June 2004 Archives

United

| 11 Comments

United has been trying to get the federal government to underwrite its loans:

United Airlines on Monday lost a bid to secure a federal loan guarantee, a fresh setback to the carrier's efforts to emerge from bankruptcy.

The Air Transportation Stabilization Board said that after studying the airline's latest application, submitted last week, it would not change the panel's June 17 decision to reject United's request for a $1.6 billion federal loan guarantee....

In Monday's letter, the board said it "carefully considered the additional financial information provided by United." But in the end, the board concluded � as it did in its June 17th rejection � that granting the loan guarantee was not a necessary part of maintaining a safe, efficient and viable commercial aviation system in the United States, a requirement for receiving a federal loan guarantee.

If they cannot climb out of bankruptcy on their own, perhaps they don't deserve to survive. I say let 'em fail!

There would be a market upheaval if the second largest carrier failed. I'm not going to judge whether this would be "good" or "bad" in a welfare sense, but clearly creative destruction is sweeping through the airline industry.

Westernized Saudi Women at Work

Al-Ahram Weekly tells us that some Saudi women are overcoming rather high startup and transactions costs, and are heading into the workforce:

How does a man meet a woman at work in a country in which women are not permitted to drive; where women can only apply for an identification card with the permission of a father or brother; where women are required to remain covered from head to toe in public; and where the law prohibits unmarried women from sharing a room with people other than relatives?...

Salwa appears around the corner, hand outstretched, a 26- year-old Saudi Arabian woman, unveiled, relaxed and professional. Registering the baffled look on my face at her uncovered state, she rushes to explain: "As you can see, all windows and doors are made of glass; it would be ridiculous to spend the day taking your abaya on and off depending on who comes into the office," she explained...

Her initial fears of not being accepted at work turned out to be unfounded. "The opposite turned out to be the case, in fact; my most conservative, bearded colleagues -- the ones whose abaya -wearing wives walk behind them on the street -- are the ones who appreciate my work the most."

Women like Salwa are still an exception in the conservative kingdom. Women make up half of the population, and more than half of all high-school graduates are girls, yet women represent only five per cent of the workforce, most of whom work in the teaching profession. But this trend is increasing...

This month, the Chamber of Commerce in Riyadh launched a special women's department, the aim of which is to provide support for Saudi Arabian business women....

During the time of the petro-dollars in the 1970s and 1980s nobody had to work. But today, where even the land of the black gold is in the grips of unemployment and wages are sinking, more and more women are forced to work to support their families....

As they say, read the whole thing. Even with recent cultural adaptations, this all sounds too optimistic to me... but one can hope.

Does Driving Slower Save Gas?

| 119 Comments

Michelle Singletary advises that to save on gasoline, we should, among other things, slow down.

Stop speeding. The faster you drive, the more gas you use, the more money you spend. Each 5 mph over 60 is equivalent to paying an extra 10 cents per gallon for gas....

Avoid aggressive driving and quick starts and stops. At highway speeds, you'll lower your gas mileage by about 33 percent. By maintaining a constant speed and driving sensibly, you could save as much as 50 cents a gallon.

I'm not going to discuss the time cost of slowing down. For arguments sake, assume that you're indifferent between sitting at home or sitting in your car. Is it true, regardless of your car make, model, and condition, that driving 65 instead of 60 increases average fuel cost by about 10 cents per gallon? I'd say yes, with anecdotal caution.

Geneva airport plans to charge budget airlines smaller fees than standard airlines.

Low-cost travellers would have taxes reduced to SFr14 ($11) while others would see the rate upped by SFr3 to at least SFr19.

The move is designed to cement Geneva�s position as a hub for budget airlines, which are continuing to capture a larger share of the market.

But this is NOT price discrimination; instead airport authorities justify it as cost allocation. The low-cost terminal will be inexpensively remodeled, and the savings will be passed onto the low-cost airlines.

Naturally, entrenched interests do not like this one bit:

Despite the claim, airlines such as Air France, KLM and Lufthansa have cried foul.

The three traditional carriers, which account for about 20 per cent of all passenger traffic at Geneva, said that the two-tier fee system grants low-cost carriers an unfair competitive edge.

�It�s very apparent that this is a solution designed to suit easyJet,� Werner Kellerhals of Lufthansa told the "Tribune de Gen�ve".

The "unfair competition" line will be a tough sell to anybody trained in standard price theory.

The airport jointly produces standard and budget airline flights; if its managers can demonstrate that budget airlines are cross-subsidizing larger airlines, I don't think there's an easy way to stop the airport from charging different prices.

Google's much ballyhooed Dutch auction IPO might not be to the liking of some serious institutional investors.

The exit of Merrill, one of the country's largest brokerages, from involvement in Internet innovator Google's highly anticipated and equally unusual IPO (see full story) may lead others to decide that the rewards don't measure up to the required investment of time and money.

Link in original story.

Of course, I doubt Google's too worried about that. They don't seem like the types to be scared off their plan by the huffing and puffing of the big players.

Getting FAT in the Developing World

The US Patent and Trademark office has given an interesting ruling on software file structure patents that could have big implications for the developing world. The story is here.

In a decision that could have far-reaching implications -- from the fate of free software to the technology used in developing countries -- the U.S. Patent and Trademark Office (USPTO) has granted the Public Patent Foundation (PubPat) a reexamination of a recently granted patent (number 5,579,517) on the use of file allocation tables (FATs), a ubiquitous technique for accessing a file system.

The FAT file system is used in many modern devices, including those that use flash memory, and many operating systems, such as Linux and Windows . Microsoft (Nasdaq: MSFT) has been granted several file-related patents recently, and PubPat believes that all will fall if the USPTO invalidates or limits the FAT patent.

FAT and NTFS are ways to structure the underlying architecture of a computer, and thus informs how the software on the machine is used, memory is allocated, and more. That patents exist on these means that Microsoft (or any other company, technically, though it's not likely at this point) owns rights to the very foundation of a computer's architecture. Doing this allows them to set standards for the software they issue.

Of course, none of this is really a problem. Because so much of the developed world uses MS products, conflicts aren't too terribly frequent or hard to overcome. And none of this is illegal. (Much like Kevin constantly has to remind people who jump up and down screaming that Wal-Mart is "evil" that most all of Wal-Mart's practices that people find objectionable are, in fact, entirely legal, Microsoft was awarded patents legally, and has every right to demand certain standards from licensees. Whether you like this or not is another matter.) It's in the developing world that these practices are so hard to overcome.

Free operating software like Linux could, in fact, be like mana from heaven for entities that barely have enough to buy 4 year old computers, let alone make sure they have the latest editions of Office, PowerPoint, Project, or whathaveyou. Additionally, once a company, government, or individual gets locked into a certain system, it's awfully expensive to get away from continuing to use it. (Call it a form of path dependence that is based on investment in specific assets.) If a company adopts Linux, for instance, and uses the Linux file structure, not only are they agreeing to use certain software now, they have to look into the future and agree to continue, so long as MS holds patents and demands that software licensees abide by rules that eliminate the use of products by open-source operating systems.

