Saturday, January 16, 2010

Markets in Everything: L.A. Gang Tours for $65

LOS ANGELES (AP) - "Only miles from the scenic vistas and celebrity mansions that draw sightseers from around the globe - but a world away from the glitz and glamour - a bus tour is rolling through the dark side of the city's gang turf.

Passengers paying $65 a head Saturday signed waivers acknowledging they could be crime victims and put their fate in the hands of tattooed ex-gang members who say they have negotiated a cease-fire among rivals in the most violent gangland in America.

If that sounds daunting, consider the challenge facing organizers of
LA Gang Tours: trying to build a thriving venture that provides a glimpse into gang life while also trying to convince people that gang-plagued communities are not as hopeless as movies depict."

HT: Steve Parks

Note: First tour sold out.

EU vs USA, Part IV

The chart above is based on data in the 2004 Timbro study "EU vs. USA" (Table 3.3) which finds that the average poor household in America has 25% more living space (1,228 square feet) than the average European household (976.5 square feet), and the average American household has 92% more space (1,875 square feet) than the average European household.

Adjusted for differences in household size, the average poor American household has 11% more living space per person than the average European, and the average American has 82% more living space per person than their European counterpart.

EU vs USA, Part III

Click to enlarge.
My recent comparison of per-capita GDP for various U.S. states and European countries using 2007 data has now been expanded and updated using 2008 data, and a summary is presented in the table above (using BEA data for state GDP, Census data for U.S. state population, and World Bank data for Europe's per-capita GDP-PPP). The updated data show that if European countries had been added as American states in 2008:

1. Italy ($30,756), Greece ($29,361) and Portugal ($30,756) would rank as the three poorest U.S. states, below even Mississippi in per capita GDP ($31,233); Portugal would be 26% poorer than Mississippi.

2. Spain ($31,955) would be America’s second poorest state, ranking between West Virginia ($33,978) and Mississippi ($31,233).

3. France ($34,045) and Belgium ($34,493) would rank #48 and #49 as U.S. states, just barely ahead of Arkansas ($34,437).

4. Germany ($35,613), U.K. ($35,445) and Finland ($35,426) would rank among the poorest 15% of American states, with per capita GDP below Alabama ($36,469).

5. Although Switzerland (not an EU country but included here), Netherlands, Austria, Sweden and Denmark rank among Europe's wealthiest countries, they would be below average as U.S. states measured by GDP per capita, ranging between 9.5% below the U.S. average for Switzerland to 22% below the U.S. average for Denmark.

6. Luxembourg is the only EU country that would rank above average and would in fact be the wealthiest American state, but behind the District of Columbia in per-capita GDP.

Bottom Line: Professor Krugman claims that “Europe’s economic success should be obvious even without statistics.” Unfortunately for Krugman, the economic statistics tell a much different and bleaker story about Europe than Krugman portrays, and suggests that "America's economic success should be obvious - just look at the statistics."

Friday, January 15, 2010

What To Do If Scott Brown Wins in MASS on Tues.

Chart above shows rising Intrade odds for Republican party candidate Scott Brown to win Tuesday's special Senate election in Massachusetts.

PAJAMAS MEDIA -- "A new poll taken Thursday evening for Pajamas Media shows Scott Brown, a Republican, leading Martha Coakley, a Democrat, by 15.4% in Tuesday’s special election for the open Massachusetts US Senate seat. The poll of 946 likely voters was conducted by telephone using interactive voice technology (IVR) and has a margin of error of +/- 3.19%.

This is the first poll to show Brown surging to such an extent. A poll from the Suffolk University Political Research Center – published Thursday morning by the Boston Herald, but taken earlier – had Brown moving ahead by 4%."


"As the likelihood grows that Republicans could win the special election in Massachusetts, it's worth thinking again about alternatives for health care reform in case that happens. I see three, in descending order of preference:

1. Finish up the House-Senate negotiations quickly and hold a vote before Scott Brown is seated. Republicans will scream, but how could they scream any louder? It's a process argument of murky merits that will be long forgotten by November.

2. Get the House to pass the Senate bill, and maybe use a reconciliation bill (which only needs a Senate majority to pass) to implement as many House-Senate compromises as possible.

3. Go back to Olympia Snowe. I have not seen any persuasive reporting, or even conjecture, about what Snowe is actually thinking. Her substantive demands have been met. By the end of the process, her only demand was to delay the bill by some unspecified time period, which is such a vacuous demand that it's hard to believe it represents her actual beliefs. Did she turn against the bill completely? Did she decide that she couldn't take the heat for voting yes? Or did she figure that, with sixty Democrats, her vote wouldn't really be needed so there was no reason for her to take the heat? If options 1 and 2 fail, we may find out about Snowe.

Obviously, the alternative is option 4: Crawl into a hole and die. Now, the Republican mantra is that we should kill this bill and "start over." But the truth is, there isn't and has never been a real Republican plan on the table to deal with, and even the conservative plans that Republicans haven't embraced are unworkable or do nothing. So walking away means admitting you did nothing on the issue that consumed most of your time, and wait for your November beating as a failed Congress running with a failed president. Numerous conservative pundits have advised Democrats to take this approach, but I don't think it's a very sensible plan."

