Monday, July 09, 2012

Same Federal Government That Bans Compensation for Organs, Shuts Down Man Donating Free Sperm

The federal government outlawed the sale of human organs in 1984, and until a recent legal challenge that even included a ban against receiving compensation for bone marrow.  For organs like kidneys, an altruistic donation, sometimes from a complete stranger, is the only legal method of kidney exchange, and any form of compensation is illegal.

Given the federal ban on compensation for human organs, you would think the federal government would have no problem with Trent Arsenault, who donates sperm for free.  But you would be very, very wrong, see this New York Daily News article:  

"The Food and Drug Administration wants to shut down a do-it-yourself sperm bank of one. Trent Arsenault, 36, says he donates semen to low-income and same-sex couples who face hurdles acquiring it at licensed sperm banks.

"It is helping people in need," the Fremont, California, resident told CBS San Francisco. "I don't make any money, I don't charge people anything. And it's just helping childless couples have children."

The FDA disagrees. In a Cease Manufacturing letter delivered on Nov. 1 of last year, the FDA classified Arsenault's setup as a "firm" that "recovers and distributes semen and therefore is a manufacturer of human cells, tissues and cellular and tissue-based products.

Arsenault certainly seems to be meeting a demand. He told CBS he has received some 20,000 email inquiries and he has fathered 14 children since his first sperm donation to a teacher in 2004. The FDA estimated that Arsenault dealt out 328 semen donations to 46 recipients between 2006 and 2010.

To market the free sperm donations, Arsenault started the Web site, where he displays a wealth of personal information ranging from his ethnic background and personal identification documents to medical reports displaying his sperm count and test results for sexually transmitted diseases. On a page titled "Hospital photos sent by recipients," Arsenault displays 15 images of babies presumably fathered with his assistance."

MP: As far as I can tell, the FDA's case against Trent Arsenault is still pending.

HT: Morgan Frank

North Dakota Bakken Oil Facts

What Does Every New Bakken Oil Well Mean to North Dakota? 

A typical 2011 Bakken well will cost $7,925,000 to drill and complete, and will produce oil for 29 years (27 years longer than the average stimulus-funded "green" company, as Che comments).  

In those 29 years the average 2011 Bakken well will: 
1. Produce approximately 540,000 barrels of oil 

2. Pay approximately $4,585,000 in taxes 
a) $2,200,000 gross production taxes at 5%
b) $2,000,000 extraction tax at 6.5%
c) $385,000 sales tax 

3. Pay royalties of $7,500,000 to mineral owners 

4. Pay salaries and wages of $2,100,000 

5. Pay operating expenses of $2,300,000 

6. Generate over $20 million in net profit

Source: North Dakota Department of Mineral Resources 

MP: There are currently almost 7,000 wells producing oil in North Dakota.  

Sunday, July 08, 2012

ND Economy So Good, It's Like Another Country

MANDAN, N.D. — "The economy is so good in North Dakota, it’s almost like being in another country. 

Although Friday’s lackluster national jobs report may have intensified the already deep anxiety among voters about the sluggish state of the economy, here in the nation’s northern reaches, the concerns are exactly the opposite: how to build roads and schools and houses fast enough to keep up with an astounding population boom that has sprung up alongside the country’s most roaring state-level economy. Good years for North Dakota farming, a new technology sector and — most significant — a dramatic oil rush in the state’s west and north have combined to produce an economic explosion that is the envy of the rest of the country — a 3 percent unemployment rate and rising household incomes and state revenue."

Alcohol Facts of the Day

1. There are approximately 79,000 deaths attributable to excessive alcohol use each year in the United States.

2. Excessive alcohol use is responsible for 2.3 million years of potential life lost annually, or an average of about 30 years of potential life lost for each death.

3. In 2005, there were more than 1.6 million hospitalizations and more than 4 million emergency room visits for alcohol-related conditions. 

Source: CDC 

And we are waging a War on Drugs and putting people in jail for smoking weed?

Healthcare and Obamacare Explained

HT: Morgan Frank

Saturday, July 07, 2012

Markets in Everything: Family-Friendly Gun Range in Dallas To Offer Birthday Parties for Kids

Seattle, Pittsburgh, and Denver Real Estate Markets Sizzle in June, Double-Digits Gains in Sales, Prices

Several more metro areas are now reporting strong double-digit gains in both June home sales and home prices:

1. "Seattle-area house prices saw a double-digit increase in June — the first time that's happened in nearly five years. The median price of single-family homes sold last month was $380,000, up 10.1 percent from June 2011. It was the third straight month of year-over-year price increases, and by far the largest change. The last time the median rose by more than 10 percent was in July 2007, when it hit an all-time high of $481,000. 

Sales volumes were strong in June. Buyers closed on 2,117 houses in King County, the listing service said — 3 percent more than in May, which had been the best month since August 2007. When compared with June 2011, house sales were up 12 percent, condo sales up 16 percent."

2. In the 13-county Pittsburgh-region, the number of residential homes placed under agreement increased 18.6% in June 2012 versus June 2011, while average home sale price increased 13% ($194,500 versus $172,177).

Update: Add Denver to the list of hot real estate markets, with a 20% increase in June home sales and a 12% increase in price. 

Chart of the Day: Federal Drug Prisoners

The chart above shows the breakdown of the current federal inmate population by type of offense, according to the Federal Bureau of Prisons.  There are currently 93,876 Americans serving time in federal prisons for drug crimes, which is by far the No. 1 offense that results in a federal jail sentence (see chart).  Drug offenders make up almost half of our federal inmate population, and that help explains why the U.S. retains the status as the World's No.1  Jailer with a prison population of 730 per 100,000 population, more than even any of the world's most notorious and oppressive regimes like Burma (120 per 100,000 population), Cuba (510 per 100,000 population), and Iran (333 per 100,000).

Besides the fact that federal drug prisoners far outnumber any other category of criminal offenders, there is another important characteristic that distinguishes drug offenses from other federal crimes like arson, extortion, robbery, burglary, homicide, and embezzlement - almost all of those other crimes have identifiable victims who have been clearly victimized, e.g. robbed, assaulted, murdered, etc.  In contrast, drug offenders were mostly involved in "crimes" that frequently had no identifiable victim, i.e. crimes without a victim, or "victimless crimes."   Hopefully, future generations of more enlightened Americans and political leaders will look back on the War on Drugs as a shameful chapter of U.S. history and a blemish on America's long tradition of individual liberty and limited government.  

