Saturday, August 25, 2012

One-Year U.S. Stock Market Return = Almost 20%

Top 20 Stock Market Returns Over the Last Year
With all of the bad news coming out of Europe, and the ongoing gloom and doom in America with predictions of a pending double-dip recession, it might be counter-intuitive that some stock markets have actually registered impressive returns over the last year, see the table above of one-year returns based on MSCI data that includes both developed and emerging markets.  Denmark leads the list with a 26.1% return over the last year, and other European stock markets like Belgium (15.8%) and Ireland (13.3%) have achieved returns higher than the world average over the last year of 10%.  Of course one-year returns in markets like Greece (-52%), Portugal (-33%) and Spain (-24%) have been pretty dismal, but it's not like the entire continent is doing that poorly.  

Some of the Asian markets like the Philippines (18%), Thailand (11%) and Korea (9.8%) are doing quite well, and one-year returns in the U.S. of almost 20% (and 15.5% per year over the last two years and 11.4% per year over the last three years) place the U.S. as the No. 3 stock market in the world over the last year for this group.  And the one-year return in the U.S. over the last 12 months of almost 20% is almost three times the 7% average annual return over the last 60 years, and twice the world stock return over the last year of 10%. 

Note: The S&P500 is up by 19.8% over the last year and the NASDAQ has gained 24.4%.  

Update: The chart below shows corporate profits after tax (through Q1) and the S&P 500 Index (through August) over the last ten years (data here).  One of the main drivers of stock prices is corporate profits, and one of the main reasons stocks have gained almost 20% over the last year is probably because corporate profits are at record high levels (at least through Q1).  

Quotation of the Day: Pro-Business vs. Pro-Market

Why do you say that America’s political system is degenerating into crony capitalism?

There is not a well-understood distinction between being pro-business and being pro-market. Businessmen like free markets until they get into a market; once they are in it they want to block entry to others. Pro-marketeers want free markets at all times. The more conservative pro-marketeers are fearful of criticizing business, because they assume they will be seen as criticizing the free market. But we need to stand up and criticize business when business is not helping the cause of free markets.

In what way?

Take lobbying. Lobbying may once have been reactive but now it’s proactive—businessmen use it to shape policy and ask for tax advantages. This is corruptive of democracy.

Examples, please.

Companies with a lot of money abroad sponsored a bill in 2004-2005 that allowed them to repatriate their profits at a low tax rate. Thus $1 produced $220 of tax savings. The Bush-approved drug and Medicare act was a huge bonanza for the drug industry. Their market value increased by several billion dollars when this was announced. I could continue.

~Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago’s Booth School of Business being interviewed in The Economist

Markets in Everything: Private Online DMV in CA

"Cartagz is licensed and bonded with the California Department of Motor Vehicles and we are officially authorized to perform a variety of DMV related transactions. Official CA DMV license stickers and registration cards are issued directly from our central office."

"Each month, thousands of Californians benefit from’s higher level of customer service and efficiency. As California’s leading vehicle registration service, helps people save time and avoid trips to the DMV through this unique and easy to use online service." 

Cartagz has experienced phenomenal growth since starting four years ago, with revenues growing from $137,000 in 2008 to more than $14 million last year.  

More Example's (!) of the Misuse of It's for Its

From the Web and the CD comment's section: 

1. Crony Capitalism at it's best! 

2. Hailing from Brooklyn, NY, the band is paving it's own unique path in the world. 

3. Reductio ad Absurdum is a legitimate technique for pushing an argument to it's logical limits and showing it to be absurd. 

4. I'll take the opportunity costs of shale gas over it's subsidized or less environmental alternatives. 

5. And it's sold, for it's "skin rejuvenating properties.” 

6. You actually made a case for it's existence. 

Remember the simple (maybe not) rule: It's is a contraction for "it is."

The Wacky Letter Version of an Arms Race?

