

Home price indexes for January were released this week for the U.S. (Case-Shiller) and Canada (Teranet), see chart above.  Both home price indexes for both countries equal 100 in January 2000 in the graph.  U.S.  home prices more than doubled between 2000 and 2006 and peaked at 206.52 in July 2006 when the real estate bubble burst and home prices plunged by 32.4% before hitting bottom in April 2009 at an index level of 139.26.  Canadian home prices have more than doubled between 2000 and 2010, and peaked at 204.59 in August 2010, before flattening out over the last six months.  

There has been some speculation that the Canadian real estate market is headed for a major correction, here's an excerpt from yesterday's WSJ article "Housing Booms North of the Border": 

"As much of the U.S. housing market limps along, home prices north of the border are on a fresh tear, fired up in part by a borrowing binge that has sent Canadians' debt to record levels—and now higher than their notoriously profligate U.S. neighbors—while income growth pokes along. All that has raised worry at the country's central bank, which repeatedly has warned about rising debt levels, and among some economists, who say the market is ripe for a correction—maybe a steep one.

David Madani, Canada economist at Capital Economics, an independent research consultancy based in London, says Canadian housing prices could be in for a 25% drop in the next three years, a correction he says is warranted by the now-inflated ratio of house prices to income. House prices have risen to almost 5.5 times disposable income per worker, well above the long-term historical average of 3.5, he says."

Teachers in CA Receive More in Retirement Than Active Teachers in More Than Half of U.S. States

According to the California State Teachers’ Retirement System 2010 Summary Report to Members, the average retired California public school teacher receives an annual pension of $51,072 (see chart above).  According to Department of Education data, that's more in retirement pay than the average current salary for active elementary and secondary public school teachers in 28 states, and almost as much as the national average for active public school teachers of $55,350.  

If you take out the top three highest states for public school salaries (New York at $71,470, California at $70,458 and Massachusetts at $68,000), the average retired California teacher receives an annual pension that is the same as the average salary for teachers in 47 states.  And compared to teachers in the lowest paid state of South Dakota (average salary of $35,136), California teachers make 45% more in retirement than South Dakota teachers earn on average while teaching. 

Thanks to Steve Bartin for the links to Intercepts.

When It Comes to Selling His Own Book, Ian Fletcher Must Believe Free Trade DOES Work

Nobody in recent months has expressed more public opposition to free trade than Ian Fletcher, see "Ten Problems With Free Trade"  and "The Social Snobbery of Free Trade" for some examples of his anti-free trade vitriol.  In the last link, he accuses President Obama of being a "free trader," and that accusation alone should give you a good idea how much an "anti free-trader" Fletcher really is.   

Given his stated opposition to free trade, I was surprised to receive the email invitation below from Ian Fletcher inviting me to engage in free trade and incur a household trade deficit by buying his book "Free Trade Doesn't Work."  

"Hi.

The 2011 edition of my book Free Trade Doesn’t Work is now available! Thiis edition has updated statistics, political analysis revised to include the events of 2010, and a few minor sharpenings of its economics.

The book is on Amazon, but you can get it at a 60 percent discount if you go to this page and enter discount code UU2N84E6. If you want to help without buying anything, please go to the book’s Amazon page and give it a favorable review, as the reviews from the original edition do not automatically carry over.

Best Regards,

Ian Fletcher
Senior Economist
Coalition for a Prosperous America
225 Bush St., 16th Fl.
San Francisco, CA 94104 USA

Well, now I'm really confused.  How could a guy who believes free trade doesn't work be asking me to engage in free trade and "import" his book from California into my household, and subject my household to a trade deficit with him? After all, the inevitable conclusion of the philosophy that free trade doesn't work is total self-sufficiency at the household level.  In a letter to Ian Fletcher in January Don Boudreaux pointed this out by reminding Fletcher that his anti-trade position would mean that "The path to riches is for each household to write and print its own books!" .... and NOT purchase or "import" Fletcher's book. 