U.S. and Bakken Oil Updates

1. A million people in North Dakota by 2030 and a million barrels of oil per day by 2015 are possible, according to one major oil executive.  (ht/BakkenBlog News)

2. You've never seen anything like this North Dakota Oil Boomtown (in photos), from Business Insider.

3. More from Business Insider: The 15 Hottest American Cities of the Future, including North Dakota oil boomtown Williston, where unprecedented wealth will be created in the years ahead.   (ht/BakkenBlog News)

4. Net oil imports for the U.S. are down to 42.1% this year through May, bringing oil imports as a share of total products supplied down to the lowest level since 1992.   

The Coming Golden Era and Next U.S. Boom, If We Can Unleash the Animal Spirits of the Market

"Three years after the recession was declared officially over, unemployment remains high and there's worry that a new recession is down the road. And yet waiting in the wings for when we get our economic policies in order are a mounting number of stunning discoveries, inventions and technological breakthroughs that could set off a burst of growth and wealth creation as big as any in living memory."

MP: Those discoveries and technological breakthroughs outlined in the article by Malone include hydraulic fracking, nanoculture, cloud crowd, 3-D printing, Internet-based education and training, and self-health technologies.  Here's his conclusion:

"It's all on the way. Together, these trends offer the potential for a golden era. Getting there won't be easy, as we are currently governed by leaders who want to manage our complex and dynamic economy from the top down, to tame entrepreneurs with regulation, to tax the productive and, ultimately, to pick the next generation of winners. That's never worked well and isn't working today. But a better world awaits us if we elect leaders who can imagine a better future and fight to unleash the animal spirits of the market that will get us there."

June U.S. Rail Traffic: Ongoing Economic Growth

Some highlights from yesterday's monthly report from the American Association of Railroads (AAR): 

Intermodal: U.S. railroads originated 996,022 intermodal containers and trailers in June 2012, up 5.2% (49,168 units) over June 2011 and an average of 249,006 units per week. That’s the highest average for any June in history and the third highest average for any month in history (behind August 2006 and October 2006, see top chart above).

In the second quarter of 2012, intermodal loadings were up 4.0% (121,369 units) over the second quarter of 2011. For the first six months of 2012, intermodal originations were up 3.3% (193,541 containers and trailers) over the first six months of 2011.

Through June, year-to-date 2012 U.S. intermodal originations were slightly ahead of 2006, setting up the very real possibility that 2012 will be the highest-volume intermodal year ever for U.S. railroads. The recovery since 2009 has been remarkable. In the first six months of 2009, average weekly intermodal loadings were 185,075 containers and trailers. In the first six months of 2012, the average was up to 232,682 containers and trailers, a 25.7% increase. Assuming 240 intermodal units per train, the improvement in 2012 over 2009 is equal to nearly 200 additional full-size intermodal trains per week.

Carloads: U.S. rail carload traffic in June 2012 wasn’t as encouraging as intermodal traffic, but it was better than it’s been lately. U.S. freight railroads originated 1,140,271 carloads in June, an average of 285,068 carloads per month and down 1.3% from June 2011.

That’s the lowest percentage decline in five months, mainly because coal carloads weren’t as lousy as they have been. Coal carloads in June 2012 averaged 114,485 per week, the highest weekly average in four months and down just 6.2% from June 2011.

Excluding coal, U.S. rail carloads were up 2.2% (14,979 carloads) in June 2012 over June 2011. That’s their lowest year-over-year monthly increase in six months, though the weekly average in June 2012 (170,583) was the second highest (just behind April 2012) since October 2008 (see bottom chart above).

Excluding coal and grain, U.S. carloads in June 2012 averaged 151,363 per week in June 2012, up 4.2% (24,138 carloads) over June 2011 and their highest weekly average since August 2008.

U.S. carloads of petroleum and petroleum products continued their startling growth in June 2012, rising 51.0 percent (14,177 carloads) over June 2011.

Carloads of motor vehicles and parts continued to grow rapidly in June 2012 as well, with U.S. carloads up 24.5% (12,957 carloads) and U.S. plus Canadian carloads up 22.5% (16,545 carloads) compared with June 2011. 

Seasonally adjusted total U.S. rail carloads were up 2.9% in June 2012 over May 2012. Seasonally adjusted U.S. rail intermodal traffic was up 3.8% in June 2012 over May

Bottom Line:  The AAR points out that rail freight is a "derived demand" industry, meaning that the demand for rail delivery occurs as a result of demand elsewhere in the economy for the products that railroads haul (inputs, raw materials, parts, lumber, chemicals, autos, etc.). Therefore, weekly and monthly rail traffic activity is a useful gauge of broader economic activity, especially of the "tangible" economy.

Except for a decline in coal and grain deliveries this year, most other products delivered by rail have been increasing, and overall intermodal rail traffic was the highest ever for the month of June, and on track to set a new annual record in 2012.  Rail car traffic excluding coal was the highest for the month of June since 2008, and rail car loadings have been at 4-years highs in each month this year.  Overall, the June report from the AAR on U.S. rail activity suggests that the economy is continuing to make gradual improvements, and there is nothing in the report that would suggest that the economy is heading towards a recessionary cliff. 

Friday, July 06, 2012

Louis C.K. Battles Ticket Scalpers Using Basic Economics: He's Increasing Supply by Adding Shows

Comedian Louis C.K. is battling ticket scalpers (see recent related CD post here) for his upcoming national tour using some basic principles of economics: he's increasing the supply of tickets by adding shows to meet fan demand.  The market conditions that allow ticket scalpers brokers like Seat Geek and StubHub to sell tickets above face value are: a) ticket prices that are too low relative to the true market price, and/or b) a supply of tickets that is too low, relative to demand.  

