Free Markets – Page 34 – artdiamondblog.com

Gym Classes Promote Sports, Not Healthy Exercise

Here is more evidence that public school physical education classes should be turned over to private sector firms like "24 Hour Fitness."

Ms. Jackie Lund, who is quoted below, is the President of NASPE, which the article identifies as "an association of fitness educators and professionals. Note well that she as much as admits that fitness is not the purpose of gym classes.

Researchers report that in the typical high-school gym class students are active for an average of 16 minutes.

The report by Cornell University researchers also found that adding 200 minutes more of physical-education time a week had little effect. (See the report.)

"What’s actually going on in gym classes? Is it a joke?" asked John Cawley, lead author of the study and a professor of policy analysis and management at Cornell.

. . .

The rest of the extra gym time is likely spent being idle — most likely standing around while playing sports like softball or volleyball that don’t require constant movement, Mr. Cawley said.

. . .

. . . , Ms. Lund says merely counting how many minutes students are moving may not be a fair measure of a gym class. "It’s not supposed to be aerobics class. The activity level is going to vary depending on the sport they’re learning," she said.

For the full story, see:

"High-Schoolers Get Scant Exercise in Gym Class." Wall Street Journal (Weds., September 20, 2006): D4.

(Note: the online version of the article has the title: "Is High-School Gym Class An Exercise in Futility?")

(Note: ellipses are added.)

Life Is Better, But Could Be Better Still

November 9, 1952 NYT ad announcing the introduction of the snowblower. Source of image: online version of the NYT article cited below.

(p. C1) When the first snow falls on the North Shore of Chicago this winter, Robert Gordon will take his Toro snow blower out of the garage and think about how lucky he is not to be using a shovel. Mr. Gordon is 66 years old and evidently quite healthy, but his doctor has told him that he should never clear his driveway with his own hands. “People can die from shoveling snow,” Mr. Gordon said. “I bet a lot of lives have been saved by snow blowers.”

If so, most of them have been saved in the last few decades. A Canadian teenager named Arthur Sicard came up with the idea for the snow blower in the late 1800’s, while watching the blades on a piece of farm equipment, but he didn’t sell any until 1927. For the next 30 years or so, snow blowers were hulking machines typically bought by cities and schools. Only recently have they become a suburban staple.

Yet the benefits of the snow blower, namely more free time and less health risk, are largely missing from the government’s attempts to determine Americans’ economic well-being. The same goes for dozens of other inventions, be they air-conditioners, cellphones or medical devices. The reasons are a little technical — they involve the measurement of inflation — but they’re important to understand, because the implications are so large.

. . .

(p. C10) In the early 1950’s, Toro began selling mass-market snow blowers, which weighed up to 500 pounds and cost at least $150. As far as the Bureau of the Labor Statistics was concerned, however, snow blowers did not exist until 1978. That was the year when the machines began to be counted in the Consumer Price Index, the source of the official inflation rate. By then, the cheapest model sold for about $100.

In practical terms, this was an enormous price decline compared with the 1950’s, because incomes had risen enormously over this period. Yet the price index completely missed it and, by doing so, overstated inflation. It counted the rising cost of cars and groceries but not the falling cost of snow blowers.

. . .

Mr. Gordon, besides being a fan of snow blowers, also happens to be one of the country’s leading macroeconomists. A decade ago he served on a government-appointed group known as the Boskin Commission. It argued, as Mr. Gordon still does, that the government exaggerated inflation by more than one percentage point every year.

. . .

. . . Mr. Gordon’s adjustments show that men actually got a 27 percent raise in this period and women 65 percent. The gains are not as big as those of the 1950’s and 60’s, but they do sound far more realistic than the official numbers. Think about it: we live longer than people did in the 1970’s, we’re healthier while alive, we graduate from college in much greater numbers, we’re surrounded by new gadgets and we live in bigger houses. Is it really plausible, as some Democrats claim, that the middle class has made only marginal progress?

For the full commentary, see:

DAVID LEONHARDT. "Economix; Life Is Better; It Isn’t Better. Which Is It?" The New York Times (Weds., September 20, 2006): C1 & C10.

(Note: ellipsis added.)

Source of graphic: online version of the NYT article cited above.