And Fletcher is not just engaging in free trade by trying to sell his books, isn't he also engaging in the predatory, cutthroat and unfair trade practice of "dumping" his books on the American market by offering a 60% discount?

New Mpls. Federal Reserve Bank Study Shows Significant Earnings Mobility Between 2001-2007

The chart above (click to enlarge) is based on data from the Panel Study of Income Dynamics that follows the same households over time, and was reported in a recent study by economists at the Minneapolis Federal Reserve Bank titled "Facts on the Distributions of Earnings, Income, and Wealth in the United States: 2007 Update."

The results in the chart above on earnings mobility are from Tables 28 and 29 in the Minneapolis Fed study and answer the question: For U.S. households that were in a given earnings quintile (20 percent group) in 2001, what percentage of those households moved to a different quintile by 2007?  Here are some conclusions about the earnings mobility for those U.S. households that had positive earnings in both years:

1. For American households that were in the lowest earnings quintile (bottom 20 percent) in 2001, only 56% of those households remained in that quintile in 2007, and 44 percent had moved to a higher quintile by 2007. Five percent of low-income households in 2001 had moved to one of the top two quintiles in just six years.

2. For those households that were in the highest earnings quintile (top 20 percent) in 2001, 34 percent had moved to a lower quintile by 2007, and 5 percent of those households had moved all the way to the bottom quintile.

3. For those households in the middle earnings quintile (middle 20 percent) in 2001, about one-third moved to a higher quintile by 2007, more than one-fourth moved to a lower quintile, and only 42 percent remained in the same quintile.

4. More than half of the households in the second, third, and fourth quintiles in 2001 moved to a different earnings quintiles by 2007 (see bottom row in chart).

For the full post and conclusions, see my post today at the Enterprise Blog.  

State and Local Tax Revenues Set Record in QIV

In another sign that the U.S. economy has made a full recovery from the 2007-2009 recession, state and local tax collections reached a new record high in the fourth quarter 2010 of $378.3 billion, according to data released today by the Census Bureau.  Compared to the fourth quarter of 2009, state tax collections were up overall by 1.64%, helped by increases of more than 10% for individual income taxes, 14.3% for corporate income taxes, and 2.3% for sales taxes.  Property tax collections fell by almost 3% over the year, most likely due to falling home values.  

The rising tax revenues at the state and local levels to all-time record highs might suggest that the many states with budget deficits have a spending problem, not a revenue problem.  

Update: Inflation-adjusted version of the chart below:

 

U.S. Manufacturing Profits Soar to Record High

Both after-tax profits and after-tax profit margins (profits/sales) for U.S. manufacturing corporations soared to record-high levels in the fourth quarter of 2010, according to data released today by the U.S. Census Bureau.  Profits for U.S. manufacturing firms reached $135.3 billion in QIV last year, the highest amount of profits ever recorded in a single quarter for America's manufacturers, and surpassing the previous record of $127 billion in QII 2007 before the recession started (see top chart above).  The after-tax profit margin for U.S. manufacturers also reached an all-time time of 9.1%, at least for the data the Census Bureau has available going back to 1999 (see bottom chart above). 

The surge of manufacturing profits in 2010 to record high levels provides additional evidence that the U.S. manufacturing sector is expanding, profitable, thriving and healthy, and is leading the U.S. economic recovery.      

Feb. Real Consumer Expenditures at Record-High

Real consumption expenditures reached a record-high of $9.459 trillion (seasonally adjusted, annual rate in 2005 dollars) in February, according to today's BEA report on Personal Income and Outlays.  Consumer spending is now 1.1% above the pre-recession level of $9.355 in December 2007, and almost 4% above the cyclical low of $9.114 trillion in April 2009 (see chart above).     

Record High for Europe's Leading Economic Index

The Conference Board Leading Economic Index (LEI) for the Euro Area increased 0.9 percent to an historical high of 108.9 in February (2004 = 100), following a 0.7 percent increase in January and an 0.8 percent increase in December.  The February increase in the Euro Area LEI was the fifth straight monthly gain, and starting with a sharp upturn in April 2009, the LEI has increased in 21 out of the last 23 months (see chart above). 

