Monday, July 16, 2012

Fracking the U.S.-Mexico Border

The Houston Chronicle reports that "Gas drilling is a boom for drug traffickers, too":

"Energy companies boring into the depths of South Texas in the multibillion-dollar hunt for natural gas and oil are opening a growing fissure in U.S.-Mexico border security as they build hundreds of miles of private back roads and an uncharted pipeline to America for drug traffickers.

Hefty roads running through once-remote ranchlands now enable loaded-down tractor-trailers and pickups to avoid Border Patrol highway checkpoints that have long been the last line of defense for stopping all traffic headed farther into the United States.

Traffickers are seeking to use the southwest-most stretches of the massive Eagle Ford shale formation, which stretches from Mexico all the way to East Texas, to their advantage by trying to corrupt truck drivers, contractors and gate personnel. Authorities also speculate that they are trying to make "cloned" copies of legitimate trucks and use contractor-like vehicles to avoid standing out among fleets of oil-field service vehicles working for energy companies. In some cases, vehicles have been stolen and believed to have been used by smugglers.

"They are using those roads to transport drugs, guns, ammo, you name it," said Albert DeLeon, chief deputy of the Dimmit County sheriff's office."

Chart of the Day: How True....

HT: Joe Lais

Markets in Everything: Pedaling Prisoners

Brazil Uses Pedaling Prison Inmates To Generate Electricity and Power Street Lamps

HT: Strider Elass

Midwest Sand Rush Creates Jobs, Prosperity, and "Sand Millionaires," But Comes with Controversy

I spent the weekend along the Mississippi River in Buffalo City, Wisconsin, about 120 miles south of Minneapolis-St. Paul (across the river from Winona, Minnesota), where there is a growing controversy in sand-rich southeastern Minnesota and west-central Wisconsin ("America's Sandbox") about mining for frac sand (the silica sand used for hydraulic fracturing).  While starting my drive this morning to the Minneapolis airport, I took pictures of the two signs above that help tell the story of the controversy.

On one side are the frac sand supporters ("dig, baby, dig"), which include dozens of new "sand millionaires" who have reaped huge financial windfalls by selling or leasing their land for sand mining, or by selling their mineral rights for amounts typically exceeding $100,000 (in addition to royalties for each ton of frac sand mined). Frac sand mining has further stimulated local economies in Minnesota and Wisconsin by bringing many high-paying jobs (each frac sand mine employs between 10 and 20 people, while 40 to 50 people work at a typical sand processing plant, and dozens of truck drivers are hired to haul frac sand to processing plants and rail terminals), raising household incomes, bringing millions of dollars of new capital investments, and pumping revenue into area businesses and local governments.

One the other side are sand opponents, including those trying to stop a frac sand plant near the Cochrane-Fountain City (CFC) High School in Wisconsin (see photo above) because of the increased noise and congestion from constant truck traffic, health concerns about the airborne silica dust from sand mining, and environmental concerns about sand mining's effects on the local land, wetlands, and streams.

My timing was excellent, because after I arrived at the Minneapolis airport a few hours after taking the photos, I found an excellent, related article published today by the Minneapolis Federal Reserve titled "Sand SurgeIn Minnesota and Wisconsin, frac sand mining has lifted local economies--and stirred opposition," here are a few excerpts:

"High-grade frac sand commands a premium in the marketplace: $60 to $80 per ton, over five times the price of construction sand and gravel. Oil companies and oilfield service firms can pay over $300 per ton for processed sand delivered to the wellhead. No wonder that large mining firms, many of them based outside the region, have invested hundreds of millions of dollars in mines and processing facilities.

Unemployment in Barron County, Wis., topped 11 percent at one point during the recession. But since 2010, sand mining companies have invested hundreds of millions of dollars in the predominantly rural county—making its economic development director bullish on the future. “Frac sand is the biggest and best thing that’s happened in our lifetime in Barron County,” Bob Missling said. “I see frac sand becoming one of the county’s biggest sources of business revenue, moving forward.”

For rural communities struggling to recover from the recession, new and expanded sand mines are a boon; they bring relatively well-paying jobs, increased spending at local businesses and a stronger tax base. But not everything about frac sand is golden. Mining development also can impose costs, such as lost revenues in other industries, environmental harm and diminished public health and safety.

