Saturday, March 26, 2011

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

Friday, March 25, 2011

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 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).

Thursday, March 24, 2011

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. 

Wednesday, March 23, 2011

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 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.  

Tuesday, March 22, 2011

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."

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

Monday, March 21, 2011

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)
Czech Republic34.329.41.17
New Zealand35.930.31.19
Slovak Republic32281.14
United Kingdom38.632.31.2
United States45.133.51.35

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."

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.