Said Jean-Claude Manini, The Conference Board Senior Economist for Europe: “The fourth consecutive large increase in the LEI for the Euro Area suggests that European businesses will likely benefit from the current upswing in the expansion. However, despite the rapid improvement in the leading indicators, present economic conditions are relatively weak. Retailers and consumers are likely to remain cautious as higher inflation and expected budget cuts are likely to weigh on growth during the second half of the year.”

Administrative Bloat in Michigan Public Universities

From a front page story in today's Detroit Free Press, "Amid Tougher Times, Spending on Payroll Soars at Michigan Universities":

"Michigan universities increased their spending on administrative positions by nearly 30% on average in the last five years, even as university leaders say they've slashed expenses to keep college affordable for families. The number of administrative jobs grew 19% over that period at the state's public universities, according to data submitted by the schools to the state budget office. 

The increases took place from the 2005-06 school year through 2009-10 -- a period in which both student enrollment and state funding of universities remained about the same, state data show. The higher administrative costs were slightly exceeded by tuition hikes over this period."

From a related earlier story in the Flint Journal:

"The University of Michigan-Flint’s administrative ranks has grown the fastest among the 15 public universities in the state, according to figures from the Michigan Higher Education Institutional Data Inventory released earlier this year. The data showed that the percentage growth in full time administrative and professional staff positions swelled 74 percent between 2005 and 2009, although the percent of administrative positions on campus remains average compared to other universities.

As the number of deans, associate deans and program directors grew at the Flint campus over the last five years, so have administrative paychecks. Six-figure salaries more than doubled on campus since 2006, according to the newest faculty and staff salary information recently released by UM. Nearly 50 of the roughly 1,000 employees made $100,000 or more at UM-Flint, compared to about 20 four years earlier."

More Milton Friedman.... Poverty and Equality

 
"You can only aim for equality by giving some people the right to take things from others. And what ultimately happens when you aim for equality is that A and B decide what C should do for D. Except that they take a little bit of commission off on the way."

First comment on the YouTube site for this video:

"Whenever Milton Friedman speaks, God smiles."

"Healthcare Marketization" Could End the Crisis

Some key paragraphs from the editorial "Private enterprise fix could save healthcare":

"Does America have a “grocery system”? An “automobile system?” A “tourism system”? The nation does, of course, have a “healthcare system” and the fact that the medical-services sector can’t be described as a market… well, it’s the prime cause of the “healthcare crisis.” 

Consumers make choices about employment, food, housing, clothing, transportation, investment, and leisure peddled by an uncountable — and ever-changing — number of vendors. Price, convenience, and quality vary. Transparency is standard. Accountability is enforced, at times rapidly and ruthlessly, by both sellers and buyers. Yet satisfying the nation’s healthcare needs involves an appalling supply of waste, waiting, bureaucracy, and buck-passing. 

Consumer-driven medical services, if fused with health savings accounts that insure against catastrophic conditions, would revolutionize the way physicians and hospitals — gulp — “do business.” Savings would be substantial. The “crisis” would quickly end."

Witch City: Who Should Determine the Number of Psychics? Gov't. Regulation v. Market Competition

Here's a good case study of occupational licensing, with economic lessons in barriers to entry, contestable markets, and government regulation vs. market competition:

In 2007, the city of Salem, Massachusetts lifted its cap on the number of psychics allowed to operate in the city and now some local psychics believe the 'Witch City' is getting overrun with too many competitiors.  The views of two area psychics represent the two opposing approaches to the situation: a) more government regulation to limit the number of psychics, vs. market competition determining the number of psychics in Salem.

1. Barbara Szafranski, long-time psychic license holder and owner of shop "Angelica of the Angels," argues for greater government regulation:

"It negatively affected my business by 75%. I lost business because many stores opened up that were not in this field. They just opened up because they wanted to get the money from the readings.  It just becomes a bunch of gypsies. Maybe I shouldn't say that word because they might be upset by it but those people are not necessarily always qualified.

