Monday, December 26, 2011

A New Energy Future is Emerging From Tight Oil and It Holds the Promise of Ending Oil Imports

From the Globe and Mail

"The Bakken is an oil play that has erupted across a forgotten corner of the U.S. It is a frenzy of drilling and pumping and moneymaking. It is also a place where a new energy future is emerging, one that holds the promise of ending U.S. dependence on overseas oil and kick-starting the country’s stagnant economy. Government estimates suggest it could yield 4.3 billion barrels of oil. One industry estimate is five times higher, which would mean the Bakken alone could hold as much recoverable oil as the rest of the country. And it’s just the beginning.

The flares lit in the Bakken, a so-called “tight oil” play enabled by a revolution in drilling technology, are spreading rapidly across the continent. Suddenly, geologists and drillers are discovering that what works in the Bakken works in a lot of other places, too, bringing forth sudden new volumes of oil – and optimism that there will be much more – in Texas, in Utah, in Ohio, in Saskatchewan and in Alberta. In all, 14 places are being explored for tight oil.

All those drills turning in all those places have sweeping ramifications for North America.

The Bakken and its followers have fundamentally altered the energy outlook for the continent. If energy consultant IHS CERA is right, in the span of merely one decade, tight oil wells will pump more oil than the entire oil sands. The growth is so globally significant that the firm has reduced its 2020 world oil price estimate down from $120 to $100 a barrel. And it’s begun contemplating possibilities that would have been considered insane only a few years ago.

Tight oil also stands to have a substantial economic impact. The enormous cost of drilling tens of thousands of wells – which can run $10 million each, not including the cost of acquiring land – will pour hundreds of billions into domestic wages and manufacturing. The fact that Americans will be buying U.S. gas at the pumps will also have a meaningful impact on the dollars the country sends abroad every year.

“There might be some possibility that we could ... pretty much reduce our oil imports to zero,” said Leta Smith, director of oil and gas supply outlooks with IHS CERA. “That’s a really optimistic case. And that’s not what we’re forecasting right now. But still, it’s an interesting question to postulate.”

The sun that shines on the Bakken, it seems, is shining on America itself."

Markets in Everything: Solar Paint

ScienceDaily — "Imagine if the next coat of paint you put on the outside of your home generates electricity from light -- electricity that can be used to power the appliances and equipment on the inside.

A team of researchers at the University of Notre Dame has made a major advance toward this vision by creating an inexpensive "solar paint" that uses semiconducting nanoparticles to produce energy."

HT: Robert Kuehl

Many NY Homeowners Switching to Nat Gas Heat

Times Herald Record (NY) -- "Many homeowners are switching to natural gas heat as oil prices go up: The Cost of conversion runs in the thousands, but folks say they recoup it quickly."

Conversion costs:
$1,500 to install a natural gas power burner in an existing oil-fired boiler.
$5,000 to $8,000 for a new natural gas boiler; higher price, higher efficiency.
$500 to convert from propane to natural gas, with minimal piping modifications.

The price of warmth: Projected household expenditures in the Northeast for winter heating fuels in 2011-12, and change from 2010-12:

Natural gas$1,023-2.2%
Oil $2,492 +8.4%
Electricity $1,333-5.8%
Propane $2,919+6.7%
Source: U.S. Energy Information Administration

MP: Here's yet another example of the many positive benefits of the shale gas revolution: consumers are saving money by switching to clean, high-efficiency natural gas (and most are probably switching "naturally," without any special energy tax credits, rebates, etc.), and heating companies are getting business installing new natural gas furnaces, boilers and burners.   

Gingrich Odds Fall from 38% to 8.2% in 2 Weeks

Gingrich odds on Intrade are down to 8.2%, the lowest since the first week of November, almost two months ago (see chart above). 

USA: Ranks #1 Most Charitable Nation in the World

Charities Aid Foundation (a UK international charity): "This is the second edition of the 'World Giving Index', the largest study into charitable behavior across the globe involving 153 countries in total. Using data from Gallup's Worldview World Poll, the report is based on three measures of giving behavior - giving money, volunteering time and helping a stranger.

The results show that the USA is officially the most charitable nation in the world, moving from fifth place last year to first place this year. Ireland is the second most charitable country and Australia the third (see chart above, click to enlarge). Overall the World Giving Index, demonstrates that the world has become a more charitable place over the last 12 months - with a 2% increase in the global population 'helping a stranger' and a 1% increase in people volunteering."

HT: Taxprof via Instapundit and Newsalert

Sunday, December 25, 2011

Merry Christmas from Carpe Diem!

From everybody here at the Carpe Diem organization (well just me), Merry Christmas and Happy Hanukkah !  

Thanks for your readership and support this year, and for setting a new benchmark for CD in November of more than 200,000 monthly visits (not seasonally adjusted!) for the first time ever (see chart above)!  

Living the Good Life: The Good Old Days Are Now

Here's another comparison of consumer purchasing power in the 1960s versus today, based on the time cost of common household appliances like a kitchen oven. The Sears Kenmore oven pictured below retailed for $330 in 1966, which would represent 121.3 hours of work (about three weeks) at the average hourly wage in that year (ignoring taxes).  

At the current average hourly wage of $19.54, today's average consumer would earn roughly $2,370 working 121.3 hours, and would be able to furnish their entire kitchen and laundry room with the eight new appliances pictured below (click to enlarge) from Best Buy including a high-efficiency front-loading washing machine, a super capacity gas dryer, a 30-inch gas stove, a 8.8 cubic feet chest freezer, a 16.5 cubic foot refrigerator, a 24-inch dishwasher, a mid-size microwave and a blender:

In other words, with the income earned working 121 hours, the typical consumer 45 years ago in 1965 would have only been able to purchase a single appliance - the electric oven pictured above, compared to the eight appliances that a typical consumer could purchase today with the income earned working 121 hours.

