Saturday, March 12, 2011

Obama Says U.S. Needs Progress for Men’s Equality

A little fantasy editing of this Bloomberg news article: 

"President Barack Obama said women men have made great some strides toward full equality with men women over the past 50 years, yet more progress is needed to close an economic, college degree, and labor market gender gap.

In his weekly radio and Internet address, Obama said women men are still more likely than men to live in poverty, are: a) are underrepresented in math and engineering education for college degrees at the associate’s, bachelor’s and master’s levels, b) are underrepresented by academic field for degrees in biology, communication, education, English, foreign languages, health professions, psychology, public administration, social sciences, visual arts, optometry, pharmacy, osteopathic medicine, veterinary medicine, and naturopathic medicine, and c) earn, on average, 75 8 percent as much as men less than women for the cohort of unmarried, childless workers under 30 who live in large cities, and d) are 20 percent more likely to be unemployed than women (over the last year).   

“We have to work even harder to close the gaps that still exist, and to uphold that simple American ideal: We are all equal and deserving of the chance to pursue our own version of happiness, he said.  The facts that: a) 150 women will earn college degrees this year for every 100 men, b) young, single women earn 8% more than single men, and c) the negative effects of unemployment and job losses in the last recession disproportionately affected men, demonstrates that a lot more progress is needed before we achieve full gender equality.”

Teachers Unions Explained


HT: Pete Friedlander

Markets in Everything: The Toepener

"The Toepener is a simple device that attaches to doors, enabling users to open the door with their feet. It is the ideal solution for exiting a public restroom. It provides a sanitary, hands-free alternative for users to open the door and avoid touching the handle."

The Toepener is being produced and marketed by a group of business students from the University of Minnesota


Markets in Everything: #1 Spot in Line for iPad 2



Mashable -- "College student Amanda Foote has turned the die-hard techie tradition of waiting hours, sometimes days, to be the first to purchase a new Apple product into a lucrative odd job. After nearly 41 hours of waiting in line for the iPad 2 release at Apple’s flagship store in New York, she sold her #1 spot for $900.

Foote sat through an entire day of rain, had a stranger help himself to a box of doughnuts she was eating, and slept a total of 3 hours and 10 minutes in the time between when she got in line at 5 p.m. Wednesday and when she left it at 9:00 a.m. Friday. She plans to buy tickets to a Lady Gaga concert with the cash that she earned.

The buyer, app developer Hazem Sayed, says he is planning on leaving for a business trip Friday evening and wants to have an iPad 2 (which starts at $499) with him."

MP: On eBay, an auction for an iPad 2  just ended at a price of $1,525 with 10 bids. Hey, isn't that "Apple scalping?"

Friday, March 11, 2011

Markets in Everything: 4th Amendment Clothing


T-Shirts printed with the 4th Amendment in Metallic Ink are available here for $45.  The website says that if you wear it, "They won't find anything except for a challenge to their unwarranted searches."

Also from the website:

"The Fourth Amendment to the Constitution of the United States, meant to prevent unwarranted search and seizure, is readable on TSA body scanners.

4th Amendment Wear. Assert your rights without saying a word."

HT: Ron H.

The Public Choice Lesson of Margarine. "I Can't Believe It Wasn't Legal to Sell Yellow Margarine"

The Wikipedia entry below on Margarine provides an excellent public choice lesson on rent-seeking by a special interest group that uses (hijacks?) the political process to enact legislation to protect that group (in this case the dairy industry) from the competition of more efficient or lower-cost rivals (in this case the margarine industry).  In this example, both of the groups are domestic producers (dairy and margarine), but the lesson would be exactly the same if it was the U.S. steel or tire industry seeking legislation (e.g. tariffs or quotas) to be protected from the competition of more efficient foreign rivals.  Here's the Margarine Lesson:
 
"Margarine can indicate any of a wide range of butter substitutes.  Margarine naturally appears white, or almost white, and by forbidding the addition of artificial coloring agents, legislators in some jurisdictions found that they could protect their dairy industries by discouraging the consumption of margarine. Bans on adding color became commonplace in the U.S., Australasia and Canada and, in some cases, those bans endured for almost 100 years. It did not become legal to sell colored margarine in Australia, for example, until the 1960s.

Canada.  Margarine was banned from 1886 until 1948 though this ban was temporarily lifted from 1917 until 1923 due to dairy shortages. Nevertheless, bootleg margarine was produced in the neighboring British colony of Newfoundland from whale, seal and fish oil by the Newfoundland Butter Company (which, in fact, produced only margarine) and was smuggled to Canada where it was widely sold for half the price of butter. The Supreme Court of Canada lifted the margarine ban in 1948 in the Margarine Reference.

In 1950, as a result of a court ruling giving provinces the right to regulate the product, rules were implemented in much of Canada regarding margarine's color, requiring it to be bright yellow or orange in some provinces or colorless in others.  By the 1980s, most provinces had lifted the restriction, however, in Ontario it was not legal to sell butter-colored margarine until 1995. Quebec, the last Canadian province to regulate margarine coloring, repealed its law requiring margarine to be colorless in July 2008.

United States. As early as 1877, the first states had passed laws to restrict the sale and labeling of margarine. By the mid-1880s, the U.S. federal government had introduced a tax of two cents per pound, and manufacturers needed an expensive license to make or sell the product.  Individual states began to require the clear labeling of margarine. The color bans, drafted by the butter lobby, began in the dairy states of New York and New Jersey. In several states, legislatures enacted laws to require margarine manufacturers to add pink colorings to make the product look unpalatable, but the Supreme Court struck down New Hampshire's law and overruled these measures in Collins v. New Hampshire, 171 U.S. 30 (1898).

