Saturday, May 30, 2009

Any Libertarians Looking for a New Place to Live?

"Freedom in the 50 States" is a February 2009 study by William P. Ruger and Jason Sorens that creates an index of personal and economic freedom for each state in the nation. According to its executive summary:
This paper presents the first-ever comprehensive ranking of the American states on their public policies affecting individual freedoms in the economic, social, and personal spheres. We develop and justify our ratings and aggregation procedure on explicitly normative criteria, defining individual freedom as the ability to dispose of one’s own life, liberty, and justly acquired property however one sees fit, so long as one does not coercively infringe on another individual’s ability to do the same.

This study improves on prior attempts to score economic freedom for American states in three primary ways: (1) it includes measures of social and personal freedoms such as peaceable citizens’ rights to educate their own children, own and carry firearms, and be free from unreasonable search and seizure; (2) it includes far more variables, even on economic policies alone, than prior studies, and there are no missing data on any variable; and (3) it uses new, more accurate measurements of key variables, particularly state fiscal policies.

We find that the freest states in the country are New Hampshire, Colorado, and South Dakota, which together achieve a virtual tie for first place. All three states feature low taxes and government spending and middling levels of regulation and paternalism. New York is the least free by a considerable margin, followed by New Jersey, Rhode Island, California, and Maryland. On personal freedom alone, Alaska is the clear winner, while Maryland brings up the rear. As for freedom in the different regions of the country, the Mountain and West North Central regions are the freest overall while the Middle Atlantic lags far behind on both economic and personal freedom. Regression analysis demonstrates that states enjoying more economic and personal freedom tend to attract substantially higher rates of internal net migration.

The data used to create the rankings are publicly available online at, and we invite others to adopt their own weights to see how the overall state freedom rankings change.

Visual Evidence of the Lack of Economic Growth in North Korea

This satellite image of North and South Korea provides striking visual evidence of the difference in economic growth between the two countries. North Korea has such little electricity that it appears dark.

Friday, May 29, 2009

Florida Amendment One - Property Tax Reductions for the Less Affluent Have Been More Than Offset By Increases in Fees for Services

Today I received a bill from the city of Jacksonville for $111, comprised of 2009 fees of $51 for solid waste and $60 for stormwater. In 2008, the bill was just the $60 stormwater fee. Prior to that, these fees did not exist. They are a direct response to the January 29, 2008 passage of Amendment One to the Florida Constitution. According to the Florida governor´s web site:
Specifically, the constitutional amendment:
1. Doubles the homestead exemption for almost all homeowners, providing an average savings of about $240 annually. The new exemption applies fully to homesteads valued over $75,000, and partially for homesteads valued between $50,000 and $75,000. This new exemption does not apply to school taxes.
2. Allows portability: The Governor has heard from many Floridians that they feel trapped in their homes. Portability allows homeowners to transfer their Save Our Homes tax benefits from their current home to a newly purchased home within any Florida county. Portability applies to homes purchased in 2007 and later, and the benefit is capped at $500,000.
3. Provides an assessment cap of 10 percent for all properties not previously capped: While homestead properties are already capped at three percent, now all other properties, including rental properties, second homes, and business properties, will be protected from huge tax increases. This new exemption does not apply to school taxes.
4. Creates a new $25,000 exemption for business property, including office furniture, computers, machinery and equipment.

The amendment was marketed to the public as a guarantee of lower property taxes. Yet, the advocates failed to sufficiently explain that because the amendment reduces government revenues from property taxes (by allowing landowners to exclude more of their property from taxation), it has necessitated increases in other taxes and fees to allow local governments to provide the services (such as police and fire protection, schools, and garbage collection) that citizens expect. If one considers all sources of revenue for local governments, the effect of the passage of amendment one has been to shift the tax burden away from the rich (because they can exclude up to $500,000 of property value from taxation with the portability provision) to the less affluent.

Tax Reform

I am willing to consider reforms of the tax system. I have attended rallies for the "flat tax," the "fair tax," and a few others. One thing they have in common is that EVERYONE in attendance (that I talked to) thinks he or she will pay less under the proposed new system, despite claims that the proposals are revenue neutral. The rich, middle-class, and poor all think they will pay less. But they cannot all be right if the new tax will generate the same revenue as the taxes it replaces. So who is being deceived? My bet (and that of most economists) is that the poor and middle-class are being mislead (again). The wealthy and powerful have a potent propaganda machine.

Wasteful Government Spending

I can think of no politician who publicly opposes the reduction of "wasteful government spending." But what seems wasteful to some appears essential to others.

Jacksonville used to be the home port of the USS John F. Kennedy, the last conventionally powered aircraft carrier built by the U.S. Navy. The ship was expensive to operate and needed extensive repairs. In 2005, the Department of Defense (DOD) proposed saving taxpayer dollars by decommissioning the Kennedy. The response by Florida politicians (including conservative Republicans who claimed to advocate the reduction of government) was that the Kennedy was essential to national defense. (It was finally decommissioned in 2007.)

A similar event is occurring now. In April 2009, the DOD proposed to cease buying new F-22 Raptor fighter jets. So many states are producing parts for the aircraft that politicians do not want to support the Navy's own recommendation for curbing its expenses.

So how do we get past this?

See also "Reductions in Defense Spending?"