Does anybody else find this to be as irritating as I do?  At websites like Ticketmaster and other online ticket sellers, you are required to perform a "word verification" procedure with "words" written in such wacky "letters" that it makes the "word" virtually unreadable, like in the examples above.  It sometimes takes three or four attempts for me to type a "word" correctly, and even then it seems like I am mostly just guessing, as if there might actually be multiple acceptable "words." 

There's actually a more technical term for trying to read unreadable wacky letters, it's called CAPTCHA (Completely Automated Public Turing test to tell Computers and Humans Apart) which is "a type of challenge-response test used in computing as an attempt to ensure that the response is generated by a person."

The "wacky word" verification known as CAPTCHA is therefore an attempt to stop ticket purchases using "ticket bot software" and verify that it's an actual person buying the ticket.  However, ticket software companies like TicketBots (available here for $990) claim their products have a "CAPTCHA bypass" feature to somehow get around the word verification requirement.  

So it must be like a "wacky letter" version of an "arms race," where Ticketmaster and other online ticket sellers try to stay one step ahead of the "CAPTCHA bypass" features of the bot software by making the letters wackier and wackier to the point that they are now mostly  unreadable?  And if the "CAPTCHA bypass" features of the bot software actually work, it appears that the bot software is winning the "wacky letter race."     

Comments welcome.   

Economics Blogosphere Transitions

1. In a post titled "My Last Post," blogging pioneer Arnold Kling announced yesterday that after blogging for more than ten years about economics at EconLog, he has stopped blogging and will switch to "writing in essay format."  

Arnold was one of the first economists to use the Internet for writing about economics starting back in December 1997.  Arnold started blogging on a regular basis in January 2002 when his blog was called Great Questions of Economics.  That would have been more than a year and a-half before the legendary economics blog Marginal Revolution started in August 2003 (according the MR archives).  Here's Arnold's first blog post on January 5, 2002 titled Science and Markets, and another one from January 2002 titled "Crony Capitalism."

By 2003, Arnold's website was called EconLog. From a January 2003 post titled "The Economics of Web Logs," Arnold wrote that "EconLog should be most helpful to others who share my interest in teaching economics and observing the use of economics in everyday issues of individual choice and public policy."

Arnold was later joined in 2005 by George Mason economist Bryan Caplan and in 2008 by economist David Henderson.  While economic blogs now are commonplace, they were in their infancy when Arnold started blogging more than a decade ago back in 2002, and we owe him greatly for paving the way for economics to be shared, taught and discussed using the Internet. 

In a testament to Arnold's influence, effectiveness, and popularity as an economist and blogger, read the many complimentary and positive comments that are pouring in below Arnold's last post from dozens of his fans.  Don Boudreaux comments that this is the "first bit of compelling evidence that I've encountered in favor of the great-stagnation thesis."  That statement pretty much sums it all up! Thanks to veteran blogger Arnold Kling for sharing his economic expertise, wisdom and insights with us for more than ten years in the blogosphere.

2. Hudson Institute economist Tim Kane and economist and Columbia Business School Dean Glenn Hubbard have recently launched, a blog about America, world history, and the concept of economic power.

Friday, August 24, 2012

Car Sales in August Could Reach 4.5 Year High

Based on new vehicle sales during the first 16 selling days of this month, J.D. Power and Associates is predicting sales during the full month of August to increase by 20% over last year and reach the highest monthly sales of new vehicles since early 2008, more than four and one-half years ago.  Here's from the company's press release today:
The August new-vehicle selling rate is expected to be the highest monthly rate in more than four and one-half years, according to a monthly sales forecast developed by J.D. Power and Associates' Power Information Network and LMC Automotive.

August new-vehicle retail sales are projected to come in at 1,066,200 units, which represents a seasonally adjusted annualized rate (SAAR) of 12.3 million units (see chart above). The year-over-year growth rate in retail sales continues a double-digit trend for a fourth consecutive month. Retail transactions are the most accurate measurement of true underlying consumer demand for new vehicles.

