Minor Thoughts from me to you

In an interview with Spiegel Online, Kenyan economics expert James Shikwati made an impassioned plea for first world nations to stop sending aid to third world nations.

Shikwati: ... for God's sake, please just stop.

SPIEGEL: Stop? The industrialized nations of the West want to eliminate hunger and poverty.

Shikwati: Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured in to Africa, the continent remains poor.

He explains why rich nations shouldn't be the ones helping poor nations -- and what happens to the corn when rich nations ship it over.

Shikwati: ... and at some point, this corn ends up in the harbor of Mombasa. A portion of the corn often goes directly into the hands of unsrupulous politicians who then pass it on to their own tribe to boost their next election campaign. Another portion of the shipment ends up on the black market where the corn is dumped at extremely low prices. Local farmers may as well put down their hoes right away; no one can compete with the UN's World Food Program. And because the farmers go under in the face of this pressure, Kenya would have no reserves to draw on if there actually were a famine next year. It's a simple but fatal cycle.

SPIEGEL: If the World Food Program didn't do anything, the people would starve.

Shikwati: I don't think so. In such a case, the Kenyans, for a change, would be forced to initiate trade relations with Uganda or Tanzania, and buy their food there. This type of trade is vital for Africa. It would force us to improve our own infrastructure, while making national borders -- drawn by the Europeans by the way -- more permeable. It would also force us to establish laws favoring market economy.

The Cato Institute recently hosted an event about this very point. Pan-African Free Trade Agreement: Helping Africa through Free Trade. (If you visit the event's page, you can watch it, listen to it, or read a full transcription of it.)

African tariffs are some of the highest in the world.

While OECD countries cut tariffs from an average of 23.7 percent to just 3.9% in the 20 years from 1983, Sub-Saharan Africa only cut its tariffs from 22.1% to 17.7%.

And astonishingly, many African countries impose tariffs on the import of medicines, and even Tanzanian-made anti-malaria bednets.

These are, effectively, killer tariffs.

While the world as a whole cut tariffs by 84 percent between 1983 and 2003, Africa only reduced theirs by 20%.

For most Africans, it is harder to trade with those across African borders than with distant Europeans and Americans.

In 1997, the World Bank found that countries in Sub-Saharan Africa imposed an average tariff of 34% on agricultural products from other African nations, and 21% on other products.

The results are clear.

Only 10% of African trade is with other African nations.

The first world isn't doing the third world any favors with our generous aid packages and handouts. We're preventing the Africans from taking the tough -- but responsible -- steps to improve their own welfare. It's time to stop coddling the contintent and start expecting it to walk on its own.

Senator Bill Frist wrote about his ONE Vote '08 campaign over at Captain's Quarters this morning. He wants Presidential candidates to publically commit to increasing aid to Africa. While it sounds like a noble goal, I'm afraid that it would only enable the African nations to continue electing corrupt politicians and continue to duck responsibility for their own welfare.

Let's listen to James Shikwati and make our own tough decision. Just stop. Please.

I'm going to start at the beginning. Merchants price a good based on several factors: the raw materials in the product, the difficulty of obtaining the product, the supply of the good locally versus the number of other merchants selling the good versus the consumer good demand for the good, and any relevant taxes. Taxes are the only truly arbitrary part of the price. It is also the only part of the price that is a constant for all merchants.

Well, all merchants that follow the law. Any merchant that is willing to break the law can sell a product for less than the competition is charging. If the difference between the untaxed price and the taxed price is great enough, merchants and buyers will form a "black market" to buy and sell products free from all government interference.

How does this tie into cigarettes and terrorism? As you may have noticed, many states have begun to impose punishing cigarette taxes. Rates vary from $3 in New York City ($1.50 in New York state) to a mere $0.07 per pack in South Carolina. 21 states charge $1.00 or more -- per pack -- in cigarette taxes. These high taxes provide a large incentive for buyers and sellers to skirt the law and buy cheaper "duty-free" cigarettes.

Organized crime has been quick to notice this and provide a ready source of smuggled cigarettes. In a post at the Belmont Club yesterday, Wretchard connects the dots between cigarette taxes and terrorism.

Why are cigarettes such an attractive commodity for organized crime groups? First, the difference between the duty-free and duty-paid prices are substantial, thereby allowing smugglers to make profits at relatively low street prices. Second, they are very easy to handle and transport. For example, a container load of cigarettes carries a potential tax value of $1.2 million, almost all of which is potential profit for the smuggler. Third, cigarette smuggling requires a willing market and a good local distribution network, which have already been established by drug-trafficking organizations.

...

In Colombia, cigarette smuggling is directly related to money laundering schemes through the so-called "black market peso exchange." During the exchange, drug-dealers convert U.S. dollars into clean pesos, while cigarette smugglers buy U.S. dollars in order to purchase international goods. The U.S. Treasury Department calls this system "the most dangerous and damaging form of money laundering ever encountered"

...