Can we eliminate federal budget deficits by reducing spending and not raising taxes?

Many opponents of tax increases claim we can reduce government budget deficits and pay down the public debt just by cutting government spending. Is this a reasonable assertion?

The federal budget defIcit for the current fiscal year is estimated to be more than $1.8 trillion. I think we would be extremely hard-pressed to find 51 U.S. Senators who would agree to cut federal spending by anything close to that amount. We can try to elect more fiscally responsible leaders. But in the meantime, what do we do? As it stands, we are passing trillions of dollars of debt to future generations. I think that is morally and ethically wrong. So, yes, I do favor raising taxes now (while still trying to reduce government spending). And, yes, I think we should extract most of that from the wealthy. I do not agree with the assertion that if you tax the rich they will just leave. Mississippi has substantially lower taxes than Massachusetts, but I don´t see most of Boston making that move.

President Bush blames insufficient regulation for economic downturn

In a May 28, 2009 speech to The Economic Club of Southwestern Michigan at Lake Michigan College, President George W. Bush blamed the current economic recession on insufficient regulation of financial markets:
He talked about the economy, blaming "a lack of responsible regulation" in the lending industry for the recession and said that the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corp., or Freddie Mac, shouldn't have engaged in certain financial practices.

As mentioned in an earlier post, markets are amazing. Yet, markets are not perfect. Most economists believe it is appropriate to regulate markets to improve their social outcomes. President Bush seems to agree. Despite his claims to the contrary, he is not a supporter of free markets, which are by definition free of government regulation and interference.

Thursday, May 28, 2009

Is taxing the rich a misguided policy?

A May 27, 2009 article in the Wall Street Journal entitled "Millionaires Go Missing" decries taxation of the rich:
Here's a two-minute drill in soak-the-rich economics:

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

No doubt the majority of that loss in millionaire filings results from the recession. However, this is one reason that depending on the rich to finance government is so ill-advised: Progressive tax rates create mountains of cash during good times that vanish during recessions. For evidence, consult California, New York and New Jersey (see here).

The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."

All of this means that the burden of paying for bloated government in Annapolis will fall on the middle class. Thanks to the futility of soaking the rich, these working families will now pay Mr. O'Malley's "fair share."

The article IMPLIES that the increase in Maryland´s taxation of the wealthy caused rich people to move elsewhere and thus dramatically reduced government revenues. One might assume an intended inference is that by reducing taxes on the wealthy, tax revenues would increase. Yet the article admits that the primary cause of the loss of millionaires is the recession. Many people who earned more than $1 million in recent years have less income now. These are not people who moved out of Maryland because of its tax policies. Despite the inferences of this article, it provides conjectures, but no evidence, of a detrimental effect of higher taxes.

Tuesday, May 26, 2009

Government Policies to Save Energy May Include Painting More Things White

According to a May 22, 2009 article by Agence France Presse entitled "US wants to paint the world white to save energy"

LONDON (AFP) - US Energy Secretary Steven Chu said Tuesday the Obama administration wanted to paint roofs an energy-reflecting white, as he took part in a climate change symposium in London.

The Nobel laureate in physics called for a "new revolution" in energy generation to cut greenhouse gas emissions.

But he warned there was no silver bullet for tackling climate change, and said a range of measures should be introduced, including painting flat roofs white.

Making roads and roofs a paler colour could have the equivalent effect of taking every car in the world off the road for 11 years, Chu said.

It was a geo-engineering scheme that was "completely benign" and would keep buildings cooler and reduce energy use from air conditioning, as well as reflecting sunlight back away from the Earth.

For people who found white hard on the eye, scientists had also developed "cool colours" which looked to the human eye like normal ones, but reflect heat like pale colours even if they are darker shades.

And painting cars in cool or light colours could deliver considerable savings on energy use for air conditioning units, he said.

Speaking at the start of a symposium on climate change hosted by the Prince of Wales and attended by more than 20 Nobel laureates, Chu said fresh thinking was required to cut the amount of carbon created by power generation.

He said: "The industrial revolution was a revolution in the use of energy. It offloaded from human and animal power into using fossil fuels.

"We have to go to a different new revolution that can severely decrease the amount of carbon emissions in the generation of energy."

To what extent should the government promote policies such as this? This is at the heart of one´s belief in the appropriate roles for government.

The Economics of Facebook

Social networks, such as Facebook, are generating vast amounts of data that could be valuable to businesses - especially in terms of marketing and advertising. A May 22, 2009 Business Week article entitled "Learning, and Profiting, from Online Friendships" by Stephen Baker claims:

"Companies are working fast to figure out how to make money from the wealth of data they're beginning to have about our online friendships."

Is Obama a Socialist?

A survey suggests many Americans, including critics of President Obama, do not know the difference between capitalism and socialism.

According to a May 22, 2009 Business Week article entitled "Socialism? Hardly, Say Socialists,":

"Some conservative commentators have even likened Obama's economic stimulus and regulatory initiatives to a Soviet-style takeover of the country. In February, syndicated radio host Rush Limbaugh accused Obama of waging war on capitalism. "That's his objective. He wants to destroy capitalism," Limbaugh told a caller. "He wants to establish a very powerful socialist government, authoritarian. He wants control of the economy."