I'm in favor of putting the cap on because there are so many psychics in the city now. When I first opened up my business 25 years ago I was just about the only one in this area and, of course, as you're seeing since then it's grown and grown and grown."

Szafranski wants Salem city leaders to do a better job controlling the number of fortunetellers and preventing charlatans from operating.

2. Christian Day, a Salem warlock who owns two shops in the city, lobbied the city council to lift the cap on Salem psychics and thinks the change towards greater market competition is good for the psychic industry:

"I feel like it creates this sort of sparkle effect where everybody's sort of raising the bar on one another and making everything more exciting. As a person who believes in the power of the free market, I believe that the free market should decide whether or not there are too many psychics. If we have too many, they won't make any money and they leave. It's just like anything else.

What we want to encourage is that quality people come and in my opinion the free market encourages quality. If you cap the number of licenses and keep those people with licenses protected you essentially guarantee that people with lesser talent are protected. It is rather interesting to me that people expect government to protect their business. Your ingenuity should protect your business. Your talent should protect your business. Your aggressiveness to succeed will protect your business."  

MP: I'm with Christian Day on this issue, he believes in the "power of the market" and understands basic economic principles that "competition breeds competence" and intense market competition is usually the best and most effective regulator possible.  

HT: Curtis Purington

Milton Friedman Schools Another Michael Moore

Milton Friedman Schools A Young "Michael Moore"

"

Note: I think the reference to Michael Moore is figurative, not literal.

Where Are the Female Economics Bloggers?

"There are 39 women who rank in the top 1000 economists and 0 of them blog. Contrast that with the men. Consider the top 100 men. In this elite subset; at least 8 of them blog. Consider the men ranked between 101 and 200. At least, six of them blog. So, this isn't very scientific but we see a 7% participation rate for excellent male economists and a 0% participation rate for excellent women. This differential looks statistically significant to me."

Read more here. 

HT: Joy Pavelski

How to Increase New Home Prices by $4,000 in CA

California building code amendments now require every single-family home and duplex built anywhere in the state to be equipped with a fire sprinkler system. Builders say it will add $4,000 to the price of a house.

The Price of Taxing the Rich

From the WSJ article "The Price of Taxing the Rich":

"Nearly half of California's income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes—their earnings fell by more than twice as much as the rest of the population's during the recession. When they crashed, they took California's finances down with them.

New York, New Jersey, Connecticut and Illinois—states that are the most heavily reliant on the taxes of the wealthy (see chart above)—are now among those with the biggest budget holes. A large population of rich residents was a blessing during the boom, showering states with billions in tax revenue. But it became a curse as their incomes collapsed with financial markets.

Arriving at a time of greatly increased public spending, this reversal highlights the dependence of the states on the outsize incomes of the wealthy. The result for state finances and budgets has been extreme volatility."

Here's a related item:

"In a letter sent March 21 to Gov. Pat Quinn, Caterpillar chief executive officer Doug Oberhelman said officials in at least four other states have approached the company about relocating since Illinois raised its income tax in January."

"I want to stay here. But as the leader of this business, I have to do what's right for Caterpillar when making decisions about where to invest," Oberhelman wrote in the letter obtained Friday by the Lee Enterprises Springfield bureau. "The direction that this state is headed in is not favorable to business and I'd like to work with you to change that."
 

HTs: Pete Friedlander and Steve Bartin

Japan Earthquake: Two Weeks Later

Collected here are recent images from northeastern Japan, 14 days after it was rocked by disaster on a historic scale.

HT: Tim Harford

Reason.tv Interview with Walter Williams

HT: Chris Coyne at the Coordination Problem blog

Real GDP Sets Record, Highest Gain Since 2005

On an annual basis, real GDP grew by 2.9% in 2010, the highest annual gain since a 3.05% increase in 2005, according to today's BEA report.  In dollars, real GDP in 2010 was $13.248 trillion, which set a new annual record for U.S. output, surpassing the $13.228 trillion levels in 2007 and 2008. 