If the patents that make this pattern possible are reviewed, and ultimately limited, it might be good news for developing countries trying to expand computing power at reasonable prices.*

In another example of how the software industry mirrors the drug insdustry, Microsoft regularly makes it cheap and easy for people to get licenses for their donated computers. Get 'em started on it for cheap, and there's a good chance they'll stay hooked -- and that they'll start buying the more expensive stuff. Software, this time like prescription drugs, only costs a lot for the very first one. After that, it's almost all profit.

*Lest anyone mistake my intentions, let me make it clear that I'm vehemently against patent-breaking, the abrogation of property rights, or the donation-by-fiat of goods regardless of those property rights. I bring this up to say that there are interesting trade-offs inherent in the question of property rights and the process of development. Remember, open-source software is made that way by its creators, for which I have some admiration. Their choice, not mine.

Youth Smokers Should Quit by 30

| 1 Comment

This New York Times article describes academic evidence that lifetime tobacco smokers live an average 10 years fewer than nonsmokers; it also contains the following, to me shocking, paragraphs:

The Fed's Credibility

Will the Fed raise rates next week? I think everyone agrees they will, the important question becomes by how much?

Expectations of a half-point hike June 30 were massively reduced last week after relatively tame US inflation numbers and hints from Fed officials, including chairman Alan Greenspan, that the rise in US borrowing costs from their current 46-year lows of 1.00 percent will not be aggressive.

The issue is one of credibility. If the Fed has finally earned its anti-inflation credibility, it can afford to be patient when raising rates, in effect it has a bit of credibility to burn. If the Fed is not believable, if the markets think that the Fed will continue to accommodate the large deficits, then they must move now and swiftly. So which is it?

Benanke, in a recent interview with The Region thinks the Fed should adopt an explicit inflation target in order to add that extra bit of credibility.

Bernanke: No, I think we have achieved a substantial degree of credibility based on the record of low inflation and that reduces the inflation bias problem already in itself. However, I think that announcing a target would strengthen our commitment to the price-stability objective and also give more emphasis to long-run considerations in policymaking. Our policy meetings are very often focused on near-term developments. Having a medium- to long-term inflation objective would force us to keep in view where we want the economy to be in the longer run.

We don't have good models for this psychological battle of managing expectations, nor do we understand it as well as we think we do.

David Vardy's a virgin. And it seems he's tired of that fact.

So he's auctioning off his virginity on eBay.

Not surprisingly, a number of the offers have been very odd, he says. High prices and far afield locations. The act of selling a sexual experience on the internet could well be the cause of that one. But that's just a guess. And how is this not prostitution, you might be wondering? Well, because he's not going to do it again:

"I'm not selling myself for sex repeatedly like a prostitute," Vardy said. "And the money issue is simply there to put back the losers and make sure that only serious bidders are interested in this. I want to protect my own safety, to be honest. … I was in this from the start to lose my virginity, and I'll see it through. So, I'm going to accomplish that if it's the last thing I do."

Apparently it's not prostitution until you sell yourself multiple times. Maybe the streetworkers in Chicago should have mileage counters with them, so that cops can tell the neophytes from the old pros.

One note about the article itself: one would hope that the caption on the picture of Vardy is intentional, and not the product of poor word choice that it appears to be.

Stock Blogs Take Off

| 6 Comments

Trader Mike posts a neat time-series of the number of stock market blogs in existence. Up to February, he had collected about 2 new blogs per month. Since then the pace has increased--he has found 16 new ones in June.

This data is excellent, given that Mike's level of effort in discovery has remained roughly constant. I applaud him for creating his own data, an entrepreneurial activity economists would do well to learn.

Saying Goodbye to RAND

| 1 Comment

Regular readers know that I am overemployed--as a full-time worker, research assistant, dissertation writer, husband, father, and blogger.

Yesterday, I notified RAND that I will be leaving effective July 2 in order to nail down my Ph.D. dissertation. (I will not be selling bagels--search the text for "bagel").

I leave RAND now so that I will have the ambition, opportunity, and energy to attack my thesis from all sides with an obsessive but focused abandon. Finances will be tight, but manageable.

Intellectuals vs. Capitalism

Steve Antler links to an interesting article by Nozick from the Cato Institute.

It's a long, and decently written look at the (supposedly -- I've never seen numbers) skewed distribution of intellectuals across the political spectrum: they fall disproportionately to the left. Meanwhile, these intellectuals also happen to oppose capitalism.

The argument presented is decent, though at times I think it's more an attempt to sting education in general than to attack left-leaning intellectual distaste for capitalism. However, I'd offer my short take here; I think the reason public intellectuals oppose capitalism is much more simply stated:

Contrarianism.

Let's face it: the work that gets the most attention not only in academia, but also in popular press and discussion, are those things that appear contrary to our suppositions. Why do some people find economics so boring? Could it be because it often looks like a lot of convoluted chatter devoted to explaining the numbingly obvious? When prices go up, people buy less. We need 225+ years of economic debate to tell us that? (No, that isn't my take on economics -- I'm suggesting it's a popular view of the study of economics.)

What gets our attention, garners public notoriety and generates lot of interest from academics are those things that are contrary. In this case, finding fault with a system that, while imperfect, has yet to see any competing system that isn't more flawed by orders of magnitude. It works ok, it mostly does so through the normal activity of the average participant, and it seems pretty promising. How best to get noticed, then, in the field of commentary on the market? Suggest that something about it is not working the way most people think it might be. Suggest that there is something that, with the trained eye of an enlightened mind, can clearly be seen as fundamentally flawed. Suggest that, despite what we may believe, the system isn't working, and that continued misunderstanding of the situation will only make everyone worse off.

Who's going to pay someone to sit and explain how something works, aside from the engineering-minded folks who are driven by their own curiosity? No, it is more lucrative to be on the side that cries foul, that points to what a majority has come to accept and says "it is not so." And certainly, such skepticism has done wonders for the advancement of knowledge. But there are differences between testing the popular belief and suggesting alternatives, and simply pointing the finger at those who believe and by implication calling them fools.

Accepting on faith the popular perception is a dangerous thing, to be sure, but it is this claimed purpose that would seem to drive the "public intellectual" to argue against, in this case, capitalism. The willingess to accept some sort of ability beyond the average intellect that lies behind an appellation like intellectual is frequently extended to an individual in realms beyond that which originally earned them the position: linguists famed for their grasp of foreign policy, or psychologists for the same skill for that matter. Economists, as well, should be included in that group. If the belief is that they see so much further than the rest of us, of what use are proclomations that "yes, this works well -- continue"? It took no great leaps of logic, no complicated computation, and no spectacular skills to make the thing work; the intellectual, in this, is wholly unnecessary. Only through a vocal declaration of differing opinion can the intellectual propose a use for herself, mainly in the enlightenment of the misguided. In fact, contrariness might take on a tone of fervor by the cyclical nature of this: if so many people are going along not believing the intellectual's claim, then there is simply more reason (for believers) to believe that the intellectual has a special, keen insight into the situation beyond even a greater number of people than they earlier supposed. One can easily think of those who seem to make their mark by stamping harder and harder, crying "but don't you see?" when, in fact, the sights they offer are no more certain than the one they decry.

