Carpe Diem

Energy fact of the day: Net petroleum imports are below 30%

oilimportsThe chart above displays another new energy milestone for the Great American Energy Boom: Net petroleum imports have been below 30% for the most recent five months (October 2013 to February 2014, EIA data here) – the last time that happened was in the spring of 1986, almost 28 years ago. Before a dedicated group of America’s petropreneurs finally “unlocked the shale code” with revolutionary technologies that were finally able to extract oil trapped in tight shale rock formations miles below the ground, America’s dependence on foreign sources of petroleum had been rising for 20 years and imports were providing more than 65% of US demand in the fall of 2005 (see chart). In the last seven years, thanks to the shale oil bonanza in states like North Dakota and Texas, the share of America’s petroleum supplied by foreign sources has fallen from 62% in early 2007 to below 30% this year. With the increases in domestic oil production forecast by the EIA (annual growth averaging 800,000 barrels per day through 2016), we can expect net petroleum imports to continue to fall over the next few years to new record low levels.

America’s oil and gas industry continues to be the strongest sector of the US economy and is helping to provide much-needed support to an otherwise sub-par economic recovery. The Great American Energy Boom is providing thousands of shovel-ready jobs both directly in oil and gas extraction and indirectly in all of the many sectors that support the energy sector, it’s creating thousands of new millionaires who are being paid oil and gas royalties, and it’s achieving the long sought-after goal of increasing America’s energy security by reducing dependence on foreign sources of petroleum, as the chart above helps to illustrate.

Ironically, there’s probably never been a US president more hostile to the oil and gas industry than Obama; and yet there probably has also never been a US president who has benefited more from the economic stimulus and shovel-ready job-creation that the oil and gas industry has delivered during Obama’s tenure.

Carpe Diem

Richard Epstein on the many problems with ‘equal pay’

In an excellent essay (“The Many Problems with ‘Equal Pay’”), Richard Esptein argues that “the market, not the President, should determine how much women earn,” here’s an excerpt (emphasis added):

Without exception, more sophisticated studies that seek to control for some of these differences narrow the perceived 77 percent gap. But they do not eliminate it entirely. One common inference is that the persistence of that measurement gap is indicative of some lurking discrimination between the sexes throughout labor markets. Not likely. A far better explanation is that these statistical studies cannot incorporate into their regressions each relevant variable that matters to a skilled manager or recruiter, even after controlling for hours worked or, most critically, years out of the work force. Such issues as a willingness to travel, working overtime in dangerous neighborhoods, making cold calls to prospective customers, handling risk, or responding to hostility in interpersonal relations are likely to be relevant in how much an employee is paid. The effect of any one of these variables could be small, but in aggregate, they really matter. Yet, they are too numerous and too difficult to quantify, to be incorporated into the statistical models that predict unequal pay. So it is just wrong to assume that any unmeasured variation should be attributed to some undocumented form of discrimination.

The claim that women are playing against a stacked deck is wrong for still other reasons. Labor markets are intensely competitive, so the claim about systematic pay gaps has to assume both that women managers are hostile to women’s economic welfare, and that competitive markets are massively inefficient in matching people with positions. Competition for labor tends to lead to efficient outcomes. Indeed, by the standard account, price discrimination cannot survive in competitive markets, which means that the differentials in wages track differences in performance. Put simply, one danger of the Equal Pay Act is that it could mandate equal wages for unequal work, i.e. for two workers with different productivity.

Our false preoccupation with pay equity is not costless, for it leads to bad labor market regulations that hurt all workers. Employment relationships will only form and endure when the gains from the deal exceed the costs of putting it together. Every time a government regulation imposes some new restriction on the contracting parties, it increases the costs of the deal and reduces the benefits it generates, thereby killing jobs for men and women alike.

One common theme that the president raises is that his proposals are good not only for women but also for American families and the economy as a whole. Of course, he is right to say that “when women succeed, America succeeds.” Any overall improvement in labor productivity reverberates across the economy. But the President is blind to the difference between the rising tide that raises all ships, and the dam that makes water flow into one channel and not the other. Market transactions raise all ships by improving levels of productivity. The President’s regulations shrink the size of the pie in the effort to give women a larger share of what remains. But that strategy never works. Increased pay for women is always a blessing—all other things being equal. But that improvement takes on a different hue when it comes at the expense of an overall decline of the income and economic prospects for men.