Higher Oil Prices Provide Incentive to Seek Deeper Oil

Source of map: online version of the WSJ article cited below.

(p. C1) The successful production of oil from the five-mile-deep Jack well in the Gulf of Mexico is likely to spur more deep-water exploration around the world — and that prospect is helping calm overheated crude-oil markets anxious about future supplies.

. . .

The successful Jack test underscores what a group of economists and oil-industry executives have been arguing for a while: High prices will encourage energy companies to find and pump oil in deep, dark places around the world that otherwise would have been uneconomical.

For the full story, see:

RUSSELL GOLD. "More Companies May Dig Deeper In Search for Oil Gulf of Mexico Discovery Fuels Prospects of Finding New Supplies; Lack of Resources Could Slow Push." Wall Street Journal (Tues., September 19, 2006): C1.

“Free to Choose” Turns Estonia into “Boomtown”

Source of book image: http://search.barnesandnoble.com/booksearch/imageviewer.asp?ean=9780156334600

If, like Mr. Laar, you are only going to read one book in economics, Milton Friedman’s Free to Choose, is not too bad a choice:

(p. A23) Philippe Benoit du Rey is not one of those gloomy Frenchmen who frets about the threat to Gallic civilization from McDonald’s and Microsoft. He thinks international competition is good for his countrymen. He’s confident France will flourish in a global economy — eventually.

But for now, he has left the Loire Valley for Tallinn, the capital of Estonia and the economic model for New Europe. It’s a boomtown with a beautifully preserved medieval quarter along with new skyscrapers, gleaming malls and sprawling housing developments: Prague meets Houston, except that Houston’s economy is cool by comparison.

Economists call Estonia the Baltic tiger, the sequel to the Celtic tiger as Europe’s success story, and its policies are more radical than Ireland’s. On this year’s State of World Liberty Index, a ranking of countries by their economic and political freedom, Estonia is in first place, just ahead of Ireland and seven places ahead of the U.S. (North Korea comes in last at 159th.)

It transformed itself from an isolated, impoverished part of the Soviet Union thanks to a former prime minister, Mart Laar, a history teacher who took office not long after Estonia was liberated. He was 32 years old and had read just one book on economics: ”Free to Choose,” by Milton Friedman, which he liked especially because he knew Friedman was despised by the Soviets.

Laar was politically naïve enough to put the theories into practice. Instead of worrying about winning trade wars, he unilaterally disarmed by abolishing almost all tariffs. He welcomed foreign investors and privatized most government functions (with the help of a privatization czar who had formerly been the manager of the Swedish pop group Abba). He drastically cut taxes on businesses and individuals, instituting a simple flat income tax of 26 percent.

For the full commentary, see:

JOHN TIERNEY. "New Europe’s Boomtown." The New York Times (Tues., September 5, 2006): A23.

Wal-Mart Really Does Benefit Consumers by Lowering Prices

Scholarly studies show Wal-Mart’s price reductions to be sizable. Economist Emek Basker of the University of Missouri found long-term reductions of 7 to 13 percent on items such as toothpaste, shampoo and detergent. Other companies are forced to reduce their prices. On food, Wal-Mart produces consumer savings that average 20 percent, estimate Jerry Hausman of the Massachusetts Institute of Technology and Ephraim Leibtag of the Agriculture Department.

All told, these cuts have significantly raised living standards. How much is unclear. A study by the economic consulting firm Global Insight found that from 1985 to 2004, Wal-Mart’s expansion lowered the consumer price index by a cumulative 3.1 percent from what it would have been. That produced savings of $263 billion in 2004, equal to $2,329 for each U.S. household. Because Wal-Mart financed this study, its results have been criticized as too high. But even if price savings are only half as much ($132 billion and $1,165 per household), they’d dwarf the benefits of all but the biggest government programs.

For the full commentary, see:

Robert J. Samuelson. "Wal-Mart as Red Herring." The Washington Post (Wednesday, August 30, 2006): A19.