Measured by what is ultimately most important, the value of our time, household appliances keep getting cheaper and cheaper, thanks to innovation, technology improvements, supply chain efficiencies, increases in productivity and other market-driven efficiencies that drive prices lower and lower year by year. As much as we hear about declines in median income, economic stagnation, the disappearance of the middle class, falling real wages, increasing income inequality, the data tell a much different story: The rich are getting richer and the poor are getting richer.  

Saturday, December 24, 2011

Markets In Everything: Cheap Seats on Charters

The Tennessean --  "If you’ve ever wondered what it’s like to fly on those fancy private aircraft that rich people use for getaways such as skiing or beach weekends, a new Web-based company in Smyrna, Tennessee aims to put you in the jet set — at prices that rival those of regular airline seats. allows individuals to book vacant seats on private charter airplanes via the Web and ride point-to-point, avoiding layovers, plane changes and even those long security lines.

Nationwide, more than 91 private air-charter firms, which operate 627 private aircraft with 30 seats or fewer, have already signed up to offer their empty seats to Social Flights users, said Jay Deragon, chief executive officer and a co-founder of Social Flights. More than 12,500 people have registered to use the service.

 “We’re essentially using social networking to fill vacant seats on private aircraft that go all over the place every day, often with nobody on board,” he said. “A company or group might charter a jet to take them to California, but then that plane flies back empty. With Social Flights, people can buy individual seats on the return trip, giving the charter company revenue it wouldn’t have had.”

On these charter flights, passengers don’t have to go through metal detectors or X-ray machines. Their names are run through the TSA’s no-fly list, however, so any suspected terrorists would not be able to board the planes. Deragon says "You can just show up 15 minutes before your flight and walk right on." 

Besides vacant seats on planes that are already scheduled for trips, Social Flights offers users the ability to bring enough people together for a particular date and destination to be able to charter an aircraft at per-person rates that often are much less than a first-class seat on an airline."

Design Your Own 787 Dreamliner

Design your own 787 Boeing Dreamliner here, see some festive, seasonal examples above from the User's Gallery (click to enlarge).

HT: S. Jory

Friday, December 23, 2011

Merry Christmas from the Shale Gas Revolution

CPI for natural gas in November was at the lowest level for that month since 2003.
Here's a Christmas Christmakwanzakuh present for consumers around the country: Natural gas prices for residential customers are falling this winter, thanks to the fracking revolution and America's new abundant supply of shale gas:

1. "Idaho's Intermountain Gas Company filed a request Thursday with the Idaho Public Utilities Commission to lower natural gas rates for its customers. The company says it is filing the interim purchased gas adjustment because the price of natural gas continues to decrease."

2. "Residential customers of Tennessee's Piedmont Natural Gas should get a break in their bills starting Feb. 1 as natural gas costs continue to fall. That is expected to be followed the next month by an increase in service charges, if it’s approved by the Tennessee Regulatory Authority. Still, payments over a year should be about 7 percent less after both changes. The typical residential customer who spent $739 for natural gas this year would pay $685 after the adjustments, according to Piedmont."

3.  "If you're a Connecticut Light & Power customer you got a little something extra in your stocking this holiday season, as the state's largest electrical company announced Thursday that most residential customers will see a 7.5 percent rate decease on their bills starting in January."

"The lower rates are primarily due to falling natural gas prices, which affects how much we pay for power," said Jim Muntz, CL&P's acting president. "This is very positive news not only for our residential customers, but for all of our Standard Service customers, who will see reductions in their rates."

4. "New Jersey's PSE&G has announced that it is lowering residential gas bills by an additional 4.6 percent, or nearly $8.53 per winter month for the typical residential customer.
The utility said the action represents the eighth decrease in a row for residential customers, for a total of more than $614, or 35 percent, in savings since January 2009. The price reduction takes effect Dec. 1.

PSE&G attributed the cost savings and rate reductions to lower market prices for natural gas, which are partially due to the availability of abundant and lower cost shale gas."

MP: The chart above displays the CPI component: "Utility (piped) gas service, U.S. city average," and shows that this measure of natural gas prices for residential customers this November are at the lowest level for that month since 2003. In contrast, over that same period, the overall CPI and the CPI for food have increased by 22%, and the CPI for gasoline has increased 120%.    

Richard Branson: Time to End The War on Drugs

After visiting Portugal, Richard Branson was impressed with the country's success with its decade-old effort to decriminalize drug use, and now says that it's time to end the worldwide War on Drugs War on Peaceful People Who Voluntarily Choose To Use Intoxicants Not Currently Approved of By Various Governments, Who Will Put Users in Cages if Caught.  In his own words, here's Richard Branson:

"Visited Portugal, as one of the Global Drug Commissioners, to congratulate them on the success of their drug policies over the last 10 years.

Ten years ago the Portuguese Government responded to widespread public concern over drugs by rejecting a “war on drugs” approach and instead decriminalized drug possession and use. It further rebuffed convention by placing the responsibility for decreasing drug demand as well as managing dependency under the Ministry of Health rather than the Ministry of Justice. With this, the official response towards drug-dependent persons shifted from viewing them as criminals to treating them as patients.

Now with a decade of experience Portugal provides a valuable case study of how decriminalization coupled with evidence-based strategies can reduce drug consumption, dependence, recidivism and HIV infection and create safer communities for all.
Compared to the European Union and the US, Portugal drug use numbers are impressive.

Following decriminalization, Portugal has the lowest rate of lifetime marijuana use in people over 15 in the EU: 10%. The most comparable figure in America is in people over 12: 39.8%, Proportionally, more Americans have used cocaine than Portuguese have used marijuana.