But real Socialists would vigorously disagree. They say if the Obama Administration were establishing a true socialist state, we'd have at least a $15-an-hour minimum wage (instead of the current $6.55 federal minimum) and 30-hour workweeks. Every American would be guaranteed employment and health-care coverage. Oh, and homeless people would be occupying vacant office buildings in cities and vacant McMansions in the suburbs.

In fact, many Americans appear to be confused about what socialism actually is. In a poll of 1,000 adults conducted Apr. 6-7, Rasmussen Reports found that 53% of Americans said they prefer capitalism to socialism, while 20% said they prefer socialism. More than one-quarter, 27%, said they're not sure which system is better. Another poll conducted this month by found that 70% of self-identified conservatives consider Obama's political philosophy "Socialist" or "Marxist," with 11% calling it "Communist."

Socialists say the policies Obama has pursued are hallmarks of "democratic capitalist" states, not socialist ones. "None of the societies of Western Europe are socialist, but the political influence of their strong Labor, Social Democratic, and Socialist parties make their form of capitalism much more humane than our own," says Frank Llewellyn, national director of the New York-based Democratic Socialists of America (DSA), the largest U.S. Socialist party."

Should Christians Quote the Old Testament to Oppose Gay Marriage?

In response to an earlier post asking if gay marriage is an economic issue, a former student sent me a link to the clip from an episode of The West Wing in which the President responds to a radio host who quotes the Old Testament to denounce homosexuality as an abomination.

A Wikipedia episode description says:
In its second season episode "The Midterms", President Bartlet admonishes fictional radio host Dr. Jenna Jacobs for her views regarding homosexuality at a private gathering at the White House. Dr. Jacobs is a caricature of radio personality Dr. Laura Schlessinger, who strongly disapproves of homosexuality. Many of the president's biblical references in his comments to Dr. Jacobs appear to have come from an open letter to Dr. Schlessinger, circulated online in early May 2000.

Is it fair and reasonable for Christians to cite parts of the Old Testament as justification for beliefs while ignoring other parts? Do the messages of love, compassion, and forgiveness in the New Testament contradict the vengefulness of the Old Testament?

U.S. consumer confidence sees biggest jump in 6 years

U.S. consumer confidence sees biggest jump in 6 years

By Pedro Nicolaci da Costa
Tue May 26, 10:17 am ET
NEW YORK (Reuters) – U.S. consumer confidence soared in May to its highest level in eight months as severe strains in the labor market showed some signs of easing, though Americans' moods remained depressed by historical standards.

The Conference Board, an industry group, said on Tuesday its index of consumer attitudes jumped to 54.9 in May from a revised 40.8 in April, the biggest one-month jump since April 2003. Economists had been looking for a much smaller rise to 42.0.

Fewer Americans said jobs were "hard to get," the survey found, with that measure slipping to 44.7 percent from 46.6 percent. Those saying jobs were plentiful climbed to a still meager 5.7 percent, but that was still higher than April's 4.9 percent.
"Consumers are considerably less pessimistic than they were earlier this year," said Lynn Franco, director of The Conference Board's Consumer Research Center.

The data was in line with other evidence suggesting that, while the economy continues to contract in the current quarter, the pace of deterioration has abated somewhat.

U.S. stocks extended their rally after the data, with the Dow Jones industrial average up 120 points or 1.5 percent.

The survey offered mixed messages regarding Americans' propensity to spend money. The proportion of those who said they planned on buying a car over the next six months rose to 5.5 percent, its highest in at least a year.

But fewer intended to buy homes -- only 2.3 percent, a tough break for one of the hardest hit sectors in the country's economic crisis. A separate report on Tuesday revealed U.S. home prices dropped 18.7 percent in March compared to a year earlier.

(Reporting by Pedro Nicolaci da Costa, Editing by Chizu Nomiyama)

What is the Appropriate Economic Policy for the Dairy Industry?

Global milk glut squeezes dairy farmers, consumers

Monday, May 25, 2009

BARNHART, Mo. – A collapse in milk prices has wiped away the profits of dairy farmers, driving many out of business while forcing others to slaughter their herds or dump milk on the ground in protest. But nine months after prices began tumbling on the farm, consumers aren't seeing the full benefits of the crash at the checkout counter.

The average price for a gallon of milk at grocery stores last month is down just 19 percent from its peak of $3.83 in July. Farmers, on the other hand, got $1.04 a gallon in April — 35 percent less than they were paid last fall. This winter, wholesale prices were down as much as 45 percent.

Price disparities are a fact of life both for farmers and anyone who shops at a supermarket, but the nature of milk — how it's stored, priced and sold around the world — makes the gap all the more dramatic. In fact, the price that farmers get has been wildly volatile for years, creating a succession of booms and busts felt from pastures to the grocery store.

With each turn, proposals are floated to end the pricing seesaw, which at one extreme squeezes the profits of farmers and the other squeezes dairy processors. Any fix that boosts the price of milk runs the risk of bumping up how much consumers pay, too.

Today, frustrations are spilling over as the price crash creates widely divergent fortunes within the milk industry, boosting profits for the middlemen like dairy processors while pushing farmers to the edge of bankruptcy.

Darrell Kraus, a dairyman in Barnhart, spends almost as much today on hay and other supplies for his herd of 160 cows as he did a year ago, but he's getting paid less for a gallon of milk than his father in the 1970s. He blames middlemen who buy the milk from the dairies, process it and sell it to grocery stores at higher prices.

