Watch The Ascent of Money Episode 1: From Bullion to Bubbles on PBS. See more from The Ascent of Money.
Monday, October 15, 2012
Wednesday, August 22, 2012
Thursday, August 2, 2012
Are Air Pollutiom Controls Worth Their Costs?
Ted Geyer and Kip Viscusi write--no surprise--that for many recent regulations the answer is "No".
Perhaps the main failure of rationality is that of the regulators rather than the consumers and firms. Agency officials who have been given a specific substantive mission have a tendency to focus on these concerns to the exclusion of all others. Thus, fuel efficiency and energy efficiency matter, but nothing else does. In effect, government officials are acting as if they are guided by a single mission myopia that leads to the exclusion of all concerns other than their agencies' mandates.
...And if government agencies can justify regulations on the premise that consumers and firms (but not regulators) are irrational, there is no limit to the expansive use of regulatory powers to control and constrain market choices.
From http://www.newmarksdoor.com/mainblog/
Monday, July 30, 2012
Wednesday, July 4, 2012
Saturday, June 9, 2012
Capitalism and competition are antonyms, not synonyms.
Great article in Forbes:
Ten Lessons
"Capitalism is about building wealth. But in perfect competition, nobody actually makes any money; all economic profits are competed away.
Competition is overrated. In practice it is quite destructive and should be avoided wherever possible. Much better than fighting for scraps in existing markets is to create and own new ones. Sometimes you have to fight. When you do, you should win. But conflict tends to be romanticized, and people tend to get sucked in. It is worthwhile to think about how to run away from the fighting and build a monopoly business instead."
Thursday, May 17, 2012
Monday, May 7, 2012
Monday, April 23, 2012
Tuesday, April 3, 2012
17 Reasons to be cheerful
From Matt Ridley author of the Rational Optimist.
1. We're better off now Compared with 50 years ago, when I was just four years old, the average human now earns nearly three times as much money (corrected for inflation), eats one third more calories, buries two thirds fewer children, and can expect to live one third longer. In fact, it's hard to find any region of the world that's worse off now than it was then, even though the global population has more than doubled over that period.
2. Urban living is a good thing
City dwellers take up less space, use less energy, and have less impact on natural ecosystems than country dwellers. The world's cities now contain over half its people, but they occupy less than 3 percent of its land area. Urban growth may disgust environmentalists, but living in the country is not the best way to care for the earth. The best thing we can do for the planet is build more skyscrapers.
3. Poverty is nose-diving
The rich get richer, but the poor do even better. Between 1980 and 2000, the poor doubled their consumption. The Chinese are ten times richer and live about 25 years longer than they did 50 years ago. Nigerians are twice as rich and live nine more years. The percentage of the world's people living in absolute poverty has dropped by over half. The United Nations estimates that poverty was reduced more in the past 50 years than in the previous 500.
4. The important stuff costs less
One reason we are richer, healthier, taller, cleverer, longer-lived, and freer than ever before is that the four most basic human needs-food, clothing, fuel, and shelter-have grown markedly cheaper. Take one example: In 1800, a candle providing one hour's light cost six hours' work. In the 1880s, the same light from a kerosene lamp took 15 minutes' work to pay for. In 1950, it was eight seconds. Today, it's half a second. In these terms, we are 43,200 times better off than in 1800.
5. The environment is better than you think
In the United States, rivers, lakes, seas, and air are getting cleaner all the time. A car today emits less pollution traveling at full speed than a parked car did from leaks in 1970.
6. Shopping fuels innovation
Even allowing for the many people who still live in abject poverty, our own generation has access to more calories, watts, horsepower, gigabytes, megahertz, square feet, air miles, food per acre, miles per gallon, and, of course, money than any who lived before us. This will continue as long as we use these things to make other things. The more we specialize and exchange, the better off we'll be.
7. Global trade enriches our lives
By 9 a.m., I have shaved with an American razor, eaten bread made with French wheat and spread with New Zealand butter and Spanish marmalade, brewed tea from Sri Lanka, dressed in clothes made from Indian cotton and Australian wool, put on shoes of Chinese leather and Malaysian rubber, and read a newspaper printed on Finnish paper with Chinese ink. I have consumed minuscule fractions of the productive labor of hundreds of people. This is the magic of trade and specialization. Self-sufficiency is poverty.
8. More farm production = more wilderness
While world population has increased more than fourfold since 1900, other things have increased, too-the area of crops by 30 percent, harvests by 600 percent. At the same time, more than two billion acres of "secondary" tropical forest are now regrowing since farmers left them to head for cities, and it is already rich in biodiversity. In fact, I will make an outrageous prediction: The world will feed itself to a higher and higher standard throughout this century without plowing any new land.
9. The good old days weren't
Some people argue that in the past there was a simplicity, tranquillity, sociability, and spirituality that's now been lost. This rose-tinted nostalgia is generally confined to the wealthy. It's easier to wax elegiac for the life of a pioneer when you don't have to use an outhouse. The biggest-ever experiment in back-to-the-land hippie lifestyle is now known as the Dark Ages.
10. Population growth is not a threat
Although the world population is growing, the rate of increase has been falling for 50 years. Across the globe, national birth rates are lower now than in 1960, and in the less developed world, the birth rate has approximately halved. This is happening despite people living longer and infant-mortality rates dropping. According to an estimate from the United Nations, population will start falling once it peaks at 9.2 billion in 2075-so there is every prospect of feeding the world forever. After all, there are already seven billion people on earth, and they are eating better and better every decade.
11. Oil is not running out
In 1970, there were 550 billion barrels of oil reserves in the world, and in the 20 years that followed, the world used 600 billion.
So by 1990, reserves should have been overdrawn by 50 billion barrels. Instead, they amounted to 900 billion-not counting tar sands and oil shale that between them contain about 20 times the proven reserves of Saudi Arabia. Oil, coal, and gas are finite, but they will last for decades, perhaps centuries, and people will find alternatives long before they run out.
12. We are the luckiest generation
This generation has experienced more peace, freedom, leisure time, education, medicine, and travel than any in history. Yet it laps up gloom at every opportunity. Consumers do not celebrate their wonderful field of choice and, according to psychologists, say they are "overwhelmed." When I go to my local superstore, I do not see people driven to misery by the impossibility of choice. I see people choosing.
13. Storms are not getting worse
Not at all. While the climate warmed slightly last century, the incidence of hurricanes and cyclones fell. Since the 1920s, the global annual death rate from weather-related natural disasters (that is, the proportion of the world's population killed rather than simply the overall number) has declined by a staggering 99 percent.
The killing power of hurricanes depends more on wealth than on wind speed. A big hurricane struck the well-prepared Yucatán in Mexico in 2007 and killed nobody. A similar storm struck impoverished Burma the next year and killed 200,000. The best defenses against disaster are prosperity and freedom.
14. Great ideas keep coming
The more we prosper, the more we can prosper. The more we invent, the more inventions become possible. The world of things is often subject to diminishing returns. The world of ideas is not: The ever-increasing exchange of ideas causes the ever-increasing rate of innovation in the modern world. There isn't even a theoretical possibility of exhausting our supply of ideas, discoveries, and inventions.
15. We can solve all our problems
If you say the world will go on getting better, you are considered mad. If you say catastrophe is imminent, you may expect the Nobel Peace Prize. Bookshops groan with pessimism; airwaves are crammed with doom. I cannot recall a time when I was not being told by somebody that the world could survive only if it abandoned economic growth. But the world will not continue as it is. The human race has become a problem-solving machine: It solves those problems by changing its ways. The real danger comes from slowing change.
16. This depression is not depressing
The Great Depression of the 1930s was just a dip in the upward slope of human living standards. By 1939, even the worst-affected countries, America and Germany, were richer than they'd been in 1930. All sorts of new products and industries were born during the Depression. So growth will resume unless prevented by wrong policies. Someone, somewhere, is tweaking a piece of software, testing a new material, or transferring the gene that will make life easier or more fun.
17. Optimists are right
For 200 years, pessimists have had all the headlines-even though optimists have far more often been right. There is immense vested interest in pessimism. No charity ever raised money by saying things are getting better. No journalist ever got the front page writing a story about how disaster was now less likely. Pressure groups and their customers in the media search even the most cheerful statistics for glimmers of doom. Don't be browbeaten-dare to be an optimist!
1. We're better off now Compared with 50 years ago, when I was just four years old, the average human now earns nearly three times as much money (corrected for inflation), eats one third more calories, buries two thirds fewer children, and can expect to live one third longer. In fact, it's hard to find any region of the world that's worse off now than it was then, even though the global population has more than doubled over that period.
2. Urban living is a good thing
City dwellers take up less space, use less energy, and have less impact on natural ecosystems than country dwellers. The world's cities now contain over half its people, but they occupy less than 3 percent of its land area. Urban growth may disgust environmentalists, but living in the country is not the best way to care for the earth. The best thing we can do for the planet is build more skyscrapers.