"August continues this summer's trend of healthy growth in retail sales as dealers work to sell down inventory in time to make room for 2013 models," said John Humphrey, senior vice president of global automotive operations at J.D. Power and Associates. "To date, automakers have been diligent in better balancing production with demand, which has been critical to the improved financial performance for many brands.  Going forward, this discipline will be tested as demand looks to cool somewhat through the balance of the year."
MP: The expected strength in new vehicle sales this month is consistent with the facts that: a) rail shipments of motor vehicles year-to-date through mid-August are running 21% above last year, and b) motor vehicle assemblies in July of this year reached a five-year high of more than 11 million units at an annual rate, the highest since June 2007.  Despite the ongoing weaknesses in the labor market and an 8.3% jobless rate, we've been seeing offsetting strengths in new vehicle sales all year and now recently strengths developing in the U.S. housing market.  If new vehicles sales in August do come in at a four and a-half year high, it would be one more reason to doubt that the U.S. economy will fall into another recession this year.  

July Shipments of Durable Goods Set New Record

The Census Bureau reported today that both: a) new orders and b) actual shipments of manufactured durable goods showed strong monthly gains in July, increasing by 4.2% and 2.6% respectively compared to June.  New orders were boosted by strong demand for civilian aircraft in July, including an order for 260 airplanes from Boeing. On a year-to-date basis, durable goods orders are up 8.9% and shipments are up 7.5% from a year ago. 

New orders for durable manufactured goods in July, at $230.73 billion, were at the highest monthly level since February 2008, more than four years ago (blue line in chart).  Actual shipments of manufactured durable goods (electrical equipment, computers, appliances, cars, aircraft, machinery, fabricated metal products, transportation equipment) have increased in seven of the last eight months and reached a new record high of $231 billion in July (red line in chart).   

In news reports, some concern was expressed by the 3.4% decline in July orders for "non-defense capital goods orders excluding aircraft," following a 2.7% decline in June, because those orders are considered to be a measure of planned business spending.  However on a year-to-date basis through July, those orders are 3.6% above the same period last year.  Further, those orders of about $61.6 billion in July represent only about one-quarter (27%) of the total durable goods orders in July of $231 billion.    

Bottom Line: Today's report on the strong monthly and annual increases in both new orders and actual shipments of durable factory goods strengthens the case that American manufacturing continues to be one of the strongest sectors and main drivers of the economic recovery.  In addition to strong gains in manufacturing output reflected in today's Census report, the 524,000 jobs added to factory payrolls since 2010 represent more than 13% of the total increase in payroll jobs during that period, even though manufacturing jobs represent fewer than 9% of the total payroll jobs in the economy.  For both gains in output and gains in employment over the last few years, the manufacturing sector is leading the rest of the U.S. economy.  

Related: See Business Insider's chart below and article "America's Manufacturing Industry Is The Envy Of The World Right Now."

Thursday, August 23, 2012

When I Grow Up, I Want to Be a Crony

The path to success in America used to be the private sector, but what are our children learning today?
From the Crony Chronicles, the "cronyism resource." After all, why be a taxpayer, when you could be a tax spender?

2012 Drug War Killings Reach 45 This Week

The organization tracks the number of Americans each year who are casualties of America's War on Drugs Peaceful Americans Who Use Intoxicants Not Currently Approved of by the Government, Who Might Break Into Your House and Kill You While Executing a Search Warrant if They Suspect You of Possessing or Distributing a Weed That Grows Naturally Everywhere and Was Smoked Regularly by President Obama. 

That's basically what happened to Wendell Allen, 20, of New Orleans, who was a small-time distributor of marijuana and was shot and killed during a drug raid in March by a police officer who was indicted this week on manslaughter charges.  Wendell Allen was unarmed and became this year's Drug War Casualty No. 15. 

More recently, an Iowa City man was shot and killed during an undercover drug operation this week, bringing the total number of Drug War Killings this year to 45.

Related: Roughly 48% of the inmates in federal prisons (almost 93,000) are serving jail sentences for drug offenses.  