"Somebody's getting a cut of this, but it's not the dairy farmer," he said. "It's sad, but they're going to see a lot of dairy farms go out of business."

At a grocery store in Fayetteville, Ark., Katherine Thacker noticed how milk prices were slowly falling — but not as drastically as last year's price hikes. She was surprised to learn that the lower wholesale milk prices were being absorbed by dairy processors.

"That's kind of criminal, isn't it?" she said.

Milk processors and supermarkets see it differently.

Last fall and summer, they swallowed losses because of high wholesale milk prices and government-mandated ceilings on what they can charge. They're now recouping some of what they lost and anticipating a rise in prices this winter, said Mike Nosewicz, vice president of dairy operations at Cincinnati-based Kroger Co., which operates its own dairy processing division and sells milk through 2,400 supermarkets.

At the heart of the problem is the nature of milk. Unlike grain farmers who can hold out for better prices by storing crops in a silo, dairymen must sell raw milk to processors or else it spoils. And cows keep producing whether the economy's expanding or in recession.

The price paid by processors to farmers is set by the U.S. Department of Agriculture based on commodity markets, which rise and fall with global demand. Some of the raw milk is processed into milk for stores as well as butter, yogurt and other products for U.S. consumption. The rest becomes powdered milk, cheese and whey for international and domestic markets.
U.S. milk exports soared last year and demand grew in countries like China while supplies dropped from Europe and Australia. U.S dairy exports jumped to $3.82 billion, or 11 percent all milk production in 2008 according to the U.S. Dairy Export Council. Wholesale prices jumped.

Dairies responded to the demand by increasing production.

But once the global recession accelerated last fall, demand, particularly exports, fell off a cliff.

U.S. farmers were suddenly faced with too much milk and too many cows. Wholesale prices crashed. Farmers found themselves spending more to maintain their herds than they were being paid for raw milk.

"It's an inequity that cries out for attention, consideration and action," said Sen. Robert Casey, a Democrat from the dairy stronghold of Pennsylvania. Casey projects that 25 percent of his state's 7,400 dairy farms could disappear because of the crisis.

Casey said most lawmakers are focused on short-term solutions — loans or subsidies — to help farmers bridge the period of depressed prices. But he said Congress should also explore why processors and retailers are keeping their prices high while wholesale prices collapse.

Farmers also are lobbying for a bill that would change the USDA pricing system for milk so that wholesale prices reflect what they pay for feed, fuel and other supplies.

If that happens, milk would be the only commodity of its kind to have a government-set price determined in part by the cost of production, said Scott Brown, dairy analyst at The University of Missouri's Food and Agricultural Policy Research Institute.
"Anytime you put in place a policy that raises farm-level prices, those are going to get passed along to the consumer," he said.
U.S. Secretary of Agriculture Tom Vilsack also said he is not eager to remake the USDA milk pricing program. Instead, he wants to see if a range of recent actions might buoy wholesale prices. USDA recently donated 500,000 pounds of excess powdered milk to needy countries to reduce U.S. supplies, and a new program will pay farmers to slaughter more than 100,000 dairy cows.

Some farmers say faster action is needed. They're dumping their milk on the ground to draw attention to the crisis.
Jan Morrow, a farmer in Cornell, Wis., dumped milk on May 4 to protest the lowest whosesale prices she's seen in 25 years of farming. If prices don't rise, she says she may have to sell her cows.

Eddy Lekkerkerk, a 42-year-old dairy farmer outside Filer, Idaho, planned to participate in another milk dump on May 31. But he fears he may not be in business that long. For five months, he hasn't made payments on the roughly $800,000 he borrows annually to buy feed for his herd of 1,000 cattle. He said his bank is forcing him to sell his herd to pay his debt.
He predicted many of his neighbors will have no choice but to follow him off the farm.

"It's going to be ugly. This is historic stuff going on," he said. "The dairymen are nervous, and they are scared."

