NYC Has Smallest Yearly Home Price Gain Of Cities In Case-Shiller 20 City Index: 1.9 Percent For NYC Compared To Average 9.3 Percent Gain

Posted by Milton Recht:

From The Wall Street Journal, "A Look at Case-Shiller, by Metro Area" by Phil Izzo:

Home prices extended a winning streak of year-over-year gains, according to the S&P/Case-Shiller indexes.

The composite 20-city home price index, a key gauge of U.S. home prices, was up 9.3% in February from a year earlier. All 20 cities posted year-over-year gains for January and February, the first time that has happened since 2006.

Metro Area	February 2013 Level	Monthly Change	Annual Change
Atlanta	97.01	0.0%	16.5%
Boston	153.89	0.1%	5.2%
Charlotte	114.93	-0.2%	6.2%
Chicago	110.72	-0.8%	5.1%
Cleveland	99.24	-0.8%	5.3%
Dallas	120.74	0.2%	7.1%
Denver	133.90	-0.2%	9.9%
Detroit	80.58	-0.6%	15.2%
Las Vegas	105.70	1.6%	17.6%
Los Angeles	182.04	1.0%	14.1%
Miami	153.97	0.3%	10.4%
Minneapolis	123.81	-0.9%	12.0%
New York	162.00	0.4%	1.9%
Phoenix	128.10	1.1%	23.0%
Portland	141.76	0.7%	9.4%
San Diego	164.25	0.6%	10.2%
San Francisco	148.23	0.5%	18.9%
Seattle	140.97	-0.2%	9.3%
Tampa	136.33	0.6%	10.0%
Washington	186.57	-0.5%	6.9%

Sources: S&P Dow Jones Indices and CoreLogic

CEOs Get Higher Compensation When Their Human Capital Is At Risk

Posted by Milton Recht:

From WP Carey School of Business, knowacc, "The Rationale behind CEO Compensation:"

A successful turn-around can cement a CEO’s reputation as a skilled corporate leader with significant upside to future earning power, or so-called human capital. But failure, particularly if a bankruptcy is involved, could land a top executive out of a job with a tainted reputation and dismal prospects for future employment – even if the circumstances were largely out of his or her control.

Studies show that CEOs face a significant risk to their future earnings and employment prospects when taking a job at a company with existing, or potential financial problems. But new research by accounting Professor Steve Hillegeist and co-authors shows that such executives can expect to be compensated, often handsomely, for putting their human capital at risk.***Earlier studies demonstrated that executives who join firms with shaky financial prospects face considerable risk to their human capital, described as a combination of future employment opportunities and expected compensation levels.

Most CEOs lose their jobs in a bankruptcy. Studies in 1989 and 1995 concluded that CEO turnover rates after a bankruptcy range from 70 percent to 90 percent. Research in 2004 found that only 12 percent of dismissed CEOs land comparable positions with other public companies. And, if they do, it is likely at a much smaller firm at a greatly reduced salary. The studies found that leaders of bankrupt firms are often viewed as “tainted and incompetent” regardless of the circumstances leading to the firm’s financial difficulties.

Switch To No Fault Medical Injury Instead Of Malpractice And Lower Medical Injury And Death Rates From Non-Negligent Causes

Posted by Milton Recht:

From John Goodman's Health policy Blog, "Malpractice Law Is Bad for Your Health" [Working alternate website link: Original weblink defunct] by John Goodman:

Ironically, the medical malpractice system is inordinately focused on whether someone was at fault when an injury or accident occurs. Of the estimated 187,000 deaths (NCPA estimate based on NEJM and NCBI) and 6 million injuries that occur in hospitals each year, only an estimated one in four are considered negligent (malpractice) — and the actual number is probably much lower than that. Another 30 percent (such as certain types of infections) are judged to be “preventable,” even though no one is guilty of negligence. Almost half of adverse medical events are “acts of God” — no one was at fault and there is no obvious way of preventing them.