Using Google for Flu Trends, Gathering Intelligence

NPR - "Back in 2009, during the swine flu epidemic in the U.S., Google launched Google Flu Trends (see chart above). The National Institutes of Health found it helped them track outbreaks of the disease. It turns out that when people started to feel feverish and nauseous, they would go to Google to check out their symptoms. While it wasn't a perfect indicator, Google Flu Trends often beat government predictions about flu outbreaks by a week or more."

The article and NPR radio segment "A New Tool For U.S. Intelligence: Google?" goes on to report that Google trends is being used to gather intelligence, understand the mood of a country, and help predict political unrest.  

Real After-Tax Profits Reach New Record High in Q4

U.S. corporate profits reached a new record high in the fourth quarter 2010 at $1.25 trillion (at an annual rate), after taxes and adjustments for inventory valuation and capital consumption (see graph above, data here), according to today's BEA report.  Compared to the third quarter, corporate profits increased by $39.5 billion last quarter, and that makes eight straight quarterly gains in profits going back to the first quarter of 2009.  From the cyclical bottom of $774 billion of profits in the fourth quarter of 2008, profits for U.S. companies have rebounded by 61.5%, and by $476 billion.

Adjusted for inflation (using the Business Sector Deflator), real corporate profits in the fourth  quarter 2010 rose above the previous all-time record high of $1.229 trillion Q3 2006 to reach a new record high of $1.25 trillion (see red line in graph above).

Chart: Detroit Population Lowest Since 1910

The population of Detroit in 2010 at 713,777 is the lowest since 1910 when the population was 466,000. 

Quotes of the Day: Economics and Politics

1. "Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do-- and nothing is more unpredictable."

2. “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

~Thomas Sowell

NYC Taxi Medallions Approach $1 Million!!

The price of a New York City taxi medallion (the "priciest piece of aluminum in NYC") that allows a corporate owner to operate a single taxi in the Big Apple is approaching $1 million. 

According to the New York City Taxi and Limousine Commission, four corporate taxi medallions sold in February at an average price of $950,000, setting a new all-time high record (see chart above).  Twenty individual taxi medallions were sold in February at an average price of "only" $641,000, which also sets a new record high for that category.

See previous CD posts on taxi medallions and the NYC "taxi cartel" here and here.  

The New Affirmative Action.... for White Males?

From Andrew Ferguson, writing in the Weekly Standard, "The Quotas Everyone Ignores: Why universities are quietly favoring white males once again":

"After a half-century of battles over racial and gender preferences for URMs (admissions-speak for “underrepresented minorities,” a term that has traditionally comprised nearly anyone who isn’t a white male), colleges and universities have boldly embarked on a policy of affirmative action preferences for .  .  . white males. It’s like old times. 

Few admissions deans like to talk about their latest innovation in recruitment, understandably enough. Less understandably, the United States Commission on Civil Rights decided earlier this month it didn’t want to talk about it either. And even harder to figure, women’s rights organizations are staying mum too.

Since the early 1980s, when a brief period of parity was reached after generations of male dominance, more girls than boys have applied to college each year (MP:..and graduated, see chart above); in 2011, 60 percent of college applicants will be women. Girls—sorry, fellas—are by any objective measure more attractive applicants than boys, with higher average GPAs and test scores. They have fewer behavioral problems. They write better application essays. They have a wider range of extracurricular interests. They clean up better for interviews. 

On any fairly balanced scale, the acceptance rate for women at selective colleges should be far higher than for men. Instead it’s the other way around.  William and Mary, for instance, accepted 40 percent of the boys who applied in 2006 and only 26 percent of the girls. The reason is “affirmative action,” sometimes called preferences, sometimes called quotas—though never publicly."

HT: Steve Bartin

Prospects for Future Econ. Growth Remain Positive

Leading economic indexes for January increased in France (0.9%), Germany (0.4%) and Australia (0.1%), according to releases from the Conference Board over the last week.  These increases in leading economic indexes follow recent reports of increases in the leading indexes of Spain, U.K., China, Korea, Japan and U.S. 