Thursday, May 21, 2009

Index of Leading Economic Indicators up more than expected in April

By TALI ARBEL, AP Business Writer – May 21, 2009
NEW YORK – A private research's group forecast of economic activity rose more than expected in April, the first gain in seven months and fresh evidence that the recession could end later this year.
The Conference Board said Thursday its index of leading economic indicators, designed to forecast economic activity in the next three to six months, rose 1 percent last month. Economists surveyed by Thomson Reuters expected a 0.8 percent increase.
Conference Board economist Ken Goldstein said that means declines in activity could switch to growth in the overall economy in the second half of the year. The recession began in December 2007.
In April, the index posted its biggest gain since November 2005, said Ian Shepherdson, chief U.S. economist at High Frequency Economics. It is now even with its level from last November.
The index is derived from 10 components including stock prices, the money supply, jobless claims and new orders by manufacturers.
The Conference Board said strengths among the components exceeded weaknesses for the first time in more than a year. "This is more broad-based. It's not just the stock market rally," Goldstein said.
Seven indicators rose, including stock prices, as the Dow Jones industrials are up by about a third since March. Consumer expectations, the average work week, manufacturers' new orders for consumer goods and deliveries by vendors grew, while initial jobless claims dropped, also a positive.
However, some analysts expressed reservations about the strength of the gain.
"How strong the upturn will be is still in doubt, and it is possible that the improvement in (consumer) sentiment seen the last couple months, which has lifted the index of leading indicators, could stall out," Deutsche Bank chief U.S. economist Joseph LaVorgna wrote in a research note. He doesn't expect the economy to grow until early 2010.
Weekly claims for jobless aid had been dragging the index down. The U.S. unemployment rate stands at 8.9 percent and is expected to hit double digits later this year or in 2010.
The Labor Department on Thursday said new requests for jobless benefits fell to a seasonally adjusted 631,000, down from a revised figure of 643,000. Claims had reached a 14-week low of 605,000 earlier this month, which many economists thought heralded an easing in the wave of layoffs.
Earlier this week, computer giant Hewlett-Packard Co. said it would cut 6,400 jobs, or 2 percent of its work force, while credit-card issuer American Express Co. said it was slashing 4,000 jobs. Beleaguered auto makers General Motors Corp. and Chrysler LLC recently announced they will terminate their contracts with around 2,000 dealerships nationwide, which likely will result in shutdowns for many. The National Automobile Dealers Association, a trade group, said the auto makers' decisions could result in 100,000 job losses.
Meanwhile, the Conference Board said building permits, manufacturers' orders for capital goods and the real money supply weighed down the index last month.
The recession was precipitated by a crisis in housing, and while homebuilders' confidence has ticked higher, both building permits and housing construction fell to record low annual rates in April, the government said earlier this week.

Tuesday, May 19, 2009

Is Opposition to Gay Marriage an Economic Issue?

The chairman of the Republican National Committee, Michael Steele, recently provided an economic argument for the opposition to gay marriage:

"Republicans can reach a broader base by recasting gay marriage as an issue that could dent pocketbooks as small businesses spend more on health care and other benefits, GOP Chairman Michael Steele said Saturday.
Steele said that was just an example of how the party can retool its message to appeal to young voters and minorities without sacrificing core conservative principles. Steele said he used the argument weeks ago while chatting on a flight with a college student who described herself as fiscally conservative but socially liberal on issues like gay marriage.

`Now all of a sudden I've got someone who wasn't a spouse before, that I had no responsibility for, who is now getting claimed as a spouse that I now have financial responsibility for," Steele told Republicans at the state convention in traditionally conservative Georgia. "So how do I pay for that? Who pays for that? You just cost me money.´"

Regardless of one´s position in the gay marriage debate, is this the type of reasoning that should decide this issue? The same logic can be applied to the advocacy of almost any prejudice or bigotry. For example, does Michael Steele want to deny equal pay for women? Is the Republican Party opposed to paying women the same wages and salaries as men for doing the same job because it will be more costly to businesses? Would the GOP advocate a law that requires businesses to pay women less than men? It would save small businesses money, would it not?

Or how about other discriminations, such as on the basis of race or religion? Does the Republican Party advocate maintaining spousal benefits for white Protestants, but abolishing them for blacks, Hispanics, Asians, Catholics, Jews, and Muslims? Those actions would save small businesses money. Yet, that does not make it the right thing to do.

Or perhaps Michael Steele wants Republicans to advocate the general abolition of marriage. Not providing spousal benefits for anyone would reduce business expenses, right?

The Economic Origin of Celibacy

The May 5 publication of a photo of a Catholic priest frolicking on the beach with an attractive woman raised the issue of the origins of the rules that prohibit clergymen from engaging in sex. It is another example of how economic concerns influence religious doctrine, especially within the Roman Catholic Church. (See also "The Economic Origin of Eating Fish on Fridays.") One can argue the motive was purely theological - priests should devote themselves fully to God. The more practical reason was that supporting a family is a much larger financial commitment than providing for just the priest. And as M.J. Stephey points out in the May 25, 2009 issue of TIME magazine,
"celibacy meant no offspring vying to inherit church property."

Glenn Weisner published a more detained history of celibacy in the Roman Catholic Church. It begins:
"As it turns out, the wealth and power of Rome had more to do with the practice than spirituality. Clerics often married until the Middle Ages, until concern, mostly over the loss of Church lands to heirs of priests, led to the imposition of the celibacy rule."

The Future Church also published a brief history of celibacy in the church. It begins:
"First Century
Peter, the first pope, and the apostles that Jesus chose were, for the most part, married men."

Actor Gabriel Byrne (HBO´s In Treatment) mentions the celibacy issues in his April 30, 2009 interview with Terry Gross on NPR´s Fresh Air.

Update (May 28, 2009): Sex Scandal Miami Priest Quits Catholic Church:
A popular U.S. Roman Catholic priest photographed frolicking with a woman on a Florida beach announced on Thursday he had joined the Episcopal Church to pursue the priesthood in a faith that allows married clergy.

Monday, May 18, 2009

Markets are not Perfect!

As mentioned in an earlier post, markets are amazing. Yet, they are far from perfect. When markets are unregulated, they create many undesirable social outcomes, such as too much pollution, poverty, and market power, and too few public goods, such as national defense, police protection, education, and investment in technology. Evidence of this is the 1969 burning of the Cuyahoga River in Cleveland, Ohio, which prompted the adoption of significant pollution control laws in the United States, such as the Clean Air Act and Water Quality Improvement Act of 1970. Prior to this intervention in the marketplace, businesses dumped so much pollution into the environment that a river literally caught on fire. To highlight this event, the Great Lakes Brewing Company named a featured ale "Burning River."

