Monday, July 18, 2011

Walmart: The Most Successful Retailer in History

Walmart is without question the most successful retailer in the history of the United States, and in the history of the entire world by almost any measure (number of stores, sales revenue, number of employees, market share, etc.) Here are some Walmart facts:

1. In 2010, American consumers bought almost as much merchandise at low-priced Walmart ($307.7 billion in U.S. retail sales) as they purchased from the next five largest U.S. retailers combined ($324.5 billion): Kroger ($78.3 billion), Target ($65.8 billion), Walgreen ($61.2 billion), Home Depot ($60.1 billion) and Costco ($58.9 billion).   

2. In 2010, American consumers purchased more than 7% of their retail sales at a Walmart or a Sam's Club stores, and more than 8.5% of retail sales if autos are excluded.  

3. Walmart now operates more than 9,000 retail outlets around the world in 15 countries.  

4. For the first time in its history, 2011 marked the first year that Walmart operated more retail stores outside the U.S. (4,803) than in the U.S. (4,427), and the international units generated more than 27% of Walmart's 2010 revenue. 

5. In 2005, almost half (46%) of Americans lived within 5 miles of a Walmart or Sam's Club, and 88% lived within 15 miles of a Walmart or Sam's Club.  

6. As Vincent Geloso points out on his blog (which inspired this blog post), "The growth of productivity at Wal-Mart, matched by real wages growth, has allowed the corporation to cut prices systematically and provide consumers with a service they really desire.  This has resulted in growth that is faster than the overall rate of economic growth."

The chart above shows how Walmart sales as a share of U.S. GDP have grown from about one-third of one percent (0.37%) in 1989 to more than 2% (estimated) in 2011.  In other words, for every $45 dollars spent in the U.S. economy this year, almost $1 will be spent on a purchase at a Walmart. If we account for Walmart's total world sales, its sales as a share of GDP will approach 3% this year.  

MP: There has probably been no other company or organization in the history of the world that has done a better job of serving consumers than Walmart, with its "Everyday Low Prices" and obsession with supply chain efficiency.  Walmart's increasing share of U.S. GDP is a testament to its amazing success at creating more consumer surplus than any company in history. 

Related: Watch this animation of Walmart's amazing expansion in the U.S. from 1962 to 2004:


Sunday, July 17, 2011

North Dakota's Higher Education Boom

I've featured the booming, oil-rich North Dakota economy many times, some recent examples appear here, here, and here.  And now there's another economic success story for the state: a higher education boom is taking place at North Dakota's universities, with college students flocking to the Peace Garden state in ever greater numbers, according to this New York Times story titled "Frigid North Dakota Is a Hot Draw For Out-of-State College Students":

"Even as the number of North Dakota high school graduates fell below 7,400 in 2010 from 9,058 in 2000, enrollment at public colleges surged, climbing 38% in the decade ended in 2010, to 48,120. Leading that growth was a 56% jump in nonresident students. 

Out-of-state students account for about 55% of the 14,500 enrolled at North Dakota State University, as well as at similarly sized University of North Dakota in Grand Forks. Nonresident students at North Dakota's 11 public colleges constitute a higher ratio than in almost every other state.

High school juniors and seniors scouring online college guides find North Dakota universities are inexpensive and well-regarded, with modest-sized classes typically taught by faculty members rather than adjuncts or graduate students."


Saturday, July 16, 2011

Interactive Map of U.S. Newspapers, 1690-2011


Click on the  map above to access an interactive map from Stanford University of the annual number of newspapers in the United States from 1690 to 2011.  Here is a timeline of some selected years:

1690: 1 paper
1750: 24 papers
1800: 329
1850: 3,029
1890: 13,489
1900: 15,872
1920: 15,570
1950:13,632
2000: 13,690
2010: 13,670

Note that the "golden age" of newspapers was the period from about 1850 to 1890 when the number of papers increased more than four-fold from about 3,000 in 1850 to 13,489 by 1890, which is about the same number of papers as there are today (13,670).

HT: Stephen Dubner at the Freakonomics blog.

Markets in Everything: Chopsticks Made in the USA



It seems everything we buy these days says “Made in China.” But 2 million disposable wooden chopsticks with a "Made in the USA" label are made every day now at a Americus, Georgia factory (Georgia Chopsticks) for export to China, Japan, Korea and other Asian countries.  Business is booming, and the company plans to increase production to 10 million chopsticks per day. Watch the video above and see news reports here and here.

HT: Matt Bixler

High School Grade Inflation: 1991 to 2003

Following up on a recent post on college grade inflation, there's also evidence that grade inflation is taking place at America's high schools.  In a study by the college entrance exam company ACT, it found evidence of significant grade inflation between 1991 and 2003 for high school students taking the ACT exam.  While ACT scores remained stable between 1991 and 2003, the chart above shows that the average high school GPA increased for every ACT composite score over that period.  From the study:

"Each point on each curve represents the average GPA for all students in 1991 and 2003 who earned that specific ACT Composite score.  The curve for 2003 is higher at every Composite score point than the 1991 curve, which is evidence of the existence of grade inflation.

However, the amount of grade inflation varies for different Composite score values: it is highest between the scores of 13 and 27 and steadily lower with Composite scores above 27. This is because students with high ACT Composite scores tend to have higher GPAs, and there is less room for these GPAs to increase over time because GPA cannot exceed 4.00. The average amount of grade inflation is about 0.25, or about one-quarter of one grade point on a grading scale with a range of 4 points (0.00 to 4.00). This means that, during the 13-year period under study, high school GPA for ACT-tested public high school graduates increased by about 6.25%—without an accompanying increase in ACT Composite score.