3. Poverty is nose-diving
The rich get richer, but the poor do even better. Between 1980 and 2000, the poor doubled their consumption. The Chinese are ten times richer and live about 25 years longer than they did 50 years ago. Nigerians are twice as rich and live nine more years. The percentage of the world's people living in absolute poverty has dropped by over half. The United Nations estimates that poverty was reduced more in the past 50 years than in the previous 500.
4. The important stuff costs less
One reason we are richer, healthier, taller, cleverer, longer-lived, and freer than ever before is that the four most basic human needs-food, clothing, fuel, and shelter-have grown markedly cheaper. Take one example: In 1800, a candle providing one hour's light cost six hours' work. In the 1880s, the same light from a kerosene lamp took 15 minutes' work to pay for. In 1950, it was eight seconds. Today, it's half a second. In these terms, we are 43,200 times better off than in 1800.
5. The environment is better than you think
In the United States, rivers, lakes, seas, and air are getting cleaner all the time. A car today emits less pollution traveling at full speed than a parked car did from leaks in 1970.
6. Shopping fuels innovation
Even allowing for the many people who still live in abject poverty, our own generation has access to more calories, watts, horsepower, gigabytes, megahertz, square feet, air miles, food per acre, miles per gallon, and, of course, money than any who lived before us. This will continue as long as we use these things to make other things. The more we specialize and exchange, the better off we'll be.
7. Global trade enriches our lives
By 9 a.m., I have shaved with an American razor, eaten bread made with French wheat and spread with New Zealand butter and Spanish marmalade, brewed tea from Sri Lanka, dressed in clothes made from Indian cotton and Australian wool, put on shoes of Chinese leather and Malaysian rubber, and read a newspaper printed on Finnish paper with Chinese ink. I have consumed minuscule fractions of the productive labor of hundreds of people. This is the magic of trade and specialization. Self-sufficiency is poverty.
8. More farm production = more wilderness
While world population has increased more than fourfold since 1900, other things have increased, too-the area of crops by 30 percent, harvests by 600 percent. At the same time, more than two billion acres of "secondary" tropical forest are now regrowing since farmers left them to head for cities, and it is already rich in biodiversity. In fact, I will make an outrageous prediction: The world will feed itself to a higher and higher standard throughout this century without plowing any new land.
9. The good old days weren't
Some people argue that in the past there was a simplicity, tranquillity, sociability, and spirituality that's now been lost. This rose-tinted nostalgia is generally confined to the wealthy. It's easier to wax elegiac for the life of a pioneer when you don't have to use an outhouse. The biggest-ever experiment in back-to-the-land hippie lifestyle is now known as the Dark Ages.
10. Population growth is not a threat
Although the world population is growing, the rate of increase has been falling for 50 years. Across the globe, national birth rates are lower now than in 1960, and in the less developed world, the birth rate has approximately halved. This is happening despite people living longer and infant-mortality rates dropping. According to an estimate from the United Nations, population will start falling once it peaks at 9.2 billion in 2075-so there is every prospect of feeding the world forever. After all, there are already seven billion people on earth, and they are eating better and better every decade.
11. Oil is not running out
In 1970, there were 550 billion barrels of oil reserves in the world, and in the 20 years that followed, the world used 600 billion.
So by 1990, reserves should have been overdrawn by 50 billion barrels. Instead, they amounted to 900 billion-not counting tar sands and oil shale that between them contain about 20 times the proven reserves of Saudi Arabia. Oil, coal, and gas are finite, but they will last for decades, perhaps centuries, and people will find alternatives long before they run out.
12. We are the luckiest generation
This generation has experienced more peace, freedom, leisure time, education, medicine, and travel than any in history. Yet it laps up gloom at every opportunity. Consumers do not celebrate their wonderful field of choice and, according to psychologists, say they are "overwhelmed." When I go to my local superstore, I do not see people driven to misery by the impossibility of choice. I see people choosing.
13. Storms are not getting worse
Not at all. While the climate warmed slightly last century, the incidence of hurricanes and cyclones fell. Since the 1920s, the global annual death rate from weather-related natural disasters (that is, the proportion of the world's population killed rather than simply the overall number) has declined by a staggering 99 percent.
The killing power of hurricanes depends more on wealth than on wind speed. A big hurricane struck the well-prepared Yucatán in Mexico in 2007 and killed nobody. A similar storm struck impoverished Burma the next year and killed 200,000. The best defenses against disaster are prosperity and freedom.
14. Great ideas keep coming
The more we prosper, the more we can prosper. The more we invent, the more inventions become possible. The world of things is often subject to diminishing returns. The world of ideas is not: The ever-increasing exchange of ideas causes the ever-increasing rate of innovation in the modern world. There isn't even a theoretical possibility of exhausting our supply of ideas, discoveries, and inventions.
15. We can solve all our problems
If you say the world will go on getting better, you are considered mad. If you say catastrophe is imminent, you may expect the Nobel Peace Prize. Bookshops groan with pessimism; airwaves are crammed with doom. I cannot recall a time when I was not being told by somebody that the world could survive only if it abandoned economic growth. But the world will not continue as it is. The human race has become a problem-solving machine: It solves those problems by changing its ways. The real danger comes from slowing change.
16. This depression is not depressing
The Great Depression of the 1930s was just a dip in the upward slope of human living standards. By 1939, even the worst-affected countries, America and Germany, were richer than they'd been in 1930. All sorts of new products and industries were born during the Depression. So growth will resume unless prevented by wrong policies. Someone, somewhere, is tweaking a piece of software, testing a new material, or transferring the gene that will make life easier or more fun.
17. Optimists are right
For 200 years, pessimists have had all the headlines-even though optimists have far more often been right. There is immense vested interest in pessimism. No charity ever raised money by saying things are getting better. No journalist ever got the front page writing a story about how disaster was now less likely. Pressure groups and their customers in the media search even the most cheerful statistics for glimmers of doom. Don't be browbeaten-dare to be an optimist!
Friday, March 30, 2012
Thursday, March 29, 2012
Everything you need to know about the power of economic freedom in 3 charts
From:http://blog.american.com/2012/02/everything-you-need-to-know-about-the-power-of-economic-freedom-in-3-charts/
February 28, 2012
The West was quite poor heading into the 1700s and then it got richer. A lot richer. Real fast. Its embrace of economic freedom and creative destruction, both legally and culturally—what economist Deirdre McCloskey calls the idea of bourgeois dignity and liberty—led to a rise in real income per head in 2010 prices from about $2-3 a day in 1800 worldwide to over $100 today.
But China didn’t follow the same path. It did not embrace bourgeois dignity and liberty. It did not embrace innovation. As this chart from Gapminder illustrates, China’s per capita income was $986 in 1800 vs. $1,900 for the United States.
And by 1978, U.S. per capita income had skyrocketed to $28,000 (adjusted for inflation), while China was actually a bit worse off at $861. But 1978 was also the year when China began to open up its economy to enterprise and the West.
By 2010, China’s per capita GDP had surged to $8,000 vs $42,000 for the United States.
See, the Great Recession is not the Big Economic Story of our time. McCloskey:
February 28, 2012
The West was quite poor heading into the 1700s and then it got richer. A lot richer. Real fast. Its embrace of economic freedom and creative destruction, both legally and culturally—what economist Deirdre McCloskey calls the idea of bourgeois dignity and liberty—led to a rise in real income per head in 2010 prices from about $2-3 a day in 1800 worldwide to over $100 today.
But China didn’t follow the same path. It did not embrace bourgeois dignity and liberty. It did not embrace innovation. As this chart from Gapminder illustrates, China’s per capita income was $986 in 1800 vs. $1,900 for the United States.
And by 1978, U.S. per capita income had skyrocketed to $28,000 (adjusted for inflation), while China was actually a bit worse off at $861. But 1978 was also the year when China began to open up its economy to enterprise and the West.
By 2010, China’s per capita GDP had surged to $8,000 vs $42,000 for the United States.
See, the Great Recession is not the Big Economic Story of our time. McCloskey:
The Big Economic Story of our own times is that the Chinese in 1978 and then the Indians in 1991 adopted liberal ideas in the economy, and came to attribute a dignity and a liberty to the bourgeoisie formerly denied. And then China and India exploded in economic growth. The important moral, therefore, is that in achieving a pretty good life for the mass of humankind, and a chance at a fully human existence, ideas have mattered more than the usual material causes. …And to keep its economic machine humming, says the World Bank, China must further its embrace of free-market capitalism. The United States, too.
The Big Story of the past two hundred years is the innovation after 1700 or 1800 around the North Sea, and recently in once poor places like Taiwan or Ireland, and most noticeably now in the world’s biggest tyranny and the world’s biggest democracy. It has given many formerly poor and ignorant people the scope to flourish. And contrary to the usual declarations of the economists since Adam Smith or Karl Marx, the Biggest Economic Story was not caused by trade or investment or exploitation. It was caused by ideas. The idea of bourgeois dignity and liberty led to a rise of real income per head in 2010 prices from about $3 a day in 1800 worldwide to over $100 in places that have accepted the Bourgeois Deal and its creative destruction.