We tend to enjoy, as a group, the Chicken Littles, all those whose shouting gives supporters a reason to think there is finally a sane voice in the world, and gives detractors the sizable targets they've been hoping for. Of course, target size is likely to be a large reason so many intellectuals take aim at capitalism. It's so prevalent, its workings so widespread, that the prize for being the first to find fissures appears proportionate. If someone spouts a contrary opinion about the designated hitter rule in baseball, you'll get as fervent a debate as you could hope for in any setting -- the group of those interested, however, will be far smaller than if an intellectual takes aim at the direction the majority of world exchange is headed.

And in so doing, an audience can be attracted, members of which are persuaded not so much by the strength of the contrarian argument as the existence of the contrariness itself. It might be the selection problem writ large: those who seek notoriety for being at odds with things will naturally seek to be at odds with the highest stake subject possible. Those who attack capitalism might be those for whom the attack is key, rather than the thing being attacked.

NJ Politicians Want Ladies Night

| 1 Comment

The New Jersey assembly passed a unanimous resolution permitting Ladies Night, after it was ruled illegal by administrative rule. Others note this is one of the fastest legislative turnarounds ever. The bill now goes to the NJ Senate. (Here's our previous post on ladies night. Links via Fark.

No Fuel Efficiency for Americans

| 3 TrackBacks

Just read two fun older news articles that take on the political economy of fuel efficiency.

Politics Keeps Great Cars Off Our Shores talks about CAFE, labor unions, and their link to the Sierra Club being against small-car imports.

and

U.S. automakers seem to avoid fuel efficiency -- only for Americans talks about turbochargers and diesel engines.

(I found the second linked here).

On the Accuracy of Odometers

| 29 Comments

All instruments have measurement error, independent of a human misreading their output. No yard stick is exactly a yard, no reasonably priced bathroom scale measures to the quarter pound, no chem lab balance is accurate to the microgram. Similarly for an odometer, which measures distance traveled.

Correct me if I'm wrong, but the United States has no federal or state regulation about speedometer or odometer accuracy; of course it is illegal to shift the odometer without posting a notice of having done so--even if the original odometer was reading wildly outside the design tolerance of the manufacturer. (Here are the federal regs.)

US Unemployment May 2004

| 3 TrackBacks

The darker the state, the higher the unemployment rate:

Data come from the BLS courtesy of the Joint Economic Committee.

UPDATE: The JEC emails to warn that its data was wrong initially. Charts have been updated to reflect new data--look much nicer now.

The Iraqi Dinar Exchange Rate

| 1701 Comments

THIS POST IS CLOSED TO NEW COMMENTS. A new post has been created: Here's a link to the current active post.

Here are all the posts in sequence:

1) June 16, 2004 - June 27, 2004
2) June 27, 2004 - November 6, 2004
3) November 6, 2004 - April 11, 2005
4) April 11, 2005 - June 22, 2005
5) June 22, 2005 - July 22, 2005
6) July 22, 2005 - April 30, 2006
7) April 30, 2006 - July 13, 2006

8) July 13, 2006 - ...


If you guys & gals encounter any problems, email me at kevin-at-truckandbarter.com. Your previous email has been very helpful in the administration of this site.

Thanks for your patronage.



NOTE: For those who want to continue the conversation about the Iraqi Dinar, I can also recommend a new board, the Investor's Iraq Forum or the new Iraqi Dinar Blog.

You all have made about 1700 comments to this post, which I've archived in order to keep bandwidth down. To keep history preserved, all previous comments are downloadable in this HTML file.

You can also find useful comments on the other thread More on the Iraqi Dinar Exchange Rate, but that thread is now closed, also.


The CPA insists that the Iraqi dinar is very stable. However, I'm uncertain how to interpret the short-term volatility. (Check out the pictures in the link).

UPDATE: The best collection of images and links on the New Dinar can be found at globalsecurity.org. A whole bunch of people are speculating on the New Dinar:

Steve Foran headed to Iraq in January for risky but lucrative work as a truck driver, running a fuel tanker on dangerous highways with a soldier riding shotgun and hopes of banking $60,000 or more for the year.

But now he thinks he has found an Iraqi payday that could dwarf his Halliburton contract.

Like thousands of other U.S. contractors and troops -- and stateside Americans drawn by Web pitches from newborn businesses with names like BetOnIraq.com -- Foran is taking a chance on the new Iraqi dinar.

Today, the colorful currency that replaced banknotes bearing the portrait of Saddam Hussein isn't worth much. A dollar will buy about 1,000 dinars -- more if you're in Iraq, fewer if you're sitting safely in the United States.

But next month? Next year? Once Iraq is a stable democracy pumping oil like nobody's business? Who can say what the payoff might be?

If you want to buy Dinar, many companies are selling internationally; see for example buydinar.com, and their FAQ on how to avoid scams.

Yahoo has an up-to-date history of the US Dollar - Iraqi Dinar exchange rate on the international markets.

For some recent history, here is the CPA's explanation of the currency exchange. At the runup to the end of the conversion in January, exchange merchants were discounting old dinars.

Political Passion Metric

| 1 Comment

Jeff Jarvis wants a way to measure the passion of our political opinions:

Imagine a 0-5 scale like this:
0 - Don't give a damn.
1 - Would defend my view in a conversation
2 - Would start a conversation on the issue to say what I think.
3 - Would write a letter to the editor (or weblog post) on the issue.
4 - Would consider the issue when voting for a candidate.
5 - Would change a vote for a candidate over the issue.

I found this list wanting, if only because I've been trained as an economist. I responded almost automatically that most people express their preferences more accurately with money than do with words.

In the comments I suggested that we add an economic dimension to the passion scale. For instnace, "Would contribute more than 5% of my income to causes representing my view," or much better, "Have contributed more than 5% of my income to causes representing my view."

5% was an arbitrary number I stole from Gordon Tullock; apparently a "fiver" was also an industry standard at one point.

Another Depression?

| 4 Comments

This Morning, NBC Today had a report on the US economy--that is, the bad economic news of skyrocketing prices!

Unemployment in Iraq

| 1 Comment

At Kikuchiyo News, Simon notes the apparent economic malaise in Iraq by summing up Colin Powell's response to Tim Russert:

In other words, don't count on your fuel prices to drop, but count on Iraqis soon getting even more screwed at the pump than you. Also at the grocer and at the power meter. Before all the Iraqis had to suffer through getting cheap gas and free food an electricity, paid for by oil revenues. Now, they will fortunately have the subsidies drop and the prices rocket up.

Note that the unemployment rate in Iraq exceeds 50%. Note also that Powell said nothing about rising wages. (My economic training is limited, but I generally understand that they tend to rise slower than the market basket. And that that condition is generally best avoided.... Finally, note that 60% of Iraqis depend on food aid to survive.

It's impossible to say concisely what unemployment means now in Iraq, or what it meant before the invasion, and before the UN sanctions.

Unemployment at 50% seems to be a popular misconception. Actually, 25% seems more likely, although some neighborhoods can have rates of 50% to 60%. (See this February CPA brief). Also, this 25%--"28% late last year"--figure does not include the Kurdish areas, which have been better off for quite some time now.

OJ

| 4 Comments

As if Bush doesn't have enough to worry about, it appears that O.J. is hitting multiyear lows:


The record forecast in October sent the price juice processors pay for oranges to its lowest level in more than a decade. About 95 percent of Florida's annual orange crop goes to juice.

