How terrible Arizona’s immigration law really is

There is a lot that needs to be said about how wrong the new immigration law is in Arizona, but nothing like these demographics bring to light how even worse it will really be. From the Real Time Economics:

Hispanics make up roughly a third of Arizona’s 6.6 million people, according to the Census Bureau.

But while half of the state’s older Hispanics are immigrants that came to the U.S. either legally or illegally, about 90% of those under 18 were born in the U.S., according to analysis of Census data by Kenneth Johnson, senior demographer at the University of New Hampshire’s Carsey Institute.

It seems that the only thing that families value in Arizona is to rip them apart.

If you missed the webcast…

…you can find the recording here, http://webcasts.everest.edu, and click on the Second Annual Washington State Workplace Confidence Survey link.  It went fairly well.  It was a first for me, so please be mindful. It definitely is a great experience and should help for the future.  Now, about those ums and uhs…

Come listen to a live webcast I am in, April 28th 1:00 PM EST (10:00 AM PDT)

WHAT:  2^nd Annual Washington State Workplace Confidence Survey Results/ Panel Discussion

WHO:

Professor Paul Sommers

Seattle University – Albers School of Business and Economics

Steven Frable

Economist for IHS Global Insight

David Nelson

Founder and President of David Nelson Associates

Wendy Cullen

Vice President Employer Development for Corinthian Colleges, Inc.

WHEN:

Survey results issued – Wednesday, April 28 at 8 a.m. PDT, via wire service, email

Live panel discussion – Wednesday, April 28 at 10 a.m. PDT

WHERE: To listen live, please go to http://webcasts.everest.edu and click on the Second Annual Washington State Workplace Confidence Survey link.

World Bank Opens New Public Data Initiative

At data.worldbank.org, access to all the world bank’s data is now available for free.  Included are easy to use ways for accessing and presenting the data, as well as giving you tools to analyze the data for every country, anytime.  For those who are proponents for open data sets, this is a big moment.  See the youtube video for an overview of the program:

The Capacity for Fuel Economy Already Exists

According to James Hamilton’s post in Econbrowser, research done by U.C. Davis economics professor Christopher Knittel found that given today’s production techniques for cars, fuel efficiency can already be gained at an amount of 50%.   Most of this was a consequence of a rising correlation between a cars horsepower, torque and weight, all of which continued to increase while fuel economy remained around the same levels.  The fact that the capacity already exists to make fuel efficient cars puts the burden on car companies design teams and the consumers who would demand them.  Europe already forces certain fuel economy standards, while the U.S. does not.  The rise of eco-conscious consumers should help a little, but a jump in gas prices past a consistent $4.00 a gallon may help consumers start making decisions towards more fuel efficient cars when they see money begin drying up in their wallets.

Latest IMF World Economic Growth Predictions

The End of Cheap Coal

One of the reasons why the push for Cap and Trade was a good idea was it would not only internalize the cost of carbon emissions, but it would also raise the price of energy created from coal.   With higher prices for kilowatt per hour from coal energy, cleaner energy sources would become competitive.  Currently, cleaner energy sources can barely compete with coal, with exceptions of course.  But if legislation wasn’t going to push up the price of burning coal, then in the long-term, rising international demand would.  That time is now.

In 2009, China has ceased to export coal and has now began to import it.  According to the financial times, in 1993 the same happened to oil.  China’s oil imports exceeded what was being imported and the consequence was a climb in the average oil price, all too well known thanks to oil spiking at $150 a barrel in 2008.  China had been using more oil than it could produce in order to fuel its large amount of economic growth, and oil wasn’t the only commodity.

China isn’t the only player.  India as well as the emerging markets have offered its heavy share of the demand, tipping trade balances toward imports and helping to drive up commodity prices for oil and building materials.   The same is expected for coal.

This is good news for America, which contains the largest coal reserves in the world.  This is also good news for the coal industry, as it will be able to profit from an uptick in prices.