Portugal’s 10 year experiment shows clearly that enough is enough. It is time to end the war on drugs worldwide. We must stop criminalizing drug users. Health and treatment should be offered to drug users – not prison. Bad drugs policies affect literally hundreds of thousands of individuals and communities across the world. We need to provide medical help to those that have problematic use – not criminal retribution."

iPhone, iPad Study Shows Trade Stats Dramatically Overstate the Value of U.S. Imports from China

Here's the abstract of the July 2011 article "Capturing Value in Global Networks: Apple’s iPad and iPhone," by Kenneth Kraemer (UC-Irvine), Greg Linden (UC-Berkeley), and Jason Dedrick (Syracuse University):

"This article analyzes the distribution of value from innovation in the global supply chains of the Apple iPad and iPhone. We find that Apple continues to capture the largest share of value from these innovations. While these products, including most of their components, are manufactured in China, the primary benefits go to the U.S. economy as Apple continues to keep most of its product design, software development, product management, marketing and other high-wage functions in the U.S. China’s role is much smaller than most casual observers would think. A key finding for policymakers is that there is little value in electronics assembly. Bringing high-volume electronics assembly back to the U.S. is not the path to “good jobs” or economic growth."

Here are some key points of the article:

"It is a common misconception that China, where the iPad is assembled, receives a large share of money paid for electronics goods. That is not true of any name-brand products from U.S. firms that we’ve studied. The breakdown of value in these two iconic Apple products shows why (see charts above).

First, our assignment of profits (which exclude wages paid) to first-tier suppliers is based on the location of their corporate headquarters. There are no known Chinese suppliers to the iPhone or iPad. The iPhone and iPad are assembled in mainland China factories owned by Foxconn, a Taiwan-based firm."

From the conclusion:

"This study also confirms our earlier finding that trade statistics can mislead as much as inform. Earlier we found that for every $299 iPod sold in the U.S., the U.S. trade deficit with China increased by about $150. For the iPhone and the iPad, the increase is about $229 and $275 respectively. Yet the value captured from these products through assembly in China is around $10. Statistical agencies are developing tools to gain a more accurate breakdown of the origins of traded goods by value added, which will be attributed based on the location of processing, not on the location of ownership. This will eventually provide a clearer picture of who our trading partners really are, but, while this lengthy process unfolds, countries will still be arguing based on misleading data.

Those who decry the decline of U.S. manufacturing too often point at the offshoring of assembly for electronics goods like the iPhone. Our analysis here and elsewhere makes clear that there is simply little value in electronics assembly. The gradual concentration of electronics manufacturing in Asia over the past 30 years cannot be reversed in the short- to medium-term without undermining the relatively free flow of goods, capital, and people that provides the basis for the global economy. And even if high-volume assembly expands in North America, this will likely take place in Mexico where there is already a relatively low-cost electronics assembly infrastructure."

MP: Based on the way trade statistics like U.S. imports from China are mis-calcuated and overstated in terms of actual value added, I estimated here that we might actually have a trade surplus with China using a value-added approach.  It's an important distinction that Apple products (and other electronic goods) are really only "Assembled in China," and not actually "Made in China." The value of the final assembly in China is pretty small compared to the value added in the U.S., and yet China gets credit for the majority of the value according to the way trade statistics are calculated.

It's probably the case that trade statistics for merchandise exports and imports are pretty outdated and not able to capture the nuances of international supply chains and value-added measurements in a global economy.  In previous eras, an import from China or Mexico or Canada was probably really made and assembled in those countries with their domestic content, parts and labor.  Now iPods, iPads and iPhones are imported from China, but just a small fraction of the value of those products is actually created in China; yet China gets a majority of the credit for the export value of those products into the U.S. only because final assembly takes place there.  With a more accurate accounting of trade flows based on value added, our trade deficit with China would shrink significantly, and might even disappear altogether.   

HT: Robert Kuehl

Racial Preferences Have Backfired Due to the Cruelty of Affirmative Action's Academic Mismatch

From Jeff Jacoby's column today in the Boston Globe:

"The inability of racial preferences to vault more minority students into high scholastic achievement shouldn’t come as a surprise. When an elite institution relaxes its usual standards to admit more blacks and Hispanics, it all but guarantees that those academically weaker students will have trouble keeping up with their better-prepared white and Asian classmates. Minorities who might have flourished in a science or engineering program at a middle-tier state college are apt to find themselves overwhelmed by the pace at which genetics or computer architecture is taught in the Ivy League. Many decide to switch to an easier major. Others drop out altogether.

This is the cruelty of affirmative-action “mismatch’’ — the steering of minorities to schools where they are less likely to succeed. Absent such preferences, black and Hispanic students would attend universities for which their credentials better suited them. Many would earn higher grades or degrees in more prestigious and challenging fields; more would go on to graduate school and careers in academia or the professions. If it weren’t for race-based admissions policies, in other words, underrepresented minorities wouldn’t be so underrepresented.

Racial preferences, says University of San Diego law professor Gail Heriot , have backfired. She is one of three members of the civil rights commission urging the Supreme Court to recognize the damage it unleashed when it allowed racial “diversity’’ to trump the Fourteenth Amendment’s guarantee of equal protection of the laws. Skin color was always an ill-contrived proxy for diversity of experiences and beliefs. What more than 30 years of race-based admissions have made clear, Heriot argues, is that “even with the best motives in the world, race-based admissions do far more harm than good.’’ Especially to the students they are supposed to help." 

Related: In this editorial, I also suggest that racial preferences for college admissions do a great disservice to minority students because of the problem of "academic mismatch."

Thursday, December 22, 2011

Candidate Match Game

Play the candidate match game here: Answer questions about 11 different political issues to see which candidate is most like you.