Here’s the problem. When we focus exclusively on malpractice and do nothing about the other categories of adverse events, doctors will do things that reduce malpractice events but increase the risk of some other type of injury. For example, doctors can reduce their malpractice risk by ordering more tests. But each of these tests carries a risk of hospital-acquired infections and other adverse consequences.

EPA Reduces Estimates Of Methane Greenhouse Gas Leakage From Fracking

Posted by Milton Recht:

From The Washington Post, "EPA report that lowers methane-leak estimates further divides fracking camps" by Associated Press:

Environmental Protection Agency has dramatically lowered its estimate of how much of a potent heat-trapping gas leaks during natural gas production, in a shift with major implications for a debate that has divided environmentalists:***The new EPA data is "kind of an earthquake" in the debate over drilling, said Michael Shellenberger, the president of the Breakthrough Institute, an environmental group based in Oakland, Calif. "This is great news for anybody concerned about the climate and strong proof that existing technologies can be deployed to reduce methane leaks."

The Obamas Would Rather Pay More To The Private Sector Than Higher Federal Taxes

Posted by Milton Recht:

AS Harvard Economics Professor Greg Mankiw pointed out in his blog post today, "The President as Financial Planner:"

By selling some of those Treasuries and paying off the mortgage, they [the President and Michelle Obama] would effectively be getting five more percentage points on the amount; they would also be about $40,000 better off each year before taxes, not to mention being less exposed to notes that could take a hit from possible rising rates.

The Obamas would pay more in taxes but make much more after taxes -- especially since they aren’t getting the full deduction anyway, due to the AMT. That's more money going to the U.S. Treasury and more money for them; Northern Trust would be the loser. [Emphasis added.]

Mankiw is kind to the Obamas by presenting the issue as inattentive financial planning. I on the other hand think the Obamas do get excellent financial planning advice and are aware that they could have more money in their pocket if they choose to increase their tax payment. The certified public accounting and financial advising firm of Wineberg Solheim Howell & Shain, PC prepared the Obamas' tax return. I think it is a conscious, reasoned decision of the President and Michelle to pay more to a Chicago headquartered, publicly traded private company than to the US government.

Real GDP Expected To Grow 0.5 Percent Over Next Year: Federal Reserve Bank Of Cleveland

Posted by Milton Recht:

From Federal Reserve Bank of Cleveland, "Yield Curve and Predicted GDP Growth, April 2013" April 23, 2013, Covering March 16, 2012–April 19, 2013, by Joseph G. Haubrich and Patricia Waiwood:

Projecting forward using past values of the [3 month - 10 year Treasury interest rate] spread and GDP growth suggests that real GDP will grow at about a 0.5 percent rate over the next year, even with March’s number and up just a bit from February’s 0.4 percent. The strong influence of the recent recession is still leading toward relatively low growth rates. Although the time horizons do not match exactly, the forecast comes in on the more pessimistic side of other predictions, but like them, it does show moderate growth for the year.***Using the yield curve to predict whether or not the economy will be in recession in the future, we estimate that the expected chance of the economy being in a recession next April is 8.1 percent, up a bit from March’s prediction of 5.9 percent, and even above February’s number, which came in at 6.4 percent. Although our approach is somewhat pessimistic as regards the level of growth over the next year, it is quite optimistic about the recovery continuing.***Predicting GDP Growth
We use past values of the yield spread and GDP growth to project what real GDP will be in the future. We typically calculate and post the prediction for real GDP growth one year forward.

Tour Of The Federal Budget: CBO

Posted by Milton Recht:

A Tour of the Federal Budget and Possible Change in Budget Policy from Congressional Budget Office

Top Ten Percent In US Pay a Bigger Share Of Taxes, 17 To 70 Percent More, Than In Other OECD Countries

Posted by Milton Recht:

from The Washington Post, Wonkblog, "Five charts that will make you feel better about paying your taxes" posted by Ezra Klein:

Source: The Washington Post

Viewing Sexually Explicit Materials Has Little Effect On Adolescent And Young Adult Sexual Behavior

Posted by Milton Recht:

From "Chillax: Sexually explicit material affects young people not so much" on ScienceBlog:

Viewing sexually explicit material through media such as the Internet, videos, and magazines may be directly linked with the sexual behavior of adolescents and young adults, but only to a very small extent.