Monday, March 26, 2012
Adjusted for Inflation and Increased Vehicle Efficiency, Cost Per Mile is 28% Less Than in 1980
From M. J Perry
Energy Fact of the Day:
Adjusted for inflation, gasoline today is about the same price as in 1980 ($3.58 per gallon in February, see top chart). However, adjusted for both inflation and increased fuel efficiency over time, the costs per mile driven were about 23 cents in 1980 compared to 16-17 cents per mile in February 2012, according to the EIA (see bottom above), or about 28% less today than in 1980.
HT: Robert Kuehl
Adjusted for inflation, gasoline today is about the same price as in 1980 ($3.58 per gallon in February, see top chart). However, adjusted for both inflation and increased fuel efficiency over time, the costs per mile driven were about 23 cents in 1980 compared to 16-17 cents per mile in February 2012, according to the EIA (see bottom above), or about 28% less today than in 1980.
HT: Robert Kuehl
Wednesday, March 21, 2012
Thursday, March 15, 2012
Fracking Economics
Excellent article on fracking.
Note the economic principles at work.
http://www.nationalreview.com/blogs/print/293086
Also see the explanatory video at:
http://www.voyageroil.com/drilling
Note the economic principles at work.
http://www.nationalreview.com/blogs/print/293086
Also see the explanatory video at:
http://www.voyageroil.com/drilling
Tuesday, March 13, 2012
Wednesday, March 7, 2012
Walter Williams It Just Ain't So
The U.S. Census Bureau reports
that 2011 manufacturing output grew by 11 percent, to nearly $5
trillion. Were our manufacturing sector considered a nation with its own
gross domestic product, it would be the world's fourth-richest economy.
Manufacturing productivity has doubled since 1987, and manufacturing
output has risen by one-half. However, over the past two decades,
manufacturing employment has fallen about 25 percent. For some people,
that means our manufacturing sector is sick. By that criterion, our
agriculture sector shares that "sickness," only worse and for a longer
duration.
In 1790, 90 percent of Americans did agricultural work. Agriculture is now in "shambles" because only 2 percent of Americans have farm jobs. In 1970, the telecommunications industry employed 421,000 well-paid switchboard operators. Today "disaster" has hit the telecommunications industry, because there are fewer than 20,000 operators. That's a 95 percent job loss. The spectacular advances that have raised productivity in the telecommunications industry have made it possible for fewer operators to handle tens of billions of calls at a tiny fraction of the 1970 cost.
For the most part, rising worker productivity and advances in technology are the primary causes of reduced employment and higher output in the manufacturing, agriculture and telecommunications industries. My question is whether Congress should outlaw these productivity gains in the name of job creation. It would be easy. Just get rid of those John Deere harvesting machines that do in a day what used to take a thousand men a week, outlaw the robots and automation that eliminated many manufacturing jobs and bring back manually operated PBX telephone switchboards. By the way, if technological advances had not eliminated millions of jobs, where in the world would we have gotten the workers to produce all those goods and services that we now enjoy that weren't even thought of decades ago? The bottom line is that the health of an industry is measured by its output, not by the number of people it employs.
Source:http://jewishworldreview.com/cols/williamns030712.php3
Wednesday, February 29, 2012
Matt Ridley on How Expensive Green Energy Destroys Jobs, While Cheap Shale Gas Creates Jobs
From: Professor Mark J. Perry's Blog for Economics and Finance
Matt Ridley masterfully applies Bastiat's "broken-window fallacy" to green energy jobs, writing last December in City AM, a UK financial newspaper:
"When
is a job not a job? Answer: when it is a green job. Jobs in an
industry that raises the price of energy effectively destroy jobs
elsewhere; jobs in an industry that cuts the cost of energy create extra
jobs elsewhere.
The
entire argument for green jobs is a version of Frederic Bastiat’s
broken-window fallacy. The great nineteenth century French economist
pointed out that breaking a window may provide work for the glazier, but
takes work from the tailor, because the window owner has to postpone
ordering a new suit because he has to pay for the window.
You
will hear claims from Chris Huhne, the U.K.'s anti-energy secretary [he
was recently forced to resign and faces criminal charges], and the
green-greed brigade that trousers his subsidies for their wind and
solar farms, about how many jobs they are creating in renewable energy.
But since every one of these jobs is subsidized by higher electricity
bills and extra taxes, the creation of those jobs is a cost to the rest
of us. The anti-carbon and renewable agenda is not only killing jobs by
closing steel mills, aluminium smelters and power stations, but
preventing the creation of new jobs at hairdressers, restaurants and
electricians by putting up their costs and taking money from their
customers’ pockets.
Contrast
that with news from the United States that, according to a report from
IHS Global Insight, the cheap shale gas revolution now in full flow
has created 148,000 jobs directly within the gas industry and – by
making energy cheaper – has created at least another 450,000 jobs
elsewhere in the economy. By 2015, the total impact of shale gas will be
870,000 new jobs, says the report.
Back
in 1800, Britain was becoming the richest country in the world with
the fastest economic growth and the fastest job creation – the China of
its day. That was not because we had suddenly become cleverer than
everybody else at inventing things. It was because we had stumbled upon
limitless, dense and above all cheap energy in the form of coal, and
harnessed it to mechanize industry, cheaply amplifying the labor
productivity of each person so much that he could be paid high wages.
That
lesson – that cheap energy is an employment multiplier, while costly
energy is an employment divider – has been forgotten. Please let us
recall it before the green jobs myth causes more unemployment."
HT: Warren Smith
Thursday, February 16, 2012
Wednesday, February 15, 2012
Wednesday, February 8, 2012
Thursday, February 2, 2012
Monday, January 30, 2012
Unintended Consequences
The D.C. local government produces no shortage of unintended
consequences. Here is a great one-- recently D.C. banned the sale of
single beers for the following rationale:
When the law passed liquor stores immediately responded with this:
The two-pack.
Priced more competitively than a single, so vagrants can get twice as drunk -- for less!
Source: Nate Anderson
http://www.quora.com/Economics/What-are-some-actual-examples-of-the-law-of-unintended-consequences-in-action
“More often than not, single sales of alcohol are bought so they can be consumed as soon as you walk out the door – turning alleys and backyards into public restrooms and leaving empty bottles strewn through our neighborhoods."
When the law passed liquor stores immediately responded with this:
The two-pack.
Priced more competitively than a single, so vagrants can get twice as drunk -- for less!
Source: Nate Anderson
http://www.quora.com/Economics/What-are-some-actual-examples-of-the-law-of-unintended-consequences-in-action
Saturday, January 28, 2012
Sugar Tariffs Cost Americans $3.86 Billion in 2011
From: http://mjperry.blogspot.com/
The chart above displays annual refined sugar prices (cents per pound) using data from the USDA
(Tables 2 and 5) between 1982 and 2011 for: a) the U.S. wholesale
refined sugar price at Midwest markets, and b) the world refined sugar
price. Due to import quota restrictions that strictly limit the amount
of imported sugar coming into the U.S. at the world price, the domestic
producers are protected from more efficient foreign sugar growers who
can produce cane sugar in Central America, Africa and the Caribbean at
half the cost of beet sugar in Minnesota and Michigan.
Of course, there's no free lunch, and this sweet trade protection comes at the expense of American consumers and U.S. sugar-using businesses, who have been forced to pay more than twice the world price of sugar on average since 1982 (28.6 cents for domestic sugar vs. 14 cents for world sugar, see chart). How much does this trade protection cost Americans?
We can estimate the cost of sugar protection, using some additional data from the USDA (Table 1) about sugar:
1. American consumers and businesses consumed 10.18 million metric tons (22.44 billion pounds) of sugar last, and therefore every 1 cent increase in sugar prices costs Americans an additional $224.4 million per year in higher prices.
2. The U.S. produced 7.15 million metric tons (15.76 billion pounds) of sugar last year.
3. Due to quotas, Americans were only allowed to purchase 3 metric tons (6.67 billion pounds) of world sugar, or about 30% of the total sugar consumed. Domestic sugar producers ("Big Sugar") are allowed to control 70% of the sugar market every year through protectionist sugar trade policies that strictly limit foreign competition.
4. If sugar quotas were eliminated, and American consumers and business had been able to purchase 100% their sugar in 2011 at the world price (average of 31.68 cents per pound) instead of the average U.S. price of 56.22 cents, they would have saved about $3.86 billion. In other words, by forcing Americans to pay 56.22 cents for inefficiently produced domestic sugar instead of 31.68 cents for more efficiently produced world sugar, Americans pay an additional 24.54 cents per pound for the 15.76 billion pounds of American sugar produced annually, which translates to $3.86 billion in higher costs for American consumers and businesses.
(Note: This is an estimate based on the assumptions that: a) the amount of sugar consumed in the U.S., and b) world prices, wouldn't change if the U.S. sugar market was completely open.)