The Miracle of the U.S. Manufacturing Sector

Following up on the "Magic and Miracle of the Marketplace" post below, the chart above shows that the decline in prices over time has taken place for almost all manufactured goods, not just for electronics.  As a percent of consumer expenditures, the combined share of spending on food, cars, clothing and household furnishings (furniture, appliances, etc.) has fallen over time from close to 50% in the late 1940s to close to 16% in 2010.  This decline in spending over time on manufactured goods, measured as a share of all consumer spending, is really a testament to the remarkable productivity of the manufacturing sector, which leads to declining prices relative to income and services, and increases our standard of living dramatically over time. 

From Rags to Riches: Fighting India's Caste System with Capitalism: From the "Village to the Palace"

NEW YORK TIMES -- "As the founder of a successful offshore oil-rig engineering company, Mr. Ashok Khade is part of a tiny but growing class of millionaires from the Dalit population, the 200 million so-called untouchables who occupy the very lowest rung in Hinduism’s social hierarchy.

“I’ve gone from village to palace,” Mr. Khade exclaimed, using his favorite phrase to describe his remarkable journey from the son of an illiterate cobbler in the 1960s to a wealthy business partner of Arab sheiks.

The rapid growth that followed the opening of India’s economy in 1991 has widened the gulf between rich and poor, and some here have begun to blame liberalization for the rising tide of corruption. But the era of growth has also created something unthinkable a generation ago: a tiny but growing group of wealthy Dalit business people.

Some measure their fortunes in hundreds of thousands of dollars, and a handful, like Mr. Khade, have started companies worth tens of millions. With their new wealth they have also won a measure of social acceptance.

“This is a golden period for Dalits,” said Chandra Bhan Prasad, a Dalit activist and researcher who has championed capitalism among the untouchables. “Because of the new market economy, material markers are replacing social markers. Dalits can buy rank in the market economy. India is moving from a caste-based to a class-based society, where if you have all the goodies in life and your bank account is booming, you are acceptable.”

Milind Kamble, a Dalit contractor based in the city of Pune in Maharashtra State, said that out of the 100 or so members of the Dalit Indian Chamber of Commerce and Industry in his city, only one was in business before 1991.

“We are fighting the caste system with capitalism,” he said.

Watch a four-minute video here profiling Mr. Khade.  

HT: Colin Grabow

The Magic and Miracle of the Marketplace: Christmas 1964 vs. 2011 - There's No Comparison

1964 Sears Christmas Catalog
Here's a seasonal holiday post from CD last year at about this time, and with a link today from Art Carden in a related post at the Mises blog:

Pictured above are some color TVs from the 627 page 1964 Sears Christmas Catalog, available here at WishbookWeb along with many other Christmas catalogs from 1933 to 1988.  The original prices are listed ($750 for the Sears color TV console and $800 for the more expensive one), and those prices are also shown converted to today's 2010 dollars using the BLS Inflation Calculator: $5,300 for the basic console TV model and $5,650 for the more expensive model ($5,473 and $5,838 in 2011 dollars).   

To put that in perspective, the pictures below illustrate what $5,300 in today's dollars would buy in the 2010 marketplace:

Bottom Line:  For a consumer or household spending $750 in 1964, all they would have been able to afford was a console color TV from the Sears Christmas catalog.  A consumer or household spending that same amount of inflation-adjusted dollars today (about $5,500) would be able to furnish their entire kitchen with 8 brand-new appliances (refrigerator, freezer, dishwasher, range, washer, dryer, microwave and blender) and buy 9 state-of-the-art electronic items (laptop, GPS, camera, home theater, plasma HDTV, iPod Touch, Blu-ray player, 300-CD changer and a Tivo recorder).  And of course, even a billionaire in 1964 wouldn't have been able to purchase many of the items that even a teenager can afford today, e.g. laptop, GPS, digital camera.  

As much as we might complain about high unemployment, a sub-par recovery, a dysfunctional Congress and a huge deficit, we have a lot to be thankful for, and we've made a lot of economic progress since the 1960s as the example above illustrates, thanks to the "magic of the marketplace."  

Merry Christmas Baby: Chas Brown and Ray Charles

Classic song, classic performance from Charles Brown:

Brother Ray in 1979 at The Monastery Of Ettal in Germany:

Mortgage Rates Fall to Fresh Historic Record Lows

Mortgage rates fell again this week to fresh record lows, according to data released today by Freddie Mac.  The 30-year rate fell to 3.91% (see chart above), the 15-year rate dropped to 3.21% and the one-year ARM is down to 2.77%, and those are all the lowest rates in history.  How low can they go?

Leading Economic Index Points to Ongoing Growth

From the Conference Board today:

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.5 percent in November to 118.0, following a 0.9 percent increase in October, and a 0.1 percent increase in September (see chart above).

Says Ataman Ozyildirim, economist at The Conference Board: “November’s increase in the LEI for the U.S. was widespread among the leading indicators and continues to suggest that the risk of an economic downturn in the near term has receded. Interest rate spread and housing permits made the largest contributions to the LEI this month, overcoming a falling average workweek in manufacturing, which reversed its October gain. The CEI also rose on improving employment and personal income although industrial production fell in November.”

Says Ken Goldstein, economist at The Conference Board: “The LEI is pointing to continued growth this winter, possibly even gaining momentum by spring. For the second month in a row, building permits made a relatively strong contribution and there is a chance that the long decline in housing is finally slowing. However, this somewhat positive outlook for the domestic economy is at odds with a global economy that appears to be losing steam. In particular, a deeper-than-expected recession in Europe could easily derail the outlook for the U.S. economy.”