By the start of the 20th century, eight out of ten Americans could not buy yellow margarine, and those that could had to pay a hefty tax on it. Bootleg colored margarine became common, and manufacturers began to supply food-coloring capsules so that the consumer could knead the yellow color into margarine before serving it. Nevertheless, the regulations and taxes had a significant effect: the 1902 restrictions on margarine color, for example, cut annual U.S. consumption from 120 million to 48 million pounds (60,000 to 24,000 tons). However, by the end of the 1910s, it had become more popular than ever.

The long-running rent-seeking battle between the margarine and dairy lobbies continued: In the U.S., the Great Depression brought a renewed wave of pro-dairy legislation; the Second World War, a swing back to margarine. Post-war, the margarine lobby gained power and, little by little, the main margarine restrictions were lifted, the most recent states to do so being Minnesota in 1963 and Wisconsin in 1967. Some unenforced laws remain on the books."

MP: It took almost 100 years for common sense and economic logic to prevail in the battle between the dairy industry and margarine producers, and that was a fight between two well-organized, well-funded, politically powerful domestic producers.  It will probably take a lot longer, if ever, for common sense and economic logic to prevail in the case of protectionist trade policy for foreign imports.  Reason? The two main groups who are adversely affected by protectionism: a) domestic consumers and b) foreign producers, are generally not well-organized or well-funded (domestic consumers) and not politically connected (foreign producers).     

Two Good Questions About Government Subsidies

David Harsanyi on ending government subsidies for National Public Radio and PBS:

"The function and purpose of government has been rather expansive over the past few decades. Do we really believe that providing tax subsidies for entertainment and journalism is one of the charges of government? The argument may have held up in the past, but in today's world it simply doesn't."

And from Slate.com "The Ethanol Catastrophe: Biofuels Aggravate Global Warming and Cause Hunger. Why Won't the U.S. Stop Subsidizing Them?"

"The United States spends about $6 billion a year on federal support for ethanol production through tax credits, tariffs, and other programs. Thanks to this financial assistance, one-sixth of the world's corn supply is burned in American cars. That is enough corn to feed 350 million people for an entire year.

Biofuels were initially championed by environmental campaigners as a silver bullet against global warming. They started to change their minds as a stream of research showed that biofuels from most food crops did not significantly reduce greenhouse gas emissions – and in many cases, caused forests to be destroyed to grow more food, creating more net carbon-dioxide emissions than fossil fuels.

Some green activists supported mandates for biofuel, hoping they would pave the way for next-generation ethanol, which would use non-food plants. That has not happened. Today, it is difficult to find a single environmentalist who still backs the policy. Even former U.S. Vice President and Nobel laureate Al Gore—who once boasted of casting the deciding vote for ethanol support—calls the policy 'a mistake.'"

PHOTOS: Massive Earthquake Hits Japan

More than 40 photos here from the Boston Globe. 

HT: Paul Kedrosky

Cartoon of the Day


Thursday, March 10, 2011

Classic Milton Friedman Greed Lecture on CNBC



In this classic 1979 video, Milton Friedman famously “schooled” talk-show host Phil Donahue on the nature of greed and the virtues of capitalism.  Portions of this Friedman video are currently being featured on CNBC commercials.  I'll never get tired of watching this - it's Friedman at his best, and in his prime.  

Collective Bargaining Abuse Examples in Wisconsin

Earlier this week, Wisconsin Governor Scott Walker’s office released some specific examples of how collective bargaining abuses significantly increase costs to Wisconsin taxpayers, and how reforming collective bargaining in the state will save taxpayers millions of dollars annually (link here, it's fixed now).  I'm sure these collective bargaining abuses are common in other states as well, and helps put the whole issue into perspective:

1. In 2009, the City of Madison’s highest paid employee was a bus driver who earned $159,258, including $109,892 in overtime, guaranteed by a collective bargaining agreement.  In total, seven City of Madison bus drivers made more than $100,000 per year in 2009.

2. Correctional Officer collective bargaining agreements allow officers a practice known as “sick leave stacking.”  Officers can call in sick for a shift, receiving 8 hours of sick pay, and then are allowed to work the very next shift, earning time-and-a-half for overtime.  This results in the officer receiving 2.5 times his or her rate of pay, while still only working 8 hours.

In part because of these practices, 13 correctional officers made more than $100,000 in 2009, despite earning base wages of less than $60,000 per year.  The officers received an average of $66,000 in overtime pay for an average annual salary of more than $123,000 with the highest paid receiving $151,181.

3. Under the Green Bay School District’s collectively bargained Emeritus Program, teachers can retire and receive a year’s worth of salary for working only 30 days over a three year period.  This is paid in addition to their already guaranteed pension and health care payouts.

4. Due to a 1982 provision of their collective bargaining agreement, Milwaukee Public School teachers actually receive two pensions upon retirement instead of one.  The contribution to the second pension is equal to 4.2% of a teacher’s salary, with the school district making 100% of the contribution, just like they do for the first pension.  This extra benefit costs taxpayers more than $16 million per year.

5. Some state employees, due to the nature of their positions, are required to carry pagers during off-duty hours in order to respond to emergency situations.  Due to the collective bargaining agreements, these employees are compensated an extra five hours of pay each week, whether they are paged or not. For an employee earning an average salary of $50,000 per year, this requirement can cost more than $6,000 in additional compensation.