But this may understate the average amount of grade inflation when we consider that far fewer Ds and Fs are given in high school than As, Bs, or Cs. Data for the 13 years of this study show that the percentage of students with GPAs below 2.00 is less than 5 percent. This suggests that the practical range of high school grades is 2.00 (C) to 4.00 (A). So, with half of the possible grade range effectively eliminated from consideration, one-quarter of a grade point now represents not 6.25 but 12.5% of the range. Therefore, it may be more accurate to conclude that high school grades have inflated 12.5% between 1991 and 2003.

Conclusion: Due to grade inflation and other subjective factors, postsecondary institutions cannot be certain that high school grades always accurately depict the abilities of their applicants and entering first-year students. Because of this, they may find it difficult to make admissions decisions or course placement decisions with a sufficient level of confidence based  on high school GPA alone."

HT: Mike Donahue

Why Do Medicare Patients See the Doctor Too Much? They Usually Pay Nothing Out-of-Pocket; So Demand Curves Really Do Slope Downward

From an editorial earlier this week in the WSJ:

"Almost all discussions about Medicare reform ignore one key factor: Medicare utilization is roughly 50% higher than private health-insurance utilization, even after adjusting for age and medical conditions. In other words, given two patients with similar health-care needs—one a Medicare beneficiary over age 65, the other an individual under 65 who has private health insurance—the senior will use nearly 50% more care.

Several factors help cause this substantial disparity. First and foremost is the lack of effective cost sharing. When people are insulated from the cost of a desirable product or service, they use more. Thus people who have comprehensive health coverage tend to use more care, and more expensive care—with no noticeable improvement in health outcomes—than those who have basic coverage or high deductibles.

In addition, Medicare's convoluted benefit structure encourages the purchase—either individually or through an employer—of various forms of supplemental insurance. Medicare covers roughly three-fourths of total costs, but about 85% of the Medicare population has expanded coverage with small to limited cost sharing. This additional cost insulation pushes seniors' out-of-pocket costs toward zero, thereby increasing overall utilization."

MP: This crystallizes one of our main health care problems: spending other people's money (see chart above, data here).  When out-of-pocket costs for medical care approach zero, it shouldn't be any surprise that utilization goes up, that's just the Law of Demand. 

Southern California, Bay Area Home Sales Highest in a Year, Median Prices Highest Since 2010

1. Southern California home sales in June shot up more than usual from May (11.6% vs. 6.2% historical average) to the highest level for any month since June 2010, when the market got its last big boost from homebuyer tax credits. The median price paid for all new and resale Southland houses and condos purchased last month was $285,000. That was up 1.8 percent from $280,000 in May and the highest since $290,000 last December, but still down 5.0 percent from $300,000 in June 2010.

2. Bay Area home sales rose sharply last month from May to the highest level for any month since June 2010, when outgoing homebuyer tax credits gave housing demand a final boost, and median prices edged up to a 2011 high. The median price paid for all new and resale houses and condos sold in the Bay Area last month was $377,750, up 1.5 percent from May but down 7.9 percent from $410,000 in June 2010. Last month’s median was the highest since it was $380,000 last November.

MP: These reports are somewhat mixed and not completely positive, and the reporting company DQNews.com says that "Indicators of market distress continue to move in different directions."  But the fact that home sales in Southern California and the S.F. Bay Area are at 12-month highs and June median prices are the highest for 2011 in both markets suggests that there are some modest improvements taking place in California, and there even might be a glimmer of hope for the nation's real estate market to recover. 

Friday, July 15, 2011

High GPAs Have Little Use As Student Motivator or Evaluation Tool for Grad Schools and Employers

Stuart Rojstaczer is a retired Duke University professor who has tirelessly crusaded for several decades against "grade inflation" at U.S. universities and maintains a website with lots of historical GPA data and charts (GradeInflation.com).  The chart above illustrates grade inflation at the University of Michigan-Ann Arbor over roughly the last half century (data here), with the average GPA rising from 2.57 in 1951 (C+/B-) to 3.27 by 2008 (B+).  The grade inflation at Michigan is similar to the national trend at most American universities over time.  

Catherine Rampell at the NY Times Economix Blog writes about a new paper by Professor Rojstaczer and co-author Christopher Healy titled "Where A Is Ordinary: The Evolution of American College and University Grading, 1940–2009," published in the Teachers College Record.  The main findings of the paper appear below, illustrated by this chart: 


"Across a wide range of schools, As represent 43% of all letter grades, an increase of 28 percentage points since 1960 and 12 percentage points since 1988. Ds and Fs total typically less than 10% of all letter grades. Private colleges and universities give, on average, significantly more As and Bs combined than public institutions with equal student selectivity. Southern schools grade more harshly than those in other regions, and science and engineering-focused schools grade more stringently than those emphasizing the liberal arts. It is likely that at many selective and highly selective schools, undergraduate GPAs are now so saturated at the high end that they have little use as a motivator of students and as an evaluation tool for graduate and professional schools and employers."

MP: It's the college version of the "Lake Wobegon effect" and "illusory superiority." 

Thursday, July 14, 2011

Markets in Everything and Antidote to Obamacare: 24/7 Access to MD Consultations via Phone/Video

From the Teladoc website:

1. You wake up one morning with sudden cold-like symptoms: stuffy nose, cough, congestion. You don’t want to miss time at work by sitting in an urgent care or ER waiting room. What to do?

2. Simply log in to your account or call 1-800-Teladoc to request a phone or online video consultation with a Teladoc doctor. You can use Teladoc from home, work, on vacation, or while traveling internationally. The average doctor call back time is 22 minutes. 

3. A U.S. board-certified doctor or pediatrician licensed in your state reviews your Electronic Health Record (EHR), then contacts you, listens to your concerns and asks questions. It's just like an in-person consultation. There is no time limit to the consult. 

4.  The doctor recommends the right treatment for your medical issue. If a prescription is necessary, it's sent to the pharmacy of your choice.