Case for Wind Power is “Absolute Baloney”

I once heard a top MidAmerican Energy executive express considerable, articulate, scepticism about the economics of wind power. (Wind power is unreliable, so that electric companies still must stand ready to provide the electricity by other means.) If wind power made economic sense, you wouldn’t need subsidies to promote it—profit maximizing power companies would pursue it on their own. MidAmerican now invests in wind power, not because it has become an efficient energy source, but because wasteful government subsidies, make wind power profitable for MidAmerican.

Glen Schleede, a retired power company executive, has nothing to lose by speaking the truth:

(p. 1B) The turbines do bother some folks, including Glenn R. Schleede, a retired power company executive from Round Hill, Va., who said the wind power industry puts out "absolute baloney" to justify its existence.

"I’m tired of subsidizing Warren Buffett companies," Schleede said, referring to federal tax subsidies that go to MidAmerican Energy Holdings Co., a division of Omaha-based Berkshire Hathaway Inc. that is headed by Buffett. Those are MidAmerican’s turbines in the fields around Schaller.

Schleede’s criticisms, mostly in academic-style papers he writes, concentrate on the economics of wind power and what he called "false claims about how this is good for an energy system."

"In fact, these things, because they’re intermittent and volatile and unpredictable, they don’t really add a lot of capacity to an electric grid," he said. "When you see these things advertised, they talk about how many megawatts of capacity, the number of homes served and all that garbage.

"I would maintain that they don’t serve any homes."

For the full story, see:

Jordon, Steve. "Harvesting Wind;Farmers like payout, but critics of wind power point to costs." Omaha World-Herald (Sunday September 3, 2006): 1D-2D.

Salt Lake Mayor Violates “Ridiculous” Zoning Law

Salt Lake City Mayor Rocky Anderson, whose "xeriscape" yard violates a Salt Lake City zoning ordinance. Source of photo: scan from a paper copy of the NYT article cited below.

SALT LAKE CITY, Aug. 21 — Covered as it is by red bark and dotted with ornamental grasses and purple sage shrubs, the front yard of Salt Lake City’s mayor stands out in contrast against the other, uniformly green lawns on the tree-lined street.

Not only is Mayor Rocky Anderson’s yard distinctive, though. It is also illegal, one of hundreds of drought-friendly yards and gardens here that are in violation of zoning ordinances.

In light of a five-year drought that meteorologists say ended last year, Mr. Anderson is one of a growing number of homeowners in desert cities across the West who have traded in their manicured lawns and colorful flower beds for ground cover and gardens that require little water.

In Salt Lake City, though, all front yards must be completely covered with flat green grass, which needs to be watered often to keep it from turning brown and strawlike. Although the zoning ordinance is rarely enforced, some Salt Lake City leaders — including the mayor — want to bring the letter of law in line with current landscaping trends.

“I think the zoning ordinance is ridiculous,’’ Mr. Anderson said. “It clearly needs to be changed.”

For the full story, see:

MELISSA SANFORD. "Salt Lake City Moving Toward Less Thirsty Lawns." The New York Times (Fri., August 25, 2006): A12.

Feds Slowed DSL by Forcing “Open Access”

Here is the background. From the earliest days of broadband service, controversy raged over whether the physical networks used to transport data should be allowed to control content. Thus open access rules, which forced telcos to allow broadband company rivals to use their networks at regulated rates. Cable TV systems, meanwhile, also provided Internet connections via cable modems, but without any obligation to share their facilities. If an independent Internet Service Provider (ISP) like Covad or Earthlink wanted to connect customers via Comcast’s lines, they could negotiate a deal but had no legal club — as they did under open access.

There was a vigorous campaign to mandate open access on cable similar to DSL; regulators under both Presidents Clinton and Bush refused. The inevitable litigation ensued; but the Supreme Court set the matter to rest in FCC v. Brand X (2005). Its 6-3 decision upheld the FCC’s classification of cable broadband as an "information service," placing it beyond the scope of common carrier regulation.

For a number of years, therefore, DSL service was subject to open access while cable was not. Unsurprisingly, DSL providers were blown away early in the race for market share. By the end of 2002, cable-modem subscribers numbered 11 million and DSL just 6.1 million, according to Leichtman Research.