This is not so good for the coal power industry, especially in America.  While the coal industry will benefit in developing nations who have already increased the capacity to burn coal for energy and produce steel from coke, the developed world already faces pressures for pursuing greener technologies instead of burning coal.  And the coal power industry should be scared: the only thing keeping them from not succumbing to the powers of green energy is price, which is now soon to change.  With coal prices higher translating into higher per kilowatt hour energy costs that begin to be on par with greener technologies, the coal power industry will have a tough fight.

Green technologies already have the leg up of being green and renewable.  Obama’s recent moves to push for nuclear energy, which would already be competitive given Obama’s plan, and the ARRA’s subsidizing of renewable resources like wind and solar significantly put the government against the coal power industry.

The government’s backing of renewable energy certainly distorts what the market wants when providing energy, but a needed distortion nonetheless.  The only hope for the coal industry is to level the playing field by either removing green energy subsidies (not likely) or becoming green it self.  The industry’s only hope is going for clean coal. And now, it doesn’t have the luxury of waiting anymore.

Before one says that clean coal isn’t viable, I disagree.  It is possible, given recent developments in innvoation.  I blogged recently about Thomas Friedman’s catch about clean coal:

If you combine CO2 with seawater, or any kind of briny water, you produce CaCO3, calcium carbonate. That is not only the stuff of corals. It is also the same white, pasty goop that appears on your shower head from hard (calcium-rich) water. At its demonstration plant near Santa Cruz, Calif., Calera has developed a process that takes CO2 emissions from a coal- or gas-fired power plant and sprays seawater into it and naturally converts most of the CO2 into calcium carbonate, which is then spray-dried into cement or shaped into little pellets that can be used as concrete aggregates for building walls or highways — instead of letting the CO2 emissions go into the atmosphere and produce climate change.

If this can scale, it would eliminate the need for expensive carbon-sequestration facilities planned to be built alongside coal-fired power plants — and it might actually make the heretofore specious notion of “clean coal” a possibility.

With coal prices expected to rise, you can bet this will scale. With clean coal on the horizon, subsidizing greener technologies won’t be needed anymore or vice versa, coal won’t be dirty anymore. Either way, whether a Cap and Trade bill , favorable legislation towards green technologies or the sheer power of the market was going to force it, switching towards less CO2 intensive energy was inevitable. Now, about those mountain tops…

Will cutting government salaries help the deficit?

A post from Free Exchange on Friday has come to the conclusion that if anything, it is politically impossible to cut the deficit.  It is hard because the programs that make up the largest part of the deficit are the least wanted to be cut.  In the post, Free Exchange did include the idea proposed by Larry Kudlow that maybe the best place to cut deficit spending is by cutting government salary.  This makes sense considering that a government salary is vastly higher than what one would make in the private realm.  Rather than dismiss this as a political impossibility, (it most likely is) let’s make a rough calculation for a fair salary cut. Using numbers from a post at Free Market Mojo, we find on average that the  salary difference between private and public is $29,262 for 2008.  In 2008, the amount of federal employees in the U.S. was 2.76 million. (Source: IHS Global Insight, BLS) If you were to cut federal wages (excluding benefits) down to what one would get on the private market, you would end up with $80.76 billion dollars. Including benefits? That number would jump to $165.8 billion dollars.  A substantial sum, but hardly a drop in a our trillion dollar bucket.

Even if some money could be saved, I don’t know if it could be justified. Higher incomes help pump more money into the economy. What would be a good idea however, is to freeze government wages, and let private  wages to catch up.  Cutting salary’s may not help the deficit that much, but freezing them can make sure it doesn’t get any worse. But this was just an exercise to see what slack is available. Expecting this to be a reality is naive.  How can you get someone to cut their own salary? For private industry that is easy.  For the government, what can you do?

The next growth area for the economy

The optimism is rushing in as the new cadre for the future of the American economy, most of which was given a lift thanks to the new employment numbers for March.  While many report on the green shoots that help point to the one, rosy conclusion there still remains the question of where our growth will come from. From Slate, an article on “Why the U.S. recovery will be bigger, faster, and stronger than economists and politicians expect” gives a clue as to what the next new growth area for the economy will be: infrastructural efficiency.