Tobacco smuggling is a ruthlessly efficient and highly organized trade which involves some of Britain's most vicious criminal gangs, as well as the Eastern European crime groups and the Italian Mafia. British police estimate that Italian organized criminal groups account for 15% of the illegal trade, while Eastern European gangs are responsible for 10% of the smuggled cigarettes in Great Britain. The ferocity of the competition is likely to contribute to violent confrontations as the gangs compete for control.

Wretchard notes that Interpol was establishing a link between terrorists and smugglers before the attack on the World Trade Center.

Structural links between political terrorism and traditional criminal activity, such as drugs trafficking, armed robbery or extortion have come increasingly to the attention of law enforcement authorities, security agencies and political decision makers. There is a fairly accepted view in the international community that in recent years, direct state sponsorship has declined, therefore terrorists increasingly have to resort to other means of financing, including criminal activities, in order to raise funds. These activities have traditionally been drug trafficking, extortion/collection of "revolutionary taxes", armed robbery, and kidnappings.

Maybe it's time that we struck a blow against terrorism. Let's end the "War on Drugs" and drastically cut cigarette taxes. By taking a lot of the profit out of smuggling we can dramatically cut funding to terrorist organizations.

It would certainly be an innovative approach.

It's easy to forget exactly how rich we are. Two days ago, as I was driving to work, I saw a van with a bumper stick. The van belonged to a typical Madison parent, one with school-age children. The bumper sticker stridently proclaimed "The Arts Are Not a Luxury!" Obviously, at some point, this parent felt threatened that their child's school would cancel the orchestra, the band, a painting class, or some other such artistic program.

The bumper sticker, of course, is wrong. The arts are a luxury. They're an incredible luxury. They enrich our lives in many ways, yet have been a disposable part of human existence for centuries.

The first priority of any group of people has always been food, clothing, and shelter. This is easy to forget when a 900 square foot apartment qualifies as poverty, when buying clothes from Goodwill is an embarrassment, and when grocery stores stock the cuisine of the world -- available to anyone with food stamps. But America's "poor" haven't always been this rich.

For the last several weeks, my wife and I have been rereading Laura Ingalls Wilder's "Little House..." books. I was probably in middle school, the last time I read these books. Reading them with an adult's perspective has been an eye-opening experience. Charles and Caroline Ingalls spent most of their adult life doing nothing more than gathering food, stockpiling food, building shelter, and attending to household chores.

In Little House on the Prairie, we see the family leaving home, able to pack all of the belongings into one, small covered wagon. Upon arriving in "the prairie", Pa spends an entire summer doing nothing more than building a house and barn, digging a well, hunting food, making furniture, and starting to plant crops. During most summer days, Pa worked from sunup to sundown and collapsed into bed as soon as night fell. The only time he was energetic enough to play his fiddle was when winter shortened the days and he was forced to work fewer hours.

This was a world where store-bought sugar and butter were precious luxuries, to be enjoyed only a few times a year. This was a world where buying window glass represented a huge splurge and a sack stuffed with grass constituted a fine mattress.

The arts? Pa's fiddle was the sum total of the Ingalls' experience of "the arts". Forget the arts -- for many years, Laura and Mary didn't know how to read, write, or do math. Simple education was a luxury that was out of their reach. And they were hardly alone. The majority of American families lived through similar experiences.

Food, clothing, and shelter are all plentiful in the America of today. People spend so little time worrying about these staples of life that they have time to think about music, painting, and poetry. People can only enjoy the arts when bellies are full and bodies are warm.

Let me illustrate. We received a package from Amazon.com today -- Season 3 and Season 4 of the Cosby Show. These episodes were produced 21 years ago. Over the past two years, companies have been putting the episodes onto DVD. Over the next several weeks, we intend to enjoy every one of them.

Unlike Charles Ingalls, I don't have to build our house, I don't have to hunt down our food, and I don't have to worry about making our own clothing. Instead, I can come home and have multiple hours available in which to entertain myself. Rather than amusing myself with only my own fiddle, I can listen to a wide variety of music -- all on-demand. I can read from a huge selection of books and I can watch a large selection of television and film entertainment. Entire sections of our economy consist solely of people producing ways for other people to amuse themselves.

The arts -- and everything else -- are a luxury. They're a luxury that I'm incredibly thankful to have. I want my children to have them as well, but I realize that the world won't end if a music program or a painting program gets canceled. As long as my children are full and warm, I'll be content. Everything else is just butter on the bread.

Yesterday as I drove home, I passed by our local custard retailer. That brought back memories of Memorial Day weekend last year. We attended Brat Fest, then went over to Cold Stone for dessert. We had a blast. All because the people working at Cold Stone and Brat Fest were willing to give up their holiday for my enjoyment.

Why would they do that? Quite simply, greed. They wanted the wages they could earn more than they wanted a day off. Some of them did it because they could earn a higher than normal hourly rate. Some of them did it because it offered them a rare chance to work extra hours at their normal rate. Whatever the reason, they decided that the extra income was worth more than the leisure time.

