Carpe Diem

Why it’s still the case that Americans should stop whining and complaining about rising food prices

Last September, I wrote a post titled “Americans love to complain about rising food prices; here are three reasons they should stop whining.” In an article today in The Federalist, Sean Davis responds to my post in an article titled “American Families Are Right To Be Worried About Inflation.” Davis levels a number of criticisms at my post, and also criticizes more recent posts about inflation by Ramesh Ponnuru and Jimmy Pethokoukis. Here are some of Davis’s criticisms:

A lot has happened since Perry told us ten months ago to stop whining. Did events prove him right or wrong? Was his inexplicably bizarre method of averaging four years’ worth of inflation data actually an effective way of predicting future price growth? Let’s take a look.

My “inexplicably bizarre method of averaging four years’ worth of inflation data” was actually explained in my post: Given the somewhat volatile history of food prices on a monthly basis, we can look at the average food inflation rate over a longer period of time to smooth out some of the volatility. I showed a chart of the 48-month moving average of monthly food inflation rates to provide a smoothed measure of food inflation back to the 1960s.

Here’s a different way to look at historical food inflation using an alternative method of smoothing out the extreme volatility in monthly food prices. The chart below shows food inflation on an annual basis, using the average values of monthly “CPI: Food” in each year from 1990 to 2013, and the June value of “CPI: Food” for 2014.

foodannualOver the last 25 years, annual food inflation has averaged 2.68%, and has been as high as 5.8% in 1990 and 5.5% in 2008. Over the last year, food inflation has been only 2.23%, or almost 0.50% below the 25-year average. So again, I say to Americans — “stop your whining” about food prices and food inflation, it’s really not that bad. It could be worse, and it was worse – in 7 out of the previous 10 years, inflation was higher than it is right now this year!

I’d also point out that I certainly wasn’t using past food inflation to predict future food inflation, I was merely pointing out that actual, historical food inflation as of last summer certainly wasn’t very high at all, by historical standards:

Food prices over the most recent 12 month period through July [2013] have risen by only 1.44%, following 12-month increases of 1.38% in June, and 1.37% in May. Over the last 12 months starting last August, the annual food inflation rate has ranged between 1.37% and 2%, and averaged 1.6%.

With those relatively moderate rates of food inflation a year ago, I think I was quite justified telling consumers to stop their whining. What food inflation? There was none!

Well, what’s happened since last September? According to Davis:

It turns out food prices have soared since Perry so confidently told us to shut up about them. The chart below shows the rapid disparity between food price growth and wage growth since Perry issued his “stop whining” directive. No joke: compared to less than a year ago, egg prices are up 13%. Beef is up 10%. Pork is up more than 9%. Fresh fruits are up over 7%. Overall, the prices of food at home are up 2.3%, while average hourly wages are up only 1.4%. In other words, food prices are growing 64% faster than wages.

Food Prices Since Sept. 2013

Now it’s Davis who is using an “inexplicably bizarre method” of picking six food categories to supposedly demonstrate that “food prices have soared” from September 2013 to May 2014 (June data only became available today). Here’s the problem with that “inexplicably bizarre method” — the overall CPI for All Food Items increased by only 2% from September 2013 to May 2014 (with beverages it was only 1.9%, and for food at home by 2.3% as Davis reported)! Therefore, Davis’s chart makes food inflation look artificially high by picking six food categories that all increased multiple times the 2% increase in the CPI: Food (and 2.3% for food at home).

There’s another issue with the Davis analysis – average hourly wages according to this measure increased from $20.21 in September 2013 to $20.58 in May 2014, which is a 1.6% increase. And that leads to another problem — the overall CPI increased by 1.4% between September last year and May this year, which was less than this 1.6% increase in average hourly earnings (and the same as the 1.4% wage increase used by Davis). In other words, average nominal wages by one measure increased slightly greater during that period than did overall consumer prices, meaning that real wages increased. For the measure Davis uses, real wages were flat, but not declining.

foodThe chart above displays a more realistic representation of changes from September 2013 to June 2014, and shows that both measures of hourly wages (available here and here showing increases of 1.83% and1.62%) have: a) increased by less than three measures of food inflation (1.95%, 2.1% and 2.2%), but b) by more than the increase in the CPI-All Items (1.4%), meaning that real wages have increased over that nine-month period.