5. Teladoc costs far less than in-person visits: $38 or lower, depending on your plan design. Teladoc charges the credit card you provided when requesting your consultation or your billing information on file.  You can request a receipt for deductibles or reimbursement, if needed. The doctor updates your HIPAA-compliant EHR based upon the consultation. Teladoc is a qualified expense for HSA, FSA and HRA accounts.

MP: Another example of market-based, consumer-driven, convenient and affordable health care delivery as an alternative to government-managed Obamacare.

HT: Greg Ungemach. 

"Administrative Blight" Plagues Nation's Colleges

Inside Higher Ed reports today on a new book "The Fall of the Faculty: The Rise of the All-Administrative University and Why It Matters" (Oxford University Press), by Benjamin Ginsberg, Professor of Political Science at Johns Hopkins University. 

Professor Ginsberg "takes stock of what ails higher education and finds a single, unifying cause: the growth of administration."  Here are some excerpts of the review:

"Ginsberg bemoans the expansion over the past 30 years of what he calls "administrative blight" as personified by what he characterizes as an army of "deanlets" and "deanlings." By virtue of their sheer number and their managerial rather than academic orientation, Ginsberg argues, these administrators have served to marginalize the faculty in carrying out tasks related to personnel and curriculum that once sat squarely in their domain.

He provides data showing that the growth in the ranks of administrators (85 percent) and associated professional staff (240 percent) has far outstripped the increase in faculty (51 percent) between 1975 and 2005. "Generally speaking," he writes, "a million-dollar president could be kidnapped by space aliens and it would be weeks or even months before his or her absence from campus was noticed.”

The larger result, he argues, is that universities have shifted their resources and attention away from teaching and research in order to feed a cadre of administrators who, he says, do little to advance the central mission of universities and serve chiefly to inflate their own sense of importance by increasing the number of people who report to them."

"Armies of staffers pose a threat by their very existence," he wrote. "They may seem harmless enough at their tiresome meetings but if they fall into the wrong hands, deanlets can become instruments of administrative imperialism and academic destruction." 

Quote of the Day: Robert Lucas


"Is it possible that by imitating European policies on labor markets, welfare and taxes, the U.S. has chosen a new, lower GDP trend? If so, it may be that the weak recovery we have had so far is all the recovery we will get. 

If we're going to move to a European welfare state, we're going to have to pay a European price."

Markets in Everything: Cigarette Butts

A San Diego stock trader pays $3 a pound for cigarette butts.

HT: PERCtweets

Wednesday, July 13, 2011

Cartoon of the Day


Alabama Dental Cartel Tried To Squash Competition

The Nonprofit Quarterly (NPQ) has been following a controversy in Alabama involving a battle between the non-profit Sarrell Dental Center and the state's for-profit, private "dental cartel" and its trade organization - the Alabama Dental Association (ALDA), see news reports here (4/13/2010), here (4/28/11) and here (7/9/2011).  Here's some background:

From the clinic's website: "Sarrell Dental is a non-profit that treats the dental and optical needs of Alabama children ages 1-20 with Medicaid or ALLKids insurance. Sarrell Dental was founded in 2004 in Anniston, and since then Sarrell has grown to include 11 other offices and it operates a mobile dental bus which travels to schools and daycare centers throughout the state. Since 2006, Sarrell has grown to include optical services in 5 of its locations."

From NPQ: "The clinic gave away $400,000 in dental care to patients in 2010, never turns away a patient even if they are late or don’t have appointments, and, according to the CEO, “If they make it here, somehow, somewhere, even if we have to stay late, we’ll see them.” 

The $10 million Sarrell clinic, now the largest dental provider in the state, is turning away job applicants and, according to the CEO, has “never had a complaint from a consumer,” unlike other Medicaid specialty practices. There’s no evidence – and no charges – that Sarrell is offering subpar services."

MP: So what's the problem? There really is none, unless you're a for-profit, private dentist and you don't welcome the competition from a non-profit organization.  In that case, you exercise your political muscle and try to put your nonprofit competitor out of business, which the ALDA attempted to do, even though Sarrell was providing excellent, and sometime free, dental service to Alabama's under-served, poor children.  Sarrell countered with an anti-trust lawsuit against Alabama's dental cartel for trying to engage in monopolistic, anti-competitive behavior. 

Bottom Line: It now looks a compromise has been reached, signed by the governor, that will allow Sarrell to continue to operate under the supervision of the Alabama Board of Dental Examiners. In return, Sarrell will drop its antitrust lawsuit, although the FTC may still pursue action against the "dental cartel" for its attempts to put its non-profit competition out of business.

Ethanol Now Consumes More Corn Than For Animal Feed for First Time, Corn Prices Reach Record High

Financial Times --  "U.S. ethanol refiners are consuming more domestic corn than livestock and poultry farmers for the first time, underscoring how a government-supported biofuels industry has contributed to surging grain demand.

The U.S. Department of Agriculture estimated that in the year to August 31 ethanol producers will have consumed 5.05 billion bushels of corn, or more than 40% of last year’s harvest. Animal feed and residual demand accounted for 5 billion bushels."

MP: As the chart above illustrates, this also "underscores how a government-supported biofuels industry has contributed to surging, record-high corn prices." 

Ten Largest U.S. Manufacturing Industries, 2010

Rank10 Largest U.S. Manufacturing Industries2010 Revenue (Millions)Examples of Companies
1Petroleum and Coal Products$1,027,938 ExxonMobil, Chevron, Conoco
2Computers and Other Electronic Products$581,344 HP, IBM, Microsoft
3Chemicals$387,326 P&G, Dow, DuPont
4Food$284,390 ADM, Kraft, Tyson
5Pharmaceuticals$257,975 J&J, Pfizer, Abbot
6Aerospace & Defense$250,446 Boeing, United Technologies, Lockheed Martin
7Electrical Equipment & Appliances$245,307 GE, Emerson, Whirlpool
8Machinery$194,098 Caterpillar, Deere, Xerox
9Motor Vehicles$150,721 Ford, Navistar, PACCAR
10Beverages$133,619 Pepsi, Coke, Dr. Pepper/Snapple
Source: IndustryWeek

The chart above displays the top ten largest manufacturing industries based on 2010 sales revenue.  I reported on the IndustryWeek rankings previously in this post back in February.