In many communities, new or proposed sand mines have provoked public outcry, leading counties and townships to pass moratoriums on new frac sand operations. As of June, moratoriums were in force in seven counties and several townships in Minnesota and Wisconsin.

The scale and pace of sand mining development in the region over the next few years depend partly on how communities adapt to mining activity, balancing the resource demands of mines against the impact of those demands on competing land uses, the environment and public welfare.  Logistics also has a bearing on where sand mining is likely to prosper and grow. In Minnesota, transportation bottlenecks, in particular a lack of rail capacity, may prove as big a barrier to mine development as pushback from mining opponents."

MP: Like all new technologies, energy sources, and emerging industries, there are costs, disruptions, negative externalities, and risks involved (just like the historical impacts of Midwest farming and logging, and the subsequent commercial barge traffic on the Mississippi River), and frac sand is no different.  As Thomas Sowell reminds us, "There are no solutions, only tradeoffs." 

Hopefully, the significant benefits of frac sand mining will outweigh the costs, and will continue to bring sand prosperity and shovel-ready jobs to "America's Sandbox."  It should also be pointed out that this emerging energy-related industry with all of its new shovel-ready jobs is taking place on private lands with private investment, and requires no government taxpayer funding or subsidies, and no government taxpayer loan guarantees.    

Markets in Everything: Blood for Profit

FORBES -- "The supply chain for blood hasn't changed in seven decades—a system that Minneapolis-based General Blood is trying mightily to disrupt. Instead of relying on collection from local donors, then selling to hospitals within driving distance, why not buy cheaply from centers in ­America’s vast midsection and distribute overnight to hospitals on either coast, underpricing rivals like the Red Cross?
But it’s not so easy to disrupt a $4.5-billion-a-year business, even a sclerotic one. For one thing, the tide of supply and demand changes as dramatically as Old Muddy. For another, it’s tough to dislodge old ways of doing things—especially in a market where the biggest player, the American Red Cross, controls 44% of the blood supply and has the ability to distribute nationally, depending on the needs of particular areas."

Updated with link to article and correction in first sentence. 

Markets in Everything: Yell at a Bum

Cartoon of the Day: We Just Don't Make Things

HT: Jeff Jacoby

Sunday, July 15, 2012

Shale Gas Gives Big Boost to America’s Economy

Here's where America's 100-year supply of natural gas will come from: 
From The Economist:

"Natural gas has wrought some remarkable changes. Over the past five years America has recorded a decline in greenhouse-gas emissions of 450m tonnes, the biggest anywhere in the world. Ironically, given its far greater effort to tackle climate change, the European Union has seen its emissions rise, partly because its higher gas prices (linked to oil) have led to an increase in coal-fired power generation.

Cheap gas is also helping other parts of America’s economy. The country’s industry uses around a third of its gas output. The biggest winner might be the petrochemicals industry. It gobbles up gas as feedstock to make chemicals such as methanol and ammonia, a vital ingredient of fertilizer. Switching feedstock from naphtha, derived from oil, to ethane, derived from gas, has kept petrochemicals cheap even as oil prices have peaked. These chemicals in turn provide cheaper raw materials for carmakers, agriculture, household goods and builders, or go for export at prices to compete with the world’s lowest-cost producers, the state-owned petrochemicals firms in the Middle East.

Dow Chemical and others have announced a raft of new investments in America to take advantage of low gas prices. Methanex, the world’s biggest methanol producer, is considering dismantling a huge ethylene cracker in Chile and rebuilding it on America’s Gulf coast. The United States might export fewer cheap raw materials to countries with low labour costs to be made into goods to export back to America. The country could do the job itself, shortening the supply chain and returning manufacturing jobs to America in industries where petrochemicals are a large part of the cost base. PricewaterhouseCoopers, a large accountancy firm, reckons that lower feedstock and energy costs could result in 1m more American factory jobs by 2025.

There are non-industrial benefits too. According to MIT, residential and commercial buildings account for over 40% of America’s total energy consumption, in the form of electricity or gas, making up over half the country’s demand for gas. Low gas prices have meant that the cost of heating schools and other government buildings, often itemised on local tax bills, is falling.