In the short term, the ruthless pursuit of efficiency translates into the uncomfortable—and unsustainable—dichotomy of rising profits and falling employment. But the focus on efficiency is creating new business opportunities for smart companies. At BigBelly Solar, a Needham, Mass.-based firm whose solar-powered trash compactors reduce the need for both labor and energy, sales doubled in both 2008 and 2009. “Cities and institutions like universities and park systems are eager to do more with less,” says CEO Jim Poss. Leasing 500 compacting units has allowed Philadelphia to cut weekly pickups from 17 to five and will save it $13 million over 10 years. BigBelly employs fewer than 50 people, but like many businesses in fast-growing markets it indirectly supports a much larger number of jobs. At Mack Molding, an Arlington, Vt., contract manufacturer, 35 workers are kept busy on two shifts producing compactors. “When you add the employees at the more than 50 component suppliers, this work is supporting another 180 jobs,” says Joan Magrath, vice president of sales and engineering at Mack Molding. BigBelly compactors, which are entirely made in the United States, have been exported to 25 countries. It’s a drop in the bucket. But thousands of start-ups and small businesses are trying to crack the markets developing at home and abroad.

The value added is obvious. More waste can be processed at a lesser cost.  In the case of Philadelphia, the $13 million dollar savings can now be allocated to provide more value regarding something else, providing more momentum for growth in either the public or private sector.  While traditional waste handlers may be out of a job, the article notes that much higher skilled, production jobs are created in order to produce the automated receptacles.

The short-coming of this article is that it doesn’t delve any deeper into the potential that efficiency systems like this can create for the economy.  This blog has detailed some incredible ideas at maximizing efficiency, either by finding value in waste or building economies of scale.  The author misses how important infrastructural efficiency will be for the economy, especially since a lot of this efficiency will result in energy savings, usually not propelled by cost, but towards providing a greener future.  The more value we can squeeze per unit of (insert labor or widget here), the higher productivity the U.S. will enjoy which will entail higher income per individual.

A supply-side giffen good?

The Oregonian reports that farmers face a choice to grow grass and wheat and they chose to grow more wheat.  The problem? Wheat prices have been falling and are currently at their lowest. Doesn’t that seem a bit odd? Some say it is only a phenomena found in the Willamette Valley.  Farmer’s say that they want to increase output in order to provide more cash flow. So, as wheat prices are falling, they are increasing their supply.  This is obviously backwards.  Supply curves are supposed to be upward sloping where if the price increases, producers will increase quantity.

This reminds me of that weird theory called Giffen goods that always got tacked on when learning about demand curves in economics class.  Giffen goods, although only observed on the demand side, experience an upward sloping demand curve (price goes up, quantity demanded goes up) which is contrary to the law of demand that says it is downward sloping (price goes up, quantity demanded goes down).

Using the same logic of the Giffen good with the farming example, you can say this is sort of a supply-side Giffen good.   Instead of an upward sloping supply curve, (price goes down, quantity supplied goes down) the farming example has a downward sloping supply curve (price goes down, quantity supplied goes up).   Some fancy econometrics would need to prove it but I think I can explain intuitively why the farmers are doing it.

1) They are constrained by their ability to produce. They can either produce wheat or grass, but nothing else, and not both.

2) They are constrained by their income and don’t have enough cash to invest in alternatives.

3) They haven’t reached the shutdown point where their variable costs exceed their fixed costs. Since they are price takers, they have no choice.

So given their choices, the only way to profit maximize is to produce wheat at a lower price since grass fetches for even lower.

I could be wrong about this, so please comment if I am mixing up my economics.  I am assuming that this is a long-run behavior.  The farmers are given enough time to make a decision regarding falling wheat prices. I am aware of the assumptions in the short-run.  So that maybe what the debate, at least in economics, would be about.  Nevertheless it is an interesting exercise in understanding perfectly competitive markets and how it influences producers behavior.