Processors in October were paying an average 50 cents per pound solids, said Melanie Burns, the director of market information for Lakelandbased Florida Citrus Mutual, the state's largest growers' representative.

Pound solids is standard industry measure of how much juice with a specific sugar content is squeezed from oranges. The declining crop since then has boosted the current price for early-mids to about 55 cents a pound solids, Burns said. That matches the average price growers got in the 1992-93 season, the lowest in the past 21 seasons.


So if Bush loses Florida, commentators will probably blame it on this or that, when it really is the O.J.. How pissed would you be that almost every other commodity has been hitting new highs, at least for the last couple of years, while yours isn't? Expect some sort of federal price support program announcement or at least a very alarming warning from the Surgeon General about the evils of the Atkins Diet.

Click to see ten-year chart of O.J.

Click here to see a list of commodity futures, then the little c on the far right and choose the time frame you want. Most of them actually topped out in March, but are still at above average prices.

Low Turnout for EU Vote

From BBC News:

Outgoing European Parliament President Pat Cox described the results as a "wake-up call" and warned European leaders that they had to demonstrate the EU's relevance to voters.
If the primary motive for voting is civic duty or group identity, it would seem rational to conclude that either one or both are down. But isn't it possible--even likely--that voters still recognize the enormous power, control, and relevance of the EU government, but believe that they are irrelevant to EU leaders?

The city of Berkeley has come out with a study saying that the University which makes the town famous costs it $11 million more dollars than it generates for the city. Even though I lived in San Francisco for two years, I probably spent more time trying my junior year in high school to visit the campus than anytime while living in the Bay Area. In fact, I only visited the city to go the Pyramid Brewery while my attempt to see the school was cut short by one thing; the place is a dump.

Most of you right now are expecting me to say that the city of Berkeley should be grateful with having one of the world's premier institutions within their limits. Au contraire, the benefits of a university hasn't fallen on Berkeley, but on the Bay area as a whole. In other words, UC Berkeley has provided a positive externality. The place was a dump, but a lot of the surrounding communities are nice(well, let's be honest, the entire Northeast coast of the bay is a dump. The other areas of the region are nice). For the city to recoup its money, they should talk to places that benefit from its presence and demand compensation from them.

A More Efficient Organization

| 2 Comments

As previously noted, I am a fan of the Anaheim Angels and while the team has spent much of the season in first, the injuries have really mounted. In fact, much of the heart and soul of the organization has been on the disabled list: Darren Erstad, Tim Slamon, Troy Glaus, Troy Percival, Garret Anderson, Raul Mondesi, Aaron Sele and Brendan Donnely. To top it all off, I read today that a lingering injury may account for Bartolo Colon's poor season, looks like the guys may get some company. Injury plagued Angel teams aren't anything new for the Angels, the most famous incident is Moe Vaughn falling into the dugout and twisting his ankle. It is with this long and never-ending tradition that the organization has finally realized its folly and decided to chart a different course. This years draft marked the first steps in their new strategy:

Toast to a Freeman

| 3 Comments

I had just returned from picking up my wife's friend from the airport. The flags at Dulles were at half-staff, and though the sight disturbed me greatly, I had no time to stop and ask... I found out that Ronald Reagan was dead after we returned home.

Ok, but now what?

| 5 Comments | 1 TrackBack

I don't mean to take up space here, where we could be "almost posting on economics", but my massive egotism and megalomania* compels me to mention something. The tests are done, the papers turned in, and fines payed. So, in about 24 hours, I'll have successfully snookered another fine institution into letting me do The Walk thing again, this time for the sheepskin indicating I'm a full-fledged MPP. What that means, precisely, I never really did figure out.

It's been a great experience, if for no other reason than it convinced me that I'm not done yet. I know, I'm a glutton for this kind of punishment. But you might as well stick to what you do well (does that make anyone else think of They Might Be Giants? No? My bad then...). In my case, I'm still looking for that, so after a year or two to get cash coming back in, and to figure out an attack plan, I'll be heading back to academia to figure out if there is, in fact, something out there that I do well. Provided that Kevin lets me stay around T&B, I suppose you might well be subjected to some thoughts on the process.

In the meantime, I'm moving out to DC for a good job at a good company. If anyone knows of a decent apartment for a good price...

*I'm always torn on posting personal information. It's largely of no interest to anyone but me. In this case, though, I'm sufficiently proud/surprised that I'm hoping everyone will forgive me for the brief transgression...

Selling Out

| 10 Comments

You might have notice the color-matching Google Ads in the rightmost sidebar. I won't tell you to click on them, because you won't even if I plead.

I have not added them because I need the money. I have added them to capture funds from all those people who find T&B by searching for Truck or Barter or automobile insurance companies that covers a mobile unit truck in iowa or difference between s&p and moody's credit rating.

T&B's usual content is only tangential to these searches, leading people to go elsewhere quickly. And I'd like to profit off their exit. Regular readers won't even look at the ads unless they're funny--which they're not, since Google perceives T&B to be about credit and investing.

Mark Solheim of Kiplinger.com pojnts to a web page that will help you figure out if driving to a cheaper gas station will save you money.

The formula is easy, but it's nice to have the calculations done for you. Note that this doesn't include the opportunity cost of the time it takes you to drive the longer distance.

In spring/summer of 2003, Popular Mechanics ran a 3000 mile, cross-country (Manhattan to LA), gas vs. hybrid test on the Honda Civic. Each car drove the same roads under the same conditions, presumably minutes apart.

The results were bad news for those hoping to justify a hybrid purchase on total-cost-of-ownership grounds. At 2003 gas prices, the team saved a penny a mile by using the hybrid. This means it would take driving 144,000 miles to recoup the $1440 additional cost of the hybrid. Discounting future gas prices would make this a much worse calculation, although higher recent gas prices will make this a better one.

The EPA rates the Hybrid at 46 mpg in the city and 51 on the highway. So, theoretically, with a 13-gal. tank, at 51 mpg, the Hybrid will yield 663 miles on one tank. And our 3000-mile journey should need only 4.5 tanks of gas.

By comparison, our Civic EX sedan is the top model in the Civic sedan lineup and features a 1.7-liter 4-cylinder with Honda's VTEC variable valve timing... The EPA average fuel mileage is 32 city and 38 highway. So in theory, the EX should get just under 500 miles per tankful and take about six fill-ups to get to California.

One thing the EPA doesn't take into account, however, is that speed limits of 70 and 75 mph have displaced the "double nickel" in many states. And assuming Buford T. Justice gives you a 5- to 10-mph window, it is not unlikely that traffic will be flowing normally at 80 mph....

The conclusion:

Arms Races

| 1 Comment

According to wikpedia an arms race is:

...a competition between two or more countries for military supremacy. Each party competes to produce superior numbers of weapons or superior military technology in a technological escalation.

The term "arms race" is used generically to describe any competition where there is no absolute goal, only the relative goal of staying ahead of the other competitors. Evolutionary arms races are common occurrences, e.g. predators evolving more effective means to catch prey while their prey evolves more effective means of evasion

What's interesting is the many economic relationships that are typified by arms races. Still more interesting is trying to understand the notion of equilibrium in the context of these on going battles, and asking the question is it truly a stable equilibrium, or can technological innovation move you to another equilibrium?