6. Milwaukee Public Schools teacher Megan Sampson was laid off less than one week after being named Outstanding First Year Teacher by the Wisconsin Council of English Teachers.  She lost her job because the collective bargaining agreement requires layoffs to be made based on seniority rather than merit.  Informed that her union had rejected a lower-cost health care plan, that still would have required zero contribution from teachers, Sampson said, “Given the opportunity, of course I would switch to a different plan to save my job, or the jobs of 10 other teachers."

7. As a cost cutting measure, Racine County began using county inmates to cut the grass in medians and right-of-ways at no cost to the taxpayers.  A county employee union filed a grievance indicating it was the right of government workers to cut the grass, even though it would cost the taxpayers dramatically more.

Real Residential Nat Gas Prices Fall to 8-Year Low, Commercial Prices to 9-Yr. Low; Where's the News?


The top chart above shows monthly, inflation-adjusted prices for "U.S. natural gas delivered to residential customers" (data here, prices are in 2010 dollars).  The price of natural gas in December 2010 at $9.86 per 1,000 cubic feet, was the lowest price in almost 8 years.  You have to go all the way back to January 2004 to find a lower inflation-adjusted price for residential natural gas.  

The bottom chart above shows monthly prices for natural gas sold to commercial consumers (data here).  For those customers real natural gas prices are even lower today in inflation-adjusted dollars than for residential customers.  The December 2010 price of $8.54 per 1,000 cubic feet was the lowest inflation-adjusted price since November 2002, more than nine years ago.  

While rising gas and oil prices, along with concerns about rising inflation in general, have captured all of the media headlines recently, the real price of residential natural gas has quietly fallen to an 8-year real low in December 2010 for residential customers and a 9-year low for commercial customers.  I couldn't find a single news story about this, demonstrating once again that "bad news sells" and good news is often ignored and overlooked.  You heard it here first! 

Minnesota Legislation Would Allow Ticket Re-Sales

"The Minnesota Senate commerce committee approved legislation by a vote of 10-4 that prohibits a ticket issuer from restricting for resale or the offering for resale an event ticket held by the lawful possessor.  The bill would allow ticket holders to resell or exchange their tickets without needing to get the approval from the event vendor who sold it. The bill now goes to the Senate judiciary committee.

Opponents to the bill, which includes the Minnesota Vikings and Minnesota Twins, in part argue that ticket scalpers already hold an edge over fans. One concert promoter last week suggested some big name acts, such as rock star Bruce Springsteen, may refuse to play in Minnesota because they will not be able to control the price their fans pay for tickets."

MP: A couple comments.  

1. In a voluntary transaction for a ticket between a willing buyer and a willing seller, how can one party be said to "hold an edge" over the other party?    

2. An artist like Bruce Springsteen does have control over the price his fans pay for tickets, because he ultimately controls the number of tickets offered for sale to his concerts. 

To say Springsteen has no control over the price of his tickets, would be like saying OPEC has no control over the price of oil.  Just like OPEC controls the supply of oil, Springsteen controls the supply of tickets to his concerts. If one Springsteen show sells out and creates a secondary market where tickets sell above face value, then The Boss can add a second, third or fourth show, or however many shows it takes to offer enough tickets to satisfy fan demand in a given area, and limit or eliminate the secondary market.

For artists like Springsteen and promoters to complain about ticket scalping is really to acknowledge their faulty under-estimation of fan demand, and the blame should therefore be directed towards them for under-supplying tickets to their performances, not towards the secondary ticket market. 

U.S. Exports Increase to New Record-Level in Jan.

Here's some more good news from today's BEA international trade report for January: U.S. exports reached a new record-high level in January of $167.7 billion, surpassing the previous record of $165.7 billion in July 2008 (see chart above).  January exports were also 16% above the year-ago level, and 35% above the cyclical low of $124.1 billion in April 2009.  

Total U.S. Trade Reaches 2-1/2 Yr. High in January

The BEA released its report today on international trade for January, and what will likely get the most attention is the fact that the monthly trade deficit increased to $46.3 billion from $40.3 billion in December.  There will be lots of commentary and hand-wringing today about the "bad news" that America's trade position, trade gap or trade deficit is: a) widening, b) worsening or c) deteriorating in January.  What you probably won't hear much about is the good news that total U.S. trade (Exports + Imports) increased to $381 billion in January, reaching the highest level since August 2008, almost two-and-a-half years ago.  

As Cato's Dan Griswold pointed out last month on his blog:

"Politicians and commentators love to focus on the deficit, as though it were a scorecard of who is winning in global trade, but the real measure is the total volume of trade. As economies expand, so does trade, both imports and exports. Exports help us reach new markets and expand economies of scale, while imports bless consumers with lower prices and more choices, while stoking competition, innovation, and efficiency gains among producers."

MP: The good news about the January report is that imports, exports and therefore total trade  are all increasing, in another positive sign that the U.S. and world economies are expanding, recovering and growing.    

Maybe The Yardstick's Deficient, NOT Growth

Slate.com has an article titled "Why hasn't the Internet helped the American economy grow as much as economists thought it would?" about Tyler Cowen's e-book "The Great Stagnation."  Here's a really interesting point:

"Maybe it is not the growth that is deficient. Maybe it is the yardstick that is deficient. MIT professor Erik Brynjolfsson explains the idea using the example of the music industry. "Because you and I stopped buying CDs, the music industry has shrunk, according to revenues and GDP. But we're not listening to less music. There's more music consumed than before." The improved choice and variety and availability of music must be worth something to us—even if it is not easy to put into numbers. "On paper, the way GDP is calculated, the music industry is disappearing, but in reality it's not disappearing. It is disappearing in revenue. It is not disappearing in terms of what you should care about, which is music."