HT: Jacob Sullum

CO2 Emissions at a 20-Year Low, Oceans of Natural Gas, Romney v. Obama, $1T Capex in 2012

Energy updates:

1. Investor's Business Daily ran an excellent editorial a few days ago on the "shockingly good news" that carbon emissions are now the lowest in 20 years, going all the way back to 1992 (see chart above, EIA data here), here's a slice:

"Carbon emissions in the U.S. have hit a 20-year low due to a supposedly environmentally unfriendly drilling technique that has created an abundance of cheap natural gas. The free market, it seems, does it better than the EPA."

"Environmentalists find themselves between shale rock and a hard place after a little noticed technical report documented how the natural gas boom caused by the use of hydraulic fracturing, or fracking, has actually helped the environment in a major way while also creating jobs and economic growth."

"In the report, the U.S. Energy Information Agency, a part of the Energy Department, said that energy-related U.S. CO2 emissions for the first four months of this year fell to about 1992 levels. EIA estimates that full-year emissions will be the lowest since at least 1995. The untold story is that this has been achieved by the free market and private-sector technology, not government mandates."

"How ironic that those greedy energy companies and not government-backed green energy failures such as Solyndra and the Chevy Volt are both saving the earth and paving the way to genuine energy independence. Fracking will save the earth before anything like cap-and-trade or the Kyoto Protocol — an inconvenient truth indeed for environmentalists."

2. Robert Lenzner at Forbes summarizes the Top Ten Reasons to Love Natural Gas, here's the opening paragraph:

"Here is the most promising development in the American economy. Period! The discovery of oceans of natural gas in North America means a vastly cheaper source of energy, the creation of hundreds of thousands of new jobs, a meaningful reduction in global warming, a much diminished balance of payments deficit, a far stronger dollar, a jump in the profits of the electric utilities, who will then raise their cash dividend payouts, which will benefit widows and orphans as well as giant pension funds, and cause the gold bugs lasting anguish."

3.  the energy platforms of Obama and Romney are different, here's the bottom line:

"In reviewing the energy policy platforms of Romney and Obama, we see that Obama shows a distinct preference for a command-driven energy economy, while Romney strongly favors a freer, private-sector energy economy. Obama places far less emphasis on energy affordability and far more emphasis on greening the energy supply even though that raises costs. Finally, whereas Romney clearly has a goal of energy interdependence with Canada, Obama’s view of energy independence is more a “go it alone” approach, where pipelines to Canada need not apply."

4. Global oil and gas capital expenditures will break the $1 trillion barrier, according to a new report from natural resources experts Global Data, here's an excerpt:

"Increased activity in the Exploration and Production (E&P) sector will push oil and gas capital expenditure (capex) to an enormous $1,039 billion for 2012. We estimate that total oil and gas capex will increase 13.4% this year over the 2011 total of $916 billion, as oil companies intensify upstream operations across locations as diverse as offshore Brazil, the Gulf of Mexico and the Arctic Circle."
"Investor confidence in new upstream projects is being driven by the increasing number of oil and gas discoveries (242 last year alone), combined with consistently high oil prices and the arrival of new technologies that are giving the major firms access to deep offshore reserves that were previously technically and financially unviable."

"North America is expected to witness the highest capex, with $254 billion, or 24.5% of the 2012 global total. Compared to a global average capex growth rate of 13.4%, North America is expected to see growth of 15.7%. The increase of unconventional oil and gas activities, especially the continuing exploitation of shale oil and gas sites and the development of Canadian oil sands, are the major drivers for these investments."