Despite Recent "He-Covery," It's Still a Mancession

Diane Sawyer in the ABC report above: "There's a new chapter in this very serious battle of the sexes. In this fragile recovery the race is on for jobs and it's all heating up, and one gender is not just winning, it's overwhelming."  The report then goes on to highlight the "he-covery" of men getting all of the new jobs being created during the recovery.  

From January 2010 to February 2011, it's true men have gained jobs and female employment has remained flat (see chart below).  During that period, about 90% of the new 1.2 million payroll jobs have gone to men.  But that's only part of the "jobs by gender" story. 

Here's the part of the "battle of the sexes" that got left out of the story:  If you go all the way back to when employment levels peaked at about 138 million payroll jobs in January 2008, here's the gender breakdown:

1. Male employment is down by 4,932,000 jobs since the January 2008 peak, compared to female employment being 2.549 million jobs below the peak.  Therefore, we can say that for every 100 jobs lost by women since the start of the recession, men have lost 193.5 jobs. 

2. On a percentage basis, men have suffered about 66% of the recession-related job losses, and women only 34%.

Bottom Line: Despite the fact that the jobs gained in 2010 did favor men during what is being called the "he-covery/mancovery," it's still very much of a "mancession" once we account for all of the jobs gained and lost since the start of the recession.   

Markets in Everything: Merchandise Taxis

The nation's first "Store to Door" Merchandise Taxi:

Taxis have been taking people from place to place for decades. Get It Home Merchandise Taxi is a curb side pick up and drop off service. Initially conceptualized to assist customers who make retail purchases they want to get home right away and cannot fit into their car. The MERCHANDISE TAXI's versatility has grown to suit its customer's imagination!

HT: Matt Bixler

6th Edition of Mankiw: Tiger's Out, Tom Brady's In

In the new 6th edition of Greg Mankiw's economics textbook, Tiger Woods has been replaced with Tom Brady for the section above on opportunity cost titled: "Should Tiger Woods Mow His Own Lawn?"  Here's an ABC News report and video.

Made on Earth: Global Output and Trade Both Reach New Record All-Time High Levels in January

In post titled "Made on Earth," Don Boudreaux links to a FT.com editorial "Manufacturing is All Over the Place," here's a key point: 

"The challenge for economists is even more profound. In the old days, they typically measured the output of an economy by watching where goods were “made”; but which country should claim the “value” for an iPhone (or an Italian suit or an American Girl doll)? Where does the real “output” come, in a world where companies can shift profits around? 

Indeed, such is the complexity that Pascal Lamy, the head of the World Trade Organization, recently voiced the seemingly heretical idea that economists should stop paying so much attention to “import” and “export” statistics. Thus, instead of trying to measure what is now “made in America” – or “China” – what economists should do is focus on the global economy as a whole, he insists. “It no longer makes sense to think of trade in terms of ‘them’ and ‘us’,” he argues; 20th-century-style trade statistics can be too arbitrary in the 21st-century world."

Don also links to Cato's Dan Ikeson's study "Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete." 

With that background in mind, today's report on world trade and world output from the CPB Netherlands Bureau for Economic Policy Analysis seems especially timely.  Here are some highlights:

1. World trade reached a new all-time high record level in January (index = 166.2), surpassing the previous record in December (164.1), which was the first month that world trade exceeded the pre-recession level of 163.5 in April of 2008 (see chart above).  

2. World trade in January was 12% above its year-ago level, and marked the 13th consecutive month of double-digit annual growth starting in January of last year.

3. For the ninth straight month starting last May, world industrial output reached another new all-time record high level in January at 141.4.  Compared to a year ago, world output has increased 7.6%, and is now 5.2% above the previous cyclical high of 134.4 in March 2008.  

4. For almost two years, global output has increased in almost every month compared to the previous month, with only one month of output decline since March 2009. 