When enough tickets are supplied to satisfy fan demand, the secondary market for tickets above face value is limited. Louis C.K. apparently understands that he can combat the ticket scalpers by increasing the supply of tickets in markets where his originally scheduled shows sold out, and that's what he's doing.  So far Louis C.K. has added shows in New York City (two shows added), Tampa (one show added), Fort Lauderdale (one show added), Seattle (one show added), St. Louis (one show added), Dallas (one show added) and Austin (one show added).  In most cities, if his first show at 7:30 or 8 p.m. sold out, he's added a second show at 10 p.m. 

Musicians, artists and other performers should take an economics lesson from Louis C.K. and realize they have been largely responsible for creating a secondary market for tickets to their performances and they have been supporting ticket scalpers by under-supplying tickets relative to fan demand. Increase the number of tickets to satisfy fan demand, and the secondary market for tickets above face value evaporates.

Coal, Gas Shares of Electricity Equal for 1st Time

From the EIA website today --  "Recently published electric power data show that, for the first time since EIA began collecting the data, generation from natural gas-fired plants is virtually equal to generation from coal-fired plants, with each fuel providing 32% of total generation (see chart above). In April 2012, preliminary data show net electric generation from natural gas was 95.9 million megawatthours, only slightly below generation from coal, at 96.0 million megawatthours."

See related CD post here

"Markets" in Everything: Free Online Textbooks

The rising cost of textbooks—along with the rise of easy-to-use publishing tools online—has helped drive the popularity of open-source materials and professors’ taking a do-it-yourself approach to textbook publishing.  The Chronicle of Higher Education features three professors who wrote their own textbooks and are distributing them free.

Comments Restored

This morning CD was hit with a spam attack about 9 a.m. ET, and I had to temporarily change the comment setting to stop the incoming spam advertisements from being posted to every CD post.   Now that the attack has been foiled, the comment policy is back to normal.  

Markets in Everything: Hacker Hostels

SAN FRANCISCO — "From the outside it’s just a beige three-story building in a quiet residential neighborhood. But inside, in a third-floor apartment, there are enough Ikea bunk beds to sleep 10 people, crammed into two bedrooms. The living room is bare except for a futon, a tiny desk and laptop power cables strewed across the hardwood floor like a nest of snakes.

This is not some kind of dorm, but a “hacker hostel.” It’s one of several in the Bay Area that offer short- or long-term stays for aspiring tech entrepreneurs on the bottom rung of the Silicon Valley ladder, those who haven’t yet achieved Facebook-level riches. These establishments put a twist on the long tradition of communal housing for tech types by turning it into a commercial enterprise. 

The San Francisco hostel is part of a minichain of three bunk-bed-stuffed residences under the same management, all places where young programmers, designers and scientists can work, eat and sleep."

HT: Dan Greller 

Thursday, July 05, 2012

Economics 101 Tells Us That the War on Drugs is a Complete Failure: Prices Are Going Down, Not Up

From the New York Times article, "Numbers Tell of Failure in Drug War the War on Peaceful Americans Who Voluntary Choose to Use Intoxicants Not Currently Approved of By U.S. Politicians and Government Officials":

"When policy makers in Washington worry about Mexico these days, they think in terms of a handful of numbers: Mexico’s 19,500 hectares devoted to poppy cultivation for heroin; its 17,500 hectares growing cannabis; the 95 percent of American cocaine imports brought by Mexican cartels through Mexico and Central America.

They are thinking about the wrong numbers. If there is one number that embodies the seemingly intractable challenge imposed by the illegal drug trade on the relationship between the United States and Mexico, it is $177.26. That is the retail price, according to Drug Enforcement Administration data, of one gram of pure cocaine from your typical local pusher. That is 74 percent cheaper than it was 30 years ago. 

Prices match supply with demand. If the supply of an illicit drug were to fall, say because the Drug Enforcement Administration stopped it from reaching the nation’s shores, we should expect its price to go up.

That is not what happened with cocaine. Despite billions spent on measures from spraying coca fields high in the Andes to jailing local dealers in Miami or Washington, a gram of cocaine cost about 16 percent less last year than it did in 2001. The drop is similar for heroin and methamphetamine.

These numbers contain pretty much all you need to evaluate the Mexican and American governments’ “war” to eradicate illegal drugs from the streets of the United States. They would do well to heed its message. What it says is that the struggle on which they have spent billions of dollars and lost tens of thousands of lives over the last four decades has failed

Most important, conceived to eradicate the illegal drug market, the war on drugs cannot be won. Once they understand this, the Mexican and American governments may consider refocusing their strategies to take aim at what really matters: the health and security of their citizens, communities and nations."

Today's GPA-Inflated and Tuition-Inflated World

Is there a connection between rising college tuition and rising college grades?

That's what was suggested in a recent CD post about grade inflation at the University of Minnesota, based on the Star Tribune article "At U, concern grows that 'A' stands for average."  In the article, a Minnesota undergraduate student explained the rising GPA trend by saying "We live in a grade-inflated world."  A University of Minnesota anthropology professor quoted in the article suspects that attitude among students can be traced to rising college tuition, i.e. today's "tuition-inflated world."  The professor commented "They're paying for it, and they worked really hard, and they put in time, and therefore they think they should get a good grade."

I concluded in the post that: The connections among "grade inflation, "tuition inflation," "college textbook inflation," and exponentially rising student loan debt are important.  Perhaps students find it easier to accept rising tuition, higher textbook prices, and $25,000 in average student loan debt if they at least graduate with mostly As and a GPA above 3.0?  Even if they can't find a job, they can take pride in having "earned" an inflated GPA?

The chart above confirms the historical relationship between rising college tuition (based on the CPI for college tuition and fees) and the rising GPA at the University of Michigan, where grade inflation since the 1970s closely reflects the national trend (data here).  With the caveat that correlation doesn't prove causation, there does appear to be a statistical relationship (association) between college tuition and average college GPAs, which have both risen together over time in a similar pattern.

Markets in Everything: Rent Control Millionaires

Bloomberg: "Thousands of rent-controlled tenants in India’s fast-growing financial hub are becoming millionaires as developers tear down crumbling colonial mansions to build luxury towers for the rich.

Mea Kadwani, 78, has lived in the same apartment in the Mukund Mansion in Mumbai since he was a toddler. Thanks to rent control laws, he paid less than $20 a month for decades, and $23 a month recently, for a 2,600-square-foot space in the upscale Nepean Sea Road neighborhood, where rents typically top $2,000 a month. Now he’s moving on: After three years of negotiations, he and his wife pocketed $2.5 million from a real estate developer planning to turn the building into a garage for residents of its 29-story Villa Orb tower under construction next door."