Bottom Line: The cost of most trade protection is largely invisible and hard to calculate, but the cost of sugar protection is directly visible and measurable, since the USDA and the futures markets regularly report prices for both high-cost domestic sugar and low-cost world sugar. Like all protection, sugar tariffs exist to protect an inefficient domestic industry (sugar beet farmers) from more efficient foreign producers (cane sugar farmers), and come at the expense of the U.S. consumers and the American companies using sugar as an input, and make our country worse off, on net.
I'm reminded of the recent Quote of the Day from Bastiat: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." U.S. sugar policy has a long history, going back to 1789 when the First Congress of the United States imposed a tariff upon foreign sugar, and is a perfect illustration of trade protection ignores the viewpoint of disorganized, dispersed consumers in favor of the concentrated, well-organized interests of producers.
Of course, there's no free lunch, and this sweet trade protection comes at the expense of American consumers and U.S. sugar-using businesses, who have been forced to pay more than twice the world price of sugar on average since 1982 (28.6 cents for domestic sugar vs. 14 cents for world sugar, see chart). How much does this trade protection cost Americans?
We can estimate the cost of sugar protection, using some additional data from the USDA (Table 1) about sugar:
1. American consumers and businesses consumed 10.18 million metric tons (22.44 billion pounds) of sugar last, and therefore every 1 cent increase in sugar prices costs Americans an additional $224.4 million per year in higher prices.
2. The U.S. produced 7.15 million metric tons (15.76 billion pounds) of sugar last year.
3. Due to quotas, Americans were only allowed to purchase 3 metric tons (6.67 billion pounds) of world sugar, or about 30% of the total sugar consumed. Domestic sugar producers ("Big Sugar") are allowed to control 70% of the sugar market every year through protectionist sugar trade policies that strictly limit foreign competition.
4. If sugar quotas were eliminated, and American consumers and business had been able to purchase 100% their sugar in 2011 at the world price (average of 31.68 cents per pound) instead of the average U.S. price of 56.22 cents, they would have saved about $3.86 billion. In other words, by forcing Americans to pay 56.22 cents for inefficiently produced domestic sugar instead of 31.68 cents for more efficiently produced world sugar, Americans pay an additional 24.54 cents per pound for the 15.76 billion pounds of American sugar produced annually, which translates to $3.86 billion in higher costs for American consumers and businesses.
(Note: This is an estimate based on the assumptions that: a) the amount of sugar consumed in the U.S., and b) world prices, wouldn't change if the U.S. sugar market was completely open.)
Bottom Line: The cost of most trade protection is largely invisible and hard to calculate, but the cost of sugar protection is directly visible and measurable, since the USDA and the futures markets regularly report prices for both high-cost domestic sugar and low-cost world sugar. Like all protection, sugar tariffs exist to protect an inefficient domestic industry (sugar beet farmers) from more efficient foreign producers (cane sugar farmers), and come at the expense of the U.S. consumers and the American companies using sugar as an input, and make our country worse off, on net.
I'm reminded of the recent Quote of the Day from Bastiat: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." U.S. sugar policy has a long history, going back to 1789 when the First Congress of the United States imposed a tariff upon foreign sugar, and is a perfect illustration of trade protection ignores the viewpoint of disorganized, dispersed consumers in favor of the concentrated, well-organized interests of producers.
Saturday, January 7, 2012
Saturday, October 29, 2011
Income Mobility is Much More Important Than Rising Income Inequality or Stagnating Household Income, and We Have a Lot of It (Mobility)
Source: mjperry
We hear a lot these days about "increasing income inequality" and "stagnating household income," but those discussions rarely include what is probably the most important factor when it comes to income over time: income mobility. In fact, even if: a) income inequality was increasing over time, and b) median household income was stagnant over time, those outcomes wouldn't necessarily be a problem if there was significant income mobility. Reason? If there is substantial movement of households over time from lower-income to higher-income quintiles, households may only be earning the median household income for a short period of time on their way up to a higher quintile.
In other words, it's more likely that most households are "typical" or at the "median" level" only temporarily on their way to a higher income group. The fact that median household income might be stagnant over time seems far less important than what happens as households exceed median income and move up to a higher-income category. In the case of significant income mobility over time, wouldn't households actually benefit from increasing income inequality over time if that allowed them to earn higher incomes relative to the median or low-income quintiles once they arrived at one of the top two quintiles?
Most of those complaining about income inequality and stagnating income seem to statically assume that households or individuals stay in the same income group (by quintile, or the "top 1%," "top 10%," bottom 50%, median income, etc.) forever, with no movement over time. If we assume that you're stuck in the bottom income quintile for life, or even earn the median household income for life (both highly unrealistic), then the concerns about rising income inequality or stagnating median household income have greater strength. But with dynamic movement over time in the income of households and individuals, the "problems" of income inequality and stagnating income seem much less important, and might even be "non-problems."
Thomas Sowell offers this key insight (emphasis added):
“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.”
Contrary to prevailing public opinion that households get stuck at a given income level for decades or generations, there is strong empirical evidence that households actually move up and down the economic ladder over even very short periods of time.
For example, recent research from the Federal Reserve Bank of Minneapolis is summarized in the table above, based on income data from the Panel Study of Income Dynamics that followed the same households from 2001 to 2007. The empirical results answer the question: For households that started in a given earnings quintile (20 percent group) in 2001, what percentage of those households moved to a different income quintile over the next six years? Short answer: a lot.
Read more here at The Enterprise Blog.
Richard Epstein on Income Inequality in America
Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NewsHour.
Saturday, October 22, 2011
Income inequality can be explained by household demographics
From: mjperry
The Occupy Wall Street (OWS) protest has returned national attention to the topic of income inequality; see recent commentary from bloggers Megan McArdle here and James Pethokoukis here and here. Both highlight empirical evidence that challenges the narrative that income inequality has gotten worse over time.
Most of the discussion on income inequality focuses on the relative differences over time between low-income and high-income American households, but it’s also instructive to analyze the demographic differences among income groups at a given point in time to answer the question: How are high-income households different from low-income households? Recently released data from the Census Bureau (available here, here, and here) for American households by income quintiles in 2010 allows for such a comparison: see the chart below.
Here is a summary of some of the key demographic differences between American households in the bottom and top income quintiles in 2010:
The American economy and labor market are extremely dynamic, and evidence shows that individuals are not stuck forever in a single income quintile but instead move up and down the income quintiles over their lifetimes. It’s very likely that many high-income individuals who were in their peak earning years in 2010 were in a lower income quintile in prior years, before they acquired education and job experience, and they’ll move again to a lower quintile in the future when they retire.
Last November, presaging today’s protests on Wall Street, columnist Nicholas Kristof wrote in the New York Times (“A Hedge Fund Republic?”) that if Americans want to observe “rapacious income inequality,” they don’t need to travel to a banana republic. Rather, he suggests that “you can just look around” the United States to see “stunning inequality.” Given the significant differences in household characteristics by income group, it shouldn’t be too stunning that there are huge differences in incomes among American households, and it has nothing to do with “rapaciousness.” Rather, it can be easily explained by household demographics.
The Occupy Wall Street (OWS) protest has returned national attention to the topic of income inequality; see recent commentary from bloggers Megan McArdle here and James Pethokoukis here and here. Both highlight empirical evidence that challenges the narrative that income inequality has gotten worse over time.
Most of the discussion on income inequality focuses on the relative differences over time between low-income and high-income American households, but it’s also instructive to analyze the demographic differences among income groups at a given point in time to answer the question: How are high-income households different from low-income households? Recently released data from the Census Bureau (available here, here, and here) for American households by income quintiles in 2010 allows for such a comparison: see the chart below.
1. On average, there were significantly more income earners per household in the top income quintile households (1.97) than earners per household in the lowest-income households (0.43).
2. Married-couple households represented a much greater share of the top income quintile (78.4 percent) than for the bottom income quintile (17 percent), and single-parent or single households represented a much greater share of the bottom quintile (83 percent) than for the top quintile (21.6 percent).
3. Roughly 3 out of 4 households in the top income quintile included individuals in their prime earning years between the ages of 35-64, compared to only 43.6 percent of household members in the bottom fifth who were in that age group.
4. Compared to members of the top income quintile, household members in the bottom income quintile were 1.6 times more likely to be in the youngest age group (under 35 years), and three times more likely to be in the oldest age group (65 years and over).
5. More than four times as many top quintile households included at least one adult who was working full-time in 2010 (77.2 percent) compared to the bottom income quintile (only 17.4 percent), and more than seven times as many households in the bottom quintile included adults who did not work at all (65 percent) compared to top quintile households whose family members did not work (13.3 percent).
6. Family members of households in the top income quintile were about five times more likely to have a college degree (60.3 percent) than members of households in the bottom income quintile (only 12.1 percent). In contrast, family members of the lowest income quintile were 12 times more likely than those in the top income quintile to have less than a high school degree in 2010 (26.7 percent vs. 2.2 percent).