American Fructose vs. Mexican Sugar

Mexico tried imposing antidumping tariffs on fructose, but these were thrown out by the World Trade Organization. The soda drink tax was the next alternative.

"It has given the industry a break, but it is not an optimum solution," Mr. P�rez Cano said. "Nobody benefits from unilateral solutions."

The dispute reflects a larger issue about the world trade in sugar, one of the most policy-distorted of all commodities, according to the World Bank.

Governments everywhere use subsidies, artificial prices, inventories and tariffs to support their industries. No government will be the first to end protection because cheap sugar from the open world market would swamp its industry.

The NYTimes article cites every agency, worker, organization, and company involved politically in this issue, which is why it does not mention sugar and fructose consumers at all. Consumers have no clout and little financial interest, while Archer Daniels Midland and Mexican farmers have a lot riding on government intervention.


While I'm On The Subject...

Just got back from a little jaunt to the Teleologic Blog, and saw something that I wanted to respond to here, since it hints at a more general issue.

(Fair Warning: statistics is going to be mentioned again....ok, now, for those of you haven't rightly moved on to Kevin's more gripping posts...)

Rakhiir makes mention of this article, describing the results of a large study that evaluated a comparison between the effects of "talk therapy" (Freudian Cognitive Behavior Therapy) and Prozac, one of the current supposed wonder-drugs many parents use to counter-act the effects of leaving the kids in front TV or not disturbing their death-grips on video game controllers...oops, did I let my bias out? (Please note, I really do believe there are good reasons to proscribe Prozac and a number of other emotional-problem oriented drugs. But certainly the problem either correlates with something about modern parenting to demand such a spike in medicated children, or the drive to get the stuff by parents is causing any number of misdiagnoses or forced prescriptions.)

The study apparently indicates that there is no difference between the effect of talk therapy and a placebo drug. (can anyone find a link? I got tired of looking as a way to put off studying for my econometrics final tomorrow...) That is to say, the effects of both the therapy and the placebo were both not statistically different from zero. Interesting in its own right, and might require a review of the structure of the program. But that's not my main concern here. Rakhiir's reaction is:

One professor of psychiatry was quoted today as saying "It was very close to a significant effect". The more honest way of saying this is that the effect was statistically non-existant! The professor, Dr. Thase went on to say that good psychotherapies sometimes did not work in big studies. Talk about a capacity for self-delusion. The best you can say for talk therapy is that it doesn't actively hurt its subjects - its not worse than the placebo. By contrast, Prozac really does work and helped 75% of the patients.

(Emphasis in the original.)

Not so fast there, sparky. There's a big difference between not being statistically different from zero and being "non-existant." This mistaken view is a problem that arises in a lot of evaluations of programs and is worth noting. Without bogging down in the numbers, the idea of being statistically similar to zero is this: the value estimated for the effect of the treatment isn't -- because of measurment problems, calculation issues, and more -- a single point value. It's actually the middle of a range of values, among which difference can't really be determined. It's called the "confidence interval" for the estimated value. (Apologies to those who sat through that years ago in undergrad stats -- my hope is to appeal to a broad audience, and, frankly, I'm not that smart, so I like simple definitions and those fun "scare quotes.") Which means, of course, that being statistically equivalent to zero, the estimated value for the effect of the treatment on the treated includes zero. But it also includes a number larger than the point-estimate value possibly reported by the study. In other words, the effect could well be greater than even the report says. A lack of precision, however, keeps the researchers from saying "Hey, the effect is actually really huge!!! We think..."

The program may well be effective, and may well hold some benefit for those engaged in it. A lack of precision in the estimation might not be a good reason to toss something out the window since precision is often out of the hands of the researcher (it's not just that they decided to be lazy about rounding or something).

And the claim that the value was close to being significant? Is that just charlatanism running rampant? Not really. Every estimate is going to have some factor that determines the size of the confidence interval; a significance level. These are chosen, for good reasons, by the researcher. Being "close to significant" could indicate that if the researcher chose a more generous significance level, the effect might have been read as "significantly different from zero", in which case talk therapy would suddely be proven as effective in the study! (The magic of numbers!)

The overall point here is, when we all read reports about how this, that, or the other program is clearly useless because a study said the effect was "statistically insignificant", we should dig a bit deeper to see what they're talking about.

Thamir Ghadbhan & Iraqi Oil

| 1 Comment
"We are totally now in control, there are no more advisers," Ghadbhan said. "We are running the show, the oil policies will be implemented 100 percent by Iraqis."
I have no idea whether a bulk of ordinary Iraqis actually care who runs the industry, as long as profits go back to themselves. It seems, however, that unlike the Saudi oil industry run by foreigners, not only will top decisions be made by Iraqis, but the day-to-day operations are run by Iraqis:

Deathcare

Remember, in the long run, we're all dead.

That's why there's funeralwire.com, the self-proclaimed Leading Source for Deathcare Industry News.

I bring this up because they provide a great selection of nonscientific surveys of funeral directors--with some questions about regulation and business management.

For instance, Should pre-need counsellors be required to hold a funeral director's license? 56% of 399 respondents said yes, 36% said no.

Why should selling a contract for future funeral services (not performing services themselves) require any training or experience other than sales in sensitive situations?

Still, many funeral directors think having training in mortuary science and/or government licensing should be a requirement for such a sales position. Nope, no regulator capture in this industry...

San Francisco Real Estate Blog

| 4 Comments

Via Jeff Jarvis comes Bill Quick's SF Real Estate Blog. It's concerned with real estate in general, as well as the SF market. Check out this post about real estate blogs in general:

If news (as dispensed by the blogosphere) is a conversation, as Jeff Jarvis of BuzzMachine claims, then we in the real estate fields should be natural participants in the ongoing chatter among ourselves, our clients, and our vast information resources. Blogs are the best way I know of to start - or take part - in that conversation.
Any resource that helps people understand the rules and responsibility of acquiring, owning, and dispensing with property gets my approval.

There's a debate raging over television that I personally find fascinating. Aside from the fact that it could well impact the shows I get to watch (Alias, I already miss ya), the debate demonstrates why statistics, despite it being third behind "lies" and "damn lies" in the ranking of upsetting ways to make an argument, really are important.

Nielsen is planning on expanding the use of its PeopleMeter ratings system. The machines record all the activity a television undergoes while someone is watching it. No longer will "Nielsen Families" have to fill out little diaries with a list of shows watched for the week; now the machine records every flip between that guy that yells while cooking, those home decorating shows taking over the upper levels of my cable lineup, and an episode of JAG. Sounds like it would a great step forward for TV ratings, right?

Well, as you can tell from the article, not everyone is happy:

Nielsen's explanation: Fewer people are watching those shows than the diaries showed.

"They don't accept that," said Nielsen spokesman Jack Loftus. "You can't tell me my baby's ugly."

Of course, those stations whose shows are now lower rated are carping, but that's to be expected. The hottest under the collar, however, are minority groups. Why, you might ask? Potential under-representation, I would respond.