2012: The Year of the Housing Recovery, Part II; "This Is What a Housing Recovery Looks Like"

There's more positive housing data coming out this week to support the growing consensus that we've passed the bottom and now have a solid, sustainable real estate recovery underway (see related CD post on Tuesday).  Here are some of those new data:

1.  The Federal Housing Finance Agency (FHFA) released its quarterly report today with U.S. home prices for the month of June and quarterly home prices for the second quarter, based on its House Price Indexes (HPIs) for houses financed or guaranteed by Fannie Mae or Freddie Mac. According to today's report, seasonally-adjusted home prices increased in June by 0.7% from May to an index level of 189.76, which was the highest monthly home price index since August 2010 (see red line in chart above).  The May-June increase in the HPI was the fifth back-to-back monthly price increase starting in February, and the first time since early 2006 of five consecutive monthly increases.   On an annual basis, the HPI in June was 3.6% above a year ago, and was the largest annual increase in almost six years, going back to September 2006.  Without seasonal adjustment, home prices increased by 1.2% from May-June and by 3.7% compared to a year ago (blue line in chart). 

2. On a quarterly basis, U.S. home prices increased during the second quarter by 1.8% from the previous quarter, and by 3.03% from a year ago.  The 1.8% increase in home prices was the largest quarterly gain since a 2.17% increase in Q4 2005, and the annual increase was the largest since a 3.12% gain in Q4 2006. 

3.  Earlier this week, leading real-estate information provider Zillow reported that U.S. home prices increased in July for the eighth consecutive month starting in December of last year, according to Zillow's Home Value Index based on 167 U.S. metro areas.  Zillow chief economist Stan Humphries reported on the Zillow blog that "Home values increased 0.5% to $151,600 from June to July, marking another month of healthy monthly appreciation. Compared to July 2011, home values are up by 1.2 percent, supported in many places by low for-sale inventory."  Home price increases in July were especially strong in Phoenix (2.2%), San Jose (1.2%), and San Francisco (1.2%).

4. According to Data Quick's weekly National Home Sales Snapshot (based on home sales in 98 of the top 100 U.S. metro areas representing two-third of U.S. home sales), national home sales over the last 30 days (218,318 transactions) were 10.4% above a year ago, and the median home sales price of $200,000 was 5.3% above the same period last year.    

5.  Census reported today that sales of new single-family homes increased to a 372,000 seasonally-adjusted annual rate in July, beating the consensus forecast of 365,000.  July new home sales were 3.6% above the previous month, and 25.3% above July sales last year. 

6. The National Association of Realtors reported yesterday that existing-home sales in July were 10.4% above last year, while the national median existing-home price of $187,300 was up by 9.4% from a year ago. 

Regional and state home sales data continue to also show signs of a solid real estate recovery:

7. Florida home sales were up by 9.8% in July, the statewide median home sales price was up by 7.8% versus last year, and pending sales for existing single-family homes were up by a whopping 42% compared to July last year, so the sales gains should continue going forward.   

8. Houston home sales are exploding. Single-family home sales soared 27% in July from last year, while the median sales price rose 6.3% from a year ago to $170,000, matching Houston's all-time record high median price in June.  (Note: Houston is not included in the Case-Shiller Home Price Indexes, so the record home prices there will not be captured by the Case-Shiller index.) 

Bottom LineAs Brian Wesbury et al. pointed out today when summarizing some of the recent housing data, "This is what a housing recovery looks like."  I agree. When you've got ongoing, sustained increases in both home sales and median home prices (for both existing-homes and new homes), often at double-digit increases especially for home sales, continuing increases in pending home sales, low housing inventory levels, and historically low mortgage rates, you've got all of the necessary ingredients in place for a real "real estate recovery." 

Government Overreach: Good News, Bad News

Good News: City officials in Holland, Michigan will allow a 13-year-old to reopen his hot dog cart at a new legal location just two feet from the original illegal location.

Bad News: The owner of a small farm in Virginia faces thousands of dollars in fines for hosting a 10-year old's birthday party and selling her vegetables to consumers. 