MP: Based on the ongoing and solid improvements in both global trade and world output, especially the fact that both global production and trade are at all-time historical highs, I think we can safely say that the world economy has made a complete recovery from the global slowdown in 2008 and 2009.  We can also now safely say that the global economy is in a new cycle of economic growth and expansion.  To paraphrase Warren Buffet, "The world economy's best days lie ahead."  

And as I have advocated before for the U.S., I agree with Pascal Lamy that we should pay less attention to import and export trade statistics, and more attention to total trade volumes, and that should apply to both the U.S. and world economies.  

Quote of the Day: The Real Class War Today

"Many of the protesters [in Michigan and Wisconsin] seem to think the war is between rich and poor," says Michael LaFaive of the Midland, Michigan-based Mackinac Center for Public Policy. "But the real class war today is between government and the people who pay for it. And the government's been winning."

~Today's WSJ

Leave Your Lights On This Saturday: Earth Hour Celebrates Ignorance, Poverty and Backwardness

"Earth Hour 2011 will take place this Saturday 26 March at 8.30PM (local time). This Earth Hour we want you to go beyond the hour, so after the lights go back on think about what else you can do to make a difference. Together our actions add up.

Earth Hour has done a lot to raise awareness of sustainability issues. But there’s more to it than switching off lights for one hour once a year. It’s all about giving people a voice and working together to create a better future for our planet."

Canadian economist Ross McKitrick responds:

"I abhor Earth Hour. Abundant, cheap electricity has been the greatest source of human liberation in the 20th century. Every material social advance in the 20th century depended on the proliferation of inexpensive and reliable electricity. 

Giving women the freedom to work outside the home depended on the availability of electrical appliances that free up time from domestic chores. Getting children out of menial labour and into schools depended on the same thing, as well as the ability to provide safe indoor lighting for reading. 

Development and provision of modern health care without electricity is absolutely impossible. The expansion of our food supply, and the promotion of hygiene and nutrition, depended on being able to irrigate fields, cook and refrigerate foods, and have a steady indoor supply of hot water. Many of the world’s poor suffer brutal environmental conditions in their own homes because of the necessity of cooking over indoor fires that burn twigs and dung. This causes local deforestation and the proliferation of smoke- and parasite-related lung diseases.

Anyone who wants to see local conditions improve in the third world should realize the importance of access to cheap electricity from fossil-fuel based power generating stations. After all, that’s how the west developed. The whole mentality around Earth Hour demonizes electricity. I cannot do that, instead I celebrate it and all that it has provided for humanity. 

Earth Hour celebrates ignorance, poverty and backwardness. By repudiating the greatest engine of liberation it becomes an hour devoted to anti-humanism. It encourages the sanctimonious gesture of turning off trivial appliances for a trivial amount of time, in deference to some ill-defined abstraction called “the Earth,” all the while hypocritically retaining the real benefits of continuous, reliable electricity. 

People who see virtue in doing without electricity should shut off their fridge, stove, microwave, computer, water heater, lights, TV and all other appliances for a month, not an hour. And pop down to the cardiac unit at the hospital and shut the power off there too. 

I don’t want to go back to nature. Travel to a zone hit by earthquakes, floods and hurricanes to see what it’s like to go back to nature. For humans, living in “nature” meant a short life span marked by violence, disease and ignorance. People who work for the end of poverty and relief from disease are fighting against nature. I hope they leave their lights on."