Key to Happiness: Give Away Money

According to a 20 March 2008 article by Jeanna Bryner in Live Science:

"Those incoming federal tax-rebate checks could do more than boost the economy. They might also boost your mood, with one caveat: You must spend the cash on others, not yourself.

New research reveals that when individuals dole out money for gifts for friends or charitable donations, they get a boost in happiness while those who spend on themselves get no such cheery lift. ...

Despite the benefits of "prosocial spending" on others, participants spent more than 10 times as much on personal items as they did on charitable options. The researchers note personal purchases included paying bills.

Statistical analyses revealed personal spending had no link with a person's happiness, while spending on others and charity was significantly related to a boost in happiness.

`Regardless of how much income each person made," Dunn said, "those who spent money on others reported greater happiness, while those who spent more on themselves did not.´ ...

In another experiment, the researchers gave college students a $5 or $20 bill, asking them to spend the money by that evening. Half the participants were instructed to spend the money on themselves, and the remaining students to spend on others.

Participants who spent the windfall on others — which included toys for siblings and meals eaten with friends — reported feeling happier at the end of the day than those who spent the money on themselves.

If as little as $5 spent on others could produce a surge in happiness on a given day, why don't people make these changes? In another study of more than 100 college students, the researchers found that most thought personal spending would make them happier than prosocial spending.

"Often people, at some implicit level, have this idea that 'buying these things is going to make me happier,'" Ahuvia said. "It does make them momentarily happy," he added, but the warm feelings are short-lived.

Sunday, May 17, 2009

AP Economic Stress Index

The Associated Press Economic Stress Index provides " monthly, multi-format updates on the economic stress of the United States down to the county level." The index uses three economic variables: the rates of unemployment, foreclosures and bankruptcy. The result is "a score on a scale of 0-100 that measures how the recession is affecting a county compared to all others." The index number increases as economic conditions worsen (and thus stress rises). Improving conditions lower the index.

Happiness Is ... Being Old, Male and Republican

Robert Roy Britt reports in a May 15, 2009 article for LiveScience:

"Americans grow happier as they age, surveys find. And a new Pew Research Center survey shows the tendency is holding up as the economy tanks.

Happiness is a complex thing. Past studies have found that happiness is partly inherited, that Republicans are happier than Democrats, and that old men tend to be happier than old women.

And even before the economy got nasty, seniors were found to be generally happier than Baby Boomers. Some of that owes to the American Dream being lived by past generations, while Boomers work two jobs and watch the dream whither.

In times like this, it's clear how age can have its advantages. While not all seniors are weathering the recession well, for many the impact is much less severe than it is for younger people.

Why? Many people 65 and older retired and downsized their lifestyles before the economy imploded, according to Pew analysts. Most aren't raising kids and many are not so worried about being laid off. Loss of income can be, of course, a source of stress and displeasure. (While money doesn't buy happiness, a study in February showed cash can help, especially when people use it to do stuff instead of buy things.)

If you're thinking that Republicans are happy just because they perhaps make more money, that does not seem to be the case. The study that found Republicans to be happier than Democrats also showed that it held true even after adjusting for income.

It's those age 50-64 who've "seen their nest eggs shrink the most and their anxieties about retirement swell the most," the Pew survey found. It also finds that younger adults (ages 18-49) "have taken the worst lumps in the job market but remain relatively upbeat about their financial future."

Not everyone in any category is blissful, of course. Other research has shown that happiness in old age depends largely on attitude factors such as optimism and coping strategies. Add financial planning to the list.

In the new Pew telephone survey, taken in March and April of 2,969 adults, here's how many respondents in each age group said they had cut back on spending in the past year:

18-49: 68 percent
50-64: 59 percent
65+: 36 percent.
And is the recession causing stress in your family?

18-49: 52 percent
50-64: 58 percent
65+: 38 percent.
Now for the good news: A study in January found that key groups of people in the United States have grown happier over the past few decades, while other have become less so. The result: Happiness inequality has decreased since the 1970s. Americans are becoming more similar to each other on the happiness scale."

Saturday, May 16, 2009

Ridiculous Ideas That Made People Millions

"Have you ever watched an infomercial or seen an item in a department store and thought "I could have thought of that!" Have you wished you had invested money early in a blockbuster invention? Learn the stories behind some (seemingly) ridiculous ideas that have made inventors and investors very wealthy, and find out what you, as a potential investor, should look for and consider before putting up capital for a potential funding opportunity." - Katie Adams,, retrieved May 16, 2009.

"The Koosh Ball
You've may have never heard of Scott Stillinger but somewhere in your home or office you probably have one of his inventions – the Koosh ball, which made millions of dollars. Stillinger came up with the idea for the Koosh ball when he tied rubber bands together to create a smaller, easier-to-catch ball for his young children in 1987. He founded OddzOn Products Inc. to distribute the small, simple toy, and within just 12 months it was flying off of store shelves as that year's hottest Christmas gift.

The company expanded, and in 1994 Stillinger sold OddzOn to toy manufacturer Russ Berrie and Company Inc., which in turn was bought by toy behemoth Hasbro (NYSE:HAS) in 1997 for more $100 million. And it all happened a mere 10 years after the first ball was created. (For more on mergers and acquisitions, read our tutorial:Mergers and Acquisitions.)