As more of our lives are lived online, he wonders whether this might become a bigger problem. "If everybody focuses on the part of the economy that produces dollars, they would be increasingly missing what people actually consume and enjoy. The disconnect becomes bigger and bigger." 

But providing an alternative measure of what we produce or consume based on the value people derive from Wikipedia or Pandora proves an extraordinary challenge—indeed, no economist has ever really done it. Brynjolfsson says it is possible, perhaps, by adding up various "consumer surpluses," measures of how much consumers would be willing to pay for a given good or service, versus how much they do pay. (You might pony up $10 for a CD, but why would you if it is free?) That might give a rough sense of the dollar value of what the Internet tends to provide for nothing—and give us an alternative sense of the value of our technologies to us, if not their ability to produce growth or revenue for us." 

MP: In other words, we're using a 1930s, Machine-Age era system of national income accounting that might not capture production and consumption accurately in the 21st century Information Age.  As Don Boudreaux hypothesized  recently: "What has stagnated isn't the economy but, rather, economists' and statisticians' capacity to measure economic activity and its contribution to human well-being. Rather than stagnating, our economy and our wealth continue to grow so impressively that they are outstripping last-century's economic categories and measurement techniques."

Pandora and Wikipedia are two great examples of Internet-Age services that are free to users, and so probably wouldn't show up at all in "Personal Consumption Expenditures" purposes for GDP, or contribute in any way to GDP growth, the way that LP, CD and encyclopedia sales did in previous years.  But they probably create millions of dollars of "hard to measure" economic value, enjoyment and well-being every quarter for consumers and businesses (e.g. many restaurants in my neighborhood now use Pandora).  

Wednesday, March 09, 2011

Target Continues Expansion of Retail Clinics

Minneapolis StarTribune -- After years of sitting on the sidelines as CVS and Walgreens rapidly opened medical clinics nationwide, Target Corp. said Tuesday it will open eight new Target Clinics by the end of July, including four in the Twin Cities. It marks the second eight-store burst in six months for the Minneapolis-based retailer, after expanding into Chicago and Palm Beach for the first time in September. The new clinics mean Target will have 44 locations in Minnesota, Maryland, Illinois and Florida.

As the health care landscape changes and consumers become more comfortable using clinics in grocery stores, hospitals, drugstores and mass merchandisers, Target may be gearing up to grab market share from the industry's two biggest players, CVS/Caremark's MinuteClinic and Walgreens' Take Care Clinics.

Nationally there are 1,227 retail clinics in 42 states, according to Merchant Medicine, a retail clinic research and consulting firm. Use of retail clinics has risen in the past year as individuals and families face high-deductible plans, said Tom Charland, Merchant Medicine's CEO. The average deductible is well over $1,000 on a basic employer-based health plan, according to a recent study of health plan trends.

"These low-end, acute care visits are the first dollars that get spent," Charland said. "People pay for these out-of-pocket expenses at a place where they understand how much it'll cost. The menu is there for them to see."

Employment Trends Index Gains for 5th Month


For the fifth month in a row, the Conference Board Employment Trends Index (ETI) increased in February to 101.7, up from 100.1 in January. The ETI has improved by more than 8 percent from a year ago (see blue line in chart above).  The Employment Trends Index is a composite index based on eight individual labor-market indicators.

Says Gad Levanon, Associate Director, Macroeconomic Research at The Conference Board: “In the past half year, the economy has been adding, on average, about 110,000 jobs per month. The strong growth in the Employment Trends Index suggests that the pickup in jobs may accelerate in the next couple of quarters. However, with a shrinking government, a stagnant construction sector, and a manufacturing recovery that has only a small impact on overall employment, overall job growth will still be modest.”
 

February's increase in the ETI was driven by positive contributions from seven out of the eight components: Consumer Confidence “Jobs Hard to Get,” Initial Claims for Unemployment Insurance, Percentage of Firms With Positions Not Able to Fill Right Now, Number of Temporary Employees, Part-Time Workers for Economic Reasons, Industrial Production and Real Manufacturing and Trade Sales.

MP: The Employment Trends Index has been an accurate leading indicator of trends in payroll employment back to 1973. The ongoing gains in the index and the 15-point gain since mid-2009 indicate that we can look for gradual, but ongoing improvements in payroll employment levels in the months ahead. 

Why Gov't. Unions Thrive: Taxpayers Provide Lunch


"There are limits to how long unions can siphon off money from businesses, without facing serious economic repercussions.The most famous labor union leader, the legendary John L. Lewis, head of the United Mine Workers from 1920 to 1960, secured rising wages and job benefits for the coal miners, far beyond what they could have gotten out of a free market based on supply and demand.

His strikes that interrupted the supply of coal, as well as the resulting wage increases that raised its price, caused many individuals and businesses to switch from using coal to using oil, leading to reduced employment of coal miners. The higher wage rates also led coal companies to replace many miners with machines. The net result was a huge decline in employment in the coal mining industry, leaving many mining towns virtually ghost towns by the 1960s. 

Similar things happened in the unionized steel industry and in the unionized automobile industry. At one time, U.S. Steel was the largest steel producer in the world and General Motors the largest automobile manufacturer. No more. Their unions were riding high in their heyday, but they too discovered that there is no free lunch, as their members lost jobs by the hundreds of thousands.