That is the conclusion of a new study published in The Journal of Sexual Medicine. The findings suggest that the practice is just one of many factors that may influence the sexual behaviors of young people.***"Our data suggest that other factors such as personal dispositions—specifically sexual sensation seeking—rather than consumption of sexually explicit material may play a more important role in a range of sexual behaviors of adolescents and young adults, and that the effects of sexually explicit media on sexual behaviors in reality need to be considered in conjunction with such factors," Dr. [Gert Martin] Hald [University of Copenhagen in Denmark] said.

Annual Real GDP Growth For Private Sector Services Versus Goods Production, 2009 - 2012

Posted by Milton Recht:

From US Bureau of Economic Analysis, Press Release, April 25, 2013, "Durable-Goods Manufacturing Led Growth in 2012: Advance GDP by Industry Statistics for 2012:"

Source: US Bureau of Economic Analysis

Trees Can Produce Smog And Unhealthy Air-Borne Particulate Matter

Posted by Milton Recht:

From "Darn Those Trees, They're Making Smog!" on ScienceBlog:

It has long been known that trees produce and emit isoprene, an abundant molecule in the air known to protect leaves from oxygen damage and temperature fluctuations. However, in 2004, researchers, contrary to popular assumptions, revealed that isoprene was likely involved in the production of particulate matter, tiny particles that can get lodged in lungs, lead to lung cancer and asthma, and damage other tissues, not to mention the environment.

But exactly how was anybody’s guess.

Jason Surratt, assistant professor of environmental sciences and engineering at the Gillings School of Global Public Health, now reveals one mechanism by which isoprene contributes to the production of these tiny, potentially health-damaging particles.

The study found that isoprene, once it is chemically altered via exposure to the sun, reacts with man-made nitrogen oxides to create particulate matter. Nitrogen oxides are pollutants created by cars, trucks, aircrafts, coal plants and other large scale sources.

Skeptics Less Able Than Trusting People To Identify Lying Individuals

Posted by Milton Recht:

From The Washington Post, On Leadership, "The best lie detectors in the workplace" by Adam Grant:

[Nancy] Carter and [Mark] Weber recruited a group of people to watch the videos. Several days beforehand, they had completed a survey about whether they were generally skeptical or trusting of others. After watching the videos, the participants placed their bets about which candidates lied and which told the truth, and then made a choice about which ones they would hire.

The results were surprising. The more trusting evaluators better identified the liars among the group than the skeptics did, and were also less likely to hire those liars.

Contrary to conventional wisdom, it’s the skeptics who are easiest to fool. Why would this be? One possibility, according to Carter and Weber, is that lie-detection skills cause people to become more trusting. If you’re good at spotting lies, you need to worry less about being deceived by others, because you can often catch them in the act.

The other possibility is that by trusting others, we sharpen our skills in reading people. Skeptics assume that most people are hiding or misrepresenting something. This makes them interpersonally risk-averse, whereas people who habitually trust others get to see a wider range of actions — from honesty to deception and generosity to selfishness. Over time, this creates more opportunities to learn about the signals that distinguish liars from truth tellers.***So what signals do trusters use to spot lies? One of the study’s findings is that they pay more attention to vocal cues than skeptics do.

Read the complete Washington Post article for links to studies.