The "Smokey Bear Effect": How Government Forest Takeover Has Led to More, Bigger and Hotter Fires

National Public Radio reports today on how the federal government's "takeover" of America's forests with the creation of the U.S. Forest Service in 1905 has led to more, not fewer, forest fires in the long run.  Among fire historians it's known as the "Smokey Bear Effect," thus the title of the segment "How The Smokey Bear Effect Led To Raging Wildfires," here's a slice: 
Scars from thousands of sections show how often fires burned in the Southwest. It was every five or 10 years, mostly — small fires that consumed grass and shrubs and small seedlings, but left the big Ponderosa pine and Douglas fir just fine. This was the norm. 

Then something happened. "Around 1890 or 1900, it stops," say tree ring expert Thomas Swetnam. "We call it the Smokey Bear effect."

Settlers brought livestock that ate the grass, so fires had little fuel. Then when the U.S. Forest Service was formed, its marching orders were "no fires." And it was the experts who approved the all-out ban on fires in the Southwest. They got it wrong.

That's the view of fire historian Stephen Pyne. "The irony here is that the argument for setting these areas aside as national forests and parks was, to a large extent, to protect them from fire," Pyne says. "Instead, over time they became the major habitat for free-burning fire."

So instead of a few dozen trees per acre, the Southwestern mountains of New Mexico, Arizona, Colorado and Utah are now choked with trees of all sizes, and grass and shrubs. Essentially, it's fuel. And now fires are burning bigger and hotter. They're not just damaging forests — they're wiping them out. Last year, more than 74,000 wildfires burned over 8.7 million acres in the U.S.
MP: Maybe there's a lesson here for government intervention in the economy?

Shale Oil: A Tremendous Development for U.S. Oil Production, Shovel-Ready Jobs, Economic Growth

Bloomberg -- "A boom in oil production from the shale formations of North Dakota and Texas has the U.S. on a course to cut its reliance on imported crude oil to about 42% this year, the lowest level in two decades. Dependence on crude purchased from foreign countries is on a pace to decline from last year, Adam Sieminski, the head of the U.S. Energy Information Administration, said during a Bloomberg Government lunch yesterday in Washington."

"Higher oil prices and an increased use of a drilling technique known as hydraulic fracturing has producers including Continental Resources Inc. (CLR), Marathon Oil Corp. (MRO) and Hess Corp. (HES) boosting production from oil-rich geologic formations. Hydraulic fracturing involves pumping millions of gallons of water into the ground to free oil and natural gas and has been widely used in shale-rock formations such as the Bakken of North Dakota and Eagle Ford in Texas."

“What’s happening in North Dakota, and in Texas, with Eagle Ford, Bakken formation in North Dakota, is a tremendous development for U.S. oil production and economic growth,” Sieminski said. 

"In 2011, the U.S. relied on imports for 44.8% of its petroleum consumption, down from 60.3% in 2005, according to EIA data (see chart above). This year, the country should end up at about 42%."

MP: The chart above shows net oil imports from 1992 to 2012 based on EIA data through June.  For the January-June period this year, net oil imports have fallen to an average of 42.2%, which is the lowest level since 40.7% in 1992, 20 years ago. In comparison, net oil imports during the first six months of 2011 were 46.8% and were 50.9% during that period in 2010.  

Wednesday, August 22, 2012

Stingy Liberal, Exhibit A: Joe Biden

From Jeff Jacoby's column today "Stingy Liberals":
Liberals, popular stereotypes notwithstanding, are not more generous and compassionate than conservatives. To an outsider it might seem plausible that Americans whose political rhetoric emphasizes "fairness" and "social justice" would be more charitably inclined than those who stress economic liberty and individual autonomy. But reams of evidence contradict that presumption, as Syracuse University professor Arthur Brooks demonstrated in his landmark 2006 book, Who Really Cares.

However durable the myth, wrote Brooks (who now heads the American Enterprise Institute, a Washington think tank), there is no getting around the data. For years, academic research and comprehensive national studies have confirmed that Americans who lean to the left politically tend to be much less charitable than those who tilt rightward. The Chronicle of Philanthropy's new report is only the latest in a long series of studies corroborating that fact.