However, it's a little more nuanced than you might think. The problem, apparently, isn't that the new system undercounts Latinos, blacks, Asias, or anyone else, really. The real issue, according to the spokesman from this story (audio news -- I thought it would be fun to throw in a curveball) is that the within-minority sample isn't appropriately representative. By this they mean that the people targeted as, say, "Asian viewers" don't accurately represent the population. The sample is off, they contend, on the characteristics. The average Asian in the population is more or less wealthy, spends more or less time watching television, is more or less likely to speak English, than the average Asian in the sample.

This could well be true, of course. Samples are almost always off by some factor, if only because of measurement error. More likely, however, is that there are distinct selection bias issues at play. The Nielsen system is opt-in, not opt-out, meaning that in order to get a group of people to participate, they have to have chosen to do so. They select into the group, in other words. Bias -- or a difference between the values for various characteristics in the sample and the "true" values in the population -- arises because those factors that inspire someone to agree to be part of the system are functions of some characteristic that may be systematically correlated with those things that make them different from a population average. Television watching is a leisure activity. Someone who has more time to spend in front of a telelvision either can afford the time, or has nothing else to do. Perhaps those people who watch more television have more free time since the time not spent working isn't as valuable, in which case we'd expect a bias towards lower income in the participation group. Or perhaps those people who agree to participate enjoy TV because they can afford a larger set, satellite television, or more TVs in the house; we would expect in that case a bias towards higher income in the participation group. The direction of the bias (higher or lower than the population average) need not go one way in particular...the deviation itself is important here. Education might produce similar problems. More educated families might prefer to read, watch movies, or play games while less educated families might opt for more television viewing.

But there's something else I bet you're now thinking (the two of you that came this far, that is): don't lower income families have less of a chance to read, go out, or whatever, because more of them might be working and having to work longer hours? And might not more educated minority families have a greater number of English speakers, meaning that they can more fully enjoy the programming on TV? Certainly! The covariance between these characteristics is important, since they so obviously directly affect each other. The problem is, this means a potential for even more bias in the sample.

Through no particular effort of the Nielsen group, the samples they get are necessarily going to be different than the population averages. Attempts to correct for these issues while sampling can get prohibitively expensive. Perhaps the critics, then, should be more focused on just how biased the samples are. If the average in the sample is a Latino family of 4, combined income of $100,000, with all fluent english speakers, while the population average is a family of 7, single income household of $24,000 and only a couple speakers of fluency, then there might be strong reasons to change the sampling methods.

This does beg one other question, however: what’s really wrong with the sample the Nielsens use? If there is a correlation between the kind of person who participates, and the kind of person who watches more TV, might this not be an appropriate sampling to use? After all, if you force your sample to look more like the general population, you might well be biasing your results in another direction. Under such a method, you end up grouping people who have no real prediliction to watch television with those who do. In effect, you’re erasing the connection between the rating system and the amount of viewing time. (Of course, this might be desirable in its own right.) What good does it do for advertisers to look at rating numbers that take into account those people who rarely ever watch TV?

The issue here is of defining the appropriate population from which to sample. In the best case scenario, the people who become Neilsen families ought to be those who are randomly selected from among a population of people who want to be one.

To my mind, that should be the simple defense of the new PeopleMeters. If designed correctly, the system measures the television watching habits in a sample of people who most accurately represent the population of people who, on average, tend to watch a certain amount of television. After all, the ratings that come out daily, weekly, and potentially now hourly, are best read as “The share of the population watching television at this given time, was X for show Z” not “The share of the general population at this given time, was X for show Z.”

Of course, that’s a hard pill to swallow for those who see their show ratings going down. The reduction of measurement error has revealed that, perhaps, they weren’t as popular as they once thought. If the sample is representative of the television watching population, however, the best explanation isn’t that the sample is wrong -- it’s that your baby just might be ugly.

(N.B.: Here’s a link to the Nielsen site, though it is particularly unhelpful on talking about their sampling methods. Here’s an article from the always-entertaining Straight Dope column on the measurement of Nielsen ratings.)

More Credit Rating Agency Issues

Last week, I posted an article from International Economy. Appearantly, the mood to examine the credit ratings agencies have spread to this side of the Atlantic, but unlike in Germany the impetus has been ratings users(oops, forgot the link, here it is):


Credit rating agencies might be required to submit to new record-keeping and reporting requirements when the US Securities and Exchange Commission, the US financial regulator, concludes its long-running review of the industry.


The move would be the most significant reform of the ratings business in decades and would give the SEC greater authority to examine how the agencies assess companies' creditworthiness, according to people close to the regulator.

However, it is unlikely to be welcomed by some credit rating agencies, which regard tighter controls of their lightly regulated sector as unnecessary.

But in an apparent concession, the SEC is not expected to make significant changes to its system of officially recognising certain agencies.

The designations of "nationally recognised statistical ratings organisations" is held by only four agencies: Moody's Investors Service, Standard & Poor's, Fitch Ratings and the Dominion Bond Rating Service. However, eligibility guidelines for entry to this elite could be clarified. Formal action by the SEC is expected by the end of the year.

Can You see T&B?

It has come to my attention that some T&B readers using Internet Explorer 5.5 and before are having to wait eons for the page to load. Others have the link bars on the right overlapping the text. Please let me know (and send a screenshot, if you can), should you have any such difficulty reading T&B.

Email me at kbrancat-at-gmu.edu or kevin-at-truckandbarter.com ...

Birthdays

| 1 Comment

Adam Smith, from whose writings the name Truck and Barter was culled, was born today in 1723. John Maynard Keynes, the exotic blend of free thinker, liberal, and political pragmatist was born today in 1883.

Let's extrapolate the trend from these two data points: Will another great economist be born on June 5, 2043? Seems silly, no? How many other predictions do we make from only two widely spaced historical observations?

Random Stuff

| 7 Comments

You never know what you'll find going through the referrals:

How does regulation affect the pron industry? Check out Agoraphilia to discover the possibilities(thanks to Mahalanobis).

Also from Mahalanobis, is an entry talking about how Austrians have Yen based loans and mortgages. I find this fantastic and, hence, sent an email for clarification. It seems counter-intuitive for Austrians to get Yen based loans when they have the Euro.

You should check the whole blog, especially since he has similar interests to Ian's.

The Calico Cat mentions Truck&Barter as a great blog while lamenting the Jessica Cutler controversy. Michael doesn't mention this blog's attempt to appeal to the same crowd. What is interesting is this post on the right's favorite slot jockey. From what people tell me, hiring a dominatrix isn't necessairly about sex, so would there be a real controversy?

Edit: I changed the credit from Kevin to Ian for the post concerning, well you figure it out.

Michael responded to the email I sent concerning the Yen loans:

> Am I reading your post right when you say that Austrians have
> Yen based loans and mortgages? If this is correct, why, exactly,
> aren't they in Euros? It seems silly for all but sophisticated
> players to engage in such transactions.

First of all, here is some data: 300,000 Austrians (Population: 8,200,000)
currently hold a foreign-currency loan. Quite interesting: According to
some newspaper reports, the general public had been informed (via TV,
Magazines, ...) about the volatility of the yen, and, as a result,
many people swapped to Swiss francs.