Santa Mail
Every year, millions of children around the globe pen letters to Santa and hope for a response. Byron Reese realized the potential in this market. In 2002, he launched "Santa Mail," a service that allows kids to send letters to the North Pole. Parents enclose a small fee of just $9.95, and little Johnny or Jane receives a personalized letter back from the "big man" himself. By 2009, Santa Mail had responded to nearly 300,000 children. At close to $10 a letter, well, you can do the math - needless to say, it was a little idea that has earned Reese a big return. (Get some tips on how to come up with your own winning business idea. See 10 Breakout Ideas For Small Businesses.)

Lucky Break Wishbones
Are you still a little bitter that, at last year's Thanksgiving dinner, you lost out to your cousin Ned in the annual fight over the lone turkey wishbone? Well, thanks to Ken Ahroni, those days are long over. In 1999, he had something of an epiphany at his family's Thanksgiving dinner table: a family with multiple people would like multiple wishbones. He shuttered his previous consulting business and launched Lucky Break Wishbone Corp. in 2004, in order to sell his one-of-a-kind breakable plastic wishbones. Within two years, the company was generating nearly $1 million in sales through distributors in more than 40 states nationwide. (For more on Thanksgiving expenses, read Keep Thanksgiving Costs From Taking A Fowl Turn.)

Antenna Balls
You've seen them; maybe you even sport one on your car. Those ubiquitous, yellow smiley-faced balls perched atop antennas in parking lots nationwide have made Jason Wall a very wealthy man. Inspired in 1997 by a commercial for the fast food chain Jack in the Box, Wall created some antenna ball designs and began selling them locally through auto stores in California in 1998. Within a year, he had earned more than $1.15 million in sales and quickly won major accounts to sell his product through national chains, including Wal-Mart (NYSE:WMT).In 2009, the multimillionaire is president and CEO of In-Concept Inc.

Investing in Far-Out Ideas and Inventions
If you can't come up with your own idea - or don't want to put in the time - you can always invest in another inventor's ingenuity. Inventions can come from anywhere and anyone - friends, family members or even coworkers. But before you start writing checks out to just anyone who promises they have "the next BIG idea," there are five key tips to consider:
  1. Learn about the industry. If you don't personally know a potential investor in whom to invest, you can learn more about opportunities through industry trade magazines, like Investor's Digest or America's Inventor Magazine, or through organizations like the National Congress of Investor Organizations. (To learn more about specific industries check out our Industry Handbook.) 

  2. Stick to your strengths. Investing in an invention is a risky proposition. That's why it's a good idea to stick to investigating investment opportunities in a field or concept with which you are somewhat familiar. For example, if you are a mother of young children, you will have a keener sense of the needs of children and parents than someone without children. Use your background, interests and experience to your advantage when evaluating investment opportunities.   

  3. Find the right people to back. Sure, your uncle Frank may be utterly convinced that his remote-controlled backyard squirrel zapper is what every home needs, but that shouldn't be enough to get you to open your wallet. Instead, look for inventors who have demonstrated success - people who have multiple patents and success in selling their inventions, either directly to retailers or to larger companies. Successful inventors have the proven ability to secure patents and sell products. (For more on patents, seePatents Are Assets, So Learn How To Value Them.)

  4. Get to know the market and the team. All successful investors research the product and company they're going to help fund first. Do some homework to get to know not only the inventor you are considering backing, but also the market potential for the product and its profitability and evaluate the team the inventor has assembled to bring the product to market. Ask key questions such as: 

          ·        What need does the invention satisfy?
          ·        Are there competitors?
          ·        Have similar types of inventions failed in the recent past?
          ·        What is the inventor's time line to get to market?
          ·        What is his or her business and marketing plan to not only sell products but realize a healthy profit margin?
          ·        Are there any other potential patents pending on a similar type of product?  

    It takes a team of skilled professionals with the right product working in the right market to make your investment realize its potential. 

  5. Do your financial and legal due diligence. As with any investment, make sure that you know exactly what you're investing in up front. Does the person or organization seeking funding have a sound business plan? What is the current financial status and are there any other debt obligations to which you, as an investor, could be exposed? Are there any other funders, and if so, who are they? Ask for all financial records, business plans and projections; carefully review any documents you're asked to sign; seek professional legal and financial counsel, and be sure you understand any potential risk that you're incurring, including the risk of losing of your investment altogether. (For more information on doing research before investing, take a look at our article Due Diligence In 10 Easy Steps.)
The Bottom Line
Realistically, the odds are stacked against most investors looking to make their fortune by backing an inventor. The U.S. Patent Office notes that, "approximately 2% of patents earn significant dollars for their investors." Still, there are future Koosh balls and Lucky Break Wishbones to be made and profited from. Perhaps with some hard work and careful investing, you too could find a ridiculous idea that gets you laughing all the way to the bank. 

by Katie Adams,

Katie Adams is a freelance commercial writer, marketing and public relations professional with 18 years experience. She has written extensively about financial issues and was previously Director of Regional Communications for Fannie Mae. Adams earned a B.A. from the College of William and Mary and lives with her family in Virginia Beach, Virginia. She is actively involved in international philanthropic work to improve orphan care and accelerate sustainable development in Central America. Visit her website"

Personal Investments: Profit from Market Fluctuations

"Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it."
- Warren Buffett

Markets are Amazing!