MP: Amazing what government price controls can do to distort markets and create that kind of phenomenal "phantom wealth."  

Thursday Economic Reports: Lookin' Pretty Good

1. Private-sector employment increased by 176,000 in June according to today's ADP National Employment Report.  The June job gain was the 29th straight monthly increase in private employment and the 10th consecutive month of a job increase above 100,000.  The 12-month gain through June of nearly two million private-sector jobs is the largest annual  increase in almost six years, since the 12-month period ending in August 2006.

2.  (Reuters) - The number of U.S. businesses and consumers filing for bankruptcy fell 14 percent in the first half of 2012 and could end the year at the lowest level since before the 2008 financial crisis, according to data released today by Epiq Systems and the American Bankruptcy Institute.

3.  The fixed rate for 30-year mortgages fell to another fresh low this week of 3.62%, according to Freddie Mac. The fixed rate for 15-year mortgages also dropped to a new low of 2.89%.

4. From the American Association of Railroads today: "Intermodal volume for the week totaled 253,497 trailers and containers, up 7 percent compared with the same week last year and the fifth highest-volume intermodal week ever for U.S. railroads."

5. "Planned layoffs fell to a 13-month low in June, as U.S.-based employers announced job cuts totaling 37,551 during the month. That is down 39% from the 61,887 announced job cuts in May, according to today's report on downsizing activity from Challenger, Gray & Christmas. The June total is 9.4% lower than the 41,432 planned job cuts announced during the same month a year ago. It is the lowest monthly total since May 2011, when employers announced plans to eliminate 37,135 workers from their payrolls."

6. "U.S. unemployment, as measured by Gallup without seasonal adjustment, was 8.0% in June, unchanged from May, but significantly better than the 8.7% from a year ago. Gallup's seasonally adjusted number, based on applying an estimate of the government's June adjustment, is 7.8%, an improvement from 8.3% in May, and down considerably from 8.5% in June 2011. Both the unadjusted and the adjusted numbers are at least tied for the lowest Gallup has recorded since it began collecting employment data in 2010."

7. Intrade odds of a U.S. recession this year? Less than one-in-six chance at 15.8%.

Markets in Everything: Android-based Healthcare Smartphone Packed with Medical Sensors

MedGadget -- "LifeWatch AG (Neuhausen am Rheinfall, Switzerland) has presented the LifeWatch V (see video above), a feature-packed healthcare smartphone for patients and health conscious consumers. At its core, the LifeWatch V is a pretty standard Android-based phone. However, what sets it apart is the presence of a plethora of medical sensors powering seven health tests, combined with wellness-related applications and cloud-based services. The health tests are operated by placing a finger on one of the sensors, allowing users to measure, track and analyze their medical measurements, take corrective action, plan meals, activities and more.

The tests include one-lead ECG, body temperature, blood glucose, heart rate, blood oxygen saturation, body fat percentage and stress levels as expressed by heart rate variability. Each medical test is presented as an application and, in addition, there are diet applications and programmable reminders for medications. All collected data is automatically and securely saved to a remote server and can be retrieved from the cloud for follow-up anytime, anywhere. Results and historical data can be shared with doctors, family or others on the user’s request through e-mail or text message.

There is no information on pricing or availability yet, but LifeWatch intends to launch the healthcare solution smartphone world-wide in collaboration with local partners."

Cars.Com: Japan-Based Honda and Toyota Now Make 4 of Top 5 "American-Made Cars" in U.S.

2012 American-Made Index

Rank 2012Make/ModelU.S. Assembly LocationRank 2011
1Toyota Camry Georgetown, Ky.;
Lafayette, Ind.
2Ford F-150 Dearborn, Mich.;
Claycomo, Mo.
3Honda Accord Marysville, Ohio 2
4Toyota Sienna Princeton, Ind. 6
5Honda Pilot Lincoln, Ala. -
6Chevrolet Traverse Lansing, Mich. 8
7Toyota Tundra San Antonio 9
8Jeep Liberty Toledo, Ohio -
9GMC Acadia Lansing, Mich. 10
10Buick Enclave Lansing, Mich. -
Sources: Automaker data, Automotive News, dealership data, and National Highway Traffic Safety Administration

Cars.Com -- "In today's global economy, there's no easy way to determine just how American a car is. Many cars built in the U.S., for example, are assembled using parts that come from elsewhere. Some cars assembled in the U.S. from largely American-made parts don't sell well, meaning fewer Americans are employed to build them.'s American-Made Index recognizes cars that are built here, have a high percentage of domestic parts and are bought in large numbers by American consumers.

The Toyota Camry topped this year's American-Made Index, extending its No. 1 status to four years running. Ford's F-150 landed by a photo-finish at No. 2, falling behind the Camry by fewer than two days of sales. The F-150 was once a common AMI leader, topping the index from 2006 to 2008, but lower domestic parts content had dropped the best-selling pickup off the list. With its domestic parts content back to 75 percent — up from 60 percent last year — the F-150 returns to the AMI for 2012."

Here's something really interesting:

"A globalized industry may mean fewer cars that hail mostly from the U.S., but it works for many companies' bottom lines. Ford's global One Ford strategy coincides with falling domestic parts content in its vehicles. Five years ago, Ford had 20 models with 75 percent or higher domestic parts content. For the 2012 model year, that figure fell to three. Yet the same strategy has helped to bring Ford into the black with 11 straight quarterly profits.

Ford isn't alone. surveyed domestic parts content for the top 113 models on the market, which make up 89 percent of all the cars sold through May. More than 80 percent of those cars — the vast majority of what shoppers are buying — have domestic parts content below 75 percent or are assembled in Canada, Mexico or abroad."

MP: Interesting that four of the top five, and five out of the top ten "American-made" cars are Japanese automakers Toyota and Honda, and also interesting that pursuing an "American-made" strategy might actually lower profitability. Perhaps Japan-based Toyota and Honda are intentionally sourcing parts in America at a higher cost than using Japanese parts for the positive publicity value in rankings like this one, even if profits are adversely affected?  Whereas Ford, as a domestic Big 3 automaker doesn't have to be concerned about the adverse effect of increasing the use of foreign parts, because U.S. consumers will still perceive Fords as being "Made in the U.S.A."