The fossil-fuel industry is only a small slice of America’s economy, but the relative drop in gas prices is so dramatic that it could boost a manufacturing renaissance. That might add 0.5% a year to GDP over the next five years, says UBS, a Swiss bank. Meanwhile low gas prices are already fattening American wallets. According to IHS Global Insight, a research outfit, they are saving the average American household $926 a year.

Not everyone will win. Some coalminers, for instance, will have to find new work. But Mr Obama says that fracking might support 600,000 jobs by the end of this decade. Not bad for a business that barely existed ten years ago."

America's Highly Progressive Federal Tax System

Warren Buffett made this claim in an August 2011 NY Times article titled "Stop Coddling the Super-Rich":

"Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4% of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33% to 41% and averaged 36%."

The chart above shows the average tax rates paid by income quintiles (and the top 1%) in 2009  for all federal taxes (income, social insurance, corporate and excise taxes), according to new data from the CBO. Here are some comments:

1. Warren Buffett's tax situation is not typical for "wealthy" taxpayers, because the average tax rate for those in the top quintile is more than 23% compared to Buffett's 17.4% rate.  As has been documented, Buffett's lower-than-average tax rate is because he receives most of his taxable income as dividends (which have been taxed previously at the corporate level) and capital gains - taxed at only 15% - and not as ordinary income, which would be taxed as high as 35%.  He may also receive income from tax-exempt municipal bonds.    

2. More importantly, it seems highly unlikely that Buffett's secretary and other co-workers are paying effective federal tax rates of 33-41%.  It's important to note that Buffett has only mentioned federal income taxes and payroll taxes, and not state income taxes, and has specifically reported his 17.4% rate on only federal taxes.  Given the tax data in the chart above, it's either the case that: a) Buffett's assessment of his co-workers' tax data is inaccurate, or b) all of his office workers faced extremely unusual tax situations last year, which are not at all representative of the taxes paid by typical Americans.

3. Our federal tax system is highly progressive on average - higher income groups pay higher rates of federal taxes even when including payroll taxes - in general and on average.  Buffett's suggestion and anecdotal "evidence" that the federal tax system is regressive in at least some cases (his secretary and lower-paid employees pay a higher federal tax rate than he does) is not typical, but can only be considered as special cases of extreme outliers, both for him and his employees.  

Title IX, STEM, Disparity-Proves-Discrimination Dogma, Selective Concern for Gender Imbalances

Click to enlarge.
REUTERS (June 20) -- "The White House announced new measures to help increase the number of women in the science, math and technology fields as part of a celebration for the 40-year anniversary of a law prohibiting discrimination in education based on gender. The new guidelines are reinforcements to the law, known as Title IX.

They include the Department of Education broadening data collection in public schools for more accurate analysis of the gender and minority gaps in enrollment, graduation rates and in science classes. New guidelines will also be issued to grant-receiving universities and colleges to help institutions comply with Title IX rules in the science, technology, engineering and math fields."

MP: At that June celebration, Education Secretary Arne Duncan said it was "imperative" that more girls are encouraged to pursue careers in STEM fields, and Carnegie Mellon University president Jarod Cohon described the under-representation of women in STEM education as a "national crisis."

The data in the table above (click to enlarge) are from the Department of Education and show college degrees for the Class of 2010 (most recent year available) by gender and field of study.  Based on those outcomes in the table, here are some gender gaps that will most likely: a) be exempt from any Title IX rules, b) not result in any "imperatives" to encourage boys to pursue different fields of study, and c) will not be referred to as a "national crisis":

1. Women earned more bachelor's (57.2%), master's (60.3%) and doctor's degrees (51.7%) than men in 2010 reflecting gender gaps in favor of women at all levels of higher education.  The gender imbalance favoring women was especially significant at the master's level, where 152 women earned master's degrees in 2010 for every 100 men.