Then DSL began its deregulatory trek. The first critical reform was a surprise FCC decision in February 2003 to end "line sharing" rules. This dramatically raised the prices which ISPs would have to pay to use phone company facilities to provide retail DSL service, dealing a severe blow to companies like Covad. Echoing conventional wisdom, the New York Times news story forecast a consumer defeat: "High-Speed Service May Cost More."

It hasn’t. Average DSL rates, according to Kagan Research, dropped from $39.51 per month in 2002 to $34.72 in 2003. Telcos also expanded the scope, capacity and quality of advanced networks, even improving its endemic customer relations problems.

Consumers responded. DSL, holding just 35% market share in 2002, pulled even with cable among new subscribers in 2004. Leichtman Research reports that "DSL providers have added more broadband subscribers than cable providers in each of the last six quarters," and that overall, "the first quarter of 2006 was the best ever for both DSL and cable broadband providers." Unleashed from open access, DSL is attracting customers like never before — and the overall growth of broadband subscribers (DSL and cable) is notably higher.

For the full commentary, see:

THOMAS W. HAZLETT. "RULE OF LAW; Broadbandits." Wall Street Journal (Sat., August 12, 2006): A9.

Needed to Save New Orleans: Less Local Government Corruption and More Local Capitalism

Source of graphic: online version of the WSJ editorial cited below.

New Orleans’ plight is not the result of federal underspending. Uncle Sam has spent some five times more on Katrina relief than any other natural disaster in the past 50 years. Both parties in Congress and the White House opted for the status quo by relying on federal bureaucracies to oversee the rebuilding effort. If Uncle Sam were deliberately trying to waste these funds, it is hard to imagine a better way than to funnel the money through the Department of Housing and Urban Development, the Small Business Administration and the Federal Emergency Management Agency. Both HUD and the SBA have been on the chopping block back to the early Reagan years.

The post-Katrina spend-fest in Louisiana will be remembered as one of the greatest taxpayer wastes in U.S. history. First came the FEMA $2,000 debit-cards fiasco intended to pay for necessities that were used for things like flat-panel TVs and tattoos. Then came the purchase of thousands of mobile homes that cost as much as $400,000 per family housed; the $200 million for renting the Carnival Cruise Ship millions more in payments that went for season football tickets, luxury vacation resorts, even divorce lawyers. Federal flood insurance policies surely will encourage many to rebuild in the same flood plains and at the same height as before.

. . .

After the hurricane, newspapers around the world showed photos of New Orleans under headlines that shouted: "America’s shame." In truth, New Orleans was America’s shame long before Katrina. In large part the residents of the Big Easy were victims of the predatory behavior of their own politicians. Louisiana already ranked among the bottom five of all the states in crime, poverty, health care and school performance; the murder rate in New Orleans today is 10 times the national average.

For all the finger-pointing this week, Congress hasn’t spent much more than a dime to clear away the debris of corruption, patronage, welfare dependency, high taxes and racial division of decimated neighborhoods. What is still lacking in the life of New Orleans is the vital architecture of local capitalism.

For the full editorial, see:

"The Tragedy of New Orleans." The Wall Street Journal (Tues., August 29, 2006): A14.

Unintended Consequences of Sending Food: More on Why Africa is Poor

Millet in bowl. Source of photo: online version of the NYT article cited below.

NIAMEY, Niger, Sept. 21 – The images coming out of this impoverished, West African nation have been unrelentingly grim: hungry children with stick-thin arms and swollen bellies, mothers carrying babies hundreds of miles to look for food after a poor harvest and high prices put local staples out of reach. A few months ago, those images prompted a torrent of food aid from Western donors.

But now, after a season of good rains, Niger’s farmers are producing a bumper crop of millet, the national staple. This should be a cause for rejoicing, yet in one of the twists that mark life in the world’s poorest countries, the aid that was intended to save lives could ruin the harvest for many of Niger’s farmers by driving down prices.

The newly harvested millet and the donated food will reach market stalls at the same time, and with prices depressed, poor farming families may be forced to sell crops normally set aside for their own use and use the money to pay off debts. The effect would be a new cycle of hunger and poverty.

For the full story, see:

Burley, Natasha C. "In Place Where the Hungry Are Fed, Farmers May Starve." The New York Times (Thurs., September 22, 2005): A3.

Source of map: online version of the NYT article cited above.