$2.5k to $8k: Regulations Will Cost More Than Car

DETROIT (AP) -- The world's cheapest car ($2,500) is being readied for sale in the U.S., but by the time India's Tata Nano is retrofitted to meet emissions and safety standards, it won't be that cheap. Tata Motors already has made a European version of the four-seat car that will cost about $8,000 when it debuts in 2011, and a Tata Technologies official said privately that the U.S. version is expected to have a comparable price.

Thanks to Michael Kelly.

Markets in Everything: Cannabis Cafe

A marijuana restaurant opens in Oregon.

Empire State Index Positive for 6th Month

NY FED -- The Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved for the sixth consecutive month in January. The general business conditions index climbed 11 points, to 15.9 (see chart). The new orders and shipments indexes posted similar increases, and the unfilled orders index rose above zero. Both the prices paid index and the prices received index rose significantly, with the latter moving above zero for the first time in more than a year. Employment indexes advanced into positive territory. Future indexes were highly optimistic; activity and employment were widely expected to improve over the next six months; the future general business conditions index rose to 56.0, with 63 percent of respondents expecting conditions to improve (see chart). Prices, however, were expected to continue to climb in the months ahead.

Sixth Straight Monthly Increase in Industrial Production, Growing at 9% Annual Rate

WASHINGTON (MarketWatch) -- The output of the nation's factories, mines and utilities rose a seasonally adjusted 0.6% in December, the sixth increase in a row following the worst downturn since the end of World War II, the Federal Reserve reported today.

MP: The monthly increase in December industrial production marks the first time since late 1997 of six consecutive monthly increases, and the cumulative gain of 4.5% through December is the largest six-month gain since early 1998 (see top chart above). Although the year-to-year growth rate through December is negative (-2.0%), it's the least negative growth rate since the summer of 2008 and the trend in this series, along with the six straight monthly increases, is another V-sign of economic recovery (see bottom chart above).

Chile's Economic Miracle: Free Trade Lessons

The chart above helps to document graphically what has accurately been described as the “Chile economic miracle.” Up until the early 1980s, when the first round of economic reforms (1974–1983) were starting to have a positive effect, Chile’s economic performance was among the weakest of the Latin American countries, with annual increases of real GDP per capita averaging only 0.76 percent from 1913 to 1983. Additional economic reforms in 1985 and 1990 that included trade liberalization supercharged Chile’s economy, and annual growth in per capita output since 1983 has averaged an impressive 4.2 percent per year.

Before the economic reforms, with only 0.76 percent annual growth, it took almost an entire century for living standards to double in Chile; living standards now double every 17 years with 4.2 percent real growth, and that’s a real economic miracle!

One major factor in Chile’s amazing economic success has been its active pursuit since the 1990s of becoming one of the world’s most open and free markets. To help overcome its natural handicap of being a small and remote country, Chile has become a world leader in free trade, demonstrated by its free trade agreements with more than 50 countries around the world, which give its consumers and companies access to more than half of the world’s customers and markets.

Read more here of my Enterprise Blog post
More on Chile’s Economic Miracle: Free Trade Lessons for the U.S.?

Thursday, January 14, 2010

Higher Education Is Failing Men, Not Women

From yesterday's Chronicle of Higher Education, an article by Mary Ann Mason:

"At each education level, from K-12 onward, structural barriers discourage women from entering into the challenging, and much higher-paid, fields of science, technology, engineering, and math. Women are diverted from such fields at each stage of their education. In K-12, girls receive less encouragement than boys in math and science. In high-school programs, they are channeled into certain service professions, like hair styling rather than computer repair. At the undergraduate level, women are clustered in education and health programs, while men dominate engineering and the physical sciences.

In graduate school, the segregation is even more pronounced, and fewer women still go on to careers in academic science. At every level, the American educational system is failing young women by encouraging them to take a route that leads to lower pay, a route that will eventually limit them in providing for their families."

MP: I posted about this article
yesterday and reported some data that might refute Ms. Mason's claim that structural barriers discourage women from going into math, science and engineering.

The graduate school enrollment data in the chart above (available here) demonstrates that Ms. Mason is showing an extremely selective concern about sex imbalances in graduate school, since the enrollment data clearly show that: a) women are over-represented in graduate schools in general by a factor of 143 women for every 100 men, and b) women are over-represented in seven out of ten graduate fields in some cases like health sciences by as much as 398 women enrolled for every 100 men! If there's segregation in graduate school, it's men that appear to be the "victims" overall.

In fact, couldn't we say that American higher education is failing men because of the following breakdown for college graduates of the Class of 2009 (in addition to the over-representation of women in graduate school documented above)?

Associate's Degrees: 167 for women for every 100 for men.

Bachelor's Degrees: 142 for women for every 100 for men.

Master's Degrees: 159 for women for every 100 for men.

Professional Degrees: 104 for women for every 100 for men.