2. In 9 out of 17 major fields of study at the bachelor's and doctor's levels, and in 11 out of 17 fields at the master's level, women were over-represented. Some of the fields of study with the biggest gender imbalances favoring women include: 

a. Health Professions (85.1% female at the undergraduate level and 81.4% at the master's level), 
b. Public Administration and Social Services (82% female at the undergraduate level and 75.2% at the master's level),  
c. Psychology (more than 70% female at all three levels)
d. Biology (53% or higher at all three levels, 58.5% for bachelor's degrees - isn't Biology a STEM field?)
e. Education (79.5% for bachelor's degrees and 77% for master's degrees)

3. Although not displayed in the table, there are huge gender degree disparities in favor of women for certain health fields at the doctoral level like veterinary medicine (77.6% female), pharmacy (63.8% female) and optometry (66.0% female).

The White House's concern for gender imbalances appears to very selective and isolated to only certain fields of study where women are under-represented.  On the other hand, there appears to be no concern at all about the overall college degree gap in favor of women, and no concern or Title IX rules for fields of study like health professions (572 women graduating with bachelor's degrees for every 100 men), education, psychology (395 women graduating with master's degrees for every 100 men), biology, communication, veterinary medicine (346 women graduating with doctor's degrees for every 100 men).  

There is now even some speculation that the ultimate goal of the White House is to use Title IX to impose a very narrowly targeted quota system for STEM education, or "science quotas for women," to overcome the alleged gender discrimination against women in STEM that is supposedly to blame for the gender disparities.  But shouldn't the application of the "disparity-proves-discrimination" dogma that is motivating the extension of Title IX to STEM education also be applied to the non-STEM fields as well, and the STEM fields where women are over-represented (biology, veterinary medicine, etc.)?  After all, if perfect gender parity in STEM is the goal of Title IX, then the natural extension of that approach is to impose perfect gender parity for all fields of study.  Therefore, simple logic would dictate that we either apply Title IX comprehensively across all of fields of study to socially engineer perfect gender degree parity for all majors, or we don't apply it all.  But to apply Title IX selectively to only STEM fields would be inconsistent, illogical and contradictory and would expose the fallacy of the White House's very, very selective concern for gender imbalances.

Saturday, July 14, 2012

Poster of the Day: Socialism

HT: Warren Smith

Friday, July 13, 2012

Lessons from the U.S. Shale Revolution: It Wasn't from Gov't Planners, but Private Entrepreneurs

From today's WSJ editorial "The Shale Gas Secret":

"One of the few bright patches in the Obama economy is the booming production of shale gas and, increasingly, oil. The U.S. ranked 159th in GDP growth last year. But in natural gas production, it's now No. 1. 
How did that happen? Partly it's the luck of geology, though plenty of other countries have abundant shale resources. Partly, too, it's American technological leadership in developing hydraulic fracturing (fracking) and horizontal drilling. But those techniques are now widely understood the world over.

What gave the U.S. its edge is that the early development risks were largely borne by small-time entrepreneurs, drilling a lot of dry holes on private land. These "wildcat" developers were gradually able to buy up oil, gas and mineral leases from private owners while gathering enough geological data to bring in commercial producers. 

Now compare this to Europe, which sits on an estimated 639 trillion cubic feet of shale gas yet remains heavily dependent on Russian imports. The governments of France and Bulgaria have banned fracking on dubious safety grounds, with nary any pushback from their publics. That might not be the case if French farmers, for example, were able to profit from the riches underneath their terroir.

Countries such as Poland and Great Britain are willing to develop their shale potential. Yet in both places the absence of private mineral rights has delayed exploration and production.

In time, perhaps even the French will recognize their lost opportunity and lift their ban on fracking. But the deeper lesson is that this is a revolution that came about not through government planning or foresight, but through a combination of individual risk-taking and private property. Europeans could benefit by doing more to broaden the latitude for both."

The Law of Unintended Consequences Confirmed

After reformulation in 2010, OxyContin use dropped from 47.4% to 30%, but heroin use nearly doubled.
From the article "Effect of Abuse-Deterrent Formulation of OxyContin," published in the current issue of the New England Journal of Medicine:  

"In August 2010, an abuse-deterrent formulation of the widely abused prescription opioid OxyContin was introduced. The intent was to make OxyContin more difficult to solubilize or crush, thus discouraging abuse through injection and inhalation. We examined the effect of the abuse-deterrent formulation on the abuse of OxyContin and other opioids.
Data were collected quarterly from July 1, 2009, through March 31, 2012, with the use of self-administered surveys that were completed anonymously by independent cohorts of 2,566 patients with opioid dependence. 