Although the "American-Made Index" is interesting, it also helps highlight how meaningless the whole concept of "American-made" has become in a highly globalized industry like motor vehicles with global sales, global production, and global supply chains. Does it really matter any more that a Ford Focus has lower domestic content than a Toyota Camry?  Most consumers shop on price and value and don't consider domestic content, although 23% of consumers surveyed by last month still say that "they would only consider buying a car from the Detroit Three."  Well, at least that means that 77% of American consumers are thinking clearly about this issue, and shopping sensibly on price, value, quality and service, regardless of the national origin of the automaker or the domestic content.

But the old traditions of driving only "American cars" and demonizing "foreign cars" die hard in places like Flint, Michigan, where you still find signs like these at UAW offices.         

Wednesday, July 04, 2012

AMA: The Strongest Trade Union in the U.S.A.

As a follow-up to the post below on Milton Friedman's Mayo Clinic talk on the "economics of medical care," I present the two charts above.  

The top chart shows the number of annual graduates from U.S. medical schools (AMA data here) per 100,000 U.S. population, from 1962 to 2011. Between about 1970 and 1984, there was a significant increase in medical school graduates that pushed the number of new physicians from 4 per 100,000 Americans in 1970 to almost 7 per 100,000 by 1984.  Since 1984, the number of medical school graduates has been relatively flat (see red line in bottom chart), while the population has continued to grow, causing the number of new physicians per 100,000 population to decline to only 5.3 per 100,000 by 2008, the same ratio as back in 1974.  Over the last few years the number of medical school graduates has increased slightly, and the ratio of graduates per 100,000 increased to 5.56 last year, the highest in a decade.

The bottom chart compares the actual number of medical school graduates (red line) to the projected number of graduates if the number of new physicians had keep pace with U.S.  population increases, i.e. the ratio of graduates per 100,000 Americans had stayed at the 1984 level of 6.91.  In that case, we would now be graduating close to 22,000 new doctors annually, and the cumulative increase in medical school graduates from a rate of 6.91 per 100,000 population over the last 27 years would mean that we would have 84,000 additional physicians today.    

In most professions, as the population grows and the demand for those occupations increase, we would expect to see an increase in the number of people employed in those professions.  Over the last 25 years, the U.S. population has both increased in size, and gotten significantly older on average due to increasing life expectancy, and both of those factors would put upward pressure on the demand for physicians.  But in the case of medicine, the supply of students entering medical schools has been restricted relative to the growing population, leading to an insufficient supply of doctors, and higher-than-market wages.   This restriction on the supply of doctors relative to a growing population is one example of the "power of organized medicine" that Milton Friedman talks about in his lecture at the Mayo Clinic.  

Also, in his classic 1962 book Capitalism and Freedom, Dr. Friedman describes the American Medical Association (AMA) as the "strongest trade union in the United States" and documents the ways in which the AMA vigorously restricts competition. For example, the "Council on Medical Education and Hospitals" of the AMA approves both medical schools and hospitals. By restricting the number of approved medical schools and the number of applicants to those schools, the AMA effectively limits the supply of physicians, which increases their wages, and raises the overall cost of medical care.

Tuesday, July 03, 2012

Milton Friedman's Response to Obamacare? The "Economics of Medical Care" from 1978 at Mayo

The genius of Milton Friedman is that his economic insights are as powerful as they are timeless. Despite the fact that these comments were made more than thirty years ago in 1978 at the Mayo Clinic, they ring as true today as they did then.  Milton Friedman's six-part video series below on the economics of medical care is especially timely, in light of the fact that the Supreme Court ruled in favor of Obamacare this week and Milton Friedman predicted in this lecture that increased government involvement in health care would lead inevitably to completely socialized medicine.  This Mayo Clinic lecture is also a testament to Milton Friedman's effectiveness at delivering the message of individual liberty and limited government in a convincing and  non-threatening way, as Milton explains diplomatically to an audience of physicians how the "power of organized medicine" led to significant restrictions on entry to their profession through the American Medical Association's control over occupational licensing for physicians, which has contributed to the rising costs of medical care.      

Milton Friedman: "I’m going to talk today about the economics of medical care. This in an area, in which we all know there has been a trend toward ever-greater government involvement. One step in this area inevitably leads to another. We have had an expansion of government involvement in the spending of money – Medicare, Medicaid funds, expenditures by the Department of Health, Education and Welfare for other medical purposes have been growing by leaps and bounds. They have gone from a very tiny portion of the total national expenditures on medical care to a substantial portion. If this trend continues, it inevitably leads to completely socialized medicine. I believe that this trend is very much against the interest of patients, physicians, and other health care personnel. And in the brief time I have to today, I want to explain why I believe the trend is so much against their interest, why it has occurred, and what, if anything can be done about it."

Markets in Everything: Vacation Photographers

Vacationers: Don't Forget to Pack a Photographer

WSJ -- "For summer vacation, the flight is booked, the hotel is reserved, the bags are packed, but what about the professional photographer to take snapshots and make you look supernaturally gorgeous? 

A growing number of hotels and resorts are offering sessions with photographers to chronicle guests' vacations. Travelers want to record memorable moments without ruining them stressing about focus and flash. They want more sophisticated shots to share on social media. And vacationers realize that an iPhone may not catch that perfect surfing or skiing triumph."

Tuesday Night Links

1. Bill Clinton out-earned the average S&P 500 CEO in 2011, taking in a total of $13.4 million for giving 54 speeches last year, at an average of almost one-quarter of a million dollars per talk.  The former president's 2011 earnings were slightly higher than the $12.94 million earned last year by the average CEO.   

2. U.S. car sales rose last month to a five-year high for the month of June, as total light vehicle sales increased by more than 22% compared to June of last year.  The 14.08 million units sold (seasonally adjusted at an annual rate) last month was the highest sales level for the month of June since 15.77 million units were sold in June 2007.  On a year-to-date basis, sales during the first six months of this year of 6.3 million vehicles are almost 15% above the same period last year.