One set of workers, however, remained largely immune to such repercussions. These are government workers represented by public sector unions. While oil could replace coal, while U.S. Steel dropped from number one in the world to number ten, and Toyota could replace General Motors as the world's leading producer of cars, government is a monopoly. Nobody is likely to replace the federal or state bureaucracies, no matter how much money the unions drain from the taxpayers. 

That is why government unions continue to thrive while private sector unions decline. Taxpayers provide their free lunch."

20 Surprising Jobs Women Are Taking Over


"Women may be half of the workforce, but they have largely been concentrated in lower-paying service jobs like waitresses, retail workers and administrative assistants. However, they could be moving up.

Women are beginning to pour into management and professional occupations that require more education and offer higher pay and status. In fact, women are now dominating some of the jobs that used to belong to men, according to the Department of Labor’s Women’s Bureau. From finance and business operations to medical management, women now outnumber men in these 20 surprising jobs."

But ends on this sour note:

Ideally every occupation would be 50/50,” says Anne York, an economics professor at Meredith College, “with both genders bringing different perspectives to the table.”

HT: Blake Thompson

Black Markets in Everything: NYC Food-Cart Permits

"New York City's competitive street food culture has created a thriving black market for mobile food vending permits issued by the Department of Health and Mental Hygiene. The city charges a mere $200 for most food-cart permits, which must be paid every two years when they are renewed. But it only issues 3,100 year-round permits plus an additional 1,000 seasonal permits—not enough to satisfy demand. Transferring or renting these permits to another vendor is illegal but everyone, including the city's Health Department, acknowledges, that it happens.

Demand for permits and their black-market prices continue to climb as street food's popularity soars. Some permits fetch as much as $20,000 for two years."

~Today's Wall Street Journal

Tuesday, March 08, 2011

Corporate Social Responsibility: "A Fundamentally Subversive Doctrine In a Free Society," Friedman

Target's Subversive Policy of Corporate Responsibility
(Click to enlarge)
Milton Friedman writing in the New York Times Magazine in 1970, "The Social Responsibility of Business is to Increase its Profits":

"The businessmen believe that they are defending free en­terprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing em­ployment, eliminating discrimination, avoid­ing pollution and whatever else may be the catchwords of the contemporary crop of re­formers. In fact they are–or would be if they or anyone else took them seriously–preach­ing pure and unadulterated socialism. Busi­nessmen who talk this way are unwitting pup­pets of the intellectual forces that have been undermining the basis of a free society these past decades.

What does it mean to say that "business" has responsibilities? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but "business" as a whole cannot be said to have responsibilities, even in this vague sense.

The doctrine of "social responsibility" taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. “Social responsibility” is a fundamentally subversive doctrine in a free society. In such a society, there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

Gender Differences Persist in Many Subjects

ScienceDaily (July 27, 2008) — "We've all heard it. Many of us in fact believe it. Girls just aren't as good at math as boys.  

But is it true? After sifting through mountains of data - including SAT results and math scores from 7 million students who were tested in accordance with the No Child Left Behind Act - a team of scientists says the answer is no. Whether they looked at average performance, the scores of the most gifted children or students' ability to solve complex math problems, girls measured up to boys."

"There just aren't gender differences anymore in math performance," says University of Wisconsin-Madison psychology professor Janet Hyde, the study's leader. "So parents and teachers need to revise their thoughts about this."

 Reality Check:


SubjectYearMales: Grade 12   Females: Grade 12M-F DifferenceProb.
Math200915515230.0053
Science200915114920.0061
Reading2009218224-60.0000
Writing2007144162-180.0000
Economics200615214840.0071

MP: The national average test scores by gender in the table above for students in grade 12 show that there are still statistically significant differences in performance on standardized tests in math, science, reading, writing and economics, according to U.S. Department of Education data available here.  For standardized tests in math, science and economics, boys score significantly higher on average than girls in grade 12, and for reading and writing tests, girls score significantly higher than boys (all at a 1% level of statistical significance or higher). 


So there are gender differences in not only math performance, but also for science, reading, writing and economics, and these differences persist over time.  Perhaps parents, teachers and everybody else should just revise their thoughts about this and accept the reality that there are gender differences in cognitive abilities.  Is that so terribly bad that girls might be naturally better at reading and writing and boys are naturally better at math and science? 

Update: The chart below displays average SAT math test scores by gender from 1972 to 2011, showing a persistent and significant male advantage in average math performance.  Were these results part of the "mountains of data - including SAT results" that Janet Hyde's team looked at to arrive at their conclusion that "there just aren't gender differences in math performance?"




ECON 101: Protectionism for Dummies

In his latest article "The Social Snobbery of Free Trade" Ian Fletcher goes on yet another of his trademark anti-trade, protectionist tirades, claiming now that free trade advocates are snobs who look down on protectionists as "dummies, losers, incompetents, hippies, rednecks, dinosaurs, closet socialists, or crypto-fascists."

In his conclusion, Fletcher writes that "It is high time people stopped forming their opinions about free trade based on what they think people will think of them at cocktail parties. If they will make even a moderate stab at inquiring into its underlying economics, they will find out very quickly that it is an exceedingly dubious policy." (Don Boudreaux responds here.)

Well, let's take a look..  the underlying economics behind free trade and protectionism are summarized in the chart below:

The graphical analysis above shows what happens economically to a country that moves from: a) free trade with the rest of the world, with consumers paying the world price for a given product, to a b) protectionist trade policy and a new higher price that includes a tariff (tax) that reduces the amount of trade that takes place.  Here are the key outcomes of this protectionism:

1. The domestic producers are now better off because they are protected from more efficient foreign competition, and can charge higher prices and increase output.  Economically, they have converted consumer surplus (gains) to producer surplus (gains) because of the tariff, and that transfer is represented by the yellow area labeled "Producer Surplus" above.  Nothing lost there on net because of the tariff, although domestic producers have used the political process to gain at the direct expense of domestic consumers, who now pay higher prices and purchase fewer units. 