Tuesday, July 12, 2011

Dow Jones Average Dominated by Manufacturers

I've posted many times about the supposed "decline/demise/death of American manufacturing," how we supposedly "don't make anything here any more," etc. etc.  

And yet what is probably the most popular and most widely-quoted measure of the health of America's stock market?  It's the Dow Jones Industrial Average (DJIA), which is dominated by U.S. manufacturers.  Of the 30 component companies in the DJIA, 19 are American manufacturers: 3M, Dupont, Aloca, IBM, Boeing, Intel, Merck, GE, Microsoft, ExxonMobil, Chevron, Pfizer, Procter & Gamble, United Technologies, Caterpillar, Johnson and Johnson, Cisco, Coca-Cola and Kraft. 

When we want a quick barometer of how American companies and the U.S. economy are performing, we use the manufacturing-dominated DJIA.  It's maybe a simple point, but I don't think most people realize how important, vibrant and dynamic America's manufacturing remains even today.  The fact that we look to a stock market index dominated by our manufacturing sector illustrates its continued importance to the economy, and underscores the reality that it's a sector that's not in decline the way it gets portrayed by the media. 

Drill, Drill, Drill = Jobs, Jobs, Jobs = Investment, Investment, Investment = Energy Independence

BISMARCK, ND – "According to a new study from the Western Energy Alliance, North Dakota oil production could soon outpace imports from oil-rich nations like Russia, Iraq and Kuwait.

“The Bakken formation spanning North Dakota and Montana will lead oil production in the region, with an expected 685,000 barrels of oil and condensate a day by 2020 (see chart above),” the group states in a press release referring to a study done by EIS Solutions. “Combined with other western production, North Dakota will help lead the way in generating 1.3 million barrels of domestic oil production a day by the year 2020, which is more than the current amount of oil imported from Russia, Iraq and Kuwait combined.”

The study also indicates that investment in North Dakota due to oil production could increase to $58 billion annually by 2020 creating 16,000 more jobs in the state.

“These projections of increased investment in North Dakota energy is good news for our state’s economy and for American energy security,” said Ron Ness, President of the North Dakota Petroleum Council. “North Dakota’s oil producers are already responsible for a significant percentage of our domestic energy production, and continued growth of our industry means more jobs for North Dakotans, increased revenue for local and state governments, and less reliance on foreign energy sources.”

Standing in the way of this production and growth is federal policy which they describe as “significantly undermining these projections of growth, investment and expansion" the group argues."

U.S. Total Trade Surges to New Record High in May


Today's monthly trade report showing an increase in America's current account deficit to $50.2 billion in May was accompanied by the typical alarming media headlines such as: "U.S. Trade Gap Soars to 31-Month High in May," "U.S. Trade Deficit Jumped in May,"and "U.S. May Trade Gap Widens to $50.2 Billion."  

Here's what probably won't get widely reported:

1.  The total volume of U.S. international trade activity (exports + imports) reached an all-time record high in May (not adjusted for inflation) of almost $400 billion, slightly higher than the previous record of $398 billion in July 2008 (see top chart above).  Compared to the recession-related, cyclical low of $277 billion of total trade activity in May 2009, there has been a 44.5% increase in U.S. trade in just two years, as the U.S. world economies have recovered and our trade level has "surged" and "jumped" to a record high.    

2.  Despite a slight dip in exports from April, the May volume of exports ($174.86 billion) was the second-highest monthly export volume in history (not adjusted for inflation), a further sign that a worldwide economic recovery, along with a cheap dollar, have led to a "surge" and "jump" in demand for U.S. products (see bottom chart above).  

Related: Cato's Dan Griswold recently wrote in a Barron's article about the political and media obsession with the U.S. "trade deficit," and the underlying assumption that imports are "bad" and exports are "good":

"Much of what we import doesn't displace domestic production so much as complement it. Imports fuel American industry by providing the raw materials, intermediate inputs and capital machinery our producers need to compete. Competition from imports spurs innovation, cost containment, and productivity gains. Lower prices for imported consumer goods allow households to spend more on home-grown services. 

The dollars we spend on imports quickly return to buy U.S. assets. In 2010, our trade deficit in goods of $647 billion was exactly offset by our trade surplus in services and investment income and our large capital surplus—the amount of U.S. assets, including Treasury bonds, purchased by foreigners, minus the foreign assets purchased by Americans. The grand balance of U.S. international transactions last year, as in every year, was zero.

Politicians obsessed with the trade balance should give up the goal of promoting exports over imports. The aim of U.S. trade policy should be to maximize the freedom of Americans to buy and sell in global markets for mutual gain, whatever the mix of goods, services and assets we freely choose to trade."

Monday, July 11, 2011

Currency Manipulation in Favor of U.S. Consumers

From a WSJ article today "China Boosts Lead in Global Exports" about China's exports setting several new records in June: 

"China's critics, including members of the U.S. Congress, say an undervalued currency unfairly helps Chinese exporters." 

Don Boudreaux responds on Cafe Hayek:

"Overwhelmingly, the beneficiaries are non-Chinese consumers (including Americans) of China’s subsidized exports. In contrast, the people unfairly burdened are exclusively Chinese citizens – both as consumers forced to pay higher prices at home, and as taxpayers forced to fund Beijing’s practice of purchasing U.S. dollars in order to depress the price of the yuan against the dollar.