Doctoral Degrees: 107 for women for every 100 for men.

Bottom Line: Despite Ms. Mason claims, the data clearly suggest that men, not women, are the "second sex" in America's colleges and universities.

Let's Take the Crony Out of Crony Capitalism

"The word "capitalism" is used in two contradictory ways. Sometimes it's used to mean the free market, or laissez faire. Other times it's used to mean today's government-guided economy. Logically, "capitalism" can't be both things. Either markets are free or government controls them. We can't have it both ways.

The truth is that we don't have a free market—government regulation and management are pervasive—so it's misleading to say that "capitalism" caused today's problems. The free market is innocent.

But it's fair to say that crony capitalism created the economic mess.

Crony capitalism, by the way, will be the subject of my TV show this week on the Fox Business Network (Thursday [tonight] at 8 p.m. Eastern; Friday at 10)."

John Stossel writing in Reason

Why So Many Americans Are Broke

According to classical economics, human beings are logical when it comes to money. If given sufficient information, they will make the most of their dollars. But four experiments—administered on students at some of the finest universities in the world—reveal that smart people make mistakes when it comes to handling money.

Read more here.

Retail Clinics:Affordable, Convenient ER Alternative

"Hospital emergency room (ER) use is both costly and timeconsuming. Often, however, the ER is the only way to reach a physician after hours. As a result, patients overuse emergency rooms: Of the 119 million visits to hospital ERs in a given year, 55% are for nonemergencies. A 2006 survey of California hospitals found that nearly half of ER patients (46%) thought they could have resolved their medical problem with a visit to their primary care physician, but were unable to obtain timely access (see chart above).

Increasingly, however, patients have less costly and more convenient options for routine medical needs - retail clinics and urgent-care clinics."

~ "
Retail Clinics: Convenient and Affordable Care" by Devon Herrick at NCPA

Jobless Claims (Four-Week Moving Average) Fall for 19th Consecutive Week to a New 16-Month Low

WASHINGTON (MarketWatch) - "First-time jobless claims rose last week by the largest amount in five weeks, surprising economists who had expected a decline. Initial claims rose by 11,000 to 444,000 in the week ended Jan. 9, the Labor Department reported today. This is the highest level since mid-December.

Despite the increase, the trend in jobless claims is still positive. The average number of workers filing claims over the past four weeks fell by 9,000 to 440,750. This is the lowest since late August 2008, just prior to the near-collapse of the financial system. The four-week average is considered a better gauge of the labor market than the volatile weekly number."

Wednesday, January 13, 2010

Structural Barriers Discourage Girls From Going Into Math and Science? Not According to the Data.

From today's Chronicle of Higher Education, an article by Mary Ann Mason:

"Our economy is increasingly dependent on workers skilled in advanced technology, but at each education level, from K-12 onward, structural barriers discourage women from entering into the challenging, and much higher-paid, fields of science, technology, engineering, and math.

Women are diverted from such fields at each stage of their education. In K-12, girls receive less encouragement than boys in math and science. In high-school programs, they are channeled into certain service professions, like hair styling rather than computer repair. At the undergraduate level, women are clustered in education and health programs, while men dominate engineering and the physical sciences."

MP: Sorry to "screw up a good story by bringing up data and evidence" (see comments section), but according to this 2009 SAT report from the College Board:

1. The average number of years of math study for boys and girls in high school is almost identical: 3.9 years for boys and 3.8 years for girls.

2. The average number of years of science study for girls (3.5 years) in high school is almost the same as for boys (3.6 years).

3. High school girls had exactly the same math GPA as boys of 3.14, and a slightly higher average GPA for science (3.27) than boys (3.23).

4. More girls take biology and chemistry (55%) in high school than boys (45%), i.e. 122 girls per 100 boys.

5. There are 127 girls taking high school AP/Honors science classes for every 100 boys.

6. For high school students reporting more than four years of math study, the percentages are equal by gender: 50% of boys and 50% of girls take more than four years of math.

7. Both 50% of boys and 50% of girls in high school report that calculus is the highest level of high school mathematics taken.

8. More high school girls than boys took AP Honors math courses, by a ratio of 117 girls for every 100 boys.

Bottom Line: The evidence shows that high school girls are equally prepared, if not more prepared (more AP math and science classes), than high school boys for college programs in math, science and engineering.

If "structural barriers" are in place to deter and divert girls away from math and science in K-12, why are girls taking as many or more math and science classes in high school as boys and getting the same GPAs, and why are girls taking more AP Math and Science Honors courses than boys? You could make a stronger case that boys are being diverted away from math and science since they are significantly outnumbered by girls in AP Honors math and science courses, and high school biology and chemistry classes.

U.S. #1: Overtakes Russia as Top Nat Gas Producer

BLOOMBERG -- The U.S. overtook Russia as the world’s largest natural-gas producer last year as U.S. suppliers tapped unconventional resources while demand in Russia plunged amid the country’s worst economic decline on record. U.S. output in January through October advanced 3.9% from a year earlier to 18.3 trillion cubic feet (519 billion cubic meters), according to the latest Department of Energy data. Russian output, about four-fifths of which comes from state-run OAO Gazprom, plunged 17 percent in the period to 462 billion cubic meters.