Recession? This volume of activity for new car sales in June and sales YTD is certainly not consistent with an economy teetering on the edge of a recession.  Update: See chart below of the percentage change in car sales from the same month in the previous year.

3. June real estate reports are just starting to come in, and Nashville is reporting a 21% increase in June home sales compared to last year, and a year-to-date increase of 24.5% compared to the first six months last year.  The average price for a Nashville condo sold in June increased almost 7% over last year, while the average home prices rose by 3.2%.   

4. A new report highlights a significant gender gap in reading in favor of girls for U.K. high school students.  On standardized tests, only 59% of boys score at a passing level, compared to a pass rate of 73% for girls.  

5. Barack Obama's re-election odds on Intrade have been rising for the last two weeks and have increased now to 56.3%, the highest level since May. Meanwhile, Romney's Intrade odds have been falling, and are now below 41% for the first time since May. 

Michelle Obama Calls On States to Reduce Regulatory Burdens for Occupational Licensing

Well, that headline is actually a little bit exaggerated, the First Lady is really only asking states to selectively educe the regulatory burden of occupational licensing for military spouses in this Baltimore Sun editorial.  Mrs. Obama raises some excellent points about how the process of transferring or renewing professional licenses in many states is burdensome and time-consuming. Because millions of Americans, not just military spouses, face those government-imposed occupational barriers to earning an honest living, I've done some editing below to expand Mrs. Obama's initiative to cover all Americans:

"For so many military spouses and other Americans, each move to a new state also means a return to a familiar government-induced headache: renewing a professional license.  More than 100,000 military spouses and millions of others throughout America serve in a profession that requires a government license or certification to work; that's more than one-third of military spouses in the labor force, about the same share of the general population that need a license from the government to earn a living.  So for teachers, nurses, real estate agents, eyebrow threaders, hair braiders, makeup artists offering classes, limo drivers, teeth whitening services, animal masseuses, flower arrangers, horse dentists, home decorators, accountants, physical therapists and many, many dozens of other kinds of professionals, a move can mean gathering old transcripts, paying new fees, filling out a pile of government paperwork, and sometimes even taking entry-level classes — no matter how many years of experience they have (we all know how inflexible some government bureaucrats can be).

It's a burdensome regulatory process that can take months, and should be reformed. And during that time, these military spouses and other Americans who move frequently can't practice their profession without permission from the government, even though there are jobs open in their new communities and companies desperate to hire them. That means their skills go unused while their families try to get by without the income they need due to over-regulation of professions in America. It means they are unable to advance in the careers they trained for — often for years, thanks to government licensing.  And sometimes, the regulatory hassle is simply too much, and these spouses Americans choose to quit the careers they love and choose new ones that are more friendly to a military or civilian lifestyle that involves frequent  moves. So it's no wonder that military spouses bring this issue up to me more than any other, although millions of civilian Americans face the same unnecessary regulatory challenges.

Luckily, this is an eminently solvable problem. Each state has the power to act on behalf of our nation's military families and other Americans who need a government license to earn a living. We simply need the will to do it. That's why, in February, Jill Biden and I issued a nationwide call through our Joining Forces initiative, asking all 50 states to pass legislation by 2014 to help make it easier for all Americans, including military spouses to obtain new professional licenses when they move. Since then, the number of states that have enacted measures to solve this problem of oppressive, onerous regulation has grown from 11 to 23.

Governors and legislators in these states have worked together across the aisle, because supporting American who unfortunately need a government license to work, including our military families, is something we can all agree on. They're coming up with solutions that work for their states. They're helping military spouses and other Americans who move get to work while they complete any remaining state-specific requirements. And they're doing it all without lowering their professional standards one bit — they're simply finding ways to account for the realities of military life and the lives of Americans who frequently move and need a government license to work.

So we've come a long way towards reducing the time-consuming occupational licensing transfer process. But we're not finished yet streamlining the licensing transfer process nationwide. There are still 27 states that have not yet enacted measures to address this issue of the unnecessary time it takes local and state governments to process licensing paperwork.  So I want to ask for your help.  Talk to leaders in your community about the need to reform occupational licensing.  Make your voice heard.  Do your part to make this issue a priority to help the millions of Americans who need a government license to earn an honest living and support their families."

Monday, July 02, 2012

More Shockingly Good News from Shale Gas: CO2 Emissions Will Likely Fall This Year to 1991 Levels

John Hanger points out on his energy blog that energy-related carbon dioxide emissions have fallen so sharply in the first three months of 2012 according to new data from the EIA, that total CO2 emissions this year are on track to drop to the lowest level since 1991, see chart above.

The key driver for the "shockingly good news" that CO2 emissions will probably fall this year to a two-decade low according to John is "the shale gas revolution, and the low-priced gas that it has made a reality, especially in the last 12 months. As of April, gas tied coal at 32% of the electric power generation market, nearly ending coal's 100 year reign on top of electricity markets (see related CD post on this energy milestone).  Let's remember the speed and extent of gas's rise and coal's drop: coal had 52% of the market in 2000 and 48% in 2008."

Indeed, as the chart above shows, it took 16 years for CO2 emissions to rise from 5,000 to 6,000 million metric tons, and then thanks to the shale gas revolution, only five years to go from 6,000 back down to 5,000 million metric tons. 

John Hanger's bottom line: "America's carbon emissions may drop back close to 1990 levels this year. That result would have been thought impossible, even at the end of 2011.

But the shale gas revolution makes a reality many things recently thought impossible.  It was thought impossible to slash carbon US carbon emissions back to 1990 levels by 2012.  It was thought impossible to massively, quickly cut carbon emissions and, at the same time, have lower energy bills.

Shale gas production has slashed carbon emissions and saved consumers more than $100 billion per year.  Truly astonishing!"

MP: And unlike renewable energies like solar that reduce carbon emissions but are uneconomical even with billions of dollars of taxpayer dollars, the shale gas revolution has reduced CO2 emissions significantly without any taxpayer support and wasn't even part of any intentional energy policy from Washington, or any regulatory directive from the EPA.

Welcome to the shale gas revolution!