It is, in fact, obscenely unfair for Beijing to oblige the Chinese people to hand over chunks of their wealth to Americans, even the poorest of whom is far richer than is the typical man or woman in China."

MP: The chart above helps to show how American consumers have benefited from China's "unfair" currency policy by comparing the overall increase in prices (CPI: All items) since 1998 to the price increases for clothing and toys, which are both mentioned in the  WSJ article as examples of China's export dominance in labor-intensive products.  While overall prices in the U.S. have increased since 1998 by 39%, clothing prices have fallen by almost 10% and toy prices have fallen by more than 50%.  That means that in real terms, clothing is about 49% cheaper now than in 1998 and toys are cheaper by almost 90%. 

We can of course thank China's low wages in part for the dramatic decreases in real prices for clothing and toys purchased in the U.S., but we can also thank the Chinese government for manipulating its currency in favor of American consumers, and we should be grateful for the billions of dollars saved by Americans over the last decade from that manipulation.   

Markets in Everything: Yuan and Cow Breast Milk

1. Chicago Mercantile Exchange introduces futures contracts for the Chinese yuan.  Guess that means the "unfair pegging" of the yuan is over.

2. Human Breast Milk From Cows. (HT: Fred Dent)

Sunday, July 10, 2011

Markets in Everything and Antidote to Obamacare: On-Site Modern, Full-Service Medical Clinics

LA Times -- "Major employers across the country, eager to curb fast-rising healthcare costs, are opening their own state-of-the-art health centers where doctors and nurses provide medical care to workers often just steps from their desks.

The cost-cutting strategy has been embraced by dozens of companies — typically large employers that are self-insured and pay their own medical claims, including Walt Disney Co., Qualcomm Inc. and American Express Co.

Many of the health centers are full-service medical offices equipped with exam rooms, X-ray machines and pharmacies. Some provide on-site appointments with dentists, dermatologists, psychiatrists and other specialists who treat life-threatening illnesses.

Executives say providing in-house medical care keeps workers healthy and productive. But the clinics also help the bottom line by reducing absenteeism and slashing employers' medical bills for outside doctors and emergency rooms."

World's Top Five Patent Producers

As a follow-up to this recent post on historical U.S. patent activity, the chart above shows the annual number of patents granted for the top five patent-producing countries in 2009 over the period 1995-2009 (data here, note that for Europe, it's the "European Patent Office" that is being used here).   Here are some interesting observations:

1. Following a ten-year period from 1998 to 2007 when the U.S. granted more patents than any country in the world in every year, Japan took the number one place in 2008 and 2009, and produced 15.5% more patents than the U.S. in 2009. 

2. In 1995, China granted only 3,393 patents, about 3% of the number of patents registered in the U.S. (101,419) and Japan (109,100) in that year.  In 2004, China granted more patents than Korea for the first time, and in 2005 more patents than Europe.  By 2009, China granted more patents (128,489) than Korea (56,732) and the European Patent Office (51,969) combined.   

3. Korea registered only half the number of patents in 2009 (56,732) as in 2006 (120,790) and 2007 (123,705).  

Update: The chart below shows the U.S. share of total world patents granted annually from 1883 to 2009.  America's share was above 30% as recently as 2001, 2002 and 2003, has been above 20% in every year since 1987, and was as low as 12.6% in  1979. 


Saturday, July 09, 2011

How 3D Printing Will Revolutionize and Revive American Manufacturing in the 21st Century



Forbes (Rich Karlgaard) -- "The transformative technology of the 2015-2025 period could be 3D printing. This has the potential to remake the economics of manufacturing from a large-scale industry back to an artisan model of small design shops with access to 3D printers. In other words, making stuff, real stuff, could move from being a capital intensive industry into something that looks more like art and software. This should favor the American skill set of creativity."

Amazing, revolutionary potential here for manufacturing and even for medical applications like organ replacement.  According to Autodesk CTO Jeff Kowalski, because of 3D printing, "The next five years  in manufacturing are going to be substantially different than anything we've seen before.  With 3D printing, production and complexity become essentially free.  3D printing will make manufacturing localized, customizable and accessible, with no penalty for personalization or complexity.  It's entirely possible that the U.S. could see self-sufficiency and a self-sustaining future."

HT: Tom Sullivan

Related video on 3D printing via Cafe Hayek:


U.S. Patent Data Show No Innovation Slowdown


I'm reading Tyler Cowen's provocative book "The Great Stagnation" and blogging at 30,000 feet in the air on a Delta flight to Minneapolis (pretty amazing to be able to do that!).  Here's a quote from p. 20 in the first chapter of the book where Tyler discusses the supposed slowdown in innovation, supported by this factoid:

"The United States produced more patents in 1966 (54,600) than in 1993 (53,200)."  

MP: The top chart above (click to enlarge) shows the annual number of U.S. patents granted to U.S. residents from 1901 to 2009, using data available here from the World Intellectual Property Organization.  The selection of just two random years (1966 and 1993) from more than a century's worth of patent data seems very arbitrary, and ignores the subsequent 69% increase in patents between 1993 and the peak in 2006 (see chart).  

To illustrate how random and arbitrary the two years are, if we make a slight adjustment to the beginning and ending dates, we could say this: "The United States produced almost 18,000 more patents in 1994 (56,067) than in 1963 (37,291), or more than a 50% increase!"

And here's another amazing factoid: In just the single decade between 1988 and 1998 (a decade that spans Tyler's selection of the year 1993), the number of patents granted almost doubled from 40,497 in 1988 and 80,292 in 1998!

Further, the patent count in Tyler's book includes U.S. residents only.  The bottom chart above shows the total number of U.S. patents granted to both U.S. residents and non-residents, and illustrates a dramatic increase in patent activity in the United States since the early 1970s, when the Great Innovation Stagnation supposedly started.  In just an 11-year period between 1988 and 1999, the total number of patents granted more than doubled from 77,924 to 153,487.  The graph also shows that if there was any period that could be considered an "innovation slowdown" it would have to be the first half of the 20th century, the period that Tyler claims was a period of technological breakthroughs.  