This year, I once again anticipate being able to shop, eat, and drive on this holiday week. As I go out, the various people serving me will not be serving me out of compassion, a love for mankind, or a sense of noblesse oblige.

They are serving me because they want my money. The only legal way to get my money (or anyone's money) is to exchange goods or services for cash. Our free market system is uniquely able to channel peoples' private greed and desires into service for others. Out of self-interest, people across Madison will be working to meet the needs of the entire city this Memorial Day.

I'm thankful that we have an economic system that rewards those who work hard. I'm thankful that we have an economic system that gives everyone an incentive to meet the needs of everyone else. Aren't you?

And so, in closing, I leave you with these words.

The point is, ladies and gentleman, that greed -- for lack of a better word -- is good.

Greed is right.

Greed works.

Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind.

A lot of people obsess about the trade "deficit" between China and the U.S. (Hello Lou Dobbs.) They believe that just because we buy more from China than China buys from us, we must not be doing well at international trade. That we're not producing anything of value and they are.

Hah.

You and I run trade deficits every day of our lives. I buy far more from BrouxNellie's than BrouxNellie's buys from me. I buy far more from Copps than Copps buys from me. I buy far more from the local BP station than it buys from me. I run a deficit with every business I walk into. So do you. There is only one business I do not run a deficit with -- my employer. They purchase large chunks of my time and I purchase almost nothing from them.

These personal trade deficits are absolutely meaningless. They tell you nothing about whether or not I am producing anything of value of whether or not I'm "keeping up". International trade deficits are just as meaningless.

Finally, the deficit as a raw number is also meaningless because it doesn't take growth into effect. Chinese exports to the U.S. have been growing exponentially for some time. U.S. exports to China have also been growing exponentially. Both countries are importing more -- and getting wealthier as a result. That's something to celebrate, not something to bemoan.

From Political Calculations:

The logarithmic vertical scale may throw some off, but the growth of imports from China to the U.S. has grown exponentially in the recorded period, rising from 293.1 billion USD in January 1985 to 25,635 billion USD (or 25.6 trillion USD!) through January 2007.

Looking at the rates at which the value of trade doubles, we find that the doubling period is fairly consistent at approximately every four years.

Here, we find that the value of what the U.S. exports to China has only fully doubled in value 3 times since January 1985, rising from 319.2 billion USD in January 1995 to 4,364 billion USD (4.3 trillion USD) in January 2007. What's really remarkable is the acceleration of the doubling rate clearly visible over the period from January 1985 through January 2007.

Here, we find that for the first 10 years of the period, the value of U.S. exports grew at an average annualized compound growth rate of 7.2%. It took another 6 years and 3 months from November 1994 to January 2001 for the value of U.S. exports to China to double again.

And from January 2001 onward, we find that the value of all that the U.S. exports to China doubled again, in less than 3 years. That corresponds to an annualized compound growth rate greater than 24%. More significantly, since that last doubling period ended, we find that the U.S. has nearly doubled in the 36 months since, suggesting that the current rate of export growth has continued near this high level.

See -- we really are both getting richer. So don't worry about the trade deficit. And the next time you see Lou Dobbs fretting about the trade deficit, feel free to change the channel. I do.

The Times is surprised to learn that the recent emphasis on biofuels is making our gas more expensive.

In hearings before Congress last year, oil executives outlined plans to increase fuel production by expanding existing refineries. Those plans would add capacity of 1.6 million to 1.8 million barrels a day over the next five years, for an increase of 10 percent, according to the National Petrochemical and Refiners Association.

But those plans have since been scaled back to more than one million barrels a day, according to the Energy Information Administration, an arm of the federal government.

"If the national policy of the country is to push for dramatic increases in the biofuels industry, this is a disincentive for those making investment decisions on expanding capacity in oil products and refining," said John D. Hofmeister, the president of the Shell Oil Company. "Industrywide, this will have an impact."

The concerns were echoed in a recent report by Barclays Capital, which said the uncertainty about the ethanol growth "will do little to accelerate desperately needed investment in complex United States refining units."

"Indeed, it is likely to deter and further delay investment, if not rule out many refinery investments completely."

The oil companies say their views on the longer-term prospects for fuel reflect simple economics. Because of the enormous investments required to expand refineries, they say they have no other choice but to re-examine their plans in light of the calls for more ethanol fuel, regardless of how realistic they may be.

Not that any of this matters to Congress. Now that they've injected a huge dose of uncertainty into the gasoline market and driven prices sharply upwards, they're prepared to tax away any profits that might enable the oil companies to actually handle the market uncertainty. (High profits might give the companies enough of a margin to both invest in refinery capacity and invest in ethanol production. Unfortunately, profits are evil so we can't let that happen.)