2.  With a tariff (tax) on imports, the government is now able to generate "Tax Revenue" in an amount represented by the blue rectangle above.  This is also a transfer, this time from what used to be consumer surplus (gains from trade) to the federal government.  Nothing necessarily lost here either on net, assuming that the government will transfer the tax revenue back to the consumers in the form of beneficial government spending (maybe) or lower taxes elsewhere (maybe).

3. However, the two pink triangles labeled "Societal Loss" are the amount of losses to the consumers and the economy (society) from the protectionist tariffs that are NOT offset by a gain to some other group: producers or government, and represent what economists call the "deadweight loss" or "deadweight cost" of protectionism.  

Bottom Line: The deadweight losses from protectionism mean that the economy is worse off on net, or that there has been a reduction in total economic welfare, the total number of jobs, wealth, prosperity, and/or national income.  You could argue about the size of the deadweight loss triangles, but it would be really hard to argue that they don't exist.  Protectionism has to make the country worse off, on net, and that proposition is supported by 200 years of economic theory and hundreds of empirical studies.  

Free trade advocates aren't snobs when they ask protectionists to engage in economic debate grounded on the underlying economic theory, where they can find out pretty easily that it is protectionism that is an "exceedingly dubious policy." 

Monday, March 07, 2011

Markets in Everything: A North Korean Restaurant

From the current edition of Washington's City Paper, "The Strange Odyssey of the DC's Area's First North Korean Restaurant: A Tale of Espionage and Sausage":

"Sitting near the border of Alexandria and Fairfax County on Little River Turnpike—the restaurant-saturated main drag of Northern Virginia’s Korean community—the restaurant doesn’t tout its unlikely origins, at least not in English. Its only English-language sign, in the parking lot, features the name of the previous restaurant to occupy the narrow building. “Pyongyang Soondae” is written above it, in Korean. Which makes it the perfect place to find a restaurant owned by a former spy and operated by North Korean defectors."

Q: Has Tyler been there?  It's not in the Ethnic Dining Guide yet.

Leasing Frenzy in Ohio for Shale Oil, Chesapeake Energy Spends $1B, Creating Instant Millionaires

Could Ohio Be Next?

From today's Wall Street Journal, "Shale Lifts Prospects in Ohio":

Windham, Ohio -- "An oil-rich underground layer of rock, called the Utica Shale, has sparked a leasing frenzy and the prospect of a new flow of cash and jobs to a development-starved corner of the Rust Belt.

Chesapeake Energy Corp. and other oil companies have swarmed this northeast Ohio hamlet and others nearby, buying mineral-rights leases to drill into what the company and some analysts say might be one of the U.S.'s last big unconventional oil fields yet to be developed on a commercial scale. Chesapeake said it has spent about $1 billion acquiring mineral rights on more than a million acres from public and private landowners.

The Utica deposit lies below sections of eight states, from Tennessee to New York, as well as parts of Canada. But drilling companies believe eastern Ohio has the most concentrated oil reserves that are the easiest to extract. The companies are in the testing and exploratory stage now. Hydraulic fracturing processes have been used to recover oil and gas from rock formations for decades through traditional vertical drills. 

Hydraulic fracturing combined with horizontal drilling techniques has allowed producers to retrieve vast quantities of natural gas from shale formations. The techniques were more recently adapted to coax crude oil from deeply buried rocks in states including Texas, North Dakota and now, potentially, Ohio.

In Portage County, home to Windham, dozens of researchers on Chesapeake's payroll have crowded the recorder's office since September, poring over land records. Normally, Portage County records about 20 mineral leases a year; in 2010 there were 1,226.

Local oil and gas attorney Eric Johnson says some of his clients have already reaped life-altering rewards from the leases. One farmer in Ohio's poverty stricken Appalachian region pocketed nearly $1 million for selling drilling rights to his land. If the play pans out, even more money could pour into Ohio via royalties, typically 12.5% per barrel of oil."

Switching to a Dollar Coin: Seems Like a No-Brainer

G-8 CountryHighest Widely Circulated CoinU.S. ValueLowest BillU.S. Value
Canada2 Dollar$1.97 5 Dollar$4.92
France2 Euro$2.77 5 Euro$6.92
Germany2 Euro$2.77 5 Euro$6.92
Italy2 Euro$2.77 5 Euro$6.92
Japan500 Yen$6.01 1,000 Yen$12.02
Russia10 Ruble$0.33 50 Ruble$1.67
United Kingdom2 Pound$3.18 5 Pound$7.95
AVERAGE
$2.83
$6.76
United States25 Cents$0.25 1 Dollar$1.00

The chart above is based on data from the Dollar Coin Alliance (DCA), a coalition of small businesses, budget watchdogs, trade associations, and private companies advocating that the U.S. transition to the dollar coin.  The DCA is asking Congress to eliminate the dollar bill in favor of the dollar coin to save billions annually in taxpayer money. According to the DCA:

1. Each year approximately 3.2 billion $1 bills are removed from circulation due to wear and tear. They are not recyclable, so they are shredded and most are deposited in landfills. Dollar coins have a lifespan of 30 years or more, while $1 notes last approximately 2-3 years. A $1 coin that is produced for less than 16¢ would replace 17 bills that would have to be printed for a cost of 47¢.

