That Was Only 22 Years Ago?

Here are some stats from last week's USA Today. In 1985, 8% of people considered and AM/FM Radio or CD Player "essential" and that number is 95.8% in 2007. Wants, it seems, do turn into perceived "necessities" over time. Sure, you could really survive without that AC in your car, that luxury that only 15% considered a necessity in 1985.

Also, the former Communists in Russia have different tastes in cars than us, it seems. Prof. Mark Perry writes here in his Carpe Diem blog about some interesting car preferences of the Russians:

"On Tuesday in Togliatti, Russia, I toured the production facility of the Chevy Niva (pictured above), a joint venture between GM and Russia's AutoVAZ. The vehicles are one of the best-selling SUVs in Russia right now, and there is a 3-month waiting list to get the vehicles. This situation is somewhat unique to the Niva, most other vehicles in Russia are available immediately. The Nivas sell for about $16,000 and there are only two models and one option: with A/C, or without A/C. Also, there are NO radios available in either model, although the Nivas come radio-ready, with wiring and everything except the audio equipment. It seems that in the Russian market, consumers prefer to purchase their own radio/stereo equipment as an after-market option. It might also be the case that some customers prefer radio only, others prefer audio cassette tapes, and some others prefer CD players.

When in Moscow today, I asked the President of GM Russia why GM/AutoVAZ didn't raise the price of Nivas to reduce the 3-month waiting list, and she said that Russian Niva consumers would easily tolerate a 3-month wait, but many would NOT tolerate a price increase. Go figure."

And please note, I was, amazingly, able to mention Russia without taking shots at Czar Putin's incessant meddling with the wonderful people of Georgia.

Why the "Rich" Are Getting Richer...according to Professor Greg Mankiw

Harvard Economics Professor Greg Mankiw writes in The New York Times today about the wealth gap in America Today. Mankiw says...

the superrich have been getting an increasing slice of the economic pie. In 1980, the top 0.01 percent of the population had 0.87 percent of total income. By 2006, their share had more than quadrupled to 3.89 percent, a level not seen since 1916.

Part of the explanation for the growing wealth gap, according to Mankiw, is education, or lack there of. Mankiw states that while technology continues to progress rapidly, America's educational achievement has not...

According to Professors Goldin and Katz, for the past century technological progress has been a steady force not only increasing average living standards, but also increasing the demand for skilled workers relative to unskilled workers. Skilled workers are needed to apply and manage new technologies, while less skilled workers are more likely to become obsolete.

For much of the 20th century, however, skill-biased technological change was outpaced by advances in educational attainment. In other words, while technological progress increased the demand for skilled workers, our educational system increased the supply of them even faster. As a result, skilled workers did not benefit disproportionately from economic growth.

But recently things have changed. Over the last several decades, technology has kept up its pace, while educational advancement has slowed down. The numbers are striking. The cohort of workers born in 1950 had an average of 4.67 more years of schooling than the cohort born in 1900, representing an increase of 0.93 year in each decade. By contrast, the cohort born in 1975 had only 0.74 more years of schooling than that born in 1950, an increase of only 0.30 year a decade.

A Global Boom in Commodities Has Negative Side-Effects - In MPLS

MINNEAPOLIS--As copper prices surge above $4 per pound (see chart above), thieves in Minneapolis are ransacking house after house in search of copper they can sell to scrap dealers for as much as $20,000 a month.Thieves most often hit foreclosed homes, but not always. They broke into Keili Mac's Minneapolis home while she was out of the country and took copper gas pipes. They left the gas on, the house exploded and the city demolished it. The victim returned to find her house gone.

The "Freakonomics" of Inner-City Gangs

Steven Levitt, famous author of Freakonomics, talks about the economics of the Gangster Disciples A researcher from the University of Chicago, (now Harvard), sociologist Sudhir A. Venkatesh, lived with the Gangster Disciples, and found out most intimate details of the gang (and now has a new book detailing his experiences). Over a four-year period in the late 1980s and early 1990s, a former gang member kept careful records of his gang's profits, passing the information to Venkatesh on looseleaf sheets copied from the gang ledger. Levitt then created an economic model based on the gang's general expenses and its revenue from drug dealing and membership dues. For safety reasons, Levitt and Venkatesh chose to keep confidential their sources and the now-defunct gang's whereabouts and members. What you will find is the Gangster Disciples were run much like a corporation, most of the profits went to those at the top of the organization.

FOOD COSTS RISING AT THE FASTEST RATE IN 17 YEARS

There as various reasons for the rapid rise in food costs, and it boils down to supply and demand, as usual. Experts are worried about social upheaval in many developing countries. This picture, from the Wall Street Journal, shows riots in Haiti over food prices, which led to the resignation of Haiti's prime minister. Many people are blaming trade barriers and tariffs, as well as biofuels, as written about in a previous post. Here's this from the WSJ.

"During informal conversations and interviews, ministers mainly agreed that the U.S. policies on biofuels were especially harmful. U.S. ethanol is made from corn, which, ministers said, could be exported to feed the hungry, and benefited from tariffs that block Brazilian ethanol, which is produced much more efficiently from sugar cane." You can read more here.

INFLATION ----- HE'S BACK!!!!

The global economy, despite recording impressive economic growth in this decade, is facing its' highest inflation numbers in over a decade. This effect has been magnified in developing economies, especially with necessities such as food and energy. As usual, the cause is supply and demand. One of the reasons, among many others, is the use of crops for alternative fuels. As more food is used for fuel, less is available for food, which of course drives up the price ...and this is especially hard on developing economies and has the potential to create political instability (note the picture of riots in Egypt over food prices). Read more in today's Wall Street Journal here.

STAY IN SCHOOL! UNEMPLOYMENT RATE BY EDUCATION LEVEL

...and almost the entire .50% rise in the unemployment rate in the past 9 months occurred to people who never graduated from high school. Read more at Carpe Diem blog here.

News Story on Georgia Trip

STOCK RESEARCH ON THE WEB

Here are some websites you can use in researching stocks for the stock market game:

1. MSN: Moneycentral: good stock screener and more.
2. The Street: Get advice from Mad Money's Jim Cramer.
3. Google Finance
4. Yahoo Finance
5. Minyanville
6. CNBC: the web site of the stock channel.

Good Advice

... from the duty free shop at Amsterdam International Airport. Click on picture to enlarge