To pick a few random dates, we could say that there were twice as many patents granted in 1915 (43,000) than 32 years later in 1947 (20,191), reflecting a 30-year period of stagnation in innovation.    

Bottom Line:  If there is a Great Stagnation or innovation slowdown, it's sure not supported by the U.S. patent data, especially when two random years are arbitrarily selected out of more than 100 years of patent data!

Friday, July 08, 2011

What About "Affirmative Action Grading"?

In many states, it's acceptable, legal and even desirable (according to many) for publicly-funded universities to engage in state-sponsored racial discrimination by applying double standards  and special preferences for certain minority groups when considering students for: a) admission to the university, and b) scholarship funding once accepted, i.e. practice "affirmative action."

Q1: If affirmative action is acceptable, legal and desirable for admissions and scholarship funding when practiced by a university's admissions and financial aid offices, should it also be acceptable, legal and desirable for professors at that university to engage in the practice of "affirmative action" when assigning grades in college classes, i.e. apply racial double standards and race-based preferences for test scores and letter grades? 

Why or why not?  

Q2: Is it consistent for somebody to support affirmative action when practiced by a staff member in the admissions or financial aid office of a university in one building on a college campus, but not support "affirmative action grading" when practiced by a college professor on that same college campus in another building?   

Stated differently, is it logically consistent for somebody to find "affirmative action grading" objectionable, but not find "affirmative action admissions" objectionable?  If race-neutral grading is the accepted standard for the treatment of students IN the classroom, can race-based preferences be justified when selecting students for admission to the university in the first place? 

Monster Employment Index Reaches 2.5 Year High

Today's employment report from the BLS was pretty bleak, with only 57,000 new private sector jobs added in June, bringing the unemployment rate up to 9.2% last month, the highest level since last December's 9.4% rate.  

The labor market news from today's Monster Employment report on online job demand and recruitment activity for June was a little more upbeat, with the Monster Employment Index increasing to the highest level since October 2008 (see chart above).  Other highlights include:

1. The Monster Index grew at an annual rate of 4% in June, marking the 17th consecutive month of year-over-year growth.  

2. By industry, 13 out of 20 sectors showed annual growth in online job demand, with the mining, quarrying, oil and gas extraction industry leading the Monster Index with a 60% yearly increase, followed by utilities with a 25% annual gain.  More evidence here that drill, drill, drill = jobs, jobs, jobs. 

3. 26 of the 28 metro markets recorded positive annual growth in job demand for June, with Minneapolis leading (+24%) the country, followed by Detroit (+22%), Cleveland (+18%) and Cincinnati (+18%).  The only metro area with an annual decline in job demand was Washington, D.C., which experienced a -7% decrease in June. 

From Monster Worldwide Senior VP Jesse Harriott:

“It is encouraging to see that the Monster Employment Index U.S. has reached its highest level since October 2008 and has shown continued growth in the current economic cycle. Expansion in recruitment activity for the commerce sectors, like retail and wholesale trade in particular, is a positive indication of continued momentum in economic activity.”

Update: The chart below shows the strong correlation between: a) BLS private payroll jobs and b) the Monster Employment Index over the last 7.5 years. 


Thursday, July 07, 2011

Why We Need Rich People: Because They Buy New Products At the Highest Price for the Worst Version

Thanks to rich people like Gordon Gekko, who was making mobile phone calls on a $4,000 "brick with buttons" in the 1980s movie Wall Street, we can now get an iPhone for $40.



HT: Jeff Jacoby

Economic Recovery Watch

1. The American Staffing Association Staffing Index, a weekly barometer of temporary and contract employment that is also a key coincident economic indicator and a leading indicator of total U.S. nonfarm employment reached a year-to-date high of 88 for the week ending June 26.  It was also the highest weekly reading during the month of June since 2008 three years ago.

2. The International Air Transport Association (IATA) is reporting a 6.8% increase in global passenger traffic for May compared to the same month last year.  

3. Passenger traffic at Washington Reagan Airport increased 8.1% in May compared to a year ago. 

4.  The American Association of Railroads is reporting another weekly gain in rail traffic for the week ending July 2, with both carloads and intermodal volume increasing compared to the same week last year.

5. The Cass Freight Index, a monthly, broad-based measure of shipping activity across a wide range of industries reached a three-year high in June of this year, with more shipments in any single month since June 2008. 

6. Shipping volume at the Port of Portland for the month of May was 23% above the same month last year, and 63.5% above May two years ago. 

The D.C. Taxi Hobgoblin and Government "Solution" to a "Non-Problem": Create a D.C. Taxicab Cartel

Is a Taxi Cartel Like This Coming to D.C.?


In the 1920s, H.L. Mencken said "The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."   

Exhibit A: 

Taxicabs in Washington, D.C. are plentiful (estimated to number as high as 10,000), accessible and easy to find almost any time or day, and with fares cheaper by 20-25% than regulated, limited entry markets ("cartels") like NYC and Boston.  From my personal experience, most D.C. taxi drivers are owner-operators who enjoy working for themselves and being able to set their own hours.  As a group, the drivers are generally friendly and courteous.  In other words, it's a consumer-driven, market-based  industry with affordable fares and great service, and both the D.C. taxi drivers and D.C. customers are perfectly happy with the current system. 

So what's the problem?  There really is no problem, unless apparently you're an over-zealous, anti-market, meddling bureaucrat, and/or a large, anti-competitive taxi company with a self-interest in controlling a large share of a restricted market with high barriers to entry.  In that case, the government "solution" to D.C.'s "non-problem" with its taxicab industry is to create a "taxi cartel," by artificially restricting the number of DC taxicabs to only 4,000 (putting thousands of taxi drivers out of work), and charging a $10,000 cartel membership fee to purchase a special license called a "medallion." 