MP: The LEI has now increased in 31 out of the last 32 months going back to April 2009 as the recession was ending, and suggests that the economic expansion will continue through next year, with almost no chance of any kind of pending double-dip recession.   The rebound in the building permits component of the LEI lends support to the idea that the turning point in construction has finally arrived and will start making a larger contribution to the economic recovery moving forward. 

The Atlantic: The Most Important Graphs of 2011

From Derek Thompson, senior editor at The Atlantic:

"What is it about graphs and economics? In a discipline where facts are murky and certainty is elusive, graphs offer a bright light of information and a small confidence that the world can be summed up between two axes. So when the BBC asked a group of economists to name their graph of the year, we decided to do the same (so did Wonkblog!). Here, from economists on left and right, and from economic journalists from around the beat, are the graphs of the year. Click through the gallery or scroll down to find the graphs organized under categories including Europe, spending & taxing, and energy."

MP: The list includes the graph above that I submitted showing the two sides of the "jobless recovery": a complete recovery in real output (GDP) has taken place, and the U.S. economy is producing a new record-high level of output, but is doing so with 6.6 million fewer workers. 

Jobless Claims Fall to Lowest Level Since Mid-2008

In another sign that the U.S. labor market is gradually improving, the Labor Department reported today that initial weekly claims for unemployment fell last week to 364,000 (seasonally adjusted), which is the lowest weekly claims count since April 2008, more than three and-a-half years ago.  The four-week moving average fell to 380,250 claims, the lowest level since June 2008.  

The bottom chart above shows jobless claims adjusted for the size of the labor force by displaying jobless claims as a percent of civilian employment.  That adjusted measure of jobless claims is also showing an ongoing decline from the March 2009 peak, to a level that is now far below the post-recession levels in the 1970s and 1980s, and should be consistent with a gradual, but continuing decline in the jobless rate in 2012.  

Wednesday, December 21, 2011

NYC Rent Control Laws Go to the Supreme Court

James Harmon, an owner-occupant Manhattan landlord on West 76th Street near Central Park is going all the way to the United States Supreme Court with his claim that New York City’s rent laws constitute a “taking” of his rental property without just compensation, and violate his constitutional rights. 

From a NY Times article:

"[Rent control] regulations are meant to support the government’s goal of maintaining affordable housing for its citizens. Instead, Mr. Harmon  says, the laws have forced him and his family to shoulder the government’s burden and extend what is essentially “privatized welfare” to rent-stabilized tenants who are paying rent 59 percent below market rates and who have rights of succession to their lodgings in his house.

“Put yourself in our position,” Mr. Harmon, a former federal prosecutor, said of himself and his wife, Jeanne. “Suppose somebody told you, you’ve got an extra bedroom, we’d like to put someone in there for as long as they want to stay, and you have to take care of them for the rest of their lives and the rest of your life. That’s really what this is like.” 

The city’s rent regulations have been challenged many times going back decades, making this case an uphill battle. Mr. Harmon has lost twice in lower courts, most recently in September, when the United States Court of Appeals for the Second Circuit, in Manhattan, ruled that the rent-stabilization law did not constitute a “taking” because it did not stop him from using the building as a rental property and did not stop him from living there himself.

“Courts usually pay scant attention to these well-settled claims and routinely reject them,” said Jarred Kassenoff, a lawyer for landlords and tenants. 

But Mr. Harmon appears to have caught the attention of the high court, which has asked the city and state to file answers by Jan. 4 to his petition to be heard. The case could have wide repercussions for the almost one million rent-stabilized apartments in the city."

MP: There's certainly no economic, ethical or moral basis for rent control or rent-stabilization laws in NYC or elsewhere, it's all motivated by the same outdated and discredited political obsession with "affordable housing" that caused the housing bubble and financial crisis.  Good luck to Mr. Harmon in his attempt to restore the same sane, market-based pricing to NYC's rental housing that currently prevails for the city's hotels, coffee shops, restaurants, grocery stores, department stores, gas stations, etc.  In the same way that market pricing eliminates shortages of hotel rooms, food, coffee, clothing, and gasoline in Manhattan, market-based pricing for rental housing would just as effectively eliminate the shortage of rental housing.     

HT: Andy Weintraub

UN Data: China Is Now World's No. 1 Manufacturer, But It Requires 9-10 TImes As Many Workers As U.S.

According to new data just released by the United Nations, China surpassed the United States in 2010 to become the world's No. 1 manufacturing nation, ending America's dominance as the world's largest manufacturer since the late 1800s (see chart above of the top five manufacturing countries). China's manufacturing output in 2010 of $1.922 trillion and 18.89% share of world manufacturing output of $10.176 trillion,was slightly ahead of America's manufacturing output of $1.855 trillion and 18.24% share of global manufacturing production.    

Before the mainstream media or others gets overly impressed with China's rise as a manufacturing superpower (e.g. Andy Stern in the WSJ praising China's "superior economic model"), they should proceed with caution for the following reasons:

1. China's manufacturing workforce is estimated to be around 100 million and could be as high as 120 million, compared to America's manufacturing employment of about 11.5 million.  Therefore, China is producing roughly the same manufacturing output as the U.S. but Chinese worker productivity is so low it needs 9-10 workers for every one American factory worker.     

2. Even though China is now the world largest manufacturer, its GDP per capita of only $2,800 (data here from the USDA) is just now reaching a level of output per person that the U.S. achieved back in 1878, 133 years ago (see chart below). 

eBay Price Trends

I'm not sure how new this is, but Ebay now has a "price trends" feature that allows you to track the prices of standard items over time for both completed "buy it now" purchases and "auction" sales.  The chart above (click to enlarge) shows the downward price trend for the "Apple iPhone 4S (Latest Model) - 16GB - White (AT&T) Smartphone" from $710 in early October to $558 for the most recent purchases.