Bottom Line: American households in the top income quintile have almost five times more family members working on average than the lowest quintile, and individuals in higher-income households are far more likely than lower-income households to be well-educated, married, and working full-time in their prime earning years. In contrast, individuals in low-income households are far more likely to be less-educated, working part-time, either very young or very old, and living in single-parent households.The American economy and labor market are extremely dynamic, and evidence shows that individuals are not stuck forever in a single income quintile but instead move up and down the income quintiles over their lifetimes. It’s very likely that many high-income individuals who were in their peak earning years in 2010 were in a lower income quintile in prior years, before they acquired education and job experience, and they’ll move again to a lower quintile in the future when they retire.
Last November, presaging today’s protests on Wall Street, columnist Nicholas Kristof wrote in the New York Times (“A Hedge Fund Republic?”) that if Americans want to observe “rapacious income inequality,” they don’t need to travel to a banana republic. Rather, he suggests that “you can just look around” the United States to see “stunning inequality.” Given the significant differences in household characteristics by income group, it shouldn’t be too stunning that there are huge differences in incomes among American households, and it has nothing to do with “rapaciousness.” Rather, it can be easily explained by household demographics.
Thursday, August 18, 2011
Young Americans: Luckiest Generation in History
Source: http://mjperry.blogspot.com/
In 1952, the minimum wage was $0.75 per hour (equivalent to $6.39 in today's dollars), and a full-time summer job at 40 hours per week for 12 weeks would have generated $360 in total summer earnings (ignoring taxes). Using retail prices from a 1952 Sears Christmas Catalog, I found that a teenager then would have only been able to purchase the following 3 items with his or her entire pre-tax summer earnings of $360 working at the minimum wage (with $15 borrowed from the parents to cover the full $375 cost):
Now compare that to the items in the table below that could be purchased by a teenager or college student this year with his or her summer earnings of $3,480 (ignoring taxes) at the current minimum wage of $7.25 per hour:
According to Cox: "Add it all up. When it comes to their economic prospects, today’s young Americans are the Luckiest Generation in history—at least until their children grow up and forge an even luckier one. And even if real wages are flat, the explosion of new products over time at lower and lower prices translates into a rising standard of living for all income groups, even minimum wage workers."
MP: Teenagers today can afford products today like laptop or notebook computers, Kindles, digital cameras, GPS systems, iPads, iPhones, and iPods that even a billionaire couldn't have purchased 20 years ago. The comparison above illustrates that we've made a lot of economic progress over the last 60 years since 1952 that has increased our national prosperity - and that's happened in spite of ten recessions, the stagflation of the 1970s with 18.5% mortgage rates and a 20% prime rate, the S&L crisis with almost 3,000 bank failures, several major stock market corrections, the Great Recession, etc.
Even though the economy is still struggling to recover from the 2008-2009 recession, and we've had sub-par economic growth and sluggish job creation this year, economic progress and a rising standard of living will continue to move forward. The economic challenges of the past haven't stopped innovation and prosperity in the long run, and the current challenges might slow progress in the short run, but won't in the long run. Just like today's teenagers are infinitely more abundant than their counterparts in 1952 and can afford items not available to billionaires of past eras, the teenagers 60 years from now in 2070 will be infinitely more abundant than today's teens and will be able to afford products that today's billionaires can't even imagine, much less afford.
To demonstrate how free market capitalism generates increased prosperity over time for average (or even low-income) Americans, economist W. Michael Cox of the Dallas Federal Reserve has compared the purchases at different points in time from the income earned by high school graduates or entering college freshmen working at a full-time, minimum-wage summer job (ignoring taxes). Here's a summary of his article "Capitalism's Many Benefits Create 'Luckiest Generation,'" which appeared in Investor's Business Daily in October 2000. Several years ago, I presented an updated comparison of the purchases from summer jobs in 1949 and 2009 in this CD post. Here's another update:
In 1952, the minimum wage was $0.75 per hour (equivalent to $6.39 in today's dollars), and a full-time summer job at 40 hours per week for 12 weeks would have generated $360 in total summer earnings (ignoring taxes). Using retail prices from a 1952 Sears Christmas Catalog, I found that a teenager then would have only been able to purchase the following 3 items with his or her entire pre-tax summer earnings of $360 working at the minimum wage (with $15 borrowed from the parents to cover the full $375 cost):
| Items Purchased in 1952 with Summer Wages @ $0.75 hour | |
|---|---|
| Royal Deluxe Portable Typewriter | $120 |
| Silvertone Portable Phonograph | $65 |
| Silvertone 17-inch TV | $190 |
| Total | $375 |
Now compare that to the items in the table below that could be purchased by a teenager or college student this year with his or her summer earnings of $3,480 (ignoring taxes) at the current minimum wage of $7.25 per hour:
| Items Purchased in 2011 with Summer Wages @ $7.25 hour | |
|---|---|
| Dell Inspiron Laptop | $450 |
| Apple iPod Touch | $210 |
| Apple iPhone 4G | $200 |
| Garmin GPS | $100 |
| Canon 14.1 Megapixel Digital Camera | $120 |
| HP Officejet Wireless Printer | $100 |
| Westinghouse 32 inch LCD HDTV | $330 |
| Sharp 3D Wi-Fi Ready Blu-Ray Player | $200 |
| Samsung 5.1-Channel Blu-ray Home Theater System | $260 |
| Sonicare Rechargable Power Toothbrush | $110 |
| Sony PlayStation 3 | $400 |
| Sony Clock Radio with Apple iPhone and iPod Dock | $40 |
| TiVo Premiere HD DVR - 45 hours | $149 |
| XM OnyX Sirius XM Satellite Radio Tuner | $47 |
| De'Longhi EC702 Espresso Machine | $150 |
| Kindle | $114 |
| Apple iPad | $500 |
| Total | $3,480 |
According to Cox: "Add it all up. When it comes to their economic prospects, today’s young Americans are the Luckiest Generation in history—at least until their children grow up and forge an even luckier one. And even if real wages are flat, the explosion of new products over time at lower and lower prices translates into a rising standard of living for all income groups, even minimum wage workers."
MP: Teenagers today can afford products today like laptop or notebook computers, Kindles, digital cameras, GPS systems, iPads, iPhones, and iPods that even a billionaire couldn't have purchased 20 years ago. The comparison above illustrates that we've made a lot of economic progress over the last 60 years since 1952 that has increased our national prosperity - and that's happened in spite of ten recessions, the stagflation of the 1970s with 18.5% mortgage rates and a 20% prime rate, the S&L crisis with almost 3,000 bank failures, several major stock market corrections, the Great Recession, etc.
Even though the economy is still struggling to recover from the 2008-2009 recession, and we've had sub-par economic growth and sluggish job creation this year, economic progress and a rising standard of living will continue to move forward. The economic challenges of the past haven't stopped innovation and prosperity in the long run, and the current challenges might slow progress in the short run, but won't in the long run. Just like today's teenagers are infinitely more abundant than their counterparts in 1952 and can afford items not available to billionaires of past eras, the teenagers 60 years from now in 2070 will be infinitely more abundant than today's teens and will be able to afford products that today's billionaires can't even imagine, much less afford.
Wednesday, August 17, 2011
Warren Buffett's Call for Higher Taxes on the Rich Doesn’t Fit the Facts
Source: http://www.taxfoundation.org/blog/show/27542.html
The United States currently boasts the most progressive income tax in the industrialized world. Meaning, our wealthy pay a greater share of the tax burden than do the wealthy in any other capitalist nation. Yet in an August 14th New York Times op-ed, Warren Buffett called for even higher taxes on the rich in order to lower the federal deficit. He believes that he and his wealthy friends are under-taxed. However, Mr. Buffett's actions and the facts tell the real story.
Of course, like any American, Mr. Buffett can voluntarily write a check or make an electronic payment to the Treasury to help reduce the deficit by simply clicking here. To be consistent with his message, however, he should resist taking the corresponding charitable donation deduction. This would at least ensure that he still pay those low income taxes of which he so passionately speaks.
Follow David Logan on Twitter @Loganomix
The United States currently boasts the most progressive income tax in the industrialized world. Meaning, our wealthy pay a greater share of the tax burden than do the wealthy in any other capitalist nation. Yet in an August 14th New York Times op-ed, Warren Buffett called for even higher taxes on the rich in order to lower the federal deficit. He believes that he and his wealthy friends are under-taxed. However, Mr. Buffett's actions and the facts tell the real story.
- Mr. Buffett chose to leave most of his fortune to the Bill & Melinda Gates Foundation and, thus, avoided an estate tax that could potentially give 55 percent of his wealth to Uncle Sam. Moreover, keeping that wealth actively working in the private sector would generate deficit reducing tax revenues indefinitely.