2. The private sector experiences even greater cost savings and increased revenues from $1 coins. Jammed $1 bills in vending machines cost the industry $1 billion in annual repair costs and lost sales. According to the transit industry, it costs six times more to process $1 bills than $1 coins.

3. Other countries have already recognized the cost savings and benefits of the dollar coin, including Canada, the European Union, and Japan. When Canada transitioned to a dollar coin 25 years ago, the government realized savings more than ten times initial estimates.

4. The United States has one of the smallest denominations of paper currency among the major economies of the world (G-8 Countries). The $1 bill is worth less than any of these other bills except for the Russian Ruble (see chart above).

5. According to a January 2011 poll, Americans favor the transition to a dollar coin by a two-to-one margin once the potential government savings are explained.

Manufacturing in U.S. Makes More Sense Than In a Generation; China Not Such A Great Deal Any More

Here's an interesting article titled "Made in America: Small Businesses Buck the Offshoring Trend," about how some manufacturing is being brought back to the U.S. from China, especially for smaller American firms, because of: a) rising labor costs in China, b) inconsistent quality, c) shipping costs that have doubled in the last year (see chart above), and d) the lack of safeguards on intellectual property.  Here are some key paragraphs from an article that suggests that America's manufacturing sector can look forward to a bright, dynamic and thriving future:

"For U.S. firms, the decision to manufacture overseas has long seemed a no-brainer. Labor costs in China and other developing nations have been so cheap that as recently as two or three years ago, anyone who refused to offshore was viewed as a dinosaur, certain to go extinct as bolder companies built the future in Asia. But stamping out products in Guangdong Province is no longer the bargain it once was, and U.S. manufacturing is no longer as expensive. As the labor equation has balanced out, companies—particularly the small to medium-size businesses that make up the innovative guts of America’s technology industry—are taking a long, hard look at the downsides of extending their supply chains to the other side of the planet.

When accounting giant KPMG International recently asked 196 senior executives to list their top concerns for 2011 and 2012, labor costs ranked below product quality and fluctuations in shipping rates and currency values. And 19 percent of the companies that responded to an October survey by MFG.com, an online sourcing marketplace, said they had recently brought all or part of their manufacturing back to North America from overseas, up from 12 percent in the first quarter of 2010. This is one reason U.S. factories managed to add 136,000 jobs last year—the first increase in manufacturing employment since 1997 (see related CD post here).

The U.S. certainly isn’t on the verge of recapturing its past industrial glory, nor can every business benefit by fleeing China. But those that actually build tangible goods should no longer assume that “Made in the USA” is an unaffordable luxury. Unless a company is hell-bent on selling the cheapest goods possible, manufacturing at home makes more sense than it has in a generation.

China’s big manufacturing advantage has been cheap labor, but wages—while still low compared with those in the U.S.—have risen sharply in recent years (see chart below).


Manufacturing wages more than doubled in China between 2002 and 2008, and the value of the nation’s currency has risen steadily. It’s now under tremendous international pressure to let the yuan appreciate even more, and the country must cope with worrisome inflation at home (food prices rose by nearly 12 percent last year). And though Chinese workers still earn a fraction of what their American counterparts do, the rising costs of labor there are prompting companies to reevaluate their production strategies. Once they do, these businesses often realize something profound: China isn’t the great deal they expected."
 

Conclusion: "In dynamic systems such as supply chains, the tighter the connection between nodes, the lower the risk of something going haywire. That risk can be tolerated when the benefits of stretching the connections are too great to ignore. But when those benefits diminish, it’s time to consider building a system that is stable by design. And once America’s formidable innovation muscle is focused on keeping manufacturing nearby, new and inventive systems for reducing labor costs (see chart above)—without going overseas—will be developed quickly."

"Everyday Dumb Ideas" in Boston; They Have a Shortage of Grocers, But Mayor is Anti-Wal-Mart

“Wal-Mart does not suit the clientele we have in the city of Boston. I don’t need employers like that in our city.”
Last week, I featured a Boston Herald editorial by Michael Graham about
Boston Mayor Tom Menino's anti-Wal Mart position now that the retailer has "threatened" to bring jobs and low prices to the benefit of struggling families in Beantown.  

Today's Boston Globe has a related, front page article titled "Shortage of Grocers Plagues Massachusetts Cities":

"Massachusetts ranks nearly dead last — third from the bottom nationally — in having enough supermarkets with fresh, nutritious food, according to a report to be released today by the Massachusetts Public Health Association. The shortage is especially severe in lower-income communities, where many residents struggle with obesity and related ailments.

The analysis found that in some cities, such as Lowell and Fitchburg, the number of supermarkets would need to double to be in line with the national average. In other urban areas, including Boston, Springfield, and Brockton, there are about 30 percent fewer supermarkets per person than the national average.

A growing body of research indicates that people in communities without a nearby supermarket suffer disproportionately high rates of obesity, diabetes, heart disease, and other chronic health issues."

MP: So the mayor's anti-Wal-Mart position could actually have adverse health effects on Boston communities, which is then compounded because, as Michael Graham pointed out in his editorial, the mayor also opposed low-cost, convenient retail clinics coming to Boston:

"In 2008, Mayor Menino turned down CVS’s request to open “minute clinics” here, providing cheap health care in some of Boston’s neediest communities. Why did Menino oppose it? “Allowing retailers to make money off of sick people is wrong,” Menino told CVS — a company whose entire business is selling medicine to sick people."