MP: The eBay link above should work, but might take awhile to load. 

More on Dismal Legacy of Communism in N. Korea

The chart above shows another comparison of the economies of North and South Korea, based on data from Angus Maddison.  Between 1950 and the early 1970s, real GDP per capita in South Korea was exactly the same as in North Korea.  As South Korea implemented market reforms, its economy and output per person started consistently rising while economic conditions to the north stagnated.  After forty years of market-based growth, real GDP per capita is now about 17.5 time higher in South Korea compared to its northern neighbor. 

Volt May Be Most Government-Supported Car Since the Trabant, and Average Owner Makes $170k/year

Michigan Capitol Confidential -- "Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

The Volt is subsidized by multiple companies on its way to production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits. These are among many of the subsidies and tax credits for the vehicle.

It’s very unlikely all the companies involved in the production of the Volt would ever receive all the $3 billion in incentives. But the analysis looks at the total value that has been offered to the Volt in different aspects of production – from the assembly line to the dealerships to the battery manufacturers. The tax credits and subsidies are offered for periods up to 20 years, though the majority is offered over a much shorter time frame.

GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidies were realized.  The $3 billion in total value includes $690.4 million offered in incentives by the state of Michigan and $2.3 billion in federal money. That’s enough to purchase 75,222 Volts with a sticker price of $39,828.

“This might be the most government-supported car since the Trabant,” said Hohman, referring to the car produced by the former Communist state of East Germany (pictured above).

According to GM CEO Dan Akerson, the average Volt owner makes $170,000 per year."

Peaceful Costa Rica New Casualty of U.S. Drug War

National Public Radio -- "Costa Rica is Central America's most stable democracy, a peaceful country that abolished its army in 1948 and now draws nearly a million U.S. tourists a year to its national parks and beaches. But it's also right in the middle of the world's most lucrative cocaine trafficking corridor.  As Mexican drug cartels push deeper into Central America, they've cast a dark shadow over Costa Rica's idyllic green image.

Recent polls show that crime and security are the leading public concern now in this country of 4.6 million people. The same laid-back attitude and openness to outsiders that draws tourists has also attracted Mexican cartels and their Colombia cocaine suppliers, who warehouse drug loads here and move them up the coastlines or overland toward the U.S.

Local contacts are increasingly paid in raw product for their logistical help, so drug use has jumped, especially for crack cocaine, and Costa Rica's homicide rate has nearly doubled since 2004.

"I do not remember in our whole history a menace like this menace with organized crime," says Costa Rican President Laura Chinchilla.  Chinchilla says Costa Rica's view of itself as a peaceful, law-abiding country in a poor, violent region is now being put to the test by a threat far greater than even the conflicts of the Cold War era."

Tuesday, December 20, 2011

Architecture Indexes Support the Position That the Turning Point in Construction May Have Arrived

Washington, D.C.  – "Continuing the positive momentum of a nearly three point bump in October, the Architecture Billings Index (ABI) reached its first positive mark since August (see red line in chart above). As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 52.0, following a score of 49.4 in October. This score reflects an overall increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 65.0, up dramatically from a reading of 57.3 the previous month (blue line in chart)."

“This is a heartening development for the design and construction industry that only a few years ago accounted for nearly ten percent of overall GDP but has fallen to slightly less than six percent,” said AIA Chief Economist, Kermit Baker. “Hopefully, this uptick in billings is a sign that a recovery phase is in the works. However, given the volatility that we’ve seen nationally and internationally recently, we’ll need to see several more months of positive readings before we’ll have much confidence that the U.S. construction recession is ending."

MP: The November Billings Index was the highest since last December, and the New Projects Inquiry Index was the highest since January 2007, almost a year before the recession started.  The strongest region for the November billings index was the South (54.4), and the strongest sector was multi-family residential (55.8).

This strong report today for architecture billings in November follows the strong report earlier today for new residential construction from the Census Bureau.  As Brian Wesbury and Robert Stein reported today:

"Housing starts increased 9.3% in November to 685,000 units at an annual rate, blowing away the consensus expected pace of 635,000. Starts are up 24.3% versus a year ago. The large gain in starts in November was mostly due to multi-family units, which are up 145.4% from a year ago (MP: Consistent with the ABI report above for multi-family billings).

New building permits increased 5.7% in November to a 681,000 annual rate, coming in well above the consensus expected pace of 635,000. Compared to a year ago, permits for multi-unit homes are up 70.8% while permits for single-family units are up 3.6%.

Implications: Great news! The turning point in home building has clearly arrived."

MP: If we have reached a turning point in construction, ABI's leading economic indicators of construction activity suggest the recovery is real and will continue - the billing index is at a high for the year and the inquiries index is close to a five-year high, which lends support to the position that the construction recovery will continue in 2012.   

Ohio, Kansas May Be Next States to See Oil Booms

1.  CNNMoney -- "Ohio hasn't been an oil powerhouse for nearly 100 years. But thanks to controversial new drilling technology, the state that once produced a third of the nation's crude and was the birthplace of John D. Rockefeller's mighty Standard Oil could once again be a significant source of domestic supply.

If given the proper development, Ohio could be producing 200,000 barrels of crude a day by 2020.  Based on current production rates it would be enough to make Ohio the sixth-largest oil producing state in the country and put it ahead of such heavyweights as Louisiana and Wyoming. The industry is poised to create 200,000 jobs and half a billion dollars in tax revenue in Ohio over the next five years, and landowners are already getting $3,000 to $5,000 per acre for leasing their land."