Let's not forget the other place that oil industry revenues have been going:

The refining industry has also spent vast amounts "” more than $50 billion in the last 10 years "” to meet requirements to produce cleaner fuels, according to the American Petroleum Institute, the industry's main trade group.

That's a lot of money. And Congress could mandate something else in the future that will cost just as much -- or more. These are the risks that oil industry executives have to face every day of every year. When uncertainty about future expenses goes up, so do prices.

In case you think that everything will be solved if we just move from corn based ethanal to cellulosic ethanol, not so quick:

The economics of cellulosic ethanol, made from nonfood crops and agricultural waste, are also unclear. Since cellulosic ethanol, still at an experimental stage, is twice as expensive as corn-based ethanol, there are currently no commercial-scale cellulosic plants.

In addition, Mr. Goldstein said, an emphasis on ethanol might lead to increased volatility in fuel prices.

"If we get a bad corn crop, we will end up paying for it at the pump and on the food shelves," he said. "We are not buying security. We are increasing volatility."

While Congress was busy thinking about reducing our dependence on foreign oil, they forgot to think about reducing our dependence on fickle weather patterns. When was the last time that the entire nation had to worry about whether or not the farmers would have a bumper crop of corn? Thanks to Congress, we'll be able to experience this old-fashioned form of worry all over again.

Rather than blaming the oil industry for high gas prices, Congress needs to take a long hard look at their own behavior. Then stop it.

Edmund Andrews has a nice op-ed in the New York Times. He talks about the recent rise in gasoline prices and the claims that oil companies and station owners are gouging consumers. As usual, it turns out that your federal government is the culprit, not the savior.

The Energy Information Administration is predicting that crude oil prices will average about $66 a barrel this summer, versus $70 last summer. But it predicts that gasoline will average about $2.95 a gallon this summer, up from an average of $2.84 last summer.

INDUSTRY executives say the anomaly reflects a temporary drop-off in refinery activity, partly because of scheduled maintenance and partly because of unscheduled interruptions. On top of that come ethanol prices, which have soared, because refiners now blend a small percentage of ethanol into standard gasoline.

Why is the price of ethanol soaring? Why is a small amount of ethanol blended into each gallon of standard gasoline? Congress mandated it, of course! Be sure to thank them the next time you fill up.

The broader issue is that refinery capacity has not kept up with American demand for gasoline. Oil companies, caught with vast amounts of excess refining capacity in the early 1980s, systematically reduced capacity during the long lean years when energy prices and profit margins were the pity of Wall Street.

In theory, the allure of fat profits will attract heavy investment in more refinery capacity. And John Felmy, chief economist at the American Petroleum Institute, told reporters last week that oil companies have indeed been investing heavily in recent years.

In theory, yes. But your Federal government is threatening those investments:

But Congress could face an entirely new quandary in its desire to expand the use of renewable fuels. President Bush has called for producing 35 billion gallons a year of alternative fuels "” from cellulosic ethanol to coal-based diesel "” by 2017. Congressional Democrats might be even more aggressive.

If that's the plan, will oil companies want to invest in more refineries? "You've got to ask whether the demand will be there," Mr. Felmy said.

It's time to tell Congress to quit mucking about with the nation's energy supply. And, if they do insist on mucking around with it, to quit blaming the oil companies for the results of Congress's decisions. Once again, we see that our Congress is about as dignified as a class of first graders. And has about the same sense of responsibility.

Christine and Mark Moellering have a debt problem.

Their credit card debt came to $22,228, including $380 in monthly finance charges. Interest varied from 12.1 percent to 32.24 percent. The Moellerings also have a mortgage of $93,000 and a home equity loan balance of $68,574, at 8 percent interest.

John Leland, of the New York Times, points the finger at changes in federal regulations:

Just a generation ago, financial profiles like the Moellerings' would have been unusual. But changes in federal regulations since the 1980s, along with consolidation in the banking industry and changed consumer attitudes toward borrowing and saving, have made credit more widespread, more heavily marketed and more confusing, with offers of more credit "” at low rates "” extending to even the least reliable risk. In 2006, the industry mailed out nearly 8 billion credit card offers, up from 3.5 billion in 2000.

Credit card debt, less than $8 billion in 1968 (in current dollars), now exceeds $880 billion, more than tripling since 1988, adjusting for inflation, according to the Federal Reserve Bank. Penalty fees alone cost consumers $17.1 billion in 2006 "” up from $12.8 billion in 2003, adjusted for inflation, according to R. K. Hammer, a bank card advisory firm. In part because of the debt burden, the consumer savings rate fell below zero percent in 2005 and has stayed there.

Of course, there could be another explanation. According to the article, they built up their debt over several years: $6,000 in student expenses put on the credit card, $50,000 for a wedding that included rings, a reception, a honeymoon, a new bathroom. Just this past Christmas they bought an $800 42-inch television.