“Minimal hurricane disruptions and significant growth in production from onshore shale basins have contributed to the increase in domestic supply,” the Department of Energy’s Energy Information Agency said on its Web site last month. The U.S. growth trend may indicate that Gazprom will not be able to break into the U.S. market as it had planned, Mikhail Korchemkin, head of East European Gas Analysis, said today by telephone today from Malvern, Pennsylvania.

The state-run Russian company set a target to take as much as 10% of the U.S. market by 2020 through sales of liquefied natural gas, or LNG, from Arctic deposits, Gazprom Deputy Chief Executive Officer Alexander Medvedev said in June.

The surprising boost shale gas has given U.S. output has closed the world’s biggest energy consumer to some imports and “created a huge oversupply of LNG in Europe,” Korchemkin said.
MP: The chart above displays EIA data for annual "U.S. natural gas gross withdrawals," and shows an almost 3 trillion cubic feet increase in production since 2005 (a 12.5% increase).

From my recent article in the Detroit News:

What's getting all of the attention recently is hydraulic fracturing, a process that involves injecting a mixture of water, sand and chemicals under high pressure to break through shale formations to reach enormous deposits of natural gas several miles underground. New advances in seismic imaging are used to find the shale gas, and horizontal drilling enables companies to reach the gas and bring it to the surface.

Largely through the use of these techniques, U.S. natural gas production has increased 40% in recent years, reversing what was once thought to be an irreversible decline in domestic drilling. Altogether there could be as much as 842 trillion cubic feet of natural gas in shales around the country, which is more energy than all of Saudi Arabia's oil.

How Media Misuse Income Data

From Thomas Sowell in yesterday's Investor's Business Daily:

"Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a "problem" for which a "solution" is necessary. They have created a powerful vision of "classes" with "disparities" and "inequities" in income, caused by "barriers" created by "society." But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the "barriers" assumed by many, if not most, of the intelligentsia.

Far from using their intellectual skills to clarify the distinction between statistical categories and flesh-and-blood human beings, the intelligentsia have instead used their verbal virtuosity to equate the changing numerical relationship between statistical categories over time with a changing relationship between flesh-and-blood human beings ("the rich" and "the poor") over time, even though data that follow individual income-earners over time tell a diametrically opposite story from that of data which follow the statistical categories which people are moving into and out of over time.

The confusion between statistical categories and human beings has led to many claims in the media and in academia that Americans' incomes have stagnated or grown only very slowly over the years.

For example, over the entire period from 1967 to 2005, median real household income — that is, money income adjusted for inflation — rose by 31%. For selected periods within that long span, real household incomes rose even less, and those selected periods have often been cited by the intelligentsia to claim that income and living standards have "stagnated." Meanwhile, real per capita income rose by 122% over that same span, from 1967 to 2005. When a more than doubling of income is called "stagnation," that is one of the many feats of verbal virtuosity.

The reason for the large discrepancy between growth rate trends in household income and growth rate trends in individual income is very straightforward: The number of persons per household has been declining over the years (see charts above).

Despite such obvious and mundane facts, household or family income statistics continue to be widely cited in the media and in academia — and per capita income statistics widely ignored, despite the fact that households are variable in size, while per capita income always refers to the income of one person. However, the statistics that the intelligentsia keep citing are much more consistent with their vision of America than the statistics they keep ignoring."

MP: The charts above illustrate Dr. Sowell's argument, and show that once adjusted for the fact that average housesold size has been decreasing over time, real median income per household member (per capita) reached an all-time high in 2007.

Rainforest, Reform "Math" Update: Long Division Is No Longer Taught: It Stifles Students' Creativity

Scary: Only 57% of college freshman at the University of Washington could solve this problem below (231 / 7 = 33) without a calculator, using old-fashioned "long division." Here's a hint why - according to a math teacher quoted in the NY Times, "We don’t teach long division; it stifles students' creativity.”

From Professor Cliff Mass:

Last quarter I taught Atmospheric Sciences 101 at the University of Washington, a large lecture class with a mix of students, and gave them a math diagnostic test as I have done in the past. The results were stunning, in a very depressing way. This was an easy test, including elementary and middle school math problems. And these are students attending a science class at the State's flagship university--these should be the creme of the crop of our high school graduates with high GPAs. And yet most of them can't do essential basic math--operations needed for even the most essential problem solving.

Here's a link to a
PDF version of the full test and results, and here's a blank version to give your kids and friends.

Consider these embarrassing statistics from the exam:

The overall grade was 58%

43% did not know the formula for the area of a circle

86% could not do a simple algebra problem (problem 4b)

75% could not do a simple scientific notation problem (1e)

52% could not deal with a negative exponent (2 to the -2)

43% could not do a simple long division problem with no remainder (see above)!

47% did not know what a cosine was.