The selection of OxyContin as a primary drug of abuse decreased from 35.6% of respondents before the release of the abuse-deterrent formulation to just 12.8% 21 months later.  

Of all opioids used to “get high in the past 30 days at least once," OxyContin fell from 47.4% of respondents to 30.0%, whereas heroin use nearly doubled (see chart above, click to enlarge).

Our data show that an abuse-deterrent formulation successfully reduced abuse of a specific drug but also generated an unanticipated outcome: replacement of the abuse-deterrent formulation with alternative opioid medications and heroin, a drug that may pose a much greater overall risk to public health than OxyContin. Thus, abuse-deterrent formulations may not be the “magic bullets” that many hoped they would be in solving the growing problem of opioid abuse.

MP: That's why the law of unintended consequences is called a "law."  It also confirms the reality that the "stronger the drug laws, the stronger and more dangerous the drugs."

HT: Morgan Frank

Markets in Everything: London Taxi Hotel

In preparation for the summer Olympics, London is getting creative.

David Weekes, a full-time cab driver has transformed his cab into a hotel for one, available to rent for £50 (US$78.50) per night. The taxi comes with a "memory foam" mattress, pillow, duvet, a bedside lamp and a teddy bear.  It also offers a solar-powered refrigerator, a radio, an iPad, and camping chairs and a portable table on request.  But Weekes does have two rules: no smoking and no pets.

HT: Jon Murphy

Exposing the Food Stamp Stimulus Fallacy

Here's some Keynesian-style, voodoo economics from the U.S. Department of Agriculture claiming that every additional $1 of food stamp spending magically creates almost $2 in new economic activity:
Why does increasing participation in SNAP (the federal food stamp program, now known at the Supplemental Nutritional Assistance Program) make sense for your community?

SNAP Generates Economic Activity SNAP brings Federal dollars into communities in the form of benefits which are redeemed by SNAP participants at local stores. These benefits ripple throughout the economies of the community, State, and Nation. For example: Every $5 in new SNAP benefits generates a total of $9.20 in community spending Every additional dollar's worth of SNAP benefits generates 17 to 47 cents of new spending on food.

On average, $1 billion of retail food demand by SNAP recipients generates 3,300 farm jobs. In fiscal year 2009, the average monthly SNAP benefit per household was approximately $272. These benefits, funded by Federal dollars, create business when they are redeemed at your local food retailers. Eighty-six percent of benefits, totaling $25 billion, were redeemed at the nation's 35,000 supermarkets. The remaining benefits, totaling $3.6 billion, contribute to the viability of 121,000 other firms which include grocery stores, convenience stores, combination stores, farmer's markets, and other retail food stores; plus wholesalers and meal services.

Outreach and education are powerful tools in overcoming barriers to SNAP participation. Even a small increase in SNAP participation can have a substantial impact. If the national participation rate rose 5 percentage points, 1.9 million more low-income people would have an additional $1.3 billion in benefits per year to use to purchase healthy food and $2.5 billion total in new economic activity would be generated nationwide
MP: Wow, it seems like all we have to do to create a huge economic stimulus is to get more Americans using food stamps.  If raising the national food stamp participation rate by 5 percentage points generates $2.5 billion in new economic activity, imagine the economic stimulus that could be created if the food stamp participation rate increased to 100 percent!

To understand the economic fallacy of the "food stamps creates economic prosperity" myth, let me paraphrase Art Laffer, who exposed a similar fallacy a few years ago relating to the claim that unemployment benefits increase demand and stimulate the economy:

In an economy, the economic effects from a transfer program always sum to zero. Simply put, there can be no economic stimulus from increased food stamp usage. To see this, imagine an economy that produces 100 apples. If 10 of those apples are given to people with food stamps, then people who otherwise would have had those 10 apples are now worse off.  The stimulus of 10 apples through food stamps is exactly offset by the destimulus of 10 apples for those people from whom the 10 apples were taken. More realistically, we could say that to provide food stamps that will allow some Americans to purchase more apples, taxes have to be raised on other Americans to finance the food stamps to pay for the apples.  In that case, raising food stamp participation increases the tax burden on other Americans.