Self Control As Or More Important To Success As Intellect

Posted by Milton Recht:

From The Washington Post Magazine, "The Education Issue: Believing self-control predicts success, schools teach coping" posted by Andrew Reiner:

As it turns out, our emotional lives matter as much, sometimes more, as our intellect in the path to success.***A spate of studies appeared in the past three years or so, particularly the Dunedin Multidisciplinary Health and Development Study, and, almost overnight, the stakes seemed higher. The Dunedin study — headed by Moffitt and Avshalom Caspi, Duke University psychology and neuroscience professors — followed 1,000 New Zealanders over 32 years, beginning at birth. What researchers observed in this study, published by the Proceedings of the National Academy of Sciences in 2011, was astounding.

Children as young as 3 who showed lower self-restraint were much more likely to face future struggles with high cholesterol and blood pressure, periodontal disease, chronically empty savings accounts, debt and single parenthood. Those with less self-restraint had much higher incidences of drug and alcohol dependence. And "43% of least disciplined children had a criminal record by age 32, compared with just 13% of the most conscientious." If this isn’t disturbing enough, "one generation’s low self-control disadvantages the next generation," the researchers stated.

Infrastructure Operating Cost Is One-Half To Two-Thirds of Cost: Former CBO Director Calls For More Public Private Infrastructure Partnerships To Help Pay Ongoing Operating Costs

Posted by Milton Recht:

From Bloomberg, "Let the Free Market Not Bureaucrats Build Bridges" by Peter Orszag, Vice Chairman Citigroup, Former CBO and OMB Director:

For a country that prides itself on a robust private sector, the U.S. lags behind many other nations in using the private sector to finance, build and operate infrastructure. From 1990 to 2006, for example, public-private partnerships financed five times as much transportation infrastructure in the U.K. as in the U.S. -- even though the U.S. economy is more than six times larger than that of the U.K.***[Mayors] seemed to generally agree that access to low-cost financing isn’t the crucial obstacle. The more basic problem is the complex decision-making and approval process, along with the challenge to generate future revenue streams sufficient to pay for the ongoing costs of the project and the original loans to build it.***Economists Barry Bosworth and Sveta Milusheva of the Brookings Institution, who have pointed this out previously, say decision-makers too often look to obtain free federal funding for projects whose benefits are largely local. They also focus too much on new construction, and too little on operating costs and maintenance, which account for more than half of the total spending on infrastructure, according to the Congressional Budget Office. In mass transit and aviation, the share is more like two-thirds.

Partnerships with the private sector don’t make these operating and maintenance costs disappear -- ultimately, someone still pays -- but they provide a way to finance those costs, as well as the upfront investment, by leaning on people who directly use the infrastructure rather than the city’s taxpayers as a whole.

Also, see my post, "By 2015, Highway Trust Fund Will Have Funds Shortfall: Options Include Cutting Spending, Raising Gasoline Tax Or Both."

By 2015, Highway Trust Fund Will Have Funds Shortfall: Options Include Cutting Spending, Raising Gasoline Tax Or Both

Posted by Milton Recht:

From CBO, "Statement for the Record on the Status of the Highway Trust Fund" by Sarah Puro, Analyst for Surface Transportation Programs, for the Committee on the Budget, US House of Representatives:

Specifically, CBO’s analysis indicates the following:

• The current trajectory of the Highway Trust Fund is unsustainable. Starting in fiscal year 2015, the trust fund will have insufficient amounts to meet all of its obligations, resulting in steadily accumulating shortfalls.
• Since 2008, the Congress has avoided such shortfalls by transferring $41 billion from the general fund of the Treasury to the Highway Trust Fund. An additional transfer of $12.6 billion is authorized for 2014. If lawmakers chose to continue such transfers, they would have to transfer an additional $14 billion to prevent a projected shortfall in 2015.
• Lawmakers could also address that shortfall by substantially reducing spending for surface transportation programs, by boosting revenues, or by adopting some combination of the two. Bringing the trust fund into balance in 2015 would require cutting the authority to obligate funds in that year from about $51 billion projected under current law to about $4 billion, raising the taxes on motor fuels by about 10 cents per gallon, or undertaking some combination of those options.