Federalist Food Price Time Series 07072014

Davis then compares increases in his selective sample of six food groups to the increase in average hourly earnings over a longer period going back to June 2009 (see chart above), and concludes that “food inflation (of my six bizarrely selected food groups) blows away wage growth.” But we’ve got the same problem here as before. Average food prices increased only 11.26% between June 2009 and May 2014, nowhere near the increases of 20% to 35% in the six-item food sample. Also, average hourly earnings increased by 10.61% over that period, slightly higher than the overall increase in consumer prices of 10.38%, which means real earnings increased slightly since June 2009.

Here’s another problem for Davis’s food price analysis. The measures he uses are food price indexes constructed by the BLS, and not actual retail food prices. For whatever reason (maybe because of attempts to adjust for quality?), the BLS price indexes Davis uses for food items like eggs don’t match actual retail price that consumers actually pay at grocery stores, as also reported by the BLS here.

For example, Davis reports correctly that the BLS index measure for eggs increased by 13% between September 2013 and May 2014. But according to actual retail price data from the BLS, a dozen eggs increased in price by only 5.2% during that period, from $1.897 per dozen to $1.996, which is less than half of the increase reported by Davis using the egg index series. Now that June retail price data are available, egg prices fell last month, and the increase in eggs since last September through June is only 2.7%, from $1.897 to $1.948 per dozen. That increase in the retail price of eggs from September 2013 to June 2014 is displayed in the table below. Also displayed in the table below are percentage increases in the retail prices of 30 different food items over the last nine months since my September post. Those 30 items represent most of the BLS items (and categories) available from its “Average Price Data” database here.

Notice that over the last nine months, the retail prices of 19 food items have decreased, while 11 have increased. The biggest food price increases since last September have been for the various cuts of beef (see a detailed list here), which have all registered double-digit percentage price increases. Pork products like ham (3.4%) and bacon (7.5%) have also increased, as have milk (5.8%), eggs (2.7%) and cheese (2.3%).

On the other hand, other meats have declined in price since last September — turkey by almost 12% from $1.819 to $1.606 per pound, and chicken breasts by 2.9%, from $3.608 to $3.504 per pound. From the table, we can see that the retail prices of many other food items have fallen, many pretty considerably, since last September such as strawberries (-13.8%), coffee (-8.3%), potatoes (-8.2%), cookies (-8.2%), bologna (-7.5%), peanut butter (-7.3%), etc. Importantly, many of the food items that showed significant price declines (chicken, turkey, coffee, potatoes, sugar, etc.) weren’t included in the food items used by Davis.

Bottom Line: Also over the September 2013 to June 2014 period, average hourly wages increased by 1.83% (from $20.21 to $20.58), which was slightly higher than the 1.69% overall increases in all consumer prices during that period (including food). The CPI for Food increased 2.06%, although only by 1.95% when beverages are included. But it’s not food prices alone that determine our cost of living, it’s the cost of all consumer goods and services, as measured by the CPI-All Items. And by that measure of all consumers prices, average hourly earnings have been increasing greater than overall consumer prices, meaning that real wages have increased slightly.

To conclude by paraphrasing Davis, the prices of things people buy have really not been growing faster than most average workers’ ability to buy them. For example, over the most recent 12-month period, the increase in average hourly earnings (2.3%) has outpaced the increase in the CPI (1.9%), meaning that real wages have gone up. It’s time for pundits to stop pretending that rapidly rising prices are such a big deal, because they’re really not. And it’s still the case that Americans should stop whining about rising food prices, because they’re not. Especially if you’re eating strawberries, turkey, chicken, coffee, grapefruit, ice cream and peanut butter these days.