Bottom Line: Sure seems like Boston "doesn't need politicians like that in their city," with "Everyday Dumb Ideas"  about low prices, jobs, increased choices, and convenient, consumer-driven retailers coming to the city. 

HT: Rick Spillane


Sunday, March 06, 2011

Educational Extravagance, But the Unions Love It

From The New York Post:

"This is an education in extravagance. The Syosset (New York) Central School District, which serves an enclave of gated communities, ritzy eateries and children's boutiques like "Spoiled Rotten," takes the crown in employee compensation.

The school superintendent, Carole Hankin -- who oversees 6,687 kids in 10 schools -- is the highest-paid in the state with $506,322 in total compensation. She collects a $386,868 salary, $67,454 in fringe benefits and $52,000 in retirement funds and expenses including use of a "late model car," plus gas.

By contrast, New York City Chancellor Cathie Black, in charge of 1.1 million students and 1,600 schools, takes home a $250,000 salary, plus health and pension benefits. She gets a driver.

Hankin's deputy superintendent, Jeffrey Streitman, collects $382,382 in salary, benefits and perks. An assistant superintendent gets $238,221. At least 37 other administrators take home $118,000 to $201,000 in salary. Even gym teachers score six figures, one making $145,000.

The Syosset teachers union loves Hankin. Union president Jeffrey Rozran blasted Cuomo in a statement: "Why is he treating her with the disrespect one would expect from an attorney general to an evildoer, instead of the respect due to a valued public servant?" Rozran, who teaches English, makes $129,818."


World's Largest Jailer By Far, It's Not Even Close

Q: Which repressive country puts the most people in jail for violating government laws? 

A. Iran
B. Saudi Arabia
C. Libya
D. Egypt
E. United States of America

It's not even close..............

World Rank, 2010CountryPrisoners per 100,000 Population
1U.S.A.743
37Tunisia297
52Turkmenistan224
53Iran223
61Libya200
61Mexico200
69Colombia180
70Saudi Arabia178
92Bahrain149
116China120
126Venezuela114
137Iraq101
140Ethiopia98
150Egypt89
156Yemen83
185Syria58
187Afghanistan56
198Sudan45
198Pakistan45

The table above shows how the prison incarceration rate for in the United States (per 100,000 population) in 2010 compares to some of the roughest countries in the world.  The full list of 216 countries is here, the countries above were selected as some of world's the most repressive regimes (Iran, Saudi Arabia and Libya), some of the world's least economically free countries (Venezuela, Turkmenistan, Sudan, Afghanistan, according to the Heritage Foundation) and some countries with the biggest narco-terroism problems (Colombia and Mexico).  But none of them even come close to the incarceration rate of the World's #1 Jailer - the United States, largely because of the "war on drugs" (see chart below).  
 

Update: Note that neighbor Canada ranks #124 (117 per 100,000), and countries with liberalized drug laws like Portugal rank #128 (112 per 100,000) and Netherlands ranks #145 (94 per 100,000).  

Manufacturing is Still Alive and Well in the United States: But It Has Gone High-Tech and High-Skilled

Here's an MSNBC News story about America's new, high-tech manufacturing, and how community colleges are training new high-skilled manufacturing workers for the 21st century.  Here's an important point: 25-30 years ago, U.S. manufacturing was "80% brawn and 20% brains," and today it's "10% brawn and 90% brains."  That's another way of saying that we're able to produce increasing amounts of factory output in the U.S. with fewer and fewer workers, as the productivity of American manufacturing workers has tripled since the 1970s. 

Time to Get Serious About U.S. Oil, Like N. Dakota

Alaska governor Sean Parnell wrote this week in the WSJ that it's "Time To Get Serious About American Oil," and posed the question: "Why is Washington blocking oil exploration in states like Alaska and Louisiana when the Middle East is such a powder keg?"  Here are some excerpts:

"Over the past several decades, we have allowed ourselves to become dependent on oil from unstable regions that are hostile to our nation. The United States relies on an open Suez Canal, the security of which has been funded by our tax dollars for decades. With gasoline prices surging, and manufacturing and transportation costs rising, the rising cost of goods will soon impact every American, putting our economic recovery at risk.

The U.S. imports more than 63% of its oil. The time is now for our federal government to re-examine its current policy—which severely hampers domestic oil exploration and development—and to learn from our recent history.

Millions of American jobs are directly tied to our energy production. Even as the energy sector necessarily diversifies, oil will continue to be a key piece of our national energy profile for many decades. And yet Alaska and the Gulf states have been blocked from developing America's oil by politically driven federal policy, much of it aided by misinformation. If Americans wonder what our economic Achilles' heel is, they need look no further than the federal regulatory system that delays permits for domestic exploration and production.

As we watch fuel prices rise, inflation take hold, and government debt reach record levels, Alaskans and those in other oil-producing states are frustrated. We wonder why the Obama administration is openly hostile to a sector of our economy that has created hundreds of thousands of jobs, kept the country on an even keel even during the recession, and produces a global commodity we depend on every day.

As residents of our individual states, we desire responsible resource development. We don't want to live and work in a spoiled nest. We also want to create jobs that contribute to our economic recovery. Why should we spend billions overseas for foreign oil when we could spend those dollars here at home?" 

MP: The chart above shows one state's oil success story - North Dakota -  where oil production has almost tripled in four years, from 40 million barrels in 2006 to almost 120 million barrels last year.  Perhaps Alaska and the Gulf states could experience the same dramatic increases in oil production as North Dakota, if more domestic drilling was allowed.