- Mr. Buffett seems to forget that capital gains and dividends taxes are a double tax on corporate income. Before it gives out a dollar in dividends, Berkshire Hathaway - like all U.S. corporations - must first pay a 35 percent federal corporate income tax, one of the highest in the world. Then, shareholders pay the individual tax rate of 15 percent on their dividend income or the gains from appreciated stock. As a result, the combined tax rate of 50 percent is the 4th highest combined dividend rate in the industrialized world. Ironically, we had the 8th highest combined rate under Bill Clinton.
- In his op-ed, Mr. Buffett suggests that increasing taxes on the rich ensures that they pay their fair share. Perhaps, but while the top 1 percent of taxpayers earn 20 percent of the nation's income, they currently pay nearly 40 percent of the income taxes. That's a greater share of the burden than the bottom 90 percent combined (that's everyone earning under $100,000 by the way).
- Let's not forget that when the top marginal income tax rate was 70 percent in 1980, the rich paid 20 percent of all income taxes. Yet now, when the top marginal rate is 35 percent they pay twice that.
- Finally, while the tax burden on the rich has been growing, the burden on low and middle-income Americans has been shrinking. By most accounts, roughly 50 percent of American households pay no income tax at all. Indeed, the IRS will give out roughly $110 billion in "refundable" tax credits this year to households that pay no income taxes.
Of course, like any American, Mr. Buffett can voluntarily write a check or make an electronic payment to the Treasury to help reduce the deficit by simply clicking here. To be consistent with his message, however, he should resist taking the corresponding charitable donation deduction. This would at least ensure that he still pay those low income taxes of which he so passionately speaks.
Follow David Logan on Twitter @Loganomix
Wednesday, August 10, 2011
Mileage Kills
Source:http://jewishworldreview.com/0811/stossel081011.php3
A Government That Kills
By John Stossel
http://www.JewishWorldReview.com | President Obama has declared that auto companies' fleets must average 54.5 miles per gallon by 2025, almost double the current 27.5. Standing at his side when he made the announcement were executives from the Big Three automakers.
The New York Times reported: "It is an extraordinary shift in the relationship between the companies and Washington. But a lot has happened in the last four years, notably the $80 billion federal bailout of General Motors, Chrysler and scores of their suppliers, which removed any itch for a politically charged battle from the carmakers."
Right. They're happy to agree to stupid rules, since they are now dependent on government favors.
Obama said that under his new rule, "everyone wins. Consumers pay less for fuel, the economy as a whole runs more efficiently."
Sounds impressive, but he didn't mention the costs. The Center for Automotive Research says the new standard will raise the price of cars by about $7,000. You'd need to save a lot on fuel to break even.
But that's not the worst of it. The new rules will kill people.
Sam Kazman of the Competitive Enterprise Institute explained this to me. The MPG standard "has been killing people for the last 30 years," Kazman said.
How can that be?
"It forces cars to be ... made smaller and lighter. ... They are simply worse in just about every type of auto collision."
The National Highway Traffic Safety Administration actually backs Kazman up. It estimates that smaller cars are responsible for an additional 2,000 deaths each year.
Imagine that — a government safety agency promotes a rule that kills people.
"Think about the minute risks that agencies like Environmental Protection Agency go into a tizzy about. ... If any private product had a death toll one fraction of what the miles-per-gallon rules cost, that product would have been yanked off the market years ago."
Do we at least end up using less gasoline and saving money?
No, given the increased upfront cost of the car. "It is not clear that it saves people money," Kazman said. "If these technologies in fact save people money, you don't need a government law to force them down people's throats."
Right. We're not stupid.
Bob Deans of the Natural Resources Defense Council, one of America's biggest environmental groups, said that Kazman and I are wrong.
"Cars like the Chevy Cruise — 42 miles per gallon — get top marks on safety. The Ford Focus, more than 40 miles per gallon — top marks in safety. We're getting safer cars, and they're not coming at the expense of fuel efficiency."
Deans added: "By increasing that gas mileage for our auto fleet, we can cut our oil consumption in this country by 4 million barrels per day by 2030. That would almost wipe out our OPEC purchases daily. It will make our country stronger."
But we use oil for lots of things. If we cut gasoline use by a third, unlikely as that would be, we'd still only reduce our fossil fuel use by 7 percent. That does not make much difference for $7,000 a car and 2,000 extra deaths each year.
"It's not necessarily a smaller car that we're talking about," Deans replied. "You look at Chevy Malibu. That is a 3,400-pound car. It's not a small car. It's getting 33-miles to the gallon. We believe Detroit can do this."
Maybe they can. Maybe they can't. If they could, I'd think they would do it to meet consumer demand. They'd do it without government forcing it on us.
"New technologies can make cars safer," Kazman acknowledged. "The point is, if you put the technologies in a large, heavier car, that car will be safer still. ... None of the proponents of these standards would acknowledge (the lives lost). It's always win-win, and that is nonsense."
Life involves tradeoffs. If we want to minimize deaths from auto accidents, we may use more fuel than we might otherwise use. Who should make that decision, the government? Or you and I?
In the land of the supposedly free, that really should not be a tough question.
A Government That Kills
By John Stossel
 | |
| | |
http://www.JewishWorldReview.com | President Obama has declared that auto companies' fleets must average 54.5 miles per gallon by 2025, almost double the current 27.5. Standing at his side when he made the announcement were executives from the Big Three automakers.
The New York Times reported: "It is an extraordinary shift in the relationship between the companies and Washington. But a lot has happened in the last four years, notably the $80 billion federal bailout of General Motors, Chrysler and scores of their suppliers, which removed any itch for a politically charged battle from the carmakers."
Right. They're happy to agree to stupid rules, since they are now dependent on government favors.
Obama said that under his new rule, "everyone wins. Consumers pay less for fuel, the economy as a whole runs more efficiently."
Sounds impressive, but he didn't mention the costs. The Center for Automotive Research says the new standard will raise the price of cars by about $7,000. You'd need to save a lot on fuel to break even.
But that's not the worst of it. The new rules will kill people.
Sam Kazman of the Competitive Enterprise Institute explained this to me. The MPG standard "has been killing people for the last 30 years," Kazman said.
How can that be?
"It forces cars to be ... made smaller and lighter. ... They are simply worse in just about every type of auto collision."
The National Highway Traffic Safety Administration actually backs Kazman up. It estimates that smaller cars are responsible for an additional 2,000 deaths each year.
Imagine that — a government safety agency promotes a rule that kills people.
"Think about the minute risks that agencies like Environmental Protection Agency go into a tizzy about. ... If any private product had a death toll one fraction of what the miles-per-gallon rules cost, that product would have been yanked off the market years ago."
Do we at least end up using less gasoline and saving money?
No, given the increased upfront cost of the car. "It is not clear that it saves people money," Kazman said. "If these technologies in fact save people money, you don't need a government law to force them down people's throats."
Right. We're not stupid.
Bob Deans of the Natural Resources Defense Council, one of America's biggest environmental groups, said that Kazman and I are wrong.
"Cars like the Chevy Cruise — 42 miles per gallon — get top marks on safety. The Ford Focus, more than 40 miles per gallon — top marks in safety. We're getting safer cars, and they're not coming at the expense of fuel efficiency."
Deans added: "By increasing that gas mileage for our auto fleet, we can cut our oil consumption in this country by 4 million barrels per day by 2030. That would almost wipe out our OPEC purchases daily. It will make our country stronger."
But we use oil for lots of things. If we cut gasoline use by a third, unlikely as that would be, we'd still only reduce our fossil fuel use by 7 percent. That does not make much difference for $7,000 a car and 2,000 extra deaths each year.
"It's not necessarily a smaller car that we're talking about," Deans replied. "You look at Chevy Malibu. That is a 3,400-pound car. It's not a small car. It's getting 33-miles to the gallon. We believe Detroit can do this."
Maybe they can. Maybe they can't. If they could, I'd think they would do it to meet consumer demand. They'd do it without government forcing it on us.
"New technologies can make cars safer," Kazman acknowledged. "The point is, if you put the technologies in a large, heavier car, that car will be safer still. ... None of the proponents of these standards would acknowledge (the lives lost). It's always win-win, and that is nonsense."
Life involves tradeoffs. If we want to minimize deaths from auto accidents, we may use more fuel than we might otherwise use. Who should make that decision, the government? Or you and I?
In the land of the supposedly free, that really should not be a tough question.
Wednesday, July 27, 2011
Too Much Safety Could Make Drivers Less Safe
From: Wired
Back in 1908, when Mercedes-Benz was a startup and drivers had to navigate around horse-drawn carriages, signaling turns by rolling down an isinglass window and sticking out an arm, psychologists Robert Yerkes and John Dodson first described a paradox that continues to plague would-be automotive automators.
The Yerkes-Dodson law, as it became known, describes the relationship between arousal and performance. Give people too little to pay attention to and they’ll become complacent. Give them too much and they’ll become overwhelmed. For the best performance, the two researchers said, humans must work in the sweet spot where manageable tasks keep them interested.