Those Americans forced to pay higher taxes to finance increased food stamp usage have less income to spend on goods and services, which depresses economic activity. In the end, there is simply a coerced transfer of resources from food stamp-providing taxpayers to food stamp users, with a net effect of zero on economic activity and national wealth. Given the massive inefficiencies the government creates in transferring resources from one group to another, along with the disincentive effects for those Americans who are de-stimulated through higher taxes, there might actually be an overall negative net effect on economic activity.

Bottom Line: Raising food stamp usage certainly won't generate positive net benefits; it's more likely that the net economic effect will be negative.

HT: Daniel Halper via Morgan Frank

Thursday, July 12, 2012

Thursday Energy Links

1. Pennsylvania's electric generation rates are back to 1996 levels, thanks to competition and shale gas, according to John Hanger

2. According to this IEA report on North American Tight Oil Breakeven prices, oil would have to fall below $44 per barrel before Bakken shale oil would become unprofitable, and below $50 per barrel before Eagle Ford shale oil would be unprofitable (see chart above).

3.  From Investor's Business Daily: "After decades of rising prices, hostile foreign suppliers and warnings that Americans will have to bicycle to work, the world faces the possibility of vast amounts of cheap, plentiful fuel. And the source for much of this new supply? The U.S.

"If this is true, this could be another dominant American century," said Brian Wesbury, chief economist at First Trust Advisors, money managers in Wheaton, Ill.

U.S. natural-gas production is growing 4% to 5% a year, driven by sharply higher shale gas output. Shale gas production is forecast at 7.609 trillion cubic feet this year, up 11.6% from 2011 and 12 times the 2004 level (see chart above for the shale gas production forecast to 2035).

Citigroup predicts the U.S. will be not just self-sufficient but also a huge exporter of oil and gas by 2020. The bank projects that the surge in domestic oil and gas supply will add 2% to 3% in real GDP, create 2.7 million to 3.6 million new jobs and cut the current account deficit by 2.4% of GDP.

High on the winner list would be energy-intensive manufacturing, which has taken a thrashing the past few decades. "It could open the floodgates of investment in the U.S.," Wesbury said."

Wednesday, July 11, 2012

America's New No. 2 Oil State - North Dakota - Sets More Eye-Popping Oil Production Records in May

The “Economic Miracle State” of North Dakota pumped another record amount of oil during the month of May at a rate of almost 640,000 barrels per day, which was an increase of 4.9% compared to oil production in April (see chart above).  North Dakota’s record-setting oil output in May was noteworthy for several reasons:

1) The year-over-year increase in oil production of 75.5% in May was the largest annual gain in state history.

2) North Dakota produced 17% more oil than Alaska in May, marking the third consecutive month that North Dakota out-produced Alaska. The Peace Garden State surpassed Alaska’s oil production for the first time in March to become the country’s new No. 2 oil state, behind only Texas.

3) The number of producing oil wells in the state increased to a new record high of nearly 7,000, and more than 216 new wells were added in just the last month, which is the second highest monthly increase on record.  As I reported earlier this week, each new oil well is the equivalent of adding a new $8-10 million business to the state economy, see recent CD post for more details.

4) The amount of oil produced per oil well in the state increased to a new record high of 92 barrels per day, an increase of 35% compared to a year ago, and a sign that the efficiency of shale oil production is increasing significantly. Both the increasing number of wells and the increasing output per well is contributing to record high production levels.

As a result of the ongoing oil boom in the Bakken area, North Dakota continues to lead the nation with the lowest state unemployment rate at a four-year low of 3.0% in May, and more than five percentage points below the national average of 8.2%. There were ten North Dakota counties with jobless rates below 2.0% in May, and Williams County, which is at the center of the Bakken oil boom, boasts the lowest county jobless rate in the country at just 0.7%.  The exponential growth in North Dakota oil production has fueled exponential growth in the state’s “Natural Resources and Mining” employment, which has tripled in less than three years, and reached more than 22,000 in May.

Bottom Line: The ongoing record-setting oil production in North Dakota continues to make it the most economically successful state in the country, with record levels of employment and income growth, a labor shortage, increasing tax revenues, the lowest foreclosure rate in the country, a strong real estate market, and jobless rates in ten counties of the Bakken region below 2.0%.  Call it the “Dakota Model” of job creation and economic prosperity that is based on developing America’s vast energy resources, which is an economic model that could easily be replicated elsewhere if more domestic energy resources were opened up to exploration and drilling.