I think the Times wants me to feel sorry for this couple. I don't and I don't think I should. They've made a constant series of bad decisions. Ms. Moellering was "too busy" to apply for student loans, so she put her education on the credit card. They both wanted a nice wedding, so they spent $50,000 on one. Mr. Moellering was too busy to calculate his checking account balance, so he racked up $288 in bank fees. Both were too impatient, so they bought a TV on credit knowing that they already had more debt than they could manage. Their debt problem isn't the fault of federal regulators. Their debt problem is the result of buying things they want -- whether or not they can afford them.

There is a simple trick to understanding the vagaries of credit card contracts and interest rate schedules: make sure that you never put spending on a credit card unless you know that you can pay it off when the bill comes. If you follow that simple principle, you won't end up paying 32% interest. Let's take a look at how this principle could have helped the Moellering's.

Problem: You want to get married. Analysis: You have $161,000 in housing loans and another $6,000 in credit card debt. Decision: Have a small, simple ceremony with family and friends. Ask friends to help cater the reception and enjoy your honeymoon somewhere close to home.

Problem: you just got married and your current bathroom is in poor condition. Analysis: We already have $161,000 in housing loans and another $6,000 in credit card debt. Decision: endure the crummy bathroom. Decide to be thankful that you have an indoor bathroom and not an outhouse like your great-great grandparents.

Problem: you want a new television. Analysis: We already have $161,000 in housing loans and another $6,000 in credit card debt. Decision: Visit the local public library, check Craigslist, and find a used television that you can pay cash for.

Sorry Christine and Mark. I hate to be the person to break it to you. Living life as an adult requires that you take responsibility for your own decisions. Living life as an adult requires you to live within your means, not within your wants. Your debt is your responsibility. Please don't try to blame it on anyone else.

After home sales started falling last year, I saw a lot of doom and gloom commentary from "experts" afraid that we would enter a 10-year housing slump. Thanksfully, home sales in Madison (and Dane County) are on the rise again. Home prices still haven't completely rebounded, but I'm glad to see that they're starting to sell again -- at any price. As a new homeowner, don't want to see the market start stagnating!

The local residential real estate market is showing signs of recovery, a local real estate official says.

The 604 sales reported in April in Dane County were 11.4 percent below the 682 last April, according to statistics released Thursday by the Realtors Association of South Central Wisconsin.

But that is not as bad as the 20.1 percent decline for the first four months of this year compared to the same period of last year -- 1,802 to 2,006.

And RASCW Executive Director John Deininger said sales this year have improved more than they typically do as the weather warms -- by 8.0 percent from January to February, 47.0 percent from February to March, and 23.6 percent from March to April.

The U.S. Postal Service raised it's rates for first-class mail today. No longer will you be able to buy a $0.39 stamp. The day of the $0.41 stamp is upon us. The rate hike is annoying, but ultimately not all that relevant to my life. Aside from thank-you notes and renewing license plates, I don't really use the Postal Service.

However, the USPS isn't just raising rates on first-class mail. The Postal Regulatory Comission also decided to change the way it calculates rates for periodicals and magizines:

Starting in July, postal rates for some publications will rise by as much as 30 percent, and a growing number of critics say the new rates will saddle small, independent publishers with inflated costs and betray protections granted by the founding fathers to the press.

The U.S. Postal Service gave periodicals a special class of mail more than 200 years ago and averaged rates to make it cheaper to send a magazine than a letter, while still giving publishers first-class service.

The cost to the Postal Service of sending periodicals has also risen disproportionately to other types of mail over the past 10 years.

Very basically, here's how the changes in rates are calculated: The average cost increase to periodicals is 11.7 percent, but this rate skews lower or higher for many based on price-based incentives created to push publishers to streamline their mailing operation.

A 758-page document details the plan, which plugs many variables into a pricing equation: packaging, co-mailing, co-palletting, pounds, pieces, shape, sacks, drop-shipping, points of entry, distance traveled and editorial weight versus advertising weight.

Confused? So are many publishers. It doesn't help, they say, that the computer software created to help them solve this equation won't be available until mid-June.

Both sides agree that the issue is, at its core, an ideological debate between those who believe periodical postal rates should be averaged for all to protect the democratic dissemination of information and those who see averaging as a subsidization that hinders efficiency.

It's also a fairly pointless debate. The only reason it's happening at all is that periodicals have exactly one choice for delivery: the USPS. There is no competition for first-class mail delivery. By law, anyone who tries to compete with the USPS in first-class mail delivery commits a crime. Publishers are forced to use the government monopoly, instead of using whichever company gives them the best combination of price and service.

It's time to end these pointless, stupid debates over the best way to calculate postal rates. Allow Fed-Ex, UPS, DHL, and other carriers to compete with the USPS. Let publishers choose their own mail carrier. Some carriers might have rates that are less expensive than current Postal Service rates. Other carriers might have rates that are more expensive than current Postal Service rates. Regardless, they would be rates that publishers choose to pay, based on their unique needs. Everyone would get the best combination of price, speed, and service that they need.