Food Item Change in Retail Price, Sept. 2013 to June 2014
Strawberries -13.8%
Turkey -11.7%
Coffee -8.3%
Potatoes -8.2%
Cookies, Chocolate Chip -7.6%
Bologna -7.5%
Peanut Butter -7.3%
Grapefruit -4.7%
Potato Chips -3.9%
Sugar -3.6%
Chicken Breast -2.9%
Oranges -2.6%
Spaghetti -2.5%
Ice Cream -2.2%
Broccoli -1.6%
Bread, White -1.3%
Margarine -1.0%
Apples -0.9%
Orange Juice -0.3%
Rice 0.1%
Bananas 1.0%
Flour 1.9%
Cheese 2.3%
Eggs 2.7%
Ham 3.4%
Milk 5.8%
Tomatoes 7.0%
Bacon 7.5%
Ground Beef 10.8%
Lettuce 14.4%
CPI – All Items 1.7%
CPI – Food 2.1%
Average Hourly Wages 1.8%
Carpe Diem

For ‘representational equity,’ Univ. of Wisconsin-Madison calls on professors to use racial profiling for assigning grades

In the summer of 2006, as the citizens of Michigan were getting ready to vote that November on a ballot proposal that would decide whether publicly-funded Michigan universities could continue their admissions practices of racial double standards and affirmative discrimination, I wrote an op-ed about Proposal 2 that appeared in the Detroit Free Press. An excerpt of that article appears below. (Note: The ballot proposal passed by a wide 16-point margin of 58% to 42%.)

To understand why it’s time to end racial preferences in higher education, consider the following scenario. A university professor walks into class at the beginning of the semester. After a review of required texts, assignments and examinations, the professor discusses grading. The professor explains that there is a new university policy that applies a double standard for grading and is an extension of the university’s race-based admissions policies.

A standard grading scale will apply to all white, Asian and Arab students. African-American and Hispanic students will automatically receive extra points for all assignments and will receive a final letter grade based on a preferential grading scale.

Most people would find this a blatant form of discrimination.

First, the students receiving academic favoritism might justifiably object that they are being stereotyped as a homogeneous group. It would be offensive to many of those students to assume automatically that they all need preferential academic treatment.

Second, this form of academic profiling creates a disincentive for black and Hispanic students to study as hard as they would otherwise. Moreover, these students could face a special-preference stigma when they enter the job market or apply to graduate school. Their academic credentials could justifiably be questioned.

Moreover, these students could face a special-preference stigma when they enter the job market or apply to graduate school. If a student graduates from college with a 3.5 grade point average, a prospective employer or graduate program would justifiably question the academic credentials and potential abilities of those students who received race-based adjustments in all of their undergraduate course work.

Finally, most everyone would object to the fundamental unfairness of giving preferential treatment to certain groups of students. The students who didn’t receive special grading preferences would rightfully feel they were being treated unfairly and being discriminated against. Why should an Arab or Asian student with an 85% score in an accounting class get a letter grade of B if a black or Hispanic student with the same percentage gets an A?

These and many other reasons explain why the only acceptable practice in the classroom is the equal treatment of all students as individuals, without regard to race, sex, ethnicity or religion. And yet the hypothetical classroom-based discrimination is exactly the type of admission-based discrimination that prevails at some public universities in Michigan. And it is the obvious objections to academic favoritism in the classroom that explain why racial favoritism in college admissions is being legally challenged.

Students are already treated as individuals without regard to race by university professors once they enter college. Treating all students as individuals when they first apply to college will ultimately move us further along toward the ideal of a colorblind society than maintaining the current admissions practices of double standards, special preferences and racial discrimination.

MP: Never did I think that the hypothetical example of race-based grading used in my op-ed to illustrate why race-based admissions are equally objectionable and offensive would ever be seriously considered. But I guess I underestimated the extent to which racial profiling, affirmative discrimination, and diversity remain so deeply embedded and entrenched in the liberal minds of college administrators and professors.

Exhibit A: In a major departure from race-neutral grading that has been a central part of higher education in America for hundreds of years, it looks like the University of Wisconsin-Madison is now actually calling on its professors to engage in racial profiling and affirmative discrimination when they distribute grades in their classrooms.

W. Lee Hansen, University of Wisconsin-Madison economics professor emeritus, explains in a recent op-ed (“Madness in Madison“) what is happening at his institution:

Many American colleges and universities are in the thrall of “diversity,” but none more so than my institution, the University of Wisconsin. This spring, the university adopted a new plan that, according to Board of Regents policy, “places the mission of diversity at the center of institutional life so that it becomes a core organizing principle.” That is, promoting diversity appears to be more important than teaching students.