Markets in Everything: Talking Gloves -- "More than 275 million hearing-impaired people are unable to use speech to communicate. Sign language is one solution, but it's only as helpful as the number of people who know the language. That problem is what drove three Ukrainian students to develop EnableTalk, a pair of sensory gloves that help bridge that communication gap by turning sign language into speech (featured in the video above).

EnableTalk consists of two parts: The first is a pair of gloves fitted with 15 sensors that determine what gestures are being signed. The second is Windows software for smartphones that converts those gestures, transmitted via Bluetooth, into sound waves. Those sound waves are finally translated into recognizable speech using Microsoft's Speech and Bing APIs."

2012 Top 100 U.S. Retailers

Here's an interactive sortable table of the top 100 U.S. retailers, based on 2011 data.  Some of the results include:

1. As expected, Walmart was the No. 1 U.S. retailer for both U.S. and worldwide sales.  Based on its worldwide sales in 2011 of $454 billion, Walmart would rank as the 27th largest economy in the world, behind No. 26 Taiwan's GDP of $467 billion and ahead of No. 28 Argentina's GDP of $448 billion.  Somewhat less expected are the No. 2 retailers for U.S. sales (Kroger) and worldwide sales (Costco).

2. Based on the number of retail stores, Walmart barely makes it into the top 20, coming in at No. 18 with 4,423 stores.  It's no surprise that McDonald's is No. 3 with 14,087 stores and Starbucks is No. 4 with almost 11,000 outlets.  But you might be surprised by the U.S. retailer with the most stores (more than 25,000) and by the second-place retailer with more than 18,000 stores.  

3. Of the top 100 U.S. retailers, more than half (53) have 100% of their stores and sales in the U.S. and no foreign presence at all (e.g. Target, Kroger and most of the grocery chains, Kohls, RiteAid, most of the dollar stores, etc. ).   The retailers with the greatest percentage of foreign sales were IKEA (90.2%), 7-Eleven (80.9%) and Aldi (78.5%). 

4. For sales growth in 2011, Amazon was No. 1 at 42.5%, followed by Verizon Wireless at 37.1% and Apple at 36.9%. 

5. The retailer with the largest growth in the number of stores added in 2011 was 7-Eleven with a 16.3% increase, followed by Nordstrom at 10.3% growth and Best Buy with a 10% increase.

Here's a link to the article that accompanies the chart

Economic Mobility is Alive and Well in America

Video is from, which accompanies this article "84 Percent of Americans Are Richer than Their Parents Were at the Same Age."

Tuesday, July 10, 2012

Markets in Everything: Concierge Medicine

Watch the PBS News Hour segment above on "concierge medicine," featuring Texas doctor Raymond Solis who recently converted his 21-year-old traditional medical practice of 3,000 patients to a concierge-based practice serving just 400 patients.  Dr. Solis changed his business model with the assistance of national medical consulting firm MDVIP, which helps doctors switch from traditional, "conveyor belt" medicine to concierge practices, and go from patient loads of 2,500 to 3,000 down to 400 to 600.  

For about $1,500 a year, patients can join a MDVIP concierge practice and be assured of personal attention and more face time with the  doctor.  Monthly fees run about $150 per month, which allows most patients to get same-day appointments that last 30 minutes or longer. Most MDVIP doctors accept insurance.

HT: Paul Cerni

Markets In Everything; Sports Vacation Rentals

"GamedayHousing is the easiest and safest way for groups of sports fanatics to find a place to stay when they're in town for the big game. Most [college football] sports towns can't possibly accommodate the hundreds of thousands of fans who flood local hotels that are often outdated and few in number.  Gameday Housing solves this problem by bringing local property owners together with the sports traveler in a marketplace that is safe, secure, and easy to navigate."

Here are some homes available in Ann Arbor, Michigan for the Michigan-Michigan State game this year,  including this 3,000 square foot, bedroom, 3 bath home that sleeps 12
and is available for $3,500 for Friday and Saturday night.  