2. Motley Fool -- "Some states have gotten all the attention in America's rush toward unconventional energy plays. North Dakota and Montana benefit enormously from the Bakken shale. The Appalachian-girding Marcellus shale has caused controversy in Pennsylvania and New York due to methods used to extract oil and gas from the ground. Energy-conscious investors took notice of Colorado when Anadarko Petroleum found major oil and gas reserves in the Wattenberg formation.

Kansas might be the next state up to bat."

PHOTOS: The Year in Volcanic Activity, 2011

More amazing photos from The Atlantic.

Wash DC Moves to Establish NYC-Style Taxi Cartel

The word "quota" appears four times in the draft of the District of Columbia's taxi reform bill, including this key phrase:

"The District of Columbia Taxicab Commission is authorized to establish a public vehicle-for-hire licensing quota which provides that the number of new taxicab vehicle licenses may be limited, after making a determination that the market is saturated with taxi vehicles and would benefit from a stabilization or reduction of new vehicles.”

Translation: Like NYC, Washington, D.C. is proposing to establish a "taxi cartel," with limited entry to restrict competition, resulting in higher fares, and possibly some kind of medallion system.   

HT: Washington Post via Colin Grabow

Leading Economic Indexes Rebound Strongly in October for France, Australia and Germany

According to releases over the last several days from the Conference Board, October leading economic indicators increased by 0.5% in France (following three monthly declines), 0.6% in Australia (following two strong monthly gains), and 0.3% in Germany (following two monthly declines). 

Fastest Growing Jobs 2007-11 Are Energy-Related

The EMSI group (Economic Modeling Specialists, Inc.) has analyzed job growth for 800 occupations during the 2007-2011 downturn, with some interesting results:

For job growth over the last four years, six of the top eight occupations and nine of the top 15 fastest-growing occupations are related to the boom in domestic oil and natural gas extraction in places like North Dakota and Pennsylvania. Here are some details on the energy-related jobs:

1. Extraction workers for oil and natural gas: #2 overall, 46% growth, median hourly wage of $16.62.

2. Geological and petroleum technicians: #4 overall, 42% growth, median hourly wage of $18.86

3. Mining machine operator: #5 overall, 40% growth, $17.52 wage

4. Mining and geological engineers: #6 overall, 31%, $27.42 hourly wage

5. Petroleum engineers: #7 overall,  31% growth, $48.68 hourly wage
6. Gas compressor and gas pumping station operators: #8 overall, 31% growth, $19.50 hourly wage

7. Wellhead Pumpers: #11 overall 28%, $17.34 hourly wage

8. Oil and gas service operators: #12 overall, 27% growth, $18.18 hourly wage

9. Oil and gas roustabouts: #14 overall, 25% growth, $15.23 hourly wage

MP: This study provides further, detailed confirmation at the occupation level that the domestic drilling boom has created an accompanying jobs boom in a variety of occupations, and this doesn't include the additional job growth along the energy supply chain (equipment, sand, pipes, etc.) or all of the support industries (retail, restaurants, housing, etc.).   

Top Ten Things You CAN and CAN'T Have for Xmas

From Gizmag:

1. The Top Ten Things you CAN have for Christmas.

2. The Top Ten Things you CAN'T have for Christmas (because they're too expensive). 

HT: Don Geng

Monday, December 19, 2011

The Dreadful Legacy of North Korean Dictator Kim Jong Il in One Satellite Picture and One Chart

This one picture above of the Korean peninsula does a pretty good job of capturing the legacy of Kim Jong Il by comparing electricity usage at night between North and South Korea.

Here's another comparison: The CIA estimates that North Korea's GDP per capita in 2009 was $1,800.  That's equivalent to the inflation-adjusted U.S. per capita GDP back in the year 1847, more than 150 years ago (see chart below).  And South Korea's per capita GDP of $30,000 is about 17 times higher than its neighbor to the north.   

Gingrich's Intrade Odds and Gallup Lead Collapse

In a huge reversal that has happened in just the last week, Gingrich's Intrade odds are down below 9% and Romney has surged back up to almost 70% (see chart above). 

Related from Gallup: "After enjoying 14- to 15-percentage-point leads over Mitt Romney in early December, Newt Gingrich is now statistically tied with Romney in national Republican preferences for the 2012 GOP presidential nomination: 26% for Gingrich vs. 24% for Romney. This follows a steady decline in support for Gingrich in the past 10 days."

Cafe Hayek Blog Closes Comments Section

In October 2007, Greg Mankiw closed the comments section on his blog with this message "Why Comments Are Gone."  

Now Don Boudreaux and Ross Roberts have just announced that they are indefinitely closing the comments section of Cafe Hayek, with this message "Comments to be Closed."   

In both cases, the economics bloggers expressed frustration with the lack of civility among some commenters, and the "e-food fights." I've also experienced those same frustrations, along with concerns about the additional time it takes to moderate some comments, check the spam filter on a daily basis to free some of the comments stuck there, etc.  But for now, the comments section on Carpe Diem will remain open! 

Sunday, December 18, 2011

Apple 1991 PowerBook 100 vs. 2011 MacBook

Here's a website with some great historical data on Apple products back to 1976, with specifications and retail prices. The laptop above is the 1991 PowerBook 100, which retailed for $2,500 ($4,150 in today's dollars), and had a processor speed of 16 MHz and disk space of 30 MB.  Today's MacBook Pro (picture below) is 125 times faster (2 GHz) and has almost 17,000 times more disk space (500 GB) and sells for $1,800.   

Margaret Thatcher Addresses Income Inequality

Meryl Streep was interviewed tonight on "60 Minutes" about her new leading role - as British Prime Minister Margaret Thatcher in the upcoming movie "The Iron Lady."  That reminded me of the classic video clip above of Margaret Thatcher's last House of Commons Speech on November 22, 1990, where she addresses income inequality and expresses her opposition to a single European currency.