I found an article were Hans Abele (a professor of mine) said (freely
translated) that only due to the advent of foreign currency credits
(market liberalisation) a justifiable interest rate (he uses the term
"marktgerecht", literally "market-fair", I guess he thinks of an interest
rate that would be attained if markets worked efficiently)
was established in Austria. He says that there have been untenable
interest rate spreads.

Nevertheless, I do think that people are not informed adequately about
the currency risk AND that banks prefer giving foreign-currency
loans to home-currency loans due to the higher commission they can
reap (many transactions, higher account maintainence charge and what not).

Only recently a friend of my mother told me that her daughter has
aquired a very expansive house. I asked her how she thinks that her
daughter will ever be able to pay back that money and she replied:
"No problem, she has a yen-denominated credit, she almost doesn't
pay any interest". What more shall I say ;-D.


Slovakia's Economic Reforms

| 1 Comment

This morning, while watching the market absorb the latest employment numbers, I perused some recent issues of Institutional Investor. The February edition talked about some of the reforms coming out of Slovakia recently. The list is fairly impressive. From what it says in the article, other countries in the region have taken notice and Slovakia's actions may drive reforms in the region. The results have been good so far:


An economic turnaround is now evident. In 2002, GDP grew by 4.4 percent--twice the rate of that in the Czech Re public--and expanded by an estimated 4 percent in 2003. In 2002, Slovakia drew $3.7 billion in foreign direct investment--six times more than Hungary. From 1998 to the end of 2003, foreign investment totaled an estimated $9.3 billion. A hefty share of this investment is going into auto manufacturing, an industry in which Slovakia is emerging as the regional powerhouse, much to the chagrin of Czechs, Hungarians and Poles (see box, page 70). "Slovakia is becoming the biggest recipient of FDI per capita in the region," says Nora Szentivanyi, a London-based economist for J.P. Morgan Europe.

Google IPO

| 3 Comments

A CBS MarketWatch article points out the weariness that fund managers have about the Google IPO. Much of it sounds like snivelling that they have lost their advantage over retail investors:

They don't like the sounds of getting in at a price they can't make money off of. They fear the price they'd be receiving isn't much of a discount than what retail buyers would get.

It's akin to bypassing the high mark-ups you'd get from Pottery Barn, Saks or any retail outlet for that matter. Where's the value for such middlemen retailers? If Google were a new brand of wildly popular jeans sold at the same price to both consumers and retailers, then retailers might opt to buy cheaper imitations or jean jackets they can offload to consumers at higher prices.

In like vein, fund managers are finding alternative investments to play the positive sentiment surrounding the IPO.

To be sure, some fund managers expect the Google IPO to be the top of the Internet market. They'd look to short most Net shares. But I would argue that Google planned its IPO well.


I would say that Google planned its IPO well to extract as much money out of the market as possible. Initial trading of the stock is likely to be down which is contrary to how most internet stocks traded in the late nineties. The reason is simple; who is left to buy at that price? If the hesitency of fund managers to participate is widespread, it is conceivable that it may open lower than expected and institutions may jump in at that point. I think that's unlikely to happen and that individuals are likely to bid up the IPO price. There is something in the market called 'natural selling' which means that there is always somebody out there holding a stock who needs to paint the garage or pay for their daughters wedding. This phenomenom is why in slow markets, it seams stocks like to drift down. I find this much more common in smaller stocks who don't have much coverage. So, if you're planning to participate, I recommend a low ball bid.

Efficiency Wage

| 2 Comments | 3 TrackBacks

Here is some anecdotal evidence of the efficiency wage. This is, for those not familiar, when a company pays a higher than market clearing in return for a greater effort from its employees. From this article in LZ-NET.de:

One analyst at Deutsche Bank in the USA is quoted as having said that "it's better to be an employee at Costco, than a shareholder." But if one takes a closer look at the economic indicators for both companies it becomes clear that the analysts are actually wearing blinkers. Despite paying higher wage costs, Costco is much higher on productivity. Sam's Club turnover of USD 35 billion is achieved by 102,000 employees, whilst Costco's USD 34 billion is achieved by only a fraction of that number, 68,000 employees. Costco's productivity per square meter is 54 per cent higher than that of Sam's Club, its productivity per employee is 45 per cent higher, while its profits are almost 24 per cent higher.

Before you start saying "we're all Keynesians now", a couple of things need to be pointed out. First, Costco formerly went after a higher end clientele, not everybody could join. The result of this discrimantion is that the company has a substantial higher per check out ticket than its competitors. Second, Costco may pay a higher wage, but their workers may be higher skilled as well. In reality, each companies workers may be receiving the same pay rate for the amount of skill they have. This is different from saying that you could pay the the Sam's Club employee the same as Costco and get the same level of productivity. Costco, by paying more, attracts and retains better employees. The article tries to point this out:


Wages and fluctuation

Employees like Costco not only for its good wages but also for its generous healthcare benefits. They are not only highly motivated and productive, they are also loyal. The fluctuation rate is only 6 per cent, compared to Sam's 21 per cent. Even Wal-Mart knows that a change of staff costs 2,500 dollars per person, and this then adds up to USD 50 million each year.

The reaction of the Wall Street analysts to the figures published by Costco's were not primarily aimed at penalising a company for stepping outside of the ranks of wage cutters, it was all about the interests of the Costco shareholders.

Their numbers don't seem right. 21% turnover of 1.4 million workers at $2,500 per employee would mean that this costs them $735 million a year. If they had a 6% turnover, it would be $210 million a year for a savings of $525 million. As this PDF points out, Costco does achieve a higher level of profit per employee. For Wal-Mart to achieve the same level of profit, they would need to cut the number of employee and raise the remaining one's pruductivity. Is that possible with their current workforce? I don't know and it is beyond the scope of this post. However, as I write this, Bloomberg is flashing across the bottom of the screen that the company is planning to raise the starting wage.

Enron Traders and Me

| 9 Comments

I am glad I was never an Enron energy trader. After listening to these clips from the company's trading desk phone records, my actions and words during that time may not be much different. My hesitation would probably come when the decision to break the law was made; yeah, I do have some ethics. What the conversations capture is an attitude which fairly accurately reflects my own.

"Burn, baby, burn" is something that I muttered a couple of times. For option traders like me, who always have disaster protection or are long volatility, those days, when the world seams to be coming to an end, are the ultimate thrill. Andreline takes over, but it doesn't manifest itself in physical activity, although sometimes it could.

One morning, I was waiting for my boss to get into the office when the phone rang. He was arrested that morning for driving on a suspended license( this was the result of not paying a parking ticket of all things). The reason he was pulled over in the first place was markets overnight were down hard and he ran a stop sign coming into work. The andreline flowing through his blood had fired him up.

Typically, the physical outburst during trading are by those who have the wrong positions. The voices by the Enron traders are those of people confident and in control. Comments like "burn, baby, burn" are just a release of nervous energy and, well, of course you're make jokes and laugh as you make in a day what most people make in a year(some people make multiples more than that, others less, it just depends on how big you are and for whom you trade). The guys sound like assholes and they probably are. The comments horrify many people; how could they be so mean? Maybe they are taking pleasure in other people's pain, I never did even while making plenty of jokes that would make it seam like it.