Right now everyone gets the same combination of price, speed, and service -- whatever the Postal Regulatory Comission decides is best for the nation.

How un-American.

United States Steel, Alcoa, Goodyear and the United Steelworkers want to convince you that American manufacturing is in serious decline and that if serious action isn't taken soon our manufacturing sector will disappear entirely.

"The hemorrhaging of manufacturing jobs is hurting America down to the local level," said Terrence D. Straub, United States Steel's senior vice president for public policy and government affairs. "Until and unless there is a political understanding of that -- and political attention paid to that -- our fear is much won't change and in 10 years the American manufacturing base could be gone."

"The image of manufacturing has taken a beating "” quite unfairly "” especially with the younger generation that views information technology and services as being hip and cool," said Scott Paul, the alliance's executive director, who used to work in the A.F.L.-C.I.O.'s industrial department. He said the group wants to "reconnect the American people with the importance of manufacturing and what it means in their lives and what it has meant in terms of creating good, middle-class jobs."

"The fundamental reason we've formed this is we've lost three million manufacturing jobs, and there doesn't appear to be a strong pro-American manufacturing voice out there," said Mr. Gerard, whose union represents 800,000 steel, aluminum, rubber, paper and chemical workers. "The so-called manufacturers' organizations that exist are part of the problem. The National Association of Manufacturers promotes the loss of manufacturing. The N.A.M. has become the voice of multinationals giving away our jobs, of setting up operations overseas."

Oh, baloney. The American manufacturing sector has never been stronger. This is just another example of the shoddy facts and logic that Warren Myer attacked in his analysis of Manufacturing Jobs Myths. For one thing, we manufacture far more today than we ever did before:

Considering total goods production (including things like mining and agriculture in addition to manufacturing), real goods production as a share of real (inflation-adjusted) Gross Domestic Product (GDP) is close to its all-time high.

• In the second quarter of 2003, real goods production was 39.2 percent of real GDP; the highest annual figure ever recorded was 40 percent in 2000.
• By contrast, in the "good old days" of the 1940s, 1950s and 1960s, the United States actually produced far fewer goods as a share of total output, reaching 35.5 percent in the midst of World War II.

For another thing, not all "manufacturing jobs" are created equal:

Let's take an automobile assembly plant circa 1955. Typically, a large manufacturing plant would have a staff to do everything the factory needed. They had people on staff to clean the bathrooms, to paint the walls, and to perform equipment maintenance. The people who did these jobs were all classified as manufacturing workers, because they worked in a manufacturing plant. Since 1955, this plant has likely changed the way it staffs these type jobs. It still cleans the bathrooms, but it has a contract with an outside janitorial firm who comes in each night to do so. It still paints the walls, but has a contract with a painting contractor to do so. And it still needs the equipment to be maintained, but probably has contracts with many of the equipment suppliers to do the maintenance.

Keep in mind that the United Steelworkers exists to further the aims of steelworkers who like cushy jobs. The union doesn't exist to further the interests of all Americans. Keep that in mind as you view this graph, depicting the amount of goods manufactured, as a share of GDP.

Reaping the whirlwind:

If prices are rising, that should be a signal to people and businesses to avoid settling in risky areas. The economic centre of the hurricane business is Florida, which is both the most vulnerable part of America and the most valuable. In 2004 the total value of insured coastal property in Florida was $1.937 trillion, compared with $1.902 trillion in New York. Unfortunately, the signal is not getting through to homeowners in Florida, because the government is cushioning the blow. Insurance companies in America may not set their own prices. The rates they charge customers (and indeed the models on the basis of which they calculate their rates) are regulated by state governments. "Communism survives in three parts of the world," says Mr Muir-Wood: "North Korea, Cuba and the American insurance market."

Thanks to subsidised insurance, the risks of living on Florida's coast are not reflected in property prices. In 2005"”the year after the most damaging hurricane year ever"”six of the nine metropolitan areas with the fastest-rising house prices in America were in Florida. The state's population is expected to rise by 52% between 2003 and 2030, as against 21% for the country as a whole. The insurance industry is not impressed. "You've got to send a proper price signal," says David Unnewehr of the American Insurance Association. "You can't subsidise development through insurance."

What would Florida look like if the price signals were getting through? More like Grand Bahama, probably, which is covered by the British insurance market. The Queen's Cove canal estate in north Grand Bahama, which has been flooded three times in six years, is no longer insurable. People are moving out and new houses are being built on stilts.

I just wanted to write about how rich I am. Right now, Toyota's engineers are giving my car it's 30,000 mile checkup. They'll rotate my tires, change my oil, check all of my filters and fluids, etc. While they do that, I'm sitting in air-conditioned comfort. I have my laptop. Thanks to Toyota's "free" Wi-Fi service, I can browse the web while I wait. I have my iPod with me. It's chock full of economic lectures, audio books, music, and sermons. I also have the latest edition of Reason Magazine, thanks to Barnes & Noble's magazine rack.