This Framework for Diversity and Inclusive Excellence sailed through our Faculty Senate without the least bit of attention, much less the “sifting and winnowing” on which it prides itself.  Although much of the language is a thicket of clichés, no one dared challenge it. Moreover, there was no probing of the ramifications of the plan. Apparently, “diversity” has become such a sacred cow that even tenured professors are afraid to question it in any way.


The new framework includes eight essential “working definitions,” among them the already-discussed diversity, as well as others: “compositional diversity,” “critical mass,” “inclusion,” “equity mindedness,” “deficit-mindedness,” “representational equity,” and “excellence.” Let us take a closer look at one of these working definitions included, namely “representational equity.”

It calls for “proportional participation of historically underrepresented racial-ethnic groups at all levels of an institution, including high status special programs, high-demand majors, and in the distribution of grades.”

Especially shocking is the language about “equity” in the distribution of grades. Professors, instead of just awarding the grade that each student earns, would apparently have to adjust them so that academically weaker, “historically underrepresented racial/ethnic” students perform at the same level and receive the same grades as academically stronger students.

At the very least, this means even greater expenditures on special tutoring for weaker targeted minority students. It is also likely to trigger a new outbreak of grade inflation, as professors find out that they can avoid trouble over “inequitable” grade distributions by giving every student a high grade. Is there any reason to believe that the UW system’s Inclusive Excellence plan implemented at UW-Madison is going to improve the education of its students? I can see no reason to think so. Actually, the contrary seems more likely.

The University of Wisconsin adopted its first diversity plan back in 1966 and every few years it launches a much-touted new one. During my 30-year teaching career at Madison, followed by more than a decade of retirement, I have seen not the slightest bit of evidence that the fixation on “diversity” has made the campus better in any respect.

Update: Patrick Sims, Chief Diversity Officer and interim vice provost for Diversity and Climate at UW-Madison issued a statement a few days ago disputing Professor Hansen’s article. In that statement Sims said that UW-Madison’s diversity plan “absolutely does not extend to how instructors should or could grade students.” Further, Sims called Professor Hansen’s column “a gross misrepresentation of our current efforts.”

HT: Morgan Frank

Carpe Diem

Monday afternoon linkage

1. Video of the Day. Do girls fall behind in science and engineering because society tells them they should be pretty, rather than, “pretty brilliant?” That’s the message of a new Verizon ad campaign. But in the video above, Christina Sommers, the Factual Feminist, shows that many inconvenient facts in the Verizon ad were held back to construct the misleading and false narrative about girls and women in STEM. For example, the ad failed to acknowledge that women earn 59% of bachelor’s degrees in biology, 48% of chemistry degrees and 44% of degrees in mathematics.

satratio2. Chart of the Day above illustrates graphically one of the reasons that women are under-represented in the more mathematically intensive STEM fields like engineering and computer science. In 2013, boys out-performed girls for perfect scores of 800 on the math SAT test by a male-female ratio of 1.88 to 1 (188 boys for every 100 girls), and for a near-perfect score of 790 by a ratio of exactly 2 to 1.

3. “Smart Apps vs. Obamacare” by Greg Beato in Reason:

Health care is on the verge of becoming far more individualized, far more contextualized and collaborative, and most of all, far more ubiquitous. And as this happens, the Affordable Care Act will start to look more and more anachronistic, a 20th century solution imposing itself onto a rapidly shifting set of 21st century conditions.

Indeed, imagine if, in the late 1990s, the federal government decided to ensure our right to affordable music by making every American purchase a monthly subscription to the Columbia House Music Club or Tower Records. That would have been great for the Columbia House Music Club, Tower Records, and, say, Sisqo, but would it have been great, in the long run, for the American people?

4. Markets in Everything. uberFamily just expanded to D.C. and Philadelphia, and offers customers the option of ordering a vehicle that comes with a car seat for children. (Source: Washington Post)

5. Meanwhile, as Uber does its best to please and serve consumers, the Denver police department is doing its best to please and serve the local taxi cartel by harassing Uber drivers near the airport. See the article “My Uber got pulled over by the Denver police — and then things got really weird.”

billboard6. Billboard of the Day above.