I could go on, but you get the message. If many of our state's best students are mathematically illiterate, as shown by this exam, can you imagine what is happening to the others--those going to community college or no college at all?

What explains this mathematical illiteracy?

Starting in the mid-90s colleges of education and "curriculum specialists" in districts become enamored with a new way of teaching math--called reform or discovery math. Instead of teaching the basics --followed by practice to mastery, the idea was that students could only learn math they "discovered" themselves. Working on problem sets was considered "drill and kill." Direct instruction by teachers and equations in books were out. Long division was out. Integrated math books where all topics were swirled together were in. Group learning and playing with objects (manipulatives) were in. Describing one's through process was considered more important than getting the right answer. Most of this proved to be a disaster, but those pushing it--professors in education schools and district curriculum types--were believers, even though there was no empirical proof that it worked.

See a video demonstration here of some "rainforest math":

HT: Ironman

See previous CD posts on rainforest math here, here and here.

Tuesday, January 12, 2010

Electric Vehicles: It Might Sound Like a Good Idea; But There's At Least a 15-Year Payback Period; What Were They Thinking?

From today's Detroit News:
As automakers aggressively pursue electric vehicles, a study released today shows the cost targets behind the plans are unlikely to be achieved, making it hard for consumers to recoup the extra cost of buying electric. The study by Boston Consulting Group, released at an Automotive Press Association event in Detroit today, concludes the cost of electric vehicles is unlikely to drop to the $250 per kilowatt/hour threshold that is cited by many carmakers for these vehicles to be competitive in price.

That benchmark is not possible without a major breakthrough in battery technology, and no such breakthrough is on the horizon, said Xavier Mosquet, the Detroit-based leader of BCG's automotive group. As a result, the payback time for an all-electric vehicle in the U.S. is about 15 years, and for an extended-range vehicle such as the Chevrolet Volt it would be 19 years, the study finds.

For consumers to break even on their electric car purchase, one of the following things must happen:

• There is a chemistry breakthrough that keeps material costs the same while creating a battery that can store twice as much energy, reducing the cost from $400 per kW/hr to $215.

• A new $7,700 government incentive is offered.

• Owners triple the number of miles they drive annually so the extra cost pays for itself.

• Oil prices increase from $100 a barrel to $375 a barrel.

• A 210 percent incremental gasoline tax is implemented.

While any of them are possible, or a combination of each could add up to enough, Mosquet said he sees it as unlikely. As a result, he expects electric vehicles will continue to play a minor role in most automakers' portfolios.
MP: Aren't they supposed to do a cost-benefit analysis ahead of time?

Thanks to R_Adams.

New Oil Discovery in the Gulf: 2 Trillion Cubic Feet, 165 Million Barrels, and They're Not Done Yet

CHRON.COM (January 11) -- McMoRan Exploration Co. today announced what it said could be one of the largest oil and natural gas discoveries in the shallow waters of the Gulf of Mexico in decades. The discovery was made at the Davy Jones ultra-deep prospect located on South Marsh Island Block 230 in about 20 feet of water and 10 miles off the Louisiana coast, the New Orleans company and Energy XXI, one of its Houston partners in the project, said in statements this morning.

The well was drilled to 28,263 feet and found a 135-foot column of hydrocarbon-filled sands in the Wilcox section of the Eocene and Paleocene geologic trends. That puts the estimated the size of the discovery close to 2 trillion cubic feet of resources, rivaling some oil and gas discoveries in the deep water Gulf.

FORBES.COM -- Shares of oil companies McMoran Exploration, Energy XXI and Plains Exploration & Production are jumping this morning amid news that the trio has made a nice oil discovery at its Davy Jones prospect in the Gulf of Mexico. Drilling logs on the 28,000-foot-deep well (that's 5 miles down!) show a likely prize of as much as 165 million barrels of oil and natural gas. The partners aren't done drilling either: the plan is to keep drilling down to 29,000 feet.

HT: Bloggin' Brewskie

EU vs. USA, Part II

Click to enlarge.
Source: The 2004 study "EU vs. USA" by the Swedish think tank Timbro (Table 2.2). Note that the data in the table above are from 1999, but would probably be comparable to more recent data.

Pharmaceutical Facts 2009

Time to develop and market a new drug: 10-15 years

Average Cost to develop a new drug (2006): $1.318 billion

Total R&D spending on drugs in 2008: $65.2 billion

Generic share of market in 2007: 72%

Percent of marketed drugs that cover R&D costs: Only 20%

Total number of drugs approved in 2008: 31

R&D as a percent of U.S. sales: 20.3%

Average effective patent life for major drugs: 11.5 years

Medicines currently in development: 2,900 compounds

For every 5,000-10,000 compounds tested, the number that make it to clinical trials: 5

For every 5 compounds that make it to clinical trials, the number that get FDA approval: 1

Probability that a compound tested eventually gets FDA approval: .01% (1/100th of 1%, or 1 out of 10,000) to .02% (1/50th of 1%, or 1 out of 5,000)

Pharmaceutical Industry Profile 2009

If European Countries Became U.S. States.....