Obese Mice Given Blood Vessel Blocking Cancer Drug Lost 70 Percent Of Their Body Fat

Posted by Milton Recht:

from "Drug reduces fat by blocking blood vessels" on ScienceBlog:

Now, new evidence in an animal model suggests that blood vessels in the fat tissue of obese individuals could provide the same purpose—and could provide the key to a new way for people to lose weight. When researchers Jian-Wei Gu, Kristina L. Makey, Edmund Chinchar, Carissa Howie, and Lucio Miele, all from the University of Mississippi Medical Center, gave obese mice a cancer drug that works by inhibiting the growth of blood vessels, these mice lost about 70 percent of their fat mass.***After this treatment, researchers found that the mice who received Sunitinib lost significant amounts of weight, with an average loss of 70 percent fat mass. However, notes Gu, their lean mass remained unaffected. Both mice who received the drug orally and those who received abdominal injections lost similar amounts of fat.***Gu emphasizes that more research is necessary before this drug can be tested for human weight loss.

CBO Presentation On Federal Policy Changes To Spur Innovation

Posted by Milton Recht:

From CBO Director Doug Elmendorf’s Presentation at the National Bureau of Economic Research Conference on Innovation Policy and the Economy, "What Changes in Federal Policy Might Spur Innovation?"

What Changes in Federal Policy Might Spur Innovation? from Congressional Budget Office

A PDF version is available.

Every Year, 60,000 Americans Hospitalized For Acetaminophen Overdose

Posted by Milton Recht:

... acetaminophen, is one of the best medications we have for helping people in pain. It's also one the most commonly overdosed substances in the world and puts about 60,000 Americans in the hospital every year. Several hundred people in the U.S. will die in 2013 from liver failure after acetaminophen overdose.

... isn't addictive like narcotics, and the kids don't take it to get high, which lends it an air of benignity and social acceptance not otherwise afforded to many pain medications. When people overdose on pills like Vicodin or Percocet, though, which contain acetaminophen, it's that component that often does the most damage.

Seepage From Sewer Pipes Polluting Deep Water Aquifers With Viruses: EPA Does Not Regulate Viruses In Drinking Water

Posted by Milton Recht:

From Chemical & Engineering News, "Viruses From Sewage Contaminate Deep Well Water: Water Pollution: Human pathogens rapidly invade underground aquifers previously thought to be protected" by Janet Pelley

Scientists once thought that pathogens could not reach drinking water wells sunk into deep, protected groundwater aquifers. Nevertheless, over the past decade, researchers have identified diarrhea-causing viruses at a handful of deep bedrock well sites in the U.S. and Europe. Now, researchers in Madison, Wis., report where these pathogenic viruses may have originated. The viruses appear to seep from sewer pipes and then swiftly penetrate drinking water wells (Environ. Sci. Technol., DOI: 10.1021/es400509b).

The U.S. Environmental Protection Agency does not regulate the presence of viruses in drinking water, so many public water systems do not routinely test for them.

[HT: Slashdot]

Diagnostic Errors Account For 39 Percent Of Medical Malpractice Related Deaths

Posted by Milton Recht:

From The Washington Post, Health & Science, "Diagnostic errors are leading cause of successful malpractice claims" by David Brown:

Diagnostic errors, not surgical misadventures, obstetrical mistakes or improperly delivered medications, are the main source of successful malpractice claims. However, little is being done to identify such errors and measure their effects.***Incorrect, missed or delayed diagnoses accounted for 29 percent of successful malpractice claims. They accounted for 35 percent of the total amount of money paid out and caused 39 percent of malpractice-related deaths.***Autopsy studies suggest that 10 to 20 percent of deaths are from causes not diagnosed when the patient was alive. About half could have been successfully treated.

Mmmmm Donuts In Watertown!

Posted by Milton Recht:

From boston.com, "At cops’ request, Dunkin’ Donuts stays open" by Erin Ailworth, Globe Staff:

On block after block of the Boston’s Financial District and Downtown Crossing, Starbucks shops went dark as the city locked down, spurred by a manhunt for the second marathon bombing suspect. Dunkin’ Donuts stayed open.