News from the ROK

A couple of items from the East Asian Peninsula:

Hyundai is perhaps the hottest car maker out there. Fifteen to twenty years ago, they were very cheap and not well built. Times have changed, the article points out that they have high customer satisfaction with their quality. Of course, they are building a plant here in the U.S.. Also, Hyundai, Kia motors is the seventh largest carmaker in the world.

South Korea is experiencing what many here have called a jobless recovery. I had seen a better article the other day which captured this for the economy as a whole, but this will illustrate the point in one of the country's sectors:


According to the central bank, the elasticity of employment for manufacturers, or ``the increase rate of job offerings for each 1 percentage point in economic growth,�� stood at �0.18 in 2003.

It means that manufacturing jobs fell by 0.18 percent each time when the economy grows by 1 percent. In other words, labor productivity has increased but an economic growth would not automatically lead to creation of additional jobs, a BOK economist said.

The figure has been below zero for three consecutive years with -0.29 in 2001 and �0.08 in 2002.


South Korea, as many other countries have as well, is experiencing a decline in manufacturing employment. What's impressive about the article is that a journalist actually used the word "elasticity."

Edit: It should be noted that the trend here in the U.S. has appearantly stopped for the time being(via Instapundit). Korea has experienced strong GDP growth during this period, 2002's was above 6.0%(I would find the exact firgures, but the European exchanges are opening down to flattish and I have no idea why right now).

Not having to do with South Korea, but Powerline blogged the Miss Universe Pageant last night. If you didn't see it, there's a surpise upset.

Ladies Night at Corner Solution

| 1 Comment

Over at Corner Solution, fellow GMU Economics grad student William Butterfield notes that a New Jersey judge has ruled that the narrow commercial benefits of price discrimination in the form of "Ladies Night" "do[es] not override the 'important social policy objective of eradicating discrimination."

Mr.Butterfield aptly replies that "This is obvious judicial lunacy," and supplies us with a short discussion of the clear social benefits of such discrimination.

Classified Work

| 6 Comments

I'll be working in a classified environment for at least the next few days--possibly part of next week--and won't be checking email or posting except in the evenings, or if sleeping baby permits, the very early mornings.

This reminds me that yesterday, Businesspundit linked to a Forbes top 10 list of jobs that won't be outsorced offshore. The list is rather silly, including CEO's and surgeons.

Not included on the list were the jobs guaranteed not to be outsourced offshore --military positions in and out of warfighting specialties.

However, working in the military is not just a career move, it is a lifestyle choice not usually among the top picks of Forbes readers. (I'd make a terrible military officer--I can't even lead and inspire a team of bloggers! I just let them do what they want!)

Also, any job, like mine, that requires U.S. citizenship, or a security clearance, will not be performed for 1/10th the cost and 1/9th the productivity elsewhere on the planet--even if economic profits are to be had by doing so.

Our federal government sets and enforces rules meant to restrict the flow of information and technology outside the country, and I won't even give the appearance of violating those rules.

Bill Jamiseon on the Iraqi Economy

If I were to ask you, "Just how badly is the Iraqi economy doing?" you'd rightly condemn the inherent bias in my question.

Similarly if Bill Jamiseon of the Scotsman asks us , "How will Iraq�s economy be run after June 30? And does it stand a fighting chance?" we know we're in for a rough ride.

After recounting the nominal change in central government control, the attacks on, and the defense and rebuilding of Iraq's oil industry, the enactment of the central bank law, the attempt ease the foreign debt burden racked up by Saddam, the massive amount of private and government funds creating new jobs rebuilding after more than a decade of infrastructure neglect, and noting that the Economist predicts that GDP will grow 60% this year and 25% the next, he still insists that the road to recovery is "invisible to many".

If he wants a few micro level anecdotes--from Iraqis and visible to Iraqis--, he should read Omar, who questions his media's insistence that unemployment is rife, and talks about the amazing increase in real total compensation for some.

We are told by Mr. Jamiseon:

Even assuming that the formidable security and political problems can be overcome, rebuilding Iraq�s economy will not be easy.
Question: Why should the basic rules of Iraqi economic expansion, progress, and prosperity be any different than those that apply to the US, India, Chile, or Afghanistan? Remember, Mr. Jamiseon already controlled for security and political problems affecting the economy, and he still thinks there's a huge problem that needs to be understood and solved by someone. Does this imply that specific cultural factors or economic rules make ordinary Iraqis less likely to succeed economically?

I can't say that living under a brutal fascist dictatorship leaves entrepreneurial energies intact--as such a government winds up torturing, maiming, wearing down, killing, or exiling the best and brightest--but it sure seems like a good assumption that the vast mass of Iraqis want themselves to succeed economically, and don't have extraordinary cultural barriers.

How about the rules of economic order? The day is fast approaching when Iraq will be a relatively free country politically and economically. This political-economic order is precisely what a lot of Americans now mean by the term "democracy". The rules of the economic order are favorable in a democratic Iraq, although not all the requirements for economic expansion are in place.

Adam Smith once wrote:

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things
. Under the CPA, Iraq has had easy taxes and tolerable justice, but little peace; it looks like this 2/3 solution will continue under the new government. And to that extent, I agree that Iraq's economy will have difficulties.

But I for one do not want to have the CPA or any other organization be in charge of "rebuilding" the Iraqi economy, when political leaders should be doing their best to secure a long-term peace (which might mean short-term urban warfare).

An economy is best run when command and control of resources is in the hands of a diverse group of people with specific knowledge of effective consumer demand and low-cost supply conditions. This is true regardless of whether an economy is being "rebuilt" or "built from scratch". Having a previously existing infrastructure presents more challenges and options, but it is not a categorically different kind of economic development.

We are also told:

The picture painted in the Iraq investor road show section of the CPA website is almost laughable in its optimism, with headings such as "Iraq�s economy should recover quickly" and "Iraq�s economy has already started to rebound".
Unless Mr. Jamiseon is accusing the CPA of blatantly lying, and has sources to back up his pessimism, wouldn't you think the CPA members--being in Iraq and dealing with Iraqis all day long--would actually know better?

Besides, are incomes in Iraq visibly higher today than under Saddam? Yes, they are. I won't refer to anecdotes and pictures showing refurbishing and construction. Instead I refer you to question 24 of this poll of Iraqis conducted by the Pan Arab Research Center--"Has there been an increase or a decrease in the family income compared to that of before the war?". The results: 5% of Iraqis have had their income increase a lot, and 36% somewhat, while 43% say it's the same and 12% say it has decreased somewhat and 4% say it has decreased a lot.

Looks to me like the Iraqi economy has already improved. Hope dawned a long time ago...

UPDATE: Here aresome results of an Oxford Research International of Oxford poll of 2700 Iraqis conducted in March.

Under "Ratings of Specific Living Conditions", we find out that 40%+ of people think schools, household basics, crime protection, medical care, clean water, security, electricity, and jobs (39%) have improved since before the war, while less than ~20% think they've gotten worse (25% for jobs and 26% for security). In every category, we find that ~70%+ of people expect all of these to improve over the next year.

Pages

Powered by Movable Type 5.02

About this Archive

This page is an archive of entries from June 2004 listed from newest to oldest.

May 2004 is the previous archive.

July 2004 is the next archive.

Find recent content on the main index or look in the archives to find all content.