HT: Pete Friedlander

WOW! 12-Year old Jazz Guitarist, Andreas Varady

U.S. Has Most Progressive Tax System for OECD-24

	B. Percentage shares of richest 10%
	1. Share of taxes of the richest 10%	2. Share of market income of the richest 10%	3. Ratio of shares for richest 10%  (1/2)
Australia	36.8	28.6	1.29
Austria	28.5	26.1	1.1
Belgium	25.4	27.1	0.94
Canada	35.8	29.3	1.22
Czech Republic	34.3	29.4	1.17
Denmark	26.2	25.7	1.02
Finland	32.3	26.9	1.2
France	28	25.5	1.1
Germany	31.2	29.2	1.07
Iceland	21.6	24	0.9
Ireland	39.1	30.9	1.26
Italy	42.2	35.8	1.18
Japan	28.5	28.1	1.01
Korea	27.4	23.4	1.17
Luxembourg	30.3	26.4	1.15
Netherlands	35.2	27.5	1.28
New Zealand	35.9	30.3	1.19
Norway	27.4	28.9	0.95
Poland	28.3	33.9	0.84
Slovak Republic	32	28	1.14
Sweden	26.7	26.6	1
Switzerland	20.9	23.5	0.89
United Kingdom	38.6	32.3	1.2
United States	45.1	33.5	1.35
OECD-24	31.6	28.4	1.11

The table above is from Scott Hodge at The Tax Foundation and shows:

"The share of taxes paid by the richest 10 percent of households, the share of all market income earned by that group, and the ratio of what that 10 percent of households pays in taxes versus what they earn as a share of the nation's income.

The table then adjusts for the underlying allocation of income by showing the ratio of income taxes paid to the share of income earned by the top decile in each country. The ratio for U.S. households is 1.35, far greater than the ratio of taxes to income in any other country. Even in the three countries with a comparable distribution of income, the ratio of taxes to income was less, 1.18 in Italy, 0.84 in Poland, and 1.20 in the U.K.

Interestingly, countries with top personal income tax rates that are higher than in the U.S., such as Germany, France, or Sweden, have ratios that are closer to 1 to 1. Meaning, the share of the tax burden paid by the richest decile in those countries is roughly equal to their share of the nation's income. By contrast, we prefer to have the wealthiest households in this country pay a share of the tax burden that is one-third greater than their share of the nation's income."

Tech Trends

1. The book market is changing (more "creative destruction"), as ebook sales are growing exponentially and traditional book sales are in decline: 

"The Association of American Publishers recently released figures for the past year ending in January 2011, and the results are startling: eBooks have taken off in a large way, with sales of eBooks from various book stores doubling year-over-year from January 2010; close to 115%. The report also cast gloom over sales of traditional paper books, which declined approximately 30% over the same period. Hardcover sales were the biggest loss, dropping over 11% from January 2010 to January 2011."

2. Google’s YouTube Revenues Will Pass $1 Billion In 2012.

Greatest Reduction in World Poverty Ever in History: Isn't Free Trade Partly Responsible?

Ian Fletcher claims here that "Free Trade Isn't Helping World Poverty," and Don Boudreaux responds here.  Here's some related research:

From a 2009 NBER working paper "Parametric Estimations of the World Distribution of Income," by Maxim Pinkovskiy and Xavier Sala-i-Martin (Columbia University):

Abstract: We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006 (see chart above). The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions.

MP: The bottom chart above shows poverty rates for the five regions analyzed in the paper, with some pretty amazing results for East Asia (includes mainland China, Taiwan and S. Korea), which in 1960 had the highest regional poverty rate in the world by far, at 58.8%, compared to 39.9% for Africa, 11.6% for Latin America, 8.4% for MENA (Middle East, N. Africa) and South Asia (20.1%). In the 36-year period between 1970 and 2006, the poverty rate in East Asia fell to only 1.7% by 2006, which was below any of the other four regions: Africa (31.8%), Latin America (3.1%), MENA (5.2%) and South Asia (2.6%).

Both graphs are based on a poverty measure of $1/day, but the authors obtain similar results using four other measures of poverty from $2 to $10 per day, both for the overall reduction in world poverty (top graph) and the regional differences (bottom graph).

Bottom Line: Assuming these estimates are accurate, the 80% reduction in poverty between 1970 and 2006 has to be the greatest reduction in world poverty in such a short time span in the history of the world, and the 97% reduction in East Asia has to be the most significant improvement in regional standard of living in history as well. The authors don't explore the reasons for the record reduction in world poverty, but some likely candidates might be: globalization, market-based reforms, liberalization, Information Age technology, productivity gains in agriculture, the collapse of central planning in China and India, etc.