7. Exhibit A: In San Diego, a local Domino’s becomes the first store in the U.S. to go all-digital with online ordering only. The San Diego City Council just voted to raise the city’s minimum wage from $9 currently to $11.50 an hour by 2017 in several steps. (HT: Mike Robertson)

gummit8. Poster of the Day above. (HT: Pete Boetke via Don Boudreaux)

9. Who-d a-Thunk It? Politicians are hypocrites?

Massachusetts Sen. Elizabeth Warren—a leading progressive populist, possible Democratic presidential candidate, self-proclaimed champion of the poor, and enemy of greedy corporations — supports the Export-Import Bank. That’s right: The woman best known for demonizing big businesses nevertheless wants to maintain an outlandishly generous subsidy package for them.

technology10. Bonus Chart of the Day above (click to enlarge) from Derek Thompson’s article in The Atlantic from a few years ago titled “The 100-Year March of Technology in 1 Graph.” It shows the “adoption rate” of new technologies and is pretty fascinating. For example, it took almost 100 years from the introduction of the automobile until 90% of US households owned a car. In contrast, more recently introduced new consumer products like the color TV, microwave, cell phones, computers, and air conditioning were more quickly adopted by a majority of US households, usually within a decade, and by 90% of households within several decades in most cases. (HT: Hitssquad)

Carpe Diem

Bonus chart of the day: Expected inflation from the bond market using the 10-year Treasury-TIPS spread = 2.23%

spreadThe monthly 10-year Breakeven Inflation Rate over the last ten years is displayed above and represents a market-based measure of expected inflation derived from the spread between 10-Year Treasury Constant Maturity Securities and 10-Year Treasury Inflation-Indexed Constant Maturity Securities as calculated and reported by the St. Louis Federal Reserve. The latest value from the Treasury spread in June implies that bond market participants expect inflation to average 2.23% annually over the next 10 years. In other words, the current bond market-determined measure of expected inflation, based on thousands of bond market participants who are putting millions of dollars at stake, suggests that inflation will remain low and stable over the next ten years at less than 2.50%. More market-based evidence that there are currently no inflationary pressures building in the US economy, even over a ten-year horizon.

See Jimmy P’s related post about inflation (“Why Amity Shlaes is Dead Wrong About Inflation”) here and my recent post (“More on Why Amity Shlaes is Dead Wrong About Inflation”) here.

Update: Here’s a related chart below of the “Expected Inflation Yield Curve” from 2015 to 2044, based on the Cleveland Fed’s estimates of inflation expectations for one-year periods out to a time horizon of 30 years. According to the Cleveland Fed:

The Cleveland Fed’s estimate of inflation expectations is based on a model that combines information from a number of sources to address the shortcomings of other, commonly used measures, such as the “break-even” rate derived from Treasury inflation protected securities (TIPS) or survey-based estimates.

The Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.83% (see chart below). In other words, the public currently expects the inflation rate to be less than 2 on average over the next decade.

clevelandMore empirical evidence that future inflation, out to a time horizon of 30 years, is expected to remain low and stable in a range between 1.5% and 2.25%.

Carpe Diem, Economics, Energy and the Environment

Chart of the day: The Great American Energy Boom

gasoilThe chart above helps to illustrate the significance of America’s shale oil and gas boom by showing the combined domestic output of US oil and gas (in quadrillion BTUs, EIA data here). After production of conventional oil and gas peaked around 1970 at almost 45 quadrillion BTUs, there was a gradual, steady decline that continued until about 2005, when combined production had dropped to a 43-year low of 31.85 quadrillion BTUs, the lowest level since 1962. If that trend had continued, the US would now be producing only about 30 quadrillion BTUs of oil and gas (or less), which would have put us back to the production level of the late 1950s.

But then on the way to an era of increasing energy scarcity, a fortuitous series of technological drilling and extraction technologies emerged, thanks to the efforts of a dedicated group of American “petropreneurs”, and those technologies pumped life back into the country’s oil and gas production. By tapping into previously inaccessible reserves of tight oil and gas trapped in shale rock formations miles below the Earth’s surface, US drillers increased domestic production of oil and gas by 40% between 2005 and 2013, bringing America’s output up to the highest level (44.11 quadrillion BTUs) last year since 1973, and just shy of the all-time record of 44.85 quadrillion BTUs in 1971. Last year’s output was also 17.7 quadrillion BTUs above the estimated output level that would have prevailed if the declining trend in conventional oil and gas resources through 2005 had continued. Based on the current pace of production increases, I estimate that combined oil and gas production in the US will reach 47.7 quadrillion BTUs this year and set a new all-time record that will be three quadrillion BTUs (and more than 6%) above the previous 1971 record.