MP: Note that this housing service is mostly for college football games in markets like Ann Arbor, Michigan and South Bend, Indiana, where there is a shortage of housing on weekends of major football games.  

Gov. Chris Christie: War on Drugs Is a Failure

New Jersey Gov. Chris Christie called the war on drugs a “failure” during a speech at the Washington, D.C.-based Brookings Institution on Monday.

The North American Energy Colossus Will Fuel Our Hydrocarbon Future and Create Prosperity, Jobs

The Manhattan Institute released a study today by Mark P. Mills, titled "Unleashing the North American Energy Colossus: Hydrocarbons Can Fuel Growth and Prosperity," here are a few excerpts:

Executive Summary: "The United States, Canada, and Mexico are awash in hydrocarbon resources: oil, natural gas, and coal. The total North American hydrocarbon resource base is more than four times greater than all the resources extant in the Middle East. And the United States alone is now the fastest-growing producer of oil and natural gas in the world.

The recent growth in hydrocarbons production has already generated hundreds of thousands of jobs and billions in local tax receipts by unlocking billions of barrels of oil and natural gas in the hydrocarbon-dense shales of North Dakota, Ohio, Pennsylvania, Texas, and several other states, as well as the vast resources of Canada’s oil sands. 

It is time to appreciate the staggering potential economic and geopolitical benefits that facilitating the development of these resources can bring to the United States. It is no overstatement to say that jobs related to extraction, transport, and trade of hydrocarbons can awaken the United States from its economic doldrums and produce revenue such that key national needs can be met—including renewal of infrastructure and investment in scientific research.

Conclusion: The U.S. has yet to adopt a coherent policy in response to the deep changes in energy demand and supply. The world will need enormous quantities of hydrocarbons in the future, regardless of and despite substantial gains in energy efficiency and alternative energy deployment. No single region of the world could make as significant a difference to the supply dynamic as could North America. In the energy arena, North America, to paraphrase, is punching below its weight class.

And, in these trying economic times, expanding hydrocarbon production may be the single most important opportunity for economic growth for the U.S. and North America."

Here's the press release and here's the full study.

Great Moments in Government Bureaucracy

Did the FDA's former ban on home testing kits result in thousands of avoidable infections? 

CNN Money -- "A 24-year scandal was quietly acknowledged last week. On July 3 the U.S. Food and Drug Administration approved the first "rapid home" test for HIV—a test that people can take in the privacy of their own homes to determine whether they have the virus that causes AIDS.

The approval is an unambiguously good thing—or so you would think. The saliva test in question, made by OraSure Technologies and known as OraQuick, costs less than $60 and takes just 20 minutes to self-administer. According to statistics an FDA advisory committee presented at a hearing in May, it holds the potential to prevent the transmission of more than 4,000 new HIV infections in its first year of use alone. That would be about 8 percent of the roughly 50,000 new infections we currently see annually in the United States.

The scandal is that the approval of a rapid home test for HIV did not occur until last week—about 24 years after the FDA received its first application seeking permission to market one."

Read more here

HT: Mike McKay

Each New ND Oil Well = A New $8-10M Business

The chart above shows the number of producing oil wells in North Dakota, which have more than doubled in the last six years, from 3,345 in April of 2006 to 6,734 in April of this year.  Over just the last year, 1,425 new wells have been added from April 2011 to April 2012, at a rate of six new wells every business day.

As Bruce Oskol pointed out on his Million Dollar Way blog:

"Each of those North Dakota oil wells can be thought of as equivalent to a new $8-10 million business sprouting up in your neighborhood, and all with private money on private land, with no federal money or taxpayer subsidies.  Hundreds of new $8-10 million businesses sprouting up each month.  I read somewhere that it takes about 75 other oil service companies to keep an oil well running, including the tax accountants, the landmen, and, of course, it provides a lot of work for federal and state regulators and bureaucrats.  And the initial cost of each well should be paid back with five or six years of production, and unless the world quits using oil, the wells will keep pumping oil for 30 years."

MP: The economic impact of the increased oil production in North Dakota over the last year is the equivalent to more than 1,000 new $8-10 million small businesses being created in the state, which have created 7,000 new direct jobs in the oil business over the last year, and more than 26,000 new jobs in total throughout the state.  

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.