What do the U.S., Switzerland, China and the U.K have in common?

Citizens more likely to sacrifice for the common good (solve the free riding dilemma):

Among students in the U.S., Switzerland, China and the U.K., those identified as freeloaders most often took their punishment as a spur to contribute more generously. But in Oman, Saudi Arabia, Turkey, Greece and Russia, the freeloaders more often struck back, retaliating against those who punished them, even against those who had given most to everyone's benefit. It was akin to rapping the knuckles of the helping hand.

If only...

Daniel Casse has a book review in the WSJ documenting a secret agreement between President Clinton and Speaker Gingrich to reform entitlements.

When they finally met in October 1997 – in the Treaty Room in the East Wing of the White House – Mr. Clinton agreed to push for the creation of private Social Security accounts in return for Mr. Gingrich's promise to abandon a GOP push for further tax cuts. They also made plans for a commission that would recommend more private-sector involvement in Medicare.

Unfortunately, the actual plans are still secret.

What do oil and housing have in common?

Boom and bust cycles, driven by sudden changes in demand

both housing and oil supply react to a surge in demand with a long lag. In housing, the lag is caused by restrictive zoning and development laws, especially in coastal markets like California and Florida.

So when the economy roared back in 2002 and 2003, builders couldn't turn out homes fast enough for buyers armed with those cheap mortgages. As a result, prices spiked. They no longer bore any relation to the actual cost of buying and improving land, or constructing and marketing a new house (at some reasonable profit margin). Instead, frenzied buyers were setting the price.

Because builders were reaping huge windfall profits, they rushed to buy and develop land. And sure enough, those new houses were ready just as buyers were retreating to the sidelines because they could no longer afford to buy a home. That vast overhang of unsold homes is what's driving down prices today.

The story is much the same with oil, with a twist. A big swath of the market isn't really paying that $125 a barrel number you hear about seemingly every hour. In China, India and the Middle East, governments are heavily subsidizing oil for their consumers and corporations, leading to rampant over-consumption - and driving up prices even more.

But sooner or later the world won't keep paying those prices: Eventually, the price must fall back to the cost of that last barrel to clear the market.

So what does that barrel cost today? According to Stephen Brown, an economist at the Dallas Federal Reserve, that final barrel costs just $50 to produce. And when the price is $125, the incentive to pour out more oil, like homebuilders' incentive to build more two years ago, is irresistible.

"Cocaine is for horses, not for men; they say its going to kill me but they won't say when."

It's impossible to predict how the adjustment this time will take shape, just as it was in housing. There the surge in supply came in places the experts swore there was "no supply," and wouldn't be any. Builders found a way to extend vast tracts of homes into California's Inland Empire and Central Valley, and even build "in-fill" projects near the densely-populated coasts.

Are the Wal-Mart battles over?

Unions have waged an aggressive anti-Wal-Mart PR campaign since 2005, designed to gain bargaining concessions. Now it appears that both sides are dismantling their PR machines.

Much like a political campaign after Election Day, the groups have reduced their staffs. Wal-Mart Watch, which once had 40 workers, now has 10. WakeUpWalMart.com had up to 12 workers, but has about 6 today. And its aggressive founders, the former political operatives Paul Blank and Chris Kofinis, left in 2007. ...

But Mr. Nassar and Ms. Scott acknowledge that the appetite for criticism of Wal-Mart, which seemed insatiable at first, has waned, especially in the news media. "There has been a certain amount of fatigue about writing the Wal-Mart-is-bad story," said Mr. Nassar. Ms. Scott described "a cooling down of the Wal-Mart story."

But who won the war?

"I don't think there has been significant progress," ... Wal-Mart ... still requires workers to meet deductibles ranging from $700 to $4,000 a year for their health insurance. And most workers earn less than $20,000 a year.

Paid for with other people's money

What do college tuition, academic journals, and health care have in common besides price inflation?

It is easy to see why this would make demand less elastic, which would imply a higher price in any but a perfectly competitive industry, e.g., (P-MC)/P=1/|elasticity|. But what is the mechanism behind the price inflation (change in price)?

Kauffman Index of entrepreneurial activity

... 495,000 new businesses per month were started in 2007 with 0.30 percent of the adult population (or 300 out of 100,000 adults) involved in the startup process. This entrepreneurial activity rate is a slight increase over the 2006 rate of 0.29 percent.

New report from the Kauffman Center also documents a growing gender gap.

Men are now twice as likely as women to start a business each month, a larger differential than in any previous year of the KIEA study

Canary in the coal mine

Our entitlement problems, while enormous, are smaller than those facing Japan

...combined with the estimated trajectories of social-security contributions and taxes, ... the total sum that workers pay to the government and social security [would rise] from 18 percent of household income today to 37 percent by 2035.²

This magnitude of their entitlement burden is bigger than Sweden's (36 percent) and almost as big as Germany's (40 percent). And like our entitlement problems, no one knows how to address them.

Any increase in premiums is likely to encounter opposition from both employers and workers. ... Alternatively, policy makers could raise copayment rates, [already] among the highest in the world. [30 percent for those aged 3-29; 10% for those over 70]

To close the funding gap further would require additional measures, such as boosting consumption tax rates to 11 percent (from 5%) or raising insurance premiums to 20 percent (from the current 8 percent)

Cool Jobs - Good Pay

From Career Builder via CNN - Nine cool jobs that pay well:

1. Brewmaster
2. Toy Creator
3. Food Scientist
4. Doll Fashion Designer
5. Sommelier
6. Athletic Trainer
7. Event Planner
8. Wardrobe Stylist
9. Concert Promoter

We are #6

The big problem with most business school rankings is that they confound the value added by the school with the quality of the students who go there. A new ranking tries to separate out these two effects to correct for what academics call "selection bias."

Rank	School
1	Cornell (Johnson)
2	Indiana–Bloomington (Kelley)
3	University of Virginia (Darden)
4	Texas–Austin (McCombs)
5	Harvard
6	Vanderbilt (Owen)
7	Rice (Jones)
8	Minnesota–Twin Cities (Carlson)
9	MIT (Sloan)
10	Maryland–College Park (Smith)

Ignoring the Competition

In a prior post, we discussed a McKinsey survey that argued companies do a poor job in reacting to competitive moves by their rivals. They assess just a few options and often choose the most obvious choice.

Here’s another McKinsey survey that asked about respondents’ views on competition from companies based in emerging markets. While most appear to recognize the threat from low-cost competition, they don’t seem to be doing much about it.

• Despite rising wages in China, executives around the world who responded to a McKinsey survey say that low-cost production remains the biggest competitive advantage for companies there and will be for years to come.
• While more executives see China as a threat than they do any other emerging economy, the survey also shows that surprisingly few of them have made efforts to respond to the global aspirations of Chinese companies.