It's pretty easy to predict what will happen with a DC taxi cartel: There will be fewer cabs, the taxi fares will be higher, it will be more difficult to get a cab during peak demand, and customer satisfaction will deteriorate.   

And what will happen to D.C. medallion prices over time?  We can look to NYC to get an idea.  When NYC capped the number of taxis at about 12,000 in the 1930s, the first medallions sold for only $10 (about $157 in today's dollars). Medallions for individuals are now selling for $673,000 as of June 2011, an all-time record high (see chart above).  That's an annual return of 12.65% for owning NYC taxi medallions since 1937, more than double the 5.9% annual return for the Dow Jones Industrial Average over that same period, clearly demonstrating that "cartel membership has its privileges."

For more background and a Reason.tv video, see "D.C. Taxi Heist: How a new law would screw drivers and riders." 

Thursday Links

1. Vehicle City, the nickname given Flint as the birthplace of General Motors, has become the state's version of Dodge City, as murders and arsons soar. 

2.  There are now more medical marijuana dispensaries in Denver than Starbucks. Local smokers even have a professional weed critic in the alternative weekly paper. 

3. NYC police crack down on Midtown Manhattan food trucks.  

4. Manpower Employment Services has many job openings, but is finding a lack of qualified applicants to fill jobs.

 5. Iceland is considering banning the sale of cigarettes and making them a prescription-only product. 

6. VW plans to export 4,000 Chattanooga-made Passats per year to Korea. 

7. The extraordinary Mexican migration that delivered millions of illegal immigrants to the U.S. over the past 30 years has sputtered to a trickle because changes in Mexico have made staying home more attractive.

ADP Report: Econ. Recovery Finds New Traction


"Employment in the U.S. nonfarm private business sector rose 157,000 from May to June on a seasonally adjusted basis, according to the latest ADP National Employment Report released today (see chart above).  Today’s ADP National Employment Report estimates employment in the service-providing sector rose by 130,000 in June, nearly three times faster than in May, marking 18 consecutive months of employment gains. Employment in the goods-producing sector rose 27,000 in June, more than reversing the decline of 10,000 in May. Manufacturing employment rose 24,000 in June, which has seen growth in seven of the past eight months.

These figures are above the consensus forecast for today’s report and for Friday’s jobs number from the BLS. Payroll employment growth at this pace usually implies a steady unemployment rate, perhaps even a modest decline. June’s figures suggest that the economic recovery, which slipped in the spring, might have found new traction in early summer."

Other highlights include: 

1. June marks the 17th consecutive month of overall ADP employment gains, starting in February of last year (see chart above). 

2. Almost one million (984,000) private-sector jobs have been added so far this year, including 116,000 new manufacturing jobs.   
3. Over the last 12 months, private employment has increased by almost 1.6 million jobs (1,557,000) including 148,000 new manufacturing jobs.  

4. Private-sector employment at 108,677,000 is the highest level in more than two years, since April of 2009. 

Wednesday, July 06, 2011

The D.C. Park Police Violate the First Amendment

"Why I Was Arrested at a D.C. Taxi Commission Meeting"


Here's Reason.tv Producer Jim Epstein's account of what happened:

"On June 22, 2011, I attended a meeting of the D.C. Taxi Commission for a story I'm currently working on about a proposed medallion system in the district. About half-an-hour into the meeting, I witnessed journalist Pete Tucker snap a still photo of the proceedings on his camera phone. A few minutes later, two police officers arrested Tucker. I filmed Tucker's arrest and the audience's subsequent outrage using my iphone.

A few minutes later, as I was attempting to leave the building, I overheard the female officer who had arrested Tucker promise a woman, who I presumed to be an employee of the Taxi Commission, that she would confiscate my phone. Reason intern Kyle Blaine, overheard her say, "Do you want his phone? I can get his phone." (The woman who was given assurances by the officer that she could have my phone can be seen at the end of the video telling me, "You do not have permission to record this!")

As I tried to leave, I was told by the same blond female officer to "stay put." I told her I was leaving and attempted to exit the building. I was then surrounded by officers, and told to remain still or I would be arrested. I didn't move, but I tried to get the attention of a group of cab drivers who were standing nearby. At this point I was arrested. I spent the remainder of the day in a cell in the basement of the building. I was released at about 4PM."

Read more here and here (letter from legal counsel for Jim Epstein and Reason).   

Challenging the Middle Class Stagnation Myth: From 1979-2007 The Rich Got Richer and Poor Got Richer

Click to enlarge.
It’s a familiar and frequently-told narrative that middle-class incomes have stagnated over the last several generations while the upper-income groups have gotten richer.  President Obama has promoted this narrative by claiming in 2009 that  “For many years, middle class Americans have been working harder, yet not enjoying their fair share of the fruits of a growing economy."

But a new working paper titled “A "Second Opinion" on the Economic Health of the American Middle Class” by NBER and Cornell researchers provides new evidence that the popular narrative is largely mistaken.  By taking into account previously unmeasured shifts in household size and the tax units in them, taxes paid, transfer payments received, and the increasing importance of fringe benefits, the researchers find that the growth in after-tax household income has been substantial not only for the middle class, but for all income groups over the last 30 years.

From the paper:  

“The median pre-tax pre-transfer income of all tax units (filers and non-filers) only increased by 3.2% in real terms over the entire period between 1979 and 2007. These results are consistent with the view that the typical American has not gained much from economic growth over the last 30 years.