MP: As I have said before, the Great American Energy Boom that has allowed us to access oceans of shale oil and gas is at the forefront of America’s economic recovery and provides the best reason to be optimistic about our country’s economic, energy, and geopolitical future. The chart above helps to put that energy-based economic optimism into perspective graphically.

Carpe oleum.    

Carpe Diem

Quotation of the day on the great harm done by the ‘professional do-gooders’….

…. is from Henry Grady Weaver’s 1947 book The Mainspring of Human Progress (in reference to material that originally appeared in Isabel Patterson’s book The God of the Machine):

Most of the major ills of the world have been caused by well-meaning people who ignored the principle of individual freedom, except as applied to themselves, and who were obsessed with fanatical zeal to improve the lot of mankind-in-the-mass through some pet formula of their own. The harm done by ordinary criminals, murderers, gangsters, and thieves is negligible in comparison with the agony inflicted upon human beings by the professional do-gooders, who attempt to set themselves up as gods on earth and who would ruthlessly force their views on all others with the abiding assurance that the end justifies the means.

Related: In his 1996 book The Vision of the Anointed Thomas Sowell explores the great social and economic harm done by professional do-gooders, or by the elite, liberal intelligentsia that he refers to as “the anointed”:

Sowell presents a devastating critique of the mind-set behind the failed social policies of the past thirty years. Sowell sees what has happened during that time not as a series of isolated mistakes but as a logical consequence of a tainted vision whose defects have led to crises in education, crime, and family dynamics, and to other social pathologies. In this book, he describes how elites—the anointed—have replaced facts and rational thinking with rhetorical assertions, thereby altering the course of our social policy.

HT: Dennis Gartman in today’s The Gartman Letter (for the first quote)

Carpe Diem

Sunday afternoon linkage/chart-fest, all automotive edition

autoexports1. US auto exports. The US exported more than one million motor vehicles in 2012 (1,030,500) for the first time ever (see chart). Last year, auto exports rose by 13% to a new record high of 1,165,300 vehicles. During the first four months of this year at 404,700 vehicles, auto exports are 8.2% above the same period last year (374,200), and will likely set another annual record in 2014 of more than 1.2 million units. In 2009, the US exported only 455,700 vehicles, so the rebound by 2012 to more than one million vehicles is pretty impressive.

2. Which automaker in the US exports the most cars to markets outside North America? Hint: It’s not GM, Ford, Chrysler and it’s not Toyota or Honda. It’s BMW, which exports its US-made cars and SUVs to more than 140 countries from its single US plant in Spartanburg, South Carolina. That’s according to a recent profile by Bloomberg of BMW and its Spartanburg plant’s 20th anniversary. Bloomberg also reports that BMW exports more vehicles from Spartanburg to markets outside North America than all of the automotive facilities combined in the entire state of Michigan. Here are some more interesting facts from the Bloomberg article:

  • BMW plans to increase capacity in Spartanburg by 50%, from 300,000 vehicles a year currently to 450,000 within a few years.
  • Pushed by spiraling energy costs and tightening labor rules in Germany, Munich-based BMW will have poured $7.3 billion into the site once the latest expansion is completed in two years.
  • Auto workers in the U.S. are about 47% cheaper to employ than their counterparts in Germany.
  • Almost all of BMW’s SUVs, including the new top-of-the-line X7, are made in Spartanburg, and 70% are exported to more than 140 countries from what was BMW’s first test of full-scale auto production outside Germany.

cars13. Motor Vehicle Assemblies. According to the Federal Reserve, motor vehicle assemblies in the US in May at 11.74 million units were the highest since April 2006, more than eight years ago, and almost three times higher than the recession-driven low of fewer than 4 million units in January 2009 (see chart above). June assemblies (11.65 million units) declined slightly from May, but were up by almost 4% on a year-over-year basis, and were up by almost 2.5% compared to June 2007 in the summer before the Great Recession.

carip4. Motor Vehicle and Parts Production. The Federal Reserve also reported last week that its index measure of total manufacturing activity related to the production of motor vehicles and parts increased to a new record high in June, and was above last year’s level in June by almost 7% (see chart above).