HT: Don Boudreaux

Update: Listen to Richard Epstein’s podcast about the gender wage gap myth here that accompanies the article cited above.

Carpe Diem

Wednesday morning linkage

oilweekly1. Chart of the Day: US oil production topped 8.3 million barrels per day last week for the first time in 26 years, going back to April 1988.

2. Markets in Everything: Watch the video above to see “Termite-Inspired Robots That Can Build Houses” – maybe a substitute or complement to 3D-printing?

3. Markets in Everything II: First-ever Pot Vending Machine to debut in Colorado.

4. “Markets” in Everything III: LibriVox provides free public domain audiobooks, with a goal “To make all books in the public domain available, for free, in audio format on the internet.”

5. Markets in Everything…. NOT: Belgium bans Uber, threatens €10,000 fine for each attempted pickup.

6. Markets in Everything… NOT IIIn an attempt to cut costs, Canada Post has announced plans to scrap all home mail deliveries, making Canada the first country in the G20 to be without a door-to-door service.

7. Who’d a-Thunk It? With the paperwork of medical insurance and the bizarre, politically driven inclusions, exclusions and mandates of Obamacare, more and more Texas doctors are opting out of insurance altogether and moving into the growing field called “Concierge Medicine.”

8. VIDEO: In the video below, AEI scholar Dr. Sally Satel discusses the benefits of e-cigarettes for both individuals and the U.S. as a whole.

Carpe Diem

Diamonds aren’t rare, they’re a terrible investment, and good substitutes are now available = diamond cartels aren’t forever

A Carpe Diem regular sent me an email about the Wisconsin-based Diamond Nexus company, which sells both lab-created diamonds and “diamond simulants” at a fraction of the cost of the “earth-mined” versions, see examples below of rings that sell for less than $1,000 with total carats of 1.24 or higher:

diamondsThe company operates a retail location in the Woodfield Mall near Chicago and they’ll soon be adding another retail location in downtown Milwaukee. All of their jewelry products are also available through the Diamond Nexus website, with customer service available by phone and live chat.

According to the company’s website:

Our diamond simulants contain a small amount of carbon along with other chemical components to give the optical appearance of a diamond, in which we can offer them at $149 per carat. Our lab diamonds are pure carbon, making them optically and physically identical to a mined diamond, however, because they have been created in a lab, we can sell them for 50% less than a earth-mined diamond.

In the video above, the company asks shoppers in a mall to compare a mined diamond ring valued at $3,743 to a nearly identical ring with one of the company’s lab diamonds that sells for $549. Even under close inspection with a jeweler’s magnifying glass, nobody could tell the difference between the $3,743 ring and the $549 version. Sure, they’re ordinary people, and not jewelry experts, but if you spend $3,743 on an earth-mined diamond and neither you nor anybody else can tell it’s different than the $549 “generic” substitute, is the extra $3,200 really worth it? Certainly not for me.

The company addresses and debunks seven of the common myths about diamonds, here are three examples:

Myth 1. Diamonds are rare.

There are TRILLIONS of carats of diamonds that will never be mined or sold to consumers. These aren’t some mythical reserves that we don’t know about, these are actual deposits that have been found but left untouched. Why you may ask? Well, if the people that control the diamond trade (we like to call them cartels because, well, they are) were to release all the diamonds they knew about, diamonds would cost pennies. So, being the “smart” people that they are, the cartels artificially hold back supply to drive up demand (read price). I know this doesn’t seem possible in this day and age but sadly it’s true.

2. Diamonds are a good investment. 

Much like a car, the minute you walk out of the store with a diamond, it starts to depreciate in value. A lot of customers come to us after their first marriage because they have gone through the process of trying to sell their expensive diamond ring. What they found out is that they could only get pennies on the dollar for their ring. This is exactly why we don’t think people should have to spend three months salary to get an amazing engagement ring. It’s not an investment, it’s a symbol of love!

3. Only a diamond lasts forever. 

“Only a diamond lasts forever” was meant to make diamonds feel like heirloom jewelry that could be passed down from generation to generation. This is fairly true but to say they’re the ONLY gemstone that stands the test of time is an outright lie. Technology now allows us to engineer lab diamonds and diamond simulants that last just as long as mined diamonds. All of these stones cut glass, are just as hard as a diamond and last just as long, so don’t fall for the advertising hype!