Updated chart with 2008 data, click to enlarge.
Data Sources: GDP by state (BEA), state population (Census), European GDP-PPP per capita (World Bank via Wikipedia).

Click to enlarge.

Paul Krugman extols "Europe’s economic success" in a recent NY Times column "Learning from Europe," and writes that "...taking the longer view, the European economy works; it grows; it’s as dynamic, all in all, as our own."

Greg Mankiw adds this caveat about Europe's "economic success."

The chart above provides some additional perspective on Europe's "economic success," based on data available here that compares 2007 GDP per person on a purchasing power parity basis for U.S. states and European countries, and shows that if various European countries became part of the United States:

1. Portugal would rank #51 as a U.S. state, below Mississippi in per capita GDP.

2. Italy and Greece as U.S. states would rank between the two poorest U.S. states - West Virginia and Mississippi.

3. If France became a U.S. state it would rank #48 out of 51 by per capita GDP, just barely ahead of America's two poorest states - West Virginia and Mississippi.

4. Belgium, Finland, U.K. Germany and Spain would rank in the bottom 20% of U.S. states by per capita GDP, just barely ahead of Arkansas but below Kentucky.

5. Although Netherlands, Sweden and Denmark are among Europe's wealthiest countries, as U.S. states they would be between 14.5% and 18% below the U.S. average.

HT: Lee Coppock

Monday, January 11, 2010

Quote of the Day

Now, let me get this straight.....We are going to pass a health care plan written by a committee whose chairman says he doesn't understand it, passed by a Congress that hasn't read it but exempts themselves from it, to be signed by a president that also hasn't read it and who smokes, with funding administered by a treasury chief who didn't pay his taxes…all to be overseen by a surgeon general who is obese, and financed by a country that's nearly broke. What could possibly go wrong?


From today's "
The Gartman Letter" (subscription required)

Top 10 Monthly Job Losses As Share of Population

The chart above shows the top ten months since 1948 for monthly job losses (total nonfarm payroll) as a percent of the civilian non-institutional population (data here). The loss of 741,000 jobs in January 2009 was the second highest in BLS history back to 1948, second only to the loss of 834,000 jobs in October 1949. Adjusted for the size of population though the job loss in January 2009 ranks #8, and is the only month of job losses in 2008 or 2009 that was among the top ten months since WWII.

We hear a lot of news reports about jobless claims and job losses, but they are almost never adjusted for the size of the population, which has increased by 125% since the late 1940s. To put today's jobless claims or job losses in context, shouldn't we adjust for the size of the population?

Major Free Trade Deals in 2009: Asia = 8, USA = 0

According to Investor's Business Daily, the following trade deals were recently announced in December 2009 and early January:

China and Asia's Tigers — the Association of Southeast Asian Nations (ASEAN) — scrapped 7,000 different tariffs to form a $200 billion open market for about 2 billion consumers, one-third of the world's population.

2. ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Phillipines, Singapore, Thailand) signed a free-trade pact with mighty India, ending tariffs on 4,000 products staggered through 2016. This deal will expand a $50 billion market for 1.5 billion consumers into something even bigger.

ASEAN also signed off on free trade with Australia and New Zealand, tacking on another $50 billion market to expand for their 600 million consumers.

ASEAN signed an agreement with Japan on December 1, which created a $240 billion market for 670 million.

Thailand and South Korea completed the last step of 2007's ASEAN-Korea pact, finalizing expansion of the zone to a $72 billion market for 600 million.

ASEAN's six freest members — Thailand, Indonesia, Singapore, Philippines, Malaysia, Brunei — enacted a free-trade deal among themselves on Jan. 1, ending tariffs on goods sold to each other, freeing a $60 billion market for 500 million consumers.

India announced that three years of talks with South Korea were complete, uniting the third- and fourth-largest economies in the Far East.

India's leaders said a one-year deadline for negotiating a pact with the European Union was set.

In contrast, the number of major trade pacts signed by the U.S. in 2008 and 2009: NONE

More from the IBD:

While the Obama administration has put its energy into trade wars with China, enacting punitive tariffs on steel, tires, nylon, paper, and other goods and has signed no new pacts in 2009, free trade is marching on without the U.S.

It underlines the sorry state of affairs going on under the radar with the U.S. on trade. While the Obama administration stalled on three free-trade pacts with Colombia, Panama and South Korea, and enacted protectionist moves like "Buy American" provisos in state contracts, other countries moved on without us.

Unlike the Obama administration, Asian states don't see trade as some party favor to be doled out or withheld for special interest groups for political purposes. It's not without risk, but they see trade as a critical element to secure long-term economic growth.

With subpar growth forecast in the U.S. in the next decade, and unemployment at 10%, it's likely a closed economy that hasn't seen a new free trade pact since 2007 is a key reason. The Asian tiger example ought to be a major spur to get going. Nations that value free trade above politics aren't waiting around.