But when we broaden the sharing unit to the household, account for economies of scale in household consumption, and recognize that the payment of taxes or the receipt of tax credits as well as government transfer income and in-kind benefits all impact the economic resources available to individuals, we find the story changes. Specifically, when using our broadest measure of available resources—post-tax, post-transfer size-adjusted household income including the value of in-kind health insurance benefits—median income growth of individual Americans improves to 36.7% over the period from 1979 and 2007.

The table above illustrates the change in income for each income quintile over the entire 29 year period. Importantly, in contrast to tax unit market income measures of income where the bottom two quintiles get poorer (first column of data) and only the top quintile gets noticeably richer, each of the other series shows income growth throughout the distribution. Once taxes and health insurance are taken into account, each of the quintiles of the distribution are shown to have sizable growth over the 29 year period - with the slowest growth being a 26.4% increase in mean incomes for the bottom quintile of the distribution (last column). Growth in the middle quintile is 36.9%, dramatically greater than their 2.2% growth in private market income when measured at the tax unit level."

Conclusion: "These more inclusive measures of access to economic resources suggest that income inequality increased in the United States not because the rich got richer, the poor got poorer and the middle class stagnated, but because the rich got richer at a faster rate than the middle and poorer quintiles and this mostly occurred in the 1980s. Growth was substantial in all quintiles once the influence of government tax and transfer policy as well as the shift in compensation from wages to health insurance provided by employers and the shift to increased in-kind health insurance by government is more full recognized.

MP: The findings in this paper provide strong, empirical evidence contrary to the middle-class stagnation story, and in fact show that over the last thirty years "the rich got richer and the poor got richer" after making adjustments for household composition, taxes, transfer payments and fringe benefits to measure "access to economic resources." 

Tuesday, July 05, 2011

Bastiat's One-Hand Solution to Job Losses

According to David Brooks writing in today's NY Times, it's a "problem" that "Manufacturing employment is cratering even as output rises."

Don Boudreaux speculates that David Brooks probably "uses computers, word-processing software, ink-jet printers, e-mail, and other modern techniques that increase his productivity (and, thus, that cause the amount of time that he and others spend producing punditicities to crater even as their output rises)." In that case, Don wonders why Brooks "bemoan[s] increasing worker productivity in the manufacturing sector?"  

Q: Would Brooks also consider it to be a "problem" that "agriculture employment has been cratering for 200 years even as farm output rises to record high levels" as a direct result of significant increases in farm worker productivity?   

David Brooks is sounding a lot like President Obama, who recently linked productivity and efficiency gains to job losses, as Russ Roberts pointed out recently in his WSJ op-ed "Obama vs. ATMs: Why Technology Doesn't Destroy Jobs."

If Obama and Brooks really want to "maximize jobs" in manufacturing, banking, farming, or any other industry, they should consider an effective job-creation program from more than 150 years ago advanced by French economist Frederic Bastiat.  In 1845, as a solution to counteract job losses in some French domestic industries like textiles due to free trade, Bastiat proposed to the King of France that he "forbid all loyal subjects to use their right hands."

Bastiat predicted that "as soon as all right hands are either cut off or tied down, things will change. Twenty times, thirty times as many embroiderers, pressers and ironers, seamstresses, dressmakers and shirtmakers, will not suffice to meet the national demand."

"Yes, we may picture a touching scene of prosperity in the dressmaking business. Such bustling about! Such activity! Such animation! Each dress will busy a hundred fingers instead of ten. No young woman will any longer be idle. Not only will more young women be employed, but each of them will earn more, for all of them together will be unable to satisfy the demand."

Bottom Line: If manufacturing job losses are a "problem" due to technology and productivity gains, an effective "solution" would be to forbid all American workers from using their right hands.  By adopting Bastiat's proposal, we could immediately stop the "cratering" of manufacturing employment that David Brooks and Barack Obama lament, and dramatically increase the number of new, one-handed manufacturing workers by millions. 

Economic Freedom Extends Life Expectancy

Following my recent post on life expectancy and economic growth in Chile, here's a more comprehensive analysis in the chart above of the relationship between: a) economic freedom measured by the Heritage Foundation, on a scale from 1 (repressed) to 100 (free), and b) life expectancy for 176 countries in 2009. 

 The regression line in the chart above shows a clear and positive relationship between economic freedom and life expectancy, with higher levels of economic freedom being associated with longer life expectancies.  Specifically, from the regression equation we can say that every 10 point increase in the economic freedom index is associated with a 4.6 year increase in life expectancy.   

Bottom Line: As Larry Kudlow reminds us all the time, "Free market capitalism is the best path to prosperity," and I'll add "the best path to a longer life." There's nothing more precious than human life, and the evidence shows that economic freedom will sustain, nurture, conserve and extend human life, while economic repression does the opposite: it stifles and squashes the human spirit and shortens life expectancy.  

HT: Charles Musick for the data and idea. 

Which American Accent Do You Have?

Take a 17-question quiz here and find out. 

Political Preference for Talking Points, Not Facts

From Thomas Sowell's new column "Politics Versus Reality":

"A preference for talking points, and a lack of interest in digging into the facts about realities, prevails today in discussions of whether to have a government-controlled medical system.
Since there are various countries, such as Canada and Britain, that have the kind of government-controlled medical systems that some Americans advocate, you might think that there would be great interest in the quality of medical care in these countries.

The data are readily available as to how many weeks or months people have to wait to see a primary care physician in such countries, and how many additional weeks or months they have to wait after they are referred to a surgeon or other specialist. There are data on how often their governments allow patients to receive the latest pharmaceutical drugs, as compared to how often Americans use such advanced medications.

But supporters of government medical care show virtually no interest in such realities. Their big talking point is that the life expectancy in the United States is not as long as in those other countries. They have no interest in the reality that medical care has much less effect on death rates from homicide, obesity, and narcotics addiction than it has on death rates from cancer or other conditions that doctors can do something about. Americans survive various cancers better than people anywhere else. Americans also get to see doctors much sooner for medical treatment in general."