MP: As more diamond substitutes like this become available at a fraction of the cost of “earth-mined” diamonds that also might be “blood diamonds,” and as consumers get educated about the biggest anti-consumer marketing fraud in history, I’ll make this prediction: “Diamond cartels are NOT forever.”

 

Carpe Diem

Obama uses statistical fraud to accuse dry cleaners of gender discrimination, just like his fraud about the 23% pay gap

The extent of President Obama’s “revolting pay gap demagoguery” and willingness to spread “statistical frauds” about women’s issues to gain popularity with female voters apparently has no limits. Last week he accused America’s dry cleaners of engaging in systematic and unfair gender discrimination by charging women higher prices than men. Watch the video above as Obama, surrounded by women, says:

We’ll talk about dry cleaners next, right? [Watch all of the women shake their heads in agreement.] I don’t know why it cost more for Michelle’s blouse than my shirt. We got to make sure that America works for everybody.

Obama’s accusation that dry cleaners discriminate against their female customers is based on the same statistical fraud that he uses to attribute the entire 23% unadjusted gender pay gap to gender discrimination by falsely assuming that he’s comparing wages of men and women doing the exact same work. In the case of dry cleaners, Obama’s new statistical fraud is based on the faulty assumption that dry cleaners engage in gender-based discrimination by charging women more than men for having the exact same clothing item cleaned.

Following Obama’s false claims of gender discrimination last Tuesday, the female Executive Director of the National Cleaners Association responded later the same day with this letter to Obama, here’s an excerpt:

Imagine my distress when during your remarks about Pay Fairness, you segued into a smear on the quintessential small business, the dry cleaner, by suggesting you should be targeting them for gender biased pricing. Mr. President, for dry cleaning services, gender pricing is a myth, and we can prove it with the math!

We hope that once you understand the math, you will follow up your national conversation about dry cleaners by publicly correcting the mistaken impression that the media has helped to foster among many Americans, including our First Family.

As an industry, dry cleaners do not charge more for a woman’s shirt than a man’s shirt, they charge more for a hand ironed shirt than they do a machine pressed shirt. If you check your own dry cleaning bill, you’ll find that YOU pay more for the laundering and finishing of your hand ironed tuxedo shirt, than you do for the automated processing of your everyday traditional dress shirt! The price is in the math as calculated by the labor required not the gender of the client!
Simple math. Hand ironing takes more time and requires more skill, and therefore costs the cleaner more to produce. Because it costs more to produce, he charges more for the work.

Hopefully, now that you understand the terrible injustice that has been done to the nation’s dry cleaners, and have made the issue part of the national conversation, you will see how you were misled and take steps to undo the hurt and damage that has been inflicted on fair minded, hard working small businesses.

 

Cordially,
Nora P. Nealis
Executive Director

Bottom Line: Just like Obama’s wage gap demagoguery implies that companies like Ford Motor Company hire male engineers for $100,000 but then pay women with the same exact credentials and experience a salary of only $77,000, Obama accuses dry cleaners of charging women more than men to have the exact same shirt cleaned and pressed. In both cases (wages and dry cleaning), Obama’s engages in the politically-motivated statistical fraud of comparing apples to oranges, and then uses fraudulent conclusions to appeal to female voters: women are paid less than men for doing the exact same work, and women pay more than men for having the exact same item dry cleaned. Complete false conclusions in both cases.

Carpe Diem

Mininum wage, maximum folly; maximum rent, minimum sense

Economist Gary Galles makes some good points about government price controls like minimum wage and rent control laws in his article “Cognitive Dissonance on Minimum Wages and Maximum Rents.” The whole article is excellent, here’s an excerpt:

“Many cities are pricey places to live.” That was the opening line and major premise of a recent Los Angeles Times opinion piece advocating that high-cost cities raise minimum wages to mitigate the problem. I was struck by the fact that for years, the exact same basis was used by the same left liberal groups to justify rent controls. Apparently, high costs of living, largely caused by a panoply of government taxes, regulations, and restrictions, justify still more government-imposed coercion in both the labor and housing markets. Unfortunately, those government “solutions” are not only based on flaws in basic economic logic, but they are mutually contradictory.