Emerging Market Index Above 1,000 for 6 Days

Update: The MSCI Emerging Markets Index closed above the benchmark level of 1,000 each day last week and today, marking the first time since July 2008 of six straight days above 1,000 (see chart above). Today's closing value of 1028.07 was the highest since August 1, 2008. By popular demand, the same chart in log version appears below.

Fraser Study Finds Huge Generosity Gap: Americans Are 2-3 Times More Generous Than Canadians

From the Fraser Institutes's study "Generosity in Canada and the United States: The 2009 Generosity Index":

The Generosity Index measures private monetary generosity using two indicators: the percentage of tax filers who donated to charities (i.e., the extent of generosity), and the percentage of aggregate personal income donated to charity (i.e., the depth of generosity). A higher percentage of tax filers donated to charity in the United States (26.6%) than in Canada (24.0%) during the 2007 tax year.

Similarly, in 2007, Americans gave 1.60% of their aggregate income to charity, with donations totalling US$190 billion (United States Internal Revenue Service, 2009a; Bureau of Economic Analysis, 2009), see chart above. This rate of giving is more than double that of Canadians, who gave 0.73% of aggregate income (CA$8.5 billion in total) to charity in 2007 (Canada Revenue Agency, 2009; Statistics Canada, 2009). If Canadians had given the same percent age of their aggregate income to charity as Americans had, Canada’s charities would have received an additional $10.1 billion in private donations.

Canada makes its poorest showing in the average value of charitable donations in local currency. The average US donation was US$4,623 (United States Internal Revenue Service, 2009) — three times more than the average Canadian donation of CA$1,504 (Canada Revenue Agency, 2009a). Wyoming, the top-ranked jurisdiction on this measure, recorded an average charitable donation of US$11,011 — almost five times more than the average donation of CA$2,298 in Alberta, Canada’s top-performing province on this measure. Even in Rhode Island, the lowest-ranked US state, the average donation (US$2,810) is over $500 more than the average donation in Alberta. The disparity is more pronounced when currency differences are accounted for.


Update: Vice-President Joe Biden gave an average of
$300 per year in charity between 1998-2006, on average annual income during those years of $236,000. In percentage terms, the Bidens gave about 1/8 of 1% of their income to charity, far below the 1.6% average for Americans, demonstrating his support of "Change You Can Believe In, As Long As You're Using Someone Else's Money, And Not Your Own."

"Buy American"? Then Why Not "Buy Virginia"?

It is certainly true that people’s jobs are affected by consumers’ choices. If customers stay away in droves from Chinese hose attachments, it might well mean more work for an American hose and belting manufacturer. But why stop there? In addition to boycotting goods and services made in other countries, let’s avoid spending money on products from other states. Those of us who live in Massachusetts should refuse to buy dryer sheets from California, Ohio lightbulbs, and hoses made in California. My Boston cabbie should be curling his lip at cars made not just by companies headquartered in Japan or Germany, but by those based in Michigan, too.

Crazy? Of course. Refusing to trade across state lines wouldn’t make us economically stronger. It would make us weaker, condemning us to higher prices, less variety, reduced purchasing power, and inferior quality. Granted, such protectionism might work to the advantage of a few local producers. But it would do so only by depriving everyone else of economic opportunity and improved quality of life. To turn state borders into trade barriers would be irrational and self-defeating.

~Jeff Jacoby's recent article "The Old Delusion of Protectionism"

MP: National/state/county/city/neighborhood borders are just imaginary lines on a map, and voluntarily restricting our choices to trade on only one side of an imaginary line called a national border ("Buy American") makes as much sense (none) as restricting our choices to trade on only one side of an imaginary line called a state border ("Buy Virginia"), or trade on only one side of a county border ("Buy Fairfax County"), or a city border ("Buy Falls Church"), or a neighborhood ("Buy Dupont Circle"), etc.

Bottom Line: Trade and voluntary exchange are win-win outcomes and it doesn't matter whether the buyer and seller are on the same side, or different sides, of imaginary lines. Enjoy your coffee, tea, hot chocolate and orange juice, your diamond jewelry, your iPod, and your ski vacation in Canada, or cruise in the Caribbean, etc.

Sunday, January 10, 2010

Why Peak Oil is Peak Idiocy: Endless Oil

BUSINESS WEEK -- Consumer demand, technology, and global politics are shifting in a way that could spell a future of oil abundance, not of catastrophic dearth. As Leonardo Maugeri, a senior executive at Italian oil major ENI, puts it: "There will be enough oil for at least 100 years."

Many analysts and industry executives have little doubt that there's plenty of oil in the ground. "Only about 32% of the oil [in reserves] is produced," says Val Brock, Shell's head of business development for enhanced oil recovery. Shell estimates 300 billion barrels and maybe more might be squeezed out of existing fields, much of it once thought beyond retrieval. Peter Jackson, IHS Cambridge Energy Research Associates' London-based senior director for oil industry activity, has reviewed data from the world's biggest fields. His conclusion: 60% of their reserves remain available.