Markets are amazing.  For example, no single individual knows everything necessary to make a pencil  Yet, markets create pencils.

Friday, May 15, 2009

Newt Gingrich does not believe Americans should sacrifice.

In a TIME magazine article on November 1, 2008, Newt Gingrich said:

"People don't elect presidents who tell them to sacrifice. They elect presidents who solve problems so they don't have to sacrifice."

This is further evidence that Baby-boomers are the most selfish generation in U.S. history.  Baby-boomers have been unwilling to pay for all of the government services they have used.  The public debt began to rise dramatically around 1980, when Baby-boomers began to play a significant role in running both the government and the private sector.  And the wars in Afghanistan and Iraq are the first time in American history when Americans have insisted on tax cuts in a time of war.  Many Americans seem unwilling to make sacrifices for any cause - not even for war or national defense.

Health Benefits of Red Wine

The publication of medical studies that suggest drinking red wine has health benefits caused an increase in the demand for red wine.  The quantity of red wine demanded increased at almost every possible price.  Graphically, this is illustrated by a shift of the demand curve for red wine to the right.  The effect of increased demand in the market for red wine was an increase in both the price of red wine and the quantity of red wine purchased and consumed.

Here is an overview of the medical studies that suggest there are health benefits to drinking red wine:

"It's thought that red wine, despite the alcohol content, also has helpful properties, like resveratrol and other polyphenols," says Barbara Shukitt-Hale, a research psychologist at the Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts University in Boston.

Polyphenols are chemical compounds found in the skin of grapes and other plants. These compounds act as "antioxidants" -- the vitamins, minerals and enzymes in foods that protect the cells in your body from damage caused by the normal process of metabolism and ward off chronic disease. Resveratrol is a type of polyphenol found in red wine.

You could say that each serving that you have of a fruit or a vegetable — or perhaps a glass of wine — is beneficial, Shukitt-Hale reasons, as long as you don't forget that wine is alcohol, and you need to drink responsibly.

"You don't want to have seven glasses of red wine a day instead of seven servings of fruits and vegetables," she cautions.

One of most widely documented benefits of red wine is heart health. A pivotal study published several years ago in journal Nature found that red wine inhibited the synthesis of a protein called endothelin-1 that can lead to the development of atherosclerosis, a build-up of fatty material along the artery walls.

A November 2006 article in the academic journal Nature claims: 

Regular, moderate consumption of red wine is linked to a reduced risk of coronary heart disease and to lower overall mortality1, but the relative contribution of wine's alcohol and polyphenol components to these effects is unclear2. Here we identify procyanidins as the principal vasoactive polyphenols in red wine and show that they are present at higher concentrations in wines from areas of southwestern France and Sardinia, where traditional production methods ensure that these compounds are efficiently extracted during vinification. These regions also happen to be associated with increased longevity in the population.


Calif. County Prosecutions Halt May Spread

Tax cuts are very popular.  Yet, so are government services.  There seems to be a huge disconnect between many people´s desire for the benefits of government and their willingness to pay its costs.  The following story from National Public Radio (NPR) explains how budget cuts are forcing a county in California to stop prosecuting many crimes.  Citizens are outraged.  What will it take to increase the willingness of people to pay for the government services?  Will an increase in the crime rate do it?

Wednesday, May 13, 2009

Retail sales drop unexpectedly in April, raising recovery doubts

Macroeconomic policy attempts to manage the economy by affecting overall spending on newly produced goods and services (which economists call "aggregate demand").  The largest component of aggregate demand (AD) is consumption (C).  Retail sales are the primary  component of consumer spending.  Thus a decline in retail sales indicates a decrease in aggregate demand.  The primary cause of recessions is insufficient overall spending.  Thus, the news that retail sales are declining indicates the recovery from the recession may not be imminent.

May 13 (Bloomberg) -- Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash.

The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Other reports showed companies continued to cut stockpiles as demand slowed, and climbing oil costs pushed up prices for imported goods.

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said. Stocks dropped for a third day as the reports indicated any recovery from the worst recession in at least half a century is likely to be subdued.

“It looks like consumers are losing momentum heading into the second quarter and that is a very worrisome development,” said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. “They have very significant headwinds and number one among them is that the labor market is far from turning the corner.”

Saturday, May 9, 2009

Is the Republican Party an Endangered Species?

In a May 7, 2009 TIME magazine article entitled "Republicans in Distress:  Is the Party Over?", Michael Grunwald claims:

"These days, Republicans have the desperate aura of an endangered species. They lost Congress, then the White House; more recently, they lost a slam-dunk House election in a conservative New York district, then Senator Arlen Specter. Polls suggest that only one-fourth of the electorate considers itself Republican, that independents are trending Democratic and that as few as five states have solid Republican pluralities. And the electorate is getting less white, less rural, less Christian — in short, less demographically Republican. GOP officials who completely controlled Washington three years ago are vowing to "regain our status as a national party" and creating woe-is-us groups to resuscitate their brand, while Democrats are publishing books like The Strange Death of Republican America and 40 More Years: How the Democrats Will Rule the Next Generation. John McCain's campaign manager recently described his party as basically extinct on the West Coast, nearly extinct in the Northeast and endangered in the Mountain West and Southwest.

So are the Republicans going extinct? And can the death march be stopped?"