I truly am one of the richest people to ever walk the planet. I sit in comfort with the ability to listen to what I want, read what I want, and watch what I want. All of this is available to anyone in the United States. How wonderful is that?

Madison's "Concerts on the Square" sure are expensive. I'm not referring to money -- admission is free, after all -- but to time. Patrons sit on the lawn of the State Capital. Seating is first come, first served. Anyone can reserve a spot by simply placing a blanket on the ground. There's a catch, however: no blankets are allowed on the ground until 3pm. To reserve a seat, patrons must show up before 3pm, wait, and then spread out their blankets once 3pm arrives.

All of that waiting and uncertainty is as much of a cost as an actual ticket would be. It's just a different kind of cost. Instead of spending money, patrons spend time. In my opinion, time is much harder to get than money is. Thus, these concerts are far more expensive than traditional concerts would be.

Do they cost too much? Well, that's up to each individual. There are benefits to this kind of cost: enjoying the outdoors, sitting and talking with other early-arrivals, taking advantage of a day off to enjoy some culture without sacrificing some cash. I think the entire thing sounds like fun -- provided I come equipped with enough sunscreen. (There's another non-monetary cost for you.) I just won't make the mistake of calling it a "free concert".

Let me share two jokes with you. The first is from the Soviet Union:

Three prisoners in the gulag get to talking about why they are there. "I am here because I always got to work five minutes late, and they charged me with sabotage," says the first. "I am here because I kept getting to work five minutes early, and they charged me with spying," says the second. "I am here because I got to work on time every day," says the third, "and they charged me with owning a western watch."

The second is from America:

Three prisoners were sitting in a U.S. jail, found guilty of "economic crimes" and were also comparing stories. The first one said, "I charged higher prices than my competitors, and I was found guilty of profiteering, monopolizing and exploiting consumers." The second one said, "I charged lower prices than my competitors, and I was found guilty of predatory pricing, cutthroat competing and under-charging." The third prisoner said, "I charged the same prices as my competitors, and I was found guilty of collusion, price leadership and cartelization."

Here's my question for you: should we be concerned that American citizens can now tell the same "it's only funny because it's true" jokes as Soviet citizens?

(Hat tip to: Hit and Run)

Yesterday, the price of a gallon of gas in Madison jumped up to $2.79 a gallon. I have every expectation of seeing it go higher over the next several weeks and months. Why is it so expensive? Well, there are several factors at play.

First of all, the demand for gasoline is starting to increase. The weather is getting warmer and people want to travel more: to the park, to the grocery store for cookout supplies, to State Parks for get-togethers, to the Wisconsin Dells, etc. Simple supply and demand: as the quantity demanded increases, the price will tend to increase as well.

Secondly, the supply of gasoline may be decreasing. Many cities and regions regulate the type of gasoline that can be sold and used. They require one blend of gasoline for winter driving and another blend of gasoline for summer driving. As the refineries switch from winter production to summer production, supplies of gasoline will drop. It will take time for the refineries to fully gear up for the summer blend of gasoline. Until that happens, supplies of the summer blend will be limited. As the quantity supplied decreases, the price will tend to increase.

Thirdly, taxes. Every person in the U.S. pays 18.4 cents a gallon in Federal gas taxes. We Wisconsin residents are privileged to pay another 31.1 cents a gallon in state gas taxes. I pay a total of 49.5 cents a gallon in taxes. That means that 17.7% of the price of gas is tax related.

Fourthly, gasoline additives. Federal regulators are concerned with reducing the amount of pollution produced by gasoline. To accomplish this, they require that oil refineries put pollution reducing chemicals into the gasoline. MTBE used to be the preferred additive. However, in March of this year, federal regulators started requiring all oil companies to use ethanol instead. This is, or will be, a problem. Midwest ethanol producers were already struggling to keep up with the demand for ethanol before it was mandated as an additive for all gasoline sold in the United States. The demand for ethanol is now far, far greater than it had been. In additional, ethanol is more expensive to transport and to store than MTBE was. To put it bluntly, this "simple regulatory change" could add another 30 cents to the price of a gallon of gasoline.

Finally, balkanized gasoline markets. For most products, supplies can move freely from one region of the country to another. If there is a shortage of (for instance) wood in New Orleans, New Orleans businesses can buy more wood from other areas of the country. If there is a shortage of steel in Manhattan, construction firms can buy more steel from Indiana. The gasoline market doesn't work this way, unfortunately. Many cities and states mandate unique blends of gasoline. California has a very strict set of requirements. Milwaukee has another set. Buffalo has a third set and New York City has yet another. Most of the Midwest requires different gasoline than most of the East Coast.