truckshare5. Truck Market Share. The chart above shows the increasing trend over time going back to 1955 of truck sales as a share of total auto sales according to data from Wards Auto. In 1955, fewer than one out of every eight new vehicles sold was a truck (11.96%), but by 1978 the market share of trucks went above 25% for the first time, by 1989 more than one out of every three new vehicles was a truck, and in 1999 the market share of trucks went above 50% for the first time. The peak market share for trucks was reached in 2004 at 56.7%, before falling below 50% in 2008 and 2009, likely due to the effects of the recession. Since the recovery started, truck market share has been back above 50% and was 52.2% last year.

big3share6. Big 3 Market Share. The chart above also features data from Wards Auto and displays the annual US market share of the Big Three (GM, Ford, and Chrysler), which peaked at 90.6% in 1965, fell below 75% for the first time in 1980, below two-thirds market share for the first time in 2000 and below 50% for the first time in 2008. Last year, the Big 3 market share was 44.6%.

carindex7. American-Made Index (AMI). The graphic above displays the results of the 2014 American-Made Index from, showing that Japanese-based automakers Toyota and Honda captured 7 of the top 10 spots for the most “American-made cars.” In the three previous years’ rankings (2011, 2012 and 2013), Honda and Toyota had 5 of the top 10 spots and shared the Top Ten most American-made vehicles equally with the Big Three. Some interesting commentary from

Only these 10 cars [above in the list] were eligible for the AMI, the fewest in the study’s nine-year history. For the 2014 model year, just 13 models assembled in the U.S. have domestic-parts content of 75% or higher, according to the National Highway Traffic Safety Administration, but three of those, including the Avenger, were disqualified because they’re being discontinued. In the 2013 model year, 14 cars met that threshold. Twenty cars met the threshold in the 2012 model year, and 30 cars met it a year before that.

More evidence (along with items #1, #2 and #7 above) that the automotive industry has become increasingly globalized to the point that the distinction between an “American” and “foreign” car has become more and more meaningless, as has the importance of to what degree a car is “American-made.” Hopefully, most consumers are now buying cars based on value, price, service and quality, and aren’t discriminating based on a car’s “national origin” – which doesn’t mean much any more.

carscpi8. New Car Prices vs Overall CPI. Finally, the last chart above shows the CPI for All Items (blue line) and the CPI for New Vehicles (brown line), annually from 1982 to 2013. As can be seen, the overall price level has risen more than 141% compared to less than a 50% increase in the CPI for new vehicles. For the last 20 years starting around 1994, the CPI measurement for the cost of new vehicles (adjusted for quality, options, safety, fuel economy, durability, carrying capacity, comfort and reliability) has remained flat during a period when overall consumer prices have increased 57.2% (and average hourly wages by 82%).

Bottom Line: As I’ve commented before, I don’t think there has ever been a better time to own or buy a car than today, considering all of the factors that are important to consumers: price, value, safety, quality, durability, comfort, options, selection, warranty coverage, etc. And probably the main reason that car buyers have it so good today: international competition and the increasing globalization of the marketplace for new vehicles. I’ve also said before that “competition breeds competence,” and I don’t think there’s any doubt that intense global competition has bred much, much greater competence into America’s auto industry. We’re all much better off today as consumers compared to past periods when the Big 3 enjoyed a 90% market share, and the UAW enjoyed an ever bigger share — 100% — of the US autoworker market!

Carpe Diem

Global income inequality has been falling for the last 20 years, moving the world in a fundamentally better direction

povertyAn excerpt from Tyler Cowen’s excellent op-ed in today’s NY Times Income “Inequality Is Not Rising Globally. It’s Falling.“:

Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It’s a fact that hasn’t been noted often enough.

The finding comes from a recent investigation by Christoph Lakner and Branko Milanovic. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history (see chart above showing declining world poverty rates, especially in East Asia).

Of course, no one should use this observation as an excuse to stop helping the less fortunate. But it can help us see that higher income inequality is not always the most relevant problem, even for strict egalitarians. Policies on immigration and free trade, for example, sometimes increase inequality within a nation, yet can make the world a better place and often decrease inequality on the planet as a whole.