The fact that there's still oil for the taking is driving Shell and other majors to come up with new technologies, which are expensive to develop but worth it when crude is riding high. While the price has fallen considerably from the peak of $147 per barrel in 2008, it is still far above what many oilmen expected a few years ago. "You will see companies going into the deep water, going into the arctic, using the best technology," says Maugeri, who sees the oil industry as a dynamic system that responds rapidly to changes in the economic and political environment.

HT: Paul Kedrosky

Interactive Map: Netflix Movie Rentals by Zipcode

This interactive map from the NYTimes allows you to examine Netflix movie rental patterns, neighborhood by neighborhood (by zipcode) in a dozen cities. Some titles with distinct patterns are Mad Men, Obsessed and Last Chance Harvey (see below for the DC area, the darker the shaded area, the higher the ranking).

Markets in Everything: Auction-style Shipping

( -- In 2001, Matt Chasen's mother wanted to send an antique dresser from Ohio to Texas, but was staggered when she received a $1,000 shipping quote -- far more than the dresser was worth. Unable to find a cheaper option, she never sent it.

One year later, Chasen reserved a nine-foot truck to move from Seattle to Austin. When he arrived at the rental center, the only one left was a 20-footer, so he took it. Standing in the back of the cavernous vehicle, he thought of his mother.

"I thought, 'Wow I wish I could have gotten in touch with people with half-empty trucks to move my mom's dresser,'" he recalls.

The idea: Inspiration hit Chasen, 34, like a Mack truck. Why not create a sort of eBay for shipping, a Web site that would make the process cheaper and more efficient by taking advantage of all the empty trucks on the road?

So he started six years ago and has brokered $125 million in shipping fees.

Law of Unintended Consequences: Biomass Version

Just like all "pork".....

It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.

But as laudable as that goal sounds, it could end up causing more economic damage than good -- driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation's dependence on oil by using organic materials to create biofuels.

In a matter of months, the Biomass Crop Assistance Program -- a small provision tucked into the 2008 farm bill -- has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation's composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.

The federal government can provide up to $45 a ton in matching payments to businesses that collect, harvest, store and transport biomass waste to an authorized energy facility. That means sawdust or wood shavings may be twice as valuable if a lumber mill sells them to a biomass energy company instead of to a traditional buyer.

This is bad news for the composite panel industry, which turns these materials into particleboard and medium-density fiberboard, and outranks the U.S. biomass industry in terms of employees and economic impact, with 21,000 employees and annual sales of $7.9 billion, according to 2006 U.S. Census data.

The biomass subsidy program could "wipe us out," said T.J. Rosengarth, the CEO of Flakeboard, the largest composite panel producer in North America. "You can say, 'I've made more alternative energy,' but at what expense?"

The Unintended Ripples from the Biomass Subsidy Program" in today's Washington Post, via Government Fiasco blog

MP: That's why it's called a "law."

Texas v. Unionocracy of California: Exhibits A to E

Exhibit A: California has lost more than one million jobs in the last several years, while employment levels in Texas have remained relatively stable.

Exhibit B: In early 2006, California's unemployment was actually slightly below Texas, but is now 4.3 percentage points higher than Texas (12.3% vs. 8%).

Exhibit C:

One-way rental rates for a 26-foot truck from U-Haul:

From Dallas to San Francisco: $734
From San Francisco to Dallas: $2,116

From Houston to Los Angeles: $706
From Los Angeles to Houston: $2,051

In other words, it’s almost three times more expensive to rent a truck to leave California (from San Francisco or Los Angeles) and move to Texas (Dallas or Houston) than it is to leave Texas and move into California, suggesting that there is a huge outmigration of trucks and people away from California to Texas.

Exhibit D (via Nick Schulz):

Both states have similar demographics (although California has many more Asians). But California has what should be significant advantages—it is much richer ($42,102 per capita GDP to $37,073) and it spends 12% more on educating each student than Texas. Despite this, Texas kids are one to two years of learning ahead of California kids of the same age. And blacks, whites, and Hispanics all do better in school in Texas than they do in California.

Exhibit E: George Will offers some insights into California's problems in his column today:

California, a laboratory of liberalism, is spiraling downward, driven by a huge budget deficit.

William Voegeli tartly says that "Rome wasn't sacked in a day, and California didn't become Argentina overnight." Indeed. It took years for liberalism's redistributive itch to create an income tax so steeply progressive that it prompts the flight from the state of wealth-creators: "Between 1990 and 2007," Voegeli writes, "some 3.4 million more Americans moved from California to one of the other 49 states than moved to California from another state." (U-Haul truck rental rates above demonstrate the high outbound demand for people and trucks leaving California.)

It took years for liberalism's mania for micromanaging life with entangling regulations to make California's once creative economy resemble Gulliver immobilized by the Lilliputians' many threads. It took years for compassionate liberalism to make California's welfare menu contribute to the state becoming an importer of Mexico's poverty. It took years for servile liberalism to turn the state into what Voegeli calls a "unionocracy," run by and for unionized public employees, such as public safety employees who can retire at 50 and receive 90 percent of the final year's pay for life.

George Will's Conclusion: California's economy is being suffocated by the weight of government.