All of these requirements are mutually exclusive. Milwaukee drivers can't use Buffalo gas and California drivers can't use gas from New York City. If New York City faces a gasoline shortage, there is no one to buy extra supplies from. Thus, the price of gasoline will sharply increase in New York City -- but nowhere else. If New York City drivers were free to use gasoline from other regions, then New York City gas station owners could simply import more gasoline from Upstate New York, New Jersey, or other surrounding regions. Sadly for NYC drivers, it is illegal to do so and they simply have to suffer with higher gas prices.

These five factors: increasing demand, (temporary) decreasing supply, taxes, federally mandated gasoline additives, and balkanized markets have a large influence on the price of a gallon of gasoline. Of those five factors, three are government created. Sad to say, your government has a larger influence on the price of gasoline than the oil companies do. As a matter of fact, over the years, the Federal government alone has "earned" more money from gasoline than the oil companies have.

As you drive this summer and watch the steady climb of gasoline prices, remember who to blame. Your state and federal representatives will tell you that greedy oil executives are ripping you off. What your representatives won't tell you is that their own greed will have more influence on the price of gasoline than that of the oil executives. What your representatives won't tell you is that their rules and regulations concerning what gasoline you can put into your car will affect the price of gasoline far more than the greed of oil executives. They won't tell you, so you will have to remember -- and hold them accountable for their actions.

Geico is being sued because of their actuarial policy:

A leading U.S. consumer group Monday accused Geico Corp. of using consumers' education backgrounds and occupations as criteria in setting auto insurance rates, resulting in discrimination against minorities and lower-income people.

Geico, a unit of Berkshire Hathaway Inc., the insurance and investment company controlled by billionaire Warren Buffett, rejected the charges. It called them "an offensive attempt to link fundamentally fair and actuarially sound industry practices with invidious discrimination."

"There is clearly a disparate impact on minorities and lower income people," Hunter said in an interview. "If it isn't violative of the law, it should be. It strikes me as very unfair."

Life is unfair. Get over it. From an insurance and statistical standpoint, people with college degrees (and graduate degrees) probably are safer drivers. Therefore, it's cheaper to insure them. Geico, thankfully, passes that savings along to the driver. If you want to complain about it, first prove that -- on average -- a person with a high school degree drives just as safely as a person with a graduate degree.

Bringing charges of racism into the picture is growing increasingly tacky. It just reeks of an attitude of "I don't have a better argument to make, but I want sympathy anyway".

Life in Iraq may be dangerous right now. But at least you can be insured against the threat of terrorism:

Last month, Mr. Said, a slim, baby-faced 23-year-old, did what a small but growing number of Iraqis are doing: He walked into the offices of the Iraq Insurance Company and bought a terrorism insurance policy. It looked like an ordinary life insurance policy, but with a one-page rider adding coverage for "the following dangers: 1) explosions caused by weapons of war and car bombs; 2) assassinations; 3) terrorist attacks."

It cost him 125,000 dinars, about $90. Mr. Said paid more than most people because of his risky occupation. The payout, if he dies, is five million dinars, around $3,500, or about what an Iraqi policeman earns in a year.

(Hat tip to Marginal Revolution for the Markets in Everything concept.)

Occasionally I'll get asked about why I always advocate "letting the market handle it". Various people think it's a naive answer and one that places too much blind faith in capitalism. From now on, when I hear that question, I'll simply point the inquisitor to Professor Boudreaux's convincing answer. An excerpt:

People too often suppose that large social problems can be solved only by deciding ahead of time which particular group of people and procedures hold the key to the solution.

While declaring "Let the government handle it" comes across as a solution, it's no such thing. Instead, it is merely a sign of a simple and baseless faith -- a simple and baseless faith that people invested with power will not abuse it; that political appointees possess or will find better answers than will millions of people pursuing solutions in their own ways, and staking their own resources and reputations on their efforts; that only those 'solutions' that are spelled out in statutes and regulations and that have officials paid to implement them are true solutions.

So yes, show me a problem and I'll likely respond "Let the market handle it." I'll respond this way because I know that not only is my own meager knowledge and effort never up to the task of solving big problems but that not even the Einsteins or Krugmans or Bushes amongst us can know the best solution to any social problem.

Solutions to complex social problems require as many creative minds as possible -- and this is precisely what the market delivers.

Bryan Caplan, writing at EconLog:

I recently mentioned that if you're feeling lonely, you should criticize Austrian economics, and you'll never again lack for human contact. Now Walter Block, Christopher Westley, and Alex Padilla have a hilarious 79-page piece of satire which turns Austrians' compulsive debating into the hallmark of good science:

[W]henever there is a dispute between two economists, the last one to articulate his opinion shall be deemed the winner of the debate, and thus having had the (more nearly) correct view. So, if there is a series of arguments and counterarguments of the sort A, B, where A publishes first, B replies, and then all is silence, then we conclude that B is correct, and A incorrect. If the format is of the following variety: A, B, A', where A starts, B disagrees, and then A publishes a rejoinder to B in a second round (A'), and that is the last we hear of this, then it is A' who has an inner track on the truth, and B who must be consigned to the outer rungs of darkness.