Both the minimum wage and rent control, despite the fact that the first forces prices up and the second forces prices down, reduce the quantity of the good in question exchanged. That makes them counterproductive “solutions” to the problems faced by those who are unable to sell enough of their labor services or unable to purchase enough housing services. But the rhetoric employed disguises the fact that they make the central problem worse rather than better.

Those who advocate for price controls such as minimum wages and rent controls justify both on the basis of compassion. But they ignore the far from compassionate violations of employers’ and landlords’ property rights imposed (reflecting Will Rogers’s quip that “I remember when being liberal meant being generous with your own money”).

Despite their coercive abuses, because of logical lapses, both also present lower-income individuals and households with fewer options rather than more, harming many intended beneficiaries. And no amount of compassion justifies harming employers and landlords by forcing them to also impose harm on low-skill workers and low-income households.

Carpe Diem

More on the ‘revolting pay gap demagoguery’ and ‘statistical fraud’ of Obama and the Democrats

Some recent commentary on Obama’s paycheck poppycock, deceptive crusade, ignoble lie, equal pay canard, equal pay calamity, revolting equal pay demagoguery, equal pay hype, statistical fraud, bogus 77 cent differential, etc.:

1. Thomas Sowell in his column today titled “Statistical Fraud“:

The “war on women” political slogan is in fact a war against common sense. It is a statistical fraud when Barack Obama and other politicians say that women earn only 77 percent of what men earn — and that this is because of discrimination.

It would certainly be discrimination if women were doing the same work as men, for the same number of hours, with the same amount of training and experience, as well as other things being the same. But study after study, over the past several decades, has shown repeatedly that those things are not the same.

Constantly repeating the “77 percent” statistic does not make them the same. It simply takes advantage of many people’s ignorance — something that Barack Obama has been very good at doing on many other issues.

Actually the biggest disparity in incomes is between fathers and mothers. Nor is there anything mysterious about this, when you stop and think about it. How surprising is it that women with children do not earn as much as women who do not have children? If you don’t think children take up a mother’s time, you just haven’t raised any children.

How surprising is it that men with children earn more than men without children, just the opposite of the situation with women? Is it surprising that a man who has more mouths to feed is more likely to work longer hours? Or take on harder or more dangerous jobs, in order to earn more money?

If the 77 percent statistic was for real, employers would be paying 30 percent more than they had to, every time they hired a man to do a job that a woman could do just as well. Would employers be such fools with their own money? If you think employers don’t care about paying 30 percent more than they have to, just go ask your boss for a 30 percent raise!

2. Michael Barone in his column today “Dems Play Politics With Bogus 77-cent Differential in Male-Female Pay“:

The Democrats’ problem is that sex discrimination by employers was outlawed by the Equal Pay Act signed by President John F. Kennedy in 1963 — 51 years ago. To make “the war on women” an issue and rally single women to the polls, the Obama Democrats have had to concoct new legislation putting new burdens on small employers and ginning up business, as the 2009 Lilly Ledbetter Fair Pay Act’s extended statute of limitations did, for their trial lawyer contributors.

Such legislation attacks a problem very largely solved. The male-female pay differential for those working at similar levels has been reduced nearly, but not quite, to the vanishing point. Remaining differences result almost entirely from personal choices by women and men.

By any realistic standard, the equal pay problem is minor, certainly in comparison to the growth-stifling effects of the current tax code and the unsustainable trajectory of current entitlement programs.

3. Ruth Marcus in her Washington Post column “Democrats’ revolting equal-pay demagoguery“:

But the level of hyperbole — actually, of demagoguery — that Democrats have engaged in here is revolting. It’s entirely understandable, of course: The Senate is up for grabs. Women account for a majority of voters. They tend to favor Democrats. To the extent that women — and in particular, single women — can be motivated to turn out in a midterm election, waving the bloody shirt of unequal pay is smart politics. Fairness is another matter. Since President John F. Kennedy signed the Equal Pay Act in 1963, it has been illegal for employers to pay women less than men for the same work.

Carpe Diem

IRS data: Top 1% pay 37% of all income taxes, bottom half pay 2%, blubbering David Letterman can’t believe the facts

irssharesIRS data for 2010 (most recent year available) are displayed above and show the shares of federal income taxes paid by various income groups, here’s a summary:

1. The top 0.1% of US taxpayers, about 135,000 filers with Adjusted Gross Incomes (AGI) of $1.63 million and above, paid 18% of all federal income taxes collected.