International trade has drastically reduced poverty within developing nations, as evidenced by the export-led growth of China and other countries. Yet contrary to what many economists had promised, there is now good evidence that the rise of Chinese exports has held down the wages of some parts of the American middle class. At the same time, Chinese economic growth has probably raised incomes of the top 1 percent in the United States, through exports that have increased the value of companies whose shares are often held by wealthy Americans. So while Chinese growth has added to income inequality in the United States, it has also increased prosperity and income equality globally.

From a narrowly nationalist point of view, these developments may not be auspicious for the United States. But that narrow viewpoint is the main problem. We have evolved a political debate where essentially nationalistic concerns have been hiding behind the gentler cloak of egalitarianism. To clear up this confusion, one recommendation would be to preface all discussions of inequality with a reminder that global inequality has been falling and that, in this regard, the world is headed in a fundamentally better direction.

The message from groups like Occupy Wall Street has been that inequality is up and that capitalism is failing us. A more correct and nuanced message is this: Although significant economic problems remain, we have been living in equalizing times for the world — a change that has been largely for the good. That may not make for convincing sloganeering, but it’s the truth.

Yes, we might consider some useful revisions to current debates on inequality. But globally minded egalitarians should be more optimistic about recent history, realizing that capitalism and economic growth are continuing their historical roles as the greatest and most effective equalizers the world has ever known.

Carpe Diem

Who’d a-thunk it? Socialism is demoralizing, socially corrosive, and promotes individual dishonesty and cheating?

Here’s the abstract of the research paper “The (True) Legacy of Two Really Existing Economic Systems“:

By running an experiment among Germans collecting their passports or ID cards in the citizen centers of Berlin, we find that individuals with an East German family background cheat significantly more on an abstract task than those with a West German family background. The longer individuals were exposed to socialism, the more likely they were to cheat on our task. While it was recently argued that markets decay morals (Falk and Szech, 2013), we provide evidence that other political and economic regimes such as socialism might have an even more detrimental effect on individuals’ behavior.

And here’s part of the conclusion:

If socialism indeed promotes individual dishonesty, the specific features of this socio-political system that lead to this outcome remain to be determined. The East German socialist regime differed from the West German capitalist regime in several important ways. First, the system did not reward work based to merit, and made it difficult to accumulate wealth or pass anything on to one’s family. This may have resulted in a lack of meaning leading to demoralization (Ariely et al., 2008), and perhaps less concern for upholding standards of honesty. Furthermore, while the government claimed to exist in service of the people, it failed to provide functional public systems or economic security. Observing this moral hypocrisy in government may have eroded the value citizens placed on honesty. Finally, and perhaps most straightforwardly, the political and economic system pressured people to work around official laws and cheat to game the system. Over time, individuals may come to normalize these types of behaviors. Given these distinct possible influences, further research will be needed to understand which aspects of socialism have the strongest or most lasting impacts on morality.

Here’s a link to an article in The Economist about the paper “Lying Commies: The more people are exposed to socialism, the worse they behave.”

Related: My 1995 article “Why Socialism Failed.”

Carpe Diem

Crony crapitalism, NFL edition……

Reason’s Nick Gillespie in a December 2013 article “Football: A Waste of Taxpayers’ Money” asks a very good question: Why are we subsidizing such a hugely profitable sport?

It’s just not right when governments shovel tax dollars at favored companies or special interests, even when those firms are called, say, the Minnesota Vikings or the Scarlet Knights of Rutgers University. The NFL’s Vikings are lousy at scoring touchdowns – they have the worst record in the NFC North – but they’ve proven remarkably adept in shaking down Minnesotans for free money. Next year they’ll be playing ball in a brand-spanking new $975 million complex in downtown Minneapolis, more than half of whose cost is being picked up by state and local taxpayers. Over the 30-year life of the project, the public share of costs will come to $678 million. The team will pay about $13 million a year to use the stadium, but since it gets virtually all revenue from parking, food, luxury boxes, naming rights, and more, it should be able to cover that tab.

Not that the Vikings were ever hard up for money: Forbes values the franchise at nearly $800 million and the team’s principal owner, Zygi Wilf, is worth a cool $310 million. When the Minnesota legislature signed off on its stadium deal for the Vikings, the state was facing a $1.1 billion budget deficit. Priorities, priorities. And the Vikings deal isn’t the exception, it’s the rule.