The Chronicle's new study, which is based on IRS records from 2008 (most recent available), accounts for regional differences in the cost of living. It calculates charitable giving only from discretionary income -- the dollars left over after paying for taxes, housing, and food. But the economic differences are not nearly as significant as cultural differences. In parts of the country where conservative values dominate, charity tends to be high. Where liberalism holds sway, charity falls. "Red states are more generous than blue states," the Chronicle concludes. The eight states that ranked the highest in charitable giving all voted for John McCain in 2008. The seven lowest-ranking states supported Barack Obama.

Of course this doesn't mean that there aren't generous philanthropists in New England. It doesn't mean selfishness is unknown on the right. What it does mean is that where people are encouraged to think that solving society's ills is primarily a job for government, charity tends to evaporate. The politics of "compassion" isn't the same as compassionate behavior. America's generosity divide separates those who understand the difference from those who don't.
MP: Joe Biden's charitable giving, at least until his vice-presidential candidacy in 2008, provides a case in point of being a "stingy liberal."  When nobody was watching or scrutinizing the Bidens' tax returns, they gave less than $200 to charity in 1998, which was less than 1/10 of one percent of their adjusted gross income (AGI) that year of more than $215,000 (see table above).  According to income tax data available at Forbes, Americans earning the same AGI as the Bidens that year gave more than $5,000 to charity.  The Bidens got a little more charitable over the years, but their gifts were never more than 1% of their income until Biden became Vice-President.

And even now that the Bidens have "found religion" when it comes to charity (knowing that their tax records are now public), they are still only giving about half of the average amount of charitable giving for their income group. Joe Biden's stinginess demonstrates Jeff Jacoby's point that the politics of compassion and charity are often much different than compassionate and charitable behavior.

Great Moments in Government Regulation: How City Regulations Killed a Dream in Chattanooga

Here's an excerpt from an editorial in today's Chattanooga Times Free Press that presents a case study in how well-intended, but excessive, burdensome, and stifling government regulations can, and did, kill a small business:
When longtime Chattanooga-area resident Christian “Thor” Thoreson and his partner Christina Holmes decided to launch Buzz Chattanooga Pedicabs in February 2011, the business seemed tailor-made for the downtown area.

Thoreson’s pedicabs, which are pedal-driven tricycles with a two-person passenger compartment attached behind the driver, fill an important need for downtown. By offering a cheap and convenient way for people to get around between hotels, tourist attractions, bars and restaurants, Buzz Chattanooga is a boon for tourist and a convenient addition for locals.

The pedicabs prevent drunk driving, free up precious parking spaces and also cut down on auto emissions. The service is inexpensive — it costs passengers only the amount they wish to tip their driver — and it provides well-paying jobs for Buzz Chattanooga drivers. Thoreson estimates his drivers make more than $20 an hour. Revenues from selling ads on the pedicab and a small cut of driver tips fund the business.

The pedicabs seem like a win for everyone. But apparently, city officials don’t see it that way.

After dealing with the frustrating regulations placed on his business, the unwillingness of city leaders to allow him to serve customers on both sides of the river (pedicabs are banned from using the bridges that span the Tennessee River in downtown Chattanooga, including a pedestrian bridge) and difficulties in selling ads on the pedicabs, Thoreson decided yesterday to throw in the towel and close Buzz Chattanooga.

When asked what he’d tell another entrepreneur considering starting a business in Chattanooga, Thoreson replied, “Stay the hell away.”

Thoreson’s story is the hidden side of regulations that the city council and other bureaucrats rarely consider in their absurd exercises in trying to keep people safe and micromanage businesses. Too often, regulations stifle entrepreneurs’ ability to innovate, and prevent them from improving their businesses, serving more customers and, ultimately, making Chattanooga a better place.
To paraphrase President Obama:

Look, if you’ve been unsuccessful, you didn’t get there on your own. If you were unsuccessful at opening or operating a small business, some government official along the line probably contributed to your failure.  There was an overzealous civil servant somewhere who might have stood in your way with unreasonable regulations that are part of our American system of anti-business red tape that allowed you to not thrive.  Taxpayers invested in roads and bridges, but you might have faced city council members who wouldn’t allow you to use them.  If you’ve been forced to close a business – it’s often the case that you didn’t do that on your own.  Somebody else made that business closing happen or prevented it from opening in the first place. You can thank the bureaucratic tyrants of the nanny state.