2. The top 1% of US taxpayers, 1.35 million filers with incomes above $369,000, paid 37% of all federal income taxes paid.

3. The top 5% of US taxpayers, 6.75 million taxpayers with incomes above $161,000, paid 59% of all federal income taxes paid.

4. The top 10% of US taxpayers, 13.5 million taxpayers with incomes above $116,000, paid 71% of all federal income taxes paid.

5. The top 25% of US taxpayers, 33.7 million Americans with incomes above $69,000, paid 87% of all taxes collected.

6. The top 50% of taxpayers, 67.5 million taxpayers with incomes above $34,000, paid almost all taxes collected (98%) and the bottom half of taxpayers (67.5 million filers) paid only 2% of all federal income taxes paid in 2010.

In the video below from February 2011 at about 9 minutes into the segment, a confused and blubbering David Letterman just can’t believe the IRS statistics in the chart above when Rand Paul cites them and makes the case that the rich are paying their fair share of federal income taxes.

Sen. Paul: If you look at the income tax, the top 1% pay about a third of the income tax. The top 50%, those who make $70,000 and above, pay 96% of the income tax, so the middle class and above are paying all of the income tax. We are paying our fair share. Even you are probably paying your fair share, you don’t need to pay more.

Letterman: Right, but I think there’s something wrong with those numbers. I don’t know what it is exactly, but I’m pretty sure there’s something wrong with them…

(Applause)

Letterman: Thank you, you’re applauding my stupidity, god bless you.

At the very end of the segment, a blubbering Letterman sums up his confused liberalism and resistance to the facts by saying, “I think he’s wrong about some of these things. I just can’t tell you why. I’m sorry. “

Carpe Diem

Global stock rally: World market cap reached record high in March, and is $2.4T above pre-recession, pre-crisis level

worldstockThe Paris-based World Federation of Exchanges (WFE), an association of 60 publicly regulated stock market exchanges around the world, recently released updated data on its monthly measure of the total market capitalization of the world’s major equity markets through the end of March. Here are some highlights:

1. As of the end of March, the total value of equities in those 60 major stock markets reached $62.4 trillion and set several milestones. First, global equity values exceeded $62 trillion for the first time and established a new all-time monthly record in March (see chart above). Second, in each of the last five months except January, the global stock market capitalization has exceeded the previous cyclical record monthly high of $60.2 trillion set in October 2007 (see chart above). That was several months before the global economic slowdown and financial crisis started, and caused global equity values to plummet by more than 54% (and by almost $33 trillion), from $60.2 trillion at the end of 2007 to only $27.7 trillion by early 2009 (see chart). The record high $62.4 trillion world stock value in March was $2.2 trillion (and 3.7%) above the previous pre-recession peak.

2. Over the last year, world stock markets gained $7.3 trillion in value, rising from $55.15 trillion in March 2013 to $62.43 trillion last month. The 13% annual increase in world equity value over the last year was led by a strong 21% gain in the Europe-Africa-Middle East region, followed by a strong increase of 17.2% in the Americas, and a weak gain of only 1.4% in the Asia-Pacific region.

3. By individual country, the largest year-over-year increases in stock market values in March were recorded in Greece (117%), UAE (58%) Ireland (58%) and Oman (36.4%). In the US, the NASDAQ capitalization increased by 31.1% and the NYSE by 20.3%. The biggest losses in equity value over the last year (measured in US dollars) were posted in Turkey (-30.6%), Peru (-26.7%) and Chile (-23.3%).  The number of countries with positive increases in equity valuation over the last year (40) outnumbered countries with declines in stock market value (20) by two-to-one.

MP: Compared to the recessionary low of $27.7 trillion in February 2009, the total world stock market capitalization has more than doubled (a 125% increase) in five years to the current record level of $62.4 trillion in March, more than recapturing all of the global equity value that was lost due to the severe global recession and the various financial, mortgage and housing crises in 2008 and 2009. The global stock market rally over the last five years to a fresh record high in March has added back almost $35 trillion to world equity values since 2009, and demonstrates the incredible resiliency of economies and financial markets to recover and prosper, even following the worst financial crisis and global economic slowdown in at least a generation.