In automotive terms, this means drivers are at their best when they’re paying attention to their surroundings but they aren’t flummoxed. You’re just as likely to do a bad job driving down some lonely treeless straightaway in Kansas as you are merging onto the New Jersey Turnpike at rush hour, lost, with a scorpion on your shoulder.
This is important because, as automakers pack their cars with more and more semiautonomous safety technology like adaptive cruise control and automatic braking, driving a car becomes easier and easier. We are, essentially, given less to pay attention to while we’re taught that our cars are watching out for us.
Just how the rapid adoption of semiautonomous vehicle systems will affect overall motor vehicle safety remains to be seen, but it may fundamentally affect the kinds of crashes we see and whether active safety systems gain widespread acceptance.
These systems, in practice if not by design, allow drivers to pay less attention to the road ahead. The impact on performance and safety depends upon how big a workload drivers have. In stressful situations where drivers are easily overwhelmed, such as stop-and-go traffic or searching for an address in an unfamiliar neighborhood, electronic nannies can be a big help to a driver whose cognitive load is maxed out.
But put that same driver on an arrow-straight road in Kansas in the dead of the night and it could be a problem. The driver isn’t paying attention and may not see trouble coming until it’s too late.
In that situation, “we want to increase demand, we don’t want to decrease demand,” said Bryan Reimer, a researcher at the MIT AgeLab and associate director of the New England University Transportation Center. “You want to have enough workload that you maintain an adequate load of performance.”
Distraction isn’t a matter of choice, either. “It’s not whether you want to attend or you don’t want to attend,” Reimer said. “It’s fundamentally in the back of the brain that you need a certain amount of demand to sustain attention.”
Clifford Nass, a communications professor at Stanford University who studies multitasking, put it more bluntly.
“People are always happy to be lazy, and it’s sort of a rule of safety design,” he said. “So if you give people the slightest opportunity to be lazy, they’ll take to it with great gusto and joy.”
This is especially true for frequent multitaskers — and most apparent with young people, whose brains have developed to crave new information.
“Younger people — the majority of multitaskers — like new things, new information rather than old information,” said Nass. “As a result, if you can say, ‘You don’t have to keep on staring at this boring road,’ that makes their brains extremely happy. It doesn’t make them safe, but it makes them happy.”
Almost Doesn’t Count
The big problem with semiautonomous vehicles is summed up by the adjective used to describe them. The “semi” in semiautonomous means the technology still requires human interaction. That can throw a wrench in the works.
“The intersection of autonomy and human behavior is a difficult problem, and we are the problem,” said Reimer. “We’re not predictable, nor are we completely rational.”
Your car can’t tell if you’re tired, daydreaming or listening to a conference call on speakerphone. Therefore, it doesn’t know whether it’s appropriate to engage active safety features. In theory, perfectly programmed fully autonomous cars would be safer than human drivers, but that technology is still years away.
The automakers offering semiautonomous active safety systems primarily have been concerned with developing reliable technology. And rightly so: We wouldn’t want new Benzes and Lexuses steering into traffic or hitting the brakes at random. But these systems fall short in creating a seamless transition between human and machine.
“The point the automakers are making, which is true, is that they go to extreme lengths to make these systems work and extremely reliable,” Nass said. “The reliability on these systems is very high. If you have automatic cruise control, it’s not extremely often you have to jump into the fray.”
Therein lies the problem. We come to count on our cars to keep us out of trouble, even in situations where the technology isn’t designed to.
“Road hazards other than the car in front of you are so rare, especially on the highway where these adaptive cruise control systems would be in play, that they would, over time, encourage a complacency that undermines safety,” said Erik Blaser, a psychology professor at the University of Massachusetts, Boston, who studies vision and perception. “You stop paying attention to the driving.”
In a controlled environment such as a lab, Blaser said, subjects without distractions may be more “tuned” to particular visual stimuli, such as jumping deer and flashing brake lights. But driving isn’t a controlled environment. Friends send texts, lousy songs come on the radio and interesting scenery passes by — and important visual information goes unnoticed. Active safety systems can exacerbate this.
“I wouldn’t be surprised if in the long term you actually wind up missing more because you learn that you don’t have to pay attention to the driving as much,” Blaser said.
“The functionality of the technology is very good at this point, but how do you teach people how to use it appropriately?” Reimer said. “Reading the owner’s manual is not going to provide the information that you need.”
Instead, he suggests ongoing, lifetime driver training and an end to the American tradition of driver’s education only for new drivers. Auto dealerships should spend more time working with customers to fully explain the limits of automotive safety technology before letting them drive home. Looking further ahead of the curve, cars could one day actively detect drivers’ states — whether they’re tired or distracted, for instance — and allow the use of semiautonomous safety technologies when appropriate.
The limitations of active safety systems must be second nature to drivers, said Nass. Drivers must know what the technology can and can’t do so they don’t rely upon it in situations where it won’t work.
“It’s always a problem with partially autonomous systems,” he said. “You’ll always have the issue of remembering what it does and what it doesn’t do, and in real time we don’t want people pondering that.”
Nass says the best safety systems go unnoticed. He calls them “secret” safety systems, those unseen fail-safe systems like anti-lock brakes and electronic stability control (ESC). Such systems step in only when a driver is in trouble. Because drivers aren’t constantly made aware of their presence, they tend not to change their behavior. In other words, it doesn’t make them lazy.
“When it’s obvious [safety systems] are doing something, we say, ‘Oh I don’t have to do as much,’” Nass said.
Anti-lock brakes and stability control, on the other hand, gained widespread praise even though drivers hardly know they’re there.
“And it’s because people don’t alter their driving because they have ESC, because we don’t advertise that,” Nass said. “It’s a very different psychology.”
Twenty miles down the road, a deer darts across the road, requiring evasive action. But you’ve been zoned out for the past 15 miles, convinced your electronic nanny will protect you. Trouble is, it wasn’t designed to detect a deer and you plow into the animal.
Therein lies the paradox of semiautonomous vehicles: They’re very good at avoiding some problems but may exacerbate — or even create — others. We may not even know what those problems are until we see a lot more vehicles with the technology.
Collision mitigation systems won’t let us collide in the ways we’re used to, Reimer said, but they may let us collide in ways we aren’t. Automatic braking has the potential to nearly eliminate rear-end collisions, and lane-departure warning could drastically reduce the instance of side-swipe and merging collisions. But how human drivers react to, and rely upon, these technologies could create new, unseen problems.
“I’m really a believer that the roads are going to get a little more difficult and dangerous with autonomous systems in the vehicle before they get safer,” Reimer said. “When the driver’s in the loop but yet has control to take over, it’s tough.”
How the roads change remains to be seen.
“I won’t predict what it is — but the likelihood is that there is an effect,” Reimer said. “The effect may be smaller than the problem itself, but there is an effect.”
Back in 1908, when Mercedes-Benz was a startup and drivers had to navigate around horse-drawn carriages, signaling turns by rolling down an isinglass window and sticking out an arm, psychologists Robert Yerkes and John Dodson first described a paradox that continues to plague would-be automotive automators.
The Yerkes-Dodson law, as it became known, describes the relationship between arousal and performance. Give people too little to pay attention to and they’ll become complacent. Give them too much and they’ll become overwhelmed. For the best performance, the two researchers said, humans must work in the sweet spot where manageable tasks keep them interested.
In automotive terms, this means drivers are at their best when they’re paying attention to their surroundings but they aren’t flummoxed. You’re just as likely to do a bad job driving down some lonely treeless straightaway in Kansas as you are merging onto the New Jersey Turnpike at rush hour, lost, with a scorpion on your shoulder.
This is important because, as automakers pack their cars with more and more semiautonomous safety technology like adaptive cruise control and automatic braking, driving a car becomes easier and easier. We are, essentially, given less to pay attention to while we’re taught that our cars are watching out for us.
Just how the rapid adoption of semiautonomous vehicle systems will affect overall motor vehicle safety remains to be seen, but it may fundamentally affect the kinds of crashes we see and whether active safety systems gain widespread acceptance.
Automotive Arousal
The level of semiautonomous technology in new cars is impressive. Adaptive cruise control ensures your car slows with traffic. Lane departure warning technology tells you when you’ve strayed over the line. Some cars will tell you when you’re nodding off, while others will actually stop your car if a pedestrian steps into traffic.These systems, in practice if not by design, allow drivers to pay less attention to the road ahead. The impact on performance and safety depends upon how big a workload drivers have. In stressful situations where drivers are easily overwhelmed, such as stop-and-go traffic or searching for an address in an unfamiliar neighborhood, electronic nannies can be a big help to a driver whose cognitive load is maxed out.
But put that same driver on an arrow-straight road in Kansas in the dead of the night and it could be a problem. The driver isn’t paying attention and may not see trouble coming until it’s too late.
In that situation, “we want to increase demand, we don’t want to decrease demand,” said Bryan Reimer, a researcher at the MIT AgeLab and associate director of the New England University Transportation Center. “You want to have enough workload that you maintain an adequate load of performance.”