Markets in Everything: All-You-Can-Drink Cruise

USAToday Travel -- "Add industry giant Carnival to the list of lines offering "all-you-can-drink" alcohol packages. The world's largest cruise company this month has begun testing a nearly $50 per day package on the Carnival Victory that gives buyers access to unlimited wine, beer and spirits as well as sodas and non-alcoholic frozen cocktails."

Will College Basketball Coaches Agree to Use Race, Diversity and Affirmative Action for Their Teams?

Michigan State's top basketball players in 2011-2012.
KANSAS CITY, Mo. — “The National Association of Basketball Coaches has told the U.S. Supreme Court it believes university officials should be able to continue taking race into consideration when deciding who gets to enroll in their schools.”

Q: Will the college basketball coaches agree to take race and diversity goals into consideration when deciding who gets to play on their teams?

Update: The photo above shows the six players on the Michigan State Spartans basketball team who had the most playing time and made the most points during the 2011-2012 season, and it's not a very diverse group, and not very representative of society at large or the Michigan State student body. Certainly lots of significant racial under-representation here that could be addressed with the race-based, affirmative action preferences that frequently take place in college admissions. 

HT: Jennifer Gratz

You Can't Give Away Free Food OR Free Water

I posted recently about how you apparently can't give away free food to poor children in Philadelphia or distribute free food to the homeless in Houston without a permission slip from the government.  Here's another story about a Phoenix woman who was told by a city official that she was violating city code by giving away free bottled water in the downtown area without a permit during 112-degree heat.   

HT: Warren Smith

Tuesday, August 21, 2012

Markets in Everything: A $5 Doctor

From the Chicago Tribune, a story about a small-town physician in Illinois who charges only $5 for an office visit, and hasn't changed his price since the 1970s. 

What About the Legal "Usurious" Ticket Fees?

A $17 Tigers ticket purchased directly from the team's website costs $25.85 with fees, or 52% above face value:
From the Detroit News on July 27:
A Michigan state representative said he will introduce legislation capping the markup on tickets sold on the secondary market — in particular on websites like StubHub — at 10 percent above face value.

State Rep. Douglas Geiss, D-Taylor, requested a bill in response to a story published Thursday on, which showed ticket prices for the Detroit Tigers' upcoming seven-game homestand beginning Aug. 3 are, on average, listed at 17 percent above average ticket prices.

"It appears that we've got legalized scalping going on," Geiss said Friday. "There is a need within society for those with tickets that they can no longer use. But when you start talking about tickets with a face value of $100 being listed for $1,000 … that is usurious.
MP: Forget about the high ticket prices in the secondary market (sometimes), what about the "legalized, usurious scalping" going on in the primary market?  The graphic above shows that if you order a single $17 ticket for the August 31 Detroit Tigers home game against the Chicago White Sox from the Tigers' website, your total cost with a $4.75 "convenience fee" and a $4.10 "order fee," brings the total cost to $25.85, or a whopping 52% above face value! 
That's more than five times the 10% cap above face value Rep. Geiss is proposing for ticket sales in the secondary market!

Q: Would Rep. Geiss's legislation capping ticket prices to 10% above face value apply to the primary market as well as the secondary market, making the Detroit Tigers' current ticket pricing practices illegal?  And if not, why couldn't the secondary market cap price tickets at 10% above face value, but then add a $10-20-30 "convenience fee" and a $10-20-30 "order fee"? 

Instead of going after the "usurious" ticket prices in the secondary market, maybe Rep. Geiss should introduce legislation aimed at the usurious "ticket fees" in the primary market that can add more than 50% to the price of a ticket to a Tigers game?