Law enforcement asked the chain to keep some restaurants open in locked-down communities to provide hot coffee and food to police and other emergency workers, including in Watertown, the focus of the search for the bombing suspect. Dunkin’ is providing its products to them for free.

“At the direction of authorities, select Dunkin’ Donuts restaurants in the Boston area are open to take care of needs of law enforcement and first responders,” spokeswoman Lindsay Harrington explained via email. "We are encouraging our guests to state home today and abide by the lockdown, per the Governor’s recommendation."

[HT: Less Antman via Dave Henderson]

High School Dropouts Start More Businesses Than High School Or College Graduates

Posted by Milton Recht:

From The New York Times, Economix Blog, "America’s Biggest Entrepreneurs: High School Dropouts" by Catherine Rampell:

But as it turns out, the country’s most frequent business founders are dropouts of a different kind: They dropped out of high school.

That’s according to the latest numbers from the Kauffman Index of Entrepreneurial Activity, as prepared by Robert W. Fairlie at the University of California, Santa Cruz. Professor Fairlie looked at different demographic groups, and what share of each group started businesses in any given month (which is generally tiny, less than 1 percent for basically all major demographics). When he looked at entrepreneurship by educational attainment, he found that people who had not completed high school were most likely to start new businesses.

Source: The New York Times

***Starting a new business, by the way, does not necessarily mean taking on employees. The Labor Department survey upon which this analysis is based does not, unfortunately, currently include information on employer versus nonemployer businesses.

Inflation Effects On The Elderly Versus The General Population: BLS' Experimental Inflation Index For Seniors, CPI-E

Posted by Milton Recht:

From Congressional Budget Office, "How Does Growth in the Cost of Goods and Services for the Elderly Compare to That for the Overall Population?" posted by David Brauer & Noah Meyerson on April 19, 2013:

In particular, the CPI reflects prices paid for the goods and services purchased by an average household, not by any specific individual or by the average person in certain age groups, income groups, or other categories. Therefore, most people experience price changes that are either higher or lower than reported in the CPI. Computing changes in the cost of living separately for each person would not be feasible, but different indexes could be calculated for subgroups of the population or for different policy purposes.
***The possibility that the cost of living may grow at a different rate for the elderly than for the rest of the population is of particular concern in choosing a price index for Social Security COLAs because Social Security benefits are the main source of income for many older people. BLS computes an unofficial index that reflects the purchasing patterns of older people, called the experimental CPI for Americans 62 years of age and older (CPI-E). Since 1982 (the earliest date for which that index has been computed), annual inflation as measured by the CPI-E has been 0.2 percentage points higher, on average, than inflation as measured by the traditional CPI-U or the CPI-W. However, since December 2007, when the most recent recession began, inflation as measured by the CPI-E has generally been lower than inflation as measured by the CPI-U or CPI-W (see the figure below).

Source:  CBO

The longer-term difference between the growth rates of the CPI-E and CPI-U mainly reflects the fact that a larger percentage of spending by the elderly is for items whose prices rise especially quickly. In particular, compared with the overall population, the elderly devote a much larger percentage of their spending to medical care. That difference in spending patterns alone accounts for about half of the long-run difference between the CPI-E and the CPI U.

The other half of the longer-term difference between the growth rates of the CPI-E and CPI-U occurs primarily because other goods and services that receive greater emphasis in the CPI-E have prices that tend to rise at an above-average rate—most notably, housing. Over the past five years, however, the CPI for housing has risen less than the overall CPI has. That situation may be at least partly attributable to the collapse in housing prices that largely resulted from overbuilding during the previous economic boom. Because housing prices have started to rise again and we expect that increase to continue in the coming decade, we anticipate that the CPI-E will outpace the CPI-U in the future.

If policymakers believe that the CPI-E is an appropriate measure of inflation for the elderly, they could use it to index programs that serve that population. A chained version of the CPI-