Distraction isn’t a matter of choice, either. “It’s not whether you want to attend or you don’t want to attend,” Reimer said. “It’s fundamentally in the back of the brain that you need a certain amount of demand to sustain attention.”
Clifford Nass, a communications professor at Stanford University who studies multitasking, put it more bluntly.
“People are always happy to be lazy, and it’s sort of a rule of safety design,” he said. “So if you give people the slightest opportunity to be lazy, they’ll take to it with great gusto and joy.”
This is especially true for frequent multitaskers — and most apparent with young people, whose brains have developed to crave new information.
“Younger people — the majority of multitaskers — like new things, new information rather than old information,” said Nass. “As a result, if you can say, ‘You don’t have to keep on staring at this boring road,’ that makes their brains extremely happy. It doesn’t make them safe, but it makes them happy.”
Almost Doesn’t Count
The big problem with semiautonomous vehicles is summed up by the adjective used to describe them. The “semi” in semiautonomous means the technology still requires human interaction. That can throw a wrench in the works.
“The intersection of autonomy and human behavior is a difficult problem, and we are the problem,” said Reimer. “We’re not predictable, nor are we completely rational.”
Your car can’t tell if you’re tired, daydreaming or listening to a conference call on speakerphone. Therefore, it doesn’t know whether it’s appropriate to engage active safety features. In theory, perfectly programmed fully autonomous cars would be safer than human drivers, but that technology is still years away.
The automakers offering semiautonomous active safety systems primarily have been concerned with developing reliable technology. And rightly so: We wouldn’t want new Benzes and Lexuses steering into traffic or hitting the brakes at random. But these systems fall short in creating a seamless transition between human and machine.
“The point the automakers are making, which is true, is that they go to extreme lengths to make these systems work and extremely reliable,” Nass said. “The reliability on these systems is very high. If you have automatic cruise control, it’s not extremely often you have to jump into the fray.”
Therein lies the problem. We come to count on our cars to keep us out of trouble, even in situations where the technology isn’t designed to.
“Road hazards other than the car in front of you are so rare, especially on the highway where these adaptive cruise control systems would be in play, that they would, over time, encourage a complacency that undermines safety,” said Erik Blaser, a psychology professor at the University of Massachusetts, Boston, who studies vision and perception. “You stop paying attention to the driving.”
In a controlled environment such as a lab, Blaser said, subjects without distractions may be more “tuned” to particular visual stimuli, such as jumping deer and flashing brake lights. But driving isn’t a controlled environment. Friends send texts, lousy songs come on the radio and interesting scenery passes by — and important visual information goes unnoticed. Active safety systems can exacerbate this.
“I wouldn’t be surprised if in the long term you actually wind up missing more because you learn that you don’t have to pay attention to the driving as much,” Blaser said.
The Learning Curve
Reimer said semiautonomous vehicles work best with drivers who trust the technology and are adequately trained how and when to use it. Gaining trust in new technology isn’t a problem — you don’t see many people demanding cars without antilock brakes or airbags — but teaching drivers how to use it poses unique challenges.“The functionality of the technology is very good at this point, but how do you teach people how to use it appropriately?” Reimer said. “Reading the owner’s manual is not going to provide the information that you need.”
Instead, he suggests ongoing, lifetime driver training and an end to the American tradition of driver’s education only for new drivers. Auto dealerships should spend more time working with customers to fully explain the limits of automotive safety technology before letting them drive home. Looking further ahead of the curve, cars could one day actively detect drivers’ states — whether they’re tired or distracted, for instance — and allow the use of semiautonomous safety technologies when appropriate.
The limitations of active safety systems must be second nature to drivers, said Nass. Drivers must know what the technology can and can’t do so they don’t rely upon it in situations where it won’t work.
“It’s always a problem with partially autonomous systems,” he said. “You’ll always have the issue of remembering what it does and what it doesn’t do, and in real time we don’t want people pondering that.”
Nass says the best safety systems go unnoticed. He calls them “secret” safety systems, those unseen fail-safe systems like anti-lock brakes and electronic stability control (ESC). Such systems step in only when a driver is in trouble. Because drivers aren’t constantly made aware of their presence, they tend not to change their behavior. In other words, it doesn’t make them lazy.
“When it’s obvious [safety systems] are doing something, we say, ‘Oh I don’t have to do as much,’” Nass said.
Anti-lock brakes and stability control, on the other hand, gained widespread praise even though drivers hardly know they’re there.
“And it’s because people don’t alter their driving because they have ESC, because we don’t advertise that,” Nass said. “It’s a very different psychology.”
Time for a tradeoff.
Consider the example of driving a lonely road with adaptive cruise control engaged and your brain disengaged, convinced the car is looking out for you. A car suddenly cuts you off. You don’t notice it, but your car’s radar does and hits the brakes, avoiding a collision. Score one for technology.Twenty miles down the road, a deer darts across the road, requiring evasive action. But you’ve been zoned out for the past 15 miles, convinced your electronic nanny will protect you. Trouble is, it wasn’t designed to detect a deer and you plow into the animal.
Therein lies the paradox of semiautonomous vehicles: They’re very good at avoiding some problems but may exacerbate — or even create — others. We may not even know what those problems are until we see a lot more vehicles with the technology.
Collision mitigation systems won’t let us collide in the ways we’re used to, Reimer said, but they may let us collide in ways we aren’t. Automatic braking has the potential to nearly eliminate rear-end collisions, and lane-departure warning could drastically reduce the instance of side-swipe and merging collisions. But how human drivers react to, and rely upon, these technologies could create new, unseen problems.
“I’m really a believer that the roads are going to get a little more difficult and dangerous with autonomous systems in the vehicle before they get safer,” Reimer said. “When the driver’s in the loop but yet has control to take over, it’s tough.”
How the roads change remains to be seen.
“I won’t predict what it is — but the likelihood is that there is an effect,” Reimer said. “The effect may be smaller than the problem itself, but there is an effect.”
Saturday, July 16, 2011
Thursday, July 7, 2011
Friday, July 1, 2011
Greenspan: $2 Trillion Stimulus Had Little Impact
Source: CNBC
The Federal Reserve's massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.
Greenspan was also pessimistic about the U.S. deficit talks, saying he didn’t think Congress would reach an agreement on raising the debt ceiling by the Aug 2 deadline.
“We’re going to get up to Aug 2 and I think on that night, we are not going to have the issue solved,” he said.
If that happens, he said, the U.S. would have to continue paying debt holders or risk major damage in global financial markets. As a result, “we will default on everything else.”
He added: “At that point, I think we’ll all come to our senses.”
The Federal Reserve's massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantative easing over the past two years had done little to loosen credit and boost the economy.
"There is no evidence that huge inflow of money into the system basically worked," Greenspan said in a live interview.
"It obviously had some effect on the exchange rate and the exchange rate was a critical issue in export expansion," he said. "Aside from that, I am ill-aware of anything that really worked. Not only QE2 but QE1."
Greenspan’s comments came as the Fed ended the second installment of its bond-buying program, known as QE2, after spending $600 billion. There were no hints of any more monetary easing—or QE3—to come.
Greenspan said he "would be surprised if there was a QE3" because it would "continue erosion of the dollar."
The former Fed chairman himself has been widely criticized for the low-interest rate policy in the early and mid 2000s that many believe led to the 2008 credit crisis.
Bernanke, who took over for Greenspan in 2006, began implementing the quantitative easing program in 2009 in an attempt to unfreeze credit and prevent a collapse of the US financial system. The strategy has gotten mixed reviews so far.
On Greece, Greenspan said a default is likely and will "affect the whole structure of profitability in the U.S." because of this country's large economic commitments to Europe, which holds Greek debt. Europe is also where "half the foreign [U.S.] affiliate earnings" are generated, he added.
"We can’t afford a significant drop in foreign affiliate earnings," Greenspan said.
“We’re going to get up to Aug 2 and I think on that night, we are not going to have the issue solved,” he said.
If that happens, he said, the U.S. would have to continue paying debt holders or risk major damage in global financial markets. As a result, “we will default on everything else.”
He added: “At that point, I think we’ll all come to our senses.”
Wednesday, June 29, 2011
2,000 Yrs. in One Chart: 23% of all Goods, Services Made Since 1 A.D. Were Produced This Decade!
From: mjperry.blogspot.com
The chart above is from The Economist and shows a "population-weighted history of the past two millennia" based on "economic output" and "years lived." According to The Economist:
"By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010."
MP: It also looks like more economic output was produced in the 20th century than in the previous 19 centuries combined.
HTs: Robert Kuehl and Steve Bart
Thursday, June 23, 2011
Cluless at the Fed
Source: ABC News
Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.
"We don't have a precise read on why this slower pace of growth is persisting," Bernanke said. He said the weak housing market and problems in the banking system might be "more persistent than we thought."...
Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.
"We don't have a precise read on why this slower pace of growth is persisting," Bernanke said. He said the weak housing market and problems in the banking system might be "more persistent than we thought."...
Subscribe to:
Comments (Atom)