Markets in Everything: Whipped Cream Vodka

And marshmallow-flavored vodka......

Saturday, December 17, 2011

Everything You Need to Know About Shale Gas

Business Insider -- "There has been a surge in domestic energy production in 2011, and a large part of it has been attributed to the shale boom. In fact, the U.S. has twice as much natural gas as Saudi Arabia has oil. Shale gas is touted as a cleaner form of energy, and with its contribution to the economy, those in favor of recovering these resources argue that it would cut American and global dependence on OPEC. 

Yet 'fracking,' a crucial part of shale gas extraction, is considered dangerous and many fear its impact on the environment. In the EU, member states are diverging significantly in national policy responses to shale gas regulation.

Where does shale come from? How can you cash-in on the shale boom? Why is fracking so controversial? A report from the U.K. think tank The Global Warming Policy Foundation, authored by Matt Ridley gives us a quick breakdown of everything you need to know about the shale gas market, check it out here."

HT: Lee Coppock via Craig Newmark

Intrade Odds Quickly Turn Against Newt

What a difference 4-5 days make....
After almost closing the gap about a week ago, the Intrade odds have turned against Newt, see chart above.  Current odds are 16.9% for Newt and 61.2% for Romney.

Friday, December 16, 2011

Holiday Shopping? Consider the Most Economically Efficient Gift of All: Cash, to Avoid Deadweight Loss

"I am not sure why people give each other store-bought gifts instead of cash, which is never the wrong size or color. Some say that we give gifts because it shows that we took the time to shop. But we could accomplish the same thing by giving the cash value of our shopping time, showing that we took the time to earn the money."

In the 1993 American Economic Review article "The Deadweight Loss of Christmas," Yale economist Joel Waldfogel estimated that holiday gift-giving destroys between 10% and a third of the value of gifts.  Reason? The best the gift-giver can do is to duplicate the choice the gift-recipient would have made on his or her own with the cash-equivalent of the gift.  In reality, it's much more likely that the recipient will be worse off with the gift chosen by the gift-giver than if the recipient had made his or her own choice with the cash.

In the Seinfeld episode above, Elaine takes the standard view and doesn't appreciate Jerry's gift of cash, even though he took the time to gift-wrap the cash.  

Markets in Everything: Mobile Cigar Lounge

"Today’s smoking bans may cramp some consumers’ style, but they’ve also launched a world of new business innovations. Now joining the ranks of ashvertising, social e-cigarettes and digitally enhanced packaging is CigaRv, a “Mobile Man Cave” on wheels that brings a cigar lounge to any event, regardless of local smoking laws (see photo above)."

HT: Curtis Purington

Heavy Metal, Made in the USA Is Coming Back

From the article by Joel Kotkin "Heavy Metal Is Back: The Best Cities For Industrial Manufacturing," in New Geography:

"For a generation American manufacturing has been widely seen as a “declining sport.” Yet its demise has been largely overplayed. Despite the many jobs this sector has lost in the past generation, manufacturing remains remarkably resilient, with a global market share similar to that of the 1970s.

More recently, the U.S. industrial base has been on a powerful upswing, with employment climbing steadily since 2009. Boosted by productivity gains and higher costs in competitors, including China, U.S. manufacturing exports have grown at their fastest rate since the late 1980s. In 2011 American manufacturing continued to expand, while Germany, Japan and Brazil all weakened in this vital sector.

This shift towards domestic energy augurs well for a huge and economically beneficial shift in America’s longer term economic prospects. Cheap natural gas, for example, makes petrochemical production in America more competitive than anyone could have imagined a decade ago. Linkages with Mexico in terms of energy as well as autos has made Texas the nation’s primary export super-power, with current shipment 15% to 20% above pre-crisis levels.

Already the boom in natural gas has sparked a considerable industrial rebound in parts of eastern Ohio including the building of a new $650 million steel plant for gas pipes in the Youngstown area. Karen Wright, whose Ariel Corporation sells compressors used in gas plants, has added more than 300 positions in the past two years. “There’s a huge amount of drilling throughout the Midwest,” Wright says. “This is a game changer.”

But the industrial rebound is not only about energy. Another critical factor is rising wages in East Asia, including China. Increasingly, American-based manufacturing is in a favored position as a lower-cost producer. Concerns over “knock offs” and lack of patent protection in China may also spark a growing “Made in the USA” trend."

HT: Steve Bartin

Nat Gas Drops in Price, Thanks to Abundant Supply

One interesting factoid from today's CPI report:

The item in Table A with the largest monthly decrease from October to November was the 4.4% decrease for piped natural gas (that compares to a 2.9% monthly drop in gasoline prices), and it's the only item that has fallen in price over the last 12 months (-1.3% vs. a 19.7% increase in gasoline from November 2010 to November 2011).  

Welcome to the shale gas revolution, where thanks to modern, advanced drilling technologies, we've become the "Saudi Arabia of Natural Gas," which translates into lower prices for U.S consumers.

Amid the Gloom, U.S. Economy Quietly Improves

"Despite all the negative news, there are signs the U.S. economy is doing better than at any point since 2007, with moderate growth of about 2 percent, savings and consumer sentiment up, and unemployment still high but stagnant.

Still, insofar as our national conversation of how we are doing is shaped by these statistics, it is striking how at odds they are with the tone. The numbers are OK and getting better. The national discussions is grim and getting grimmer.

It is easy to come up with reasons why the stream of better news about our economic system has failed to dispel the widespread sense that all is not well and getting worse. But more interesting is that in spite of how gloomy we seem to be, the vast majority are simply going about their lives and plugging away at their hopes and dreams with less bitterness and less edge than the frantic tones of the media and the harsh patois of political discussion."

~Zachary Karabell writing in The Daily Beast 

HT: Warren Smith