Happy 4th of July and Thanks to China for Saving Americans Millions of Dollars on Flags & Fireworks

And here are some Fourth of July 2012 Facts from the Census Bureau, including the fact that we imported $232 million worth of fireworks and $3.3 million worth of U.S. flags from China last year.  To the extent that China artificially undervalues its currency and overvalues the U.S. dollar as is frequently claimed, China will help the U.S. celebrate the Fourth of July by saving American consumers millions of dollars on the fireworks (China supplies almost all of our fireworks according to the WSJ) and flags we purchase to celebrate Independence Day.  

As I pointed out on CD last year, we should be thankful for the generous foreign aid that China provides to the United States through its undervalued currency, which saves American consumers billions of dollars every year on China's undervalued goods we're able to purchase with an overvalued dollar.  

CoreLogic Home Price Index Rises in May

CoreLogic released its Home Price Index (HPI) report today for May, with the following positive news about the U.S. real estate market:

"Home prices nationwide, including distressed sales, increased on a year-over-year basis by 2.0 percent in May 2012 compared to May 2011 (see red line in chart above). On a month-over-month basis, home prices, including distressed sales, also increased by 1.8 percent in May 2012 compared to April 2012. The May 2012 figures mark the third consecutive increase in home prices nationwide on both a year-over-year and month-over-month basis.

Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 2.7 percent in May 2012 compared to May 2011, see blue line in chart. [MP: This is the largest annual increase since late 2006.] On a month-over-month basis excluding distressed sales, home prices increased 2.3 percent in May 2012 compared to April 2012, the fourth month-over-month increase in a row. 

The CoreLogic Pending HPI indicates that house prices, including distressed sales, will rise by at least another 1.4 percent from May 2012 to June 2012. Excluding distressed sales, house prices are also poised to rise by 2.0 percent during that same time period. The CoreLogic Pending HPI is a new and exclusive metric that was introduced within the April 2012 HPI report. It provides the most current indication of trends in home prices, and is based on Multiple Listing Service (MLS) data that measure price changes in the most recent month.

“The recent upward trend in U.S. home prices is an encouraging signal that we may be seeing a bottoming of the housing down cycle,” said Anand Nallathambi, president and chief executive officer of CoreLogic. “Tighter inventory is contributing to broad, but modest, price gains nationwide and more significant gains in the harder-hit markets, like Phoenix.”

“Home price appreciation in the lower-priced segment of the market is rebounding more quickly than in the upper end,” said Mark Fleming, chief economist for CoreLogic. “Home prices below 75 percent of the national median increased 5.7 percent from a year ago, compared to only a 1.8 percent increase for prices 125 percent or more of the median.”

MP: The home price increases reported today by CoreLogic for May and the last several months are consistent with the gains in the FHFA House Price Index (HPI), featured last Thursday on CD.  The FHFA's HPI increased by 3% in May from a year earlier, which was the third straight monthly increase, and the largest year-over-year gain since November 2006.  Slowly but surely, the U.S. housing market is making a comeback, with more evidence today of rising home prices in May according to CoreLogic's HPI.  

Busy Intersection: No Traffic Lights v. Traffic Lights

The video above shows the same intersection in Auckland, New Zealand at the same time of day.  The video on the left shows the traffic moving through the intersection without traffic signals following a power outage, and the video on the right show traffic the next day after power was restored and the traffic lights were working again. 

HT: Jake W.

Related quote from Dylan Brice: "Developments in traffic engineering show that measures aimed at making roads safer (such as road signs, traffic lights) actually make roads less safe. They signal to drivers that it’s OK not to think through the risks of their behavior."

Online Job Demand Rises in June; Both Total Ads and New Ads Reach New Monthly Record Highs

From today's Conference Board report on online labor demand:

"Online advertised vacancies rose 232,000 in June to 4,947,100, according to the Conference Board's Help Wanted OnLine (HWOL) Index. Following little growth in the first two months of the second quarter, June closed out the quarter with a strong gain. The Supply/Demand rate stands at 2.7 unemployed for every vacancy.

“Online labor demand in the first half of 2012 increased by an average of 104,000 per month, but about one-third of both the States and the 100 largest metro areas are still below their pre-recession highs for labor demand,” said June Shelp, Vice President at The Conference Board. “As of June, almost half of the occupational groups have Supply/Demand rates at or below 2.0. However, most of these are in the professional categories, such as business and finance, healthcare professionals, and management. Although we’ve seen improvement, other categories like construction, building and grounds maintenance, and personal care are still struggling with high Supply/Demand rates.

Other highlights include:

1. All 20 of the largest metro areas posted gains in labor demand in June.

2. Eight of the 20 largest metro areas have supply/demand rates below 2, indicating that there are fewer than two unemployed workers for every online advertised vacancy.

MP: Both total online job vacancies (4.94 million) and new ads (3.16 million) are now well above their pre-recession levels (see chart above) and both set new monthly record highs in June.  June's 232,000 monthly increase in online vacancies follows a 246,000 increase in March, bringing the total increase over the last four months to 524,000, the largest four-month increase in online advertised jobs since early 2007.

The Supply/Demand ratio has been below 3.0 for the last four months in a row for the first time since the fall of 2008, more than three years ago. Today's Conference Board report provides more evidence that the labor market is gradually recovering, and the sharp increase in online job vacancies over the last four months forecasts increased hiring activity in the coming months.

ISM Reports Slowdown in Manufacturing

Today's ISM report suggests that economic activity in the U.S. manufacturing sector contracted slightly in June, as the overall ISM manufacturing index (PMI) fell below 50 for the first time since July 2009 (see chart above).  However, the direction of both the "manufacturing production" and the "manufacturing employment" sub-indexes are still considered to be "growing" according to the ISM, although both are now listed as "slowing" for the "rate of change."  Based on today's report, growth in the overall economy (GDP) could be slowing to 2.4% this year based on May's PMI, but could be as high as 3.5% based on the PMI during the first half of the year. Here are some highlights:

"Manufacturing contracted in June as the PMI registered 49.7 percent, a decrease of 3.8 percentage points when compared to May's reading of 53.5 percent (see chart above). A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the June PMI indicates growth for the 37th consecutive month in the overall economy, but indicates contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2 percent.

ISM Chair Bradley Holcomb said, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (53 percent) corresponds to a 3.5 percent increase in real gross domestic product (GDP). In addition, if the PMI for June (49.7 percent) is annualized, it corresponds to a 2.4 percent increase in real GDP annually."

Glenn Reynolds on the History and State of the Blogosphere, the Higher Education Bubble, etc.

Watch Ed Driscoll's Silicon Graffiti video interview with Glenn Reynolds on the history and state of the blogosphere, and the higher education bubble (featuring a "scary-ass" CD chart).

Markets in Everything: Cellphone Escape Services

Trying to make an early exit from your 2-year cell phone contract without paying the $150-200 early termination fee?  Now there are online cellular exchange websites that match cellular subscribers, a seller who wants to get out of a contract early and a buyer who is willing to take over the contract.  Cell phone service providers apparently allow a contract to be transferred without charging an early cancellation fee, and these services facilitate those transfers by matching buyers and sellers online.  

Here are two examples of websites offering cellphone exchange services:

1. Celltrade -  "We have developed the world's first online community that gets dissatisfied cell phone customers out of their service contract. provides this service through an incentive based system that connects millions of cellular customers nationwide that want to Get Out with those that want to Get In."  

Registration is free, and once the "Get Out" seller finds a "Get In" buyer, there is a $19.99 fee for the seller. 

2.  TradeMyCellular is similar to Celltrade: "TradeMyCellular provides service for cellular contract holders who want to get out of their contract early without paying extra charges by listing their plan and cellular phone information on Also provides service to those who seek for taking over a short term contract without paying activation fees and also taking advantage of incentives provided by contract holders."

Sunday, July 01, 2012

Spontaneous Order, Sometimes It Just Happens

No Traffic Lights? No Problem

Last Friday, a severe thunderstorm knocked out power for large sections of the Virginia, D.C., and Maryland area; including the traffic lights in one of the more poorly designed intersections in the Arlington/Falls Church section of VA.  But instead of chaos, the video above shows what happened ...

If We're Not in Recession Now, ECRI Was Wrong

"Tomorrow begins July, meaning that we have arrived at midyear, the point by which ECRI [MP: Self-described as the "world's leading authority on business cycles"] predicted we would enter a new recession.  While we don't have the June data, as of May real income, payrolls, and real retail sales continued to rise, although retail sales are below their March peak.  Industrial production was off slightly in May from its post recession peak in April.

In monthly data released last week, new home sales continued their recent improvement, reaching a 2 year high.  The Case-Shiller index of repeat home sales after adjusting for seasonality still improved slightly for the third month in a row.  Durable goods orders increased although their overall trend is still sideways.  The Chicago PMI remained slightly positive.  Consumer confidence continued to fade.  Consumer spending was flat, but as indicated above consumer income improved."

MP: After summarizing about two dozen additional economic indicators, most of which were mildly positive, neutral, or mildly negative, here the conclusion:

"All things considered, it appears that this summer, like the summers of 2010 and 2011, will likely be the weakest point of the year.  Deflation now should set up a rebound later.  Turning to the title of this piece, while I suspect it will be touch and go for a couple more months, I continue to believe that ECRI's prediction will ultimately be proven wrong."

May Las Vegas Home Sales Highest Since 2006

DQ News -- "Las Vegas-area home sales rose to a six-year high for the month of May as the number of transactions above $200,000 increased sharply from last year, making up for fairly flat sales for lower-cost properties. With foreclosure resales at the lowest level since late 2007, the median sale price rose above a year earlier for the second consecutive month, reaching a 17-month high

In May, 4,829 new and resale houses and condos closed escrow in the Las Vegas metro area. That was up 6.1% from a revised 4,550 the month before and up 5.7% from 4,570 sales a year earlier."

MP: With both home sales and median home prices increasing in Las Vegas year-over-year, and with foreclosures at close to a five-year low and sales for the month of May at a six-year high, I think it's safe to say that the Las Vegas real estate market is past the cyclical bottom, and on the way back up.  

Markets in Everything: Bakken Oil Field Basics Class

Missoulian -- An oil field basics class will be offered at Bitterroot College of the University of Montana. The class will teach the “nuts and bolts” of oil and gas field operation and will use both videos and in-person instruction.

The one-day class called “Bakken Oil and Gas Field Basics” will be offered July 13 and 20. The cost is $55 for those who register before July 6.

Poster of the Day: Our New Health Care System

This pretty much sums it up....

Photo of the Day: Field of Government Agencies

Ray Charles Sings America the Beautiful

Music starts about 1:30. It doesn't get any better than this.

As a Share of Household Spending, U.S. Has Most Affordable Food in World & It's Never Been Better

We hear reports all the time that real household incomes are stagnant or falling, the middle class is disappearing, household wealth has declined, and income inequality is rising.  All of those reports might make one think that the standard of living for the average American is bad and getting worse.  But here's one basic measure of a country's standard of living that shows Americans are better off than their consumer counterparts anywhere in the world: The share of household consumption expenditure on food consumed at home, see table below (USDA data here).  

Relative to our total household spending, Americans have the cheapest food on the planet - only 6.6% of the average household budget goes to food consumed at home.  European countries like Spain, France and Norway spend twice that amount on food as a share of total expenditures, and consumers in countries like Turkey, China and Mexico spend three times as much of their budgets on food as Americans.  

Another measure of food affordability, total food expenditures in the U.S. as a share of disposable income (see chart above, USDA data here), shows that food has become more affordable in the U.S. over time.  Spending on food has fallen from more than 25% of the average American's income in 1933 to only 9.4% in 2010, an all-time low.  Between 1980 and 2010, the share of disposable income spent on food in the U.S. fell from 13.2% to 9.4%, which is equivalent to almost a 4% increase in the average American's disposable income over the last 30 years.   And a number of countries in the list below spend more on food as a share of household expenditures today than Americans spent on food during the Great Depression. 

Bottom Line: As a share of our disposable income, food in the U.S. has never been cheaper than it was in 2010 (more recent data are not yet available).  And Americans spend less on food as a share of our household expenditures than consumers anywhere else in the world.   

     Share of Household Spending    
on Food, 2010
United States6.6
United Kingdom9.7
Hong Kong, China12.1
United Arab Emirates14.5
South Korea15.0
New Zealand15.0
Czech Republic16.0
South Africa19.6
Costa Rica23.4
Saudi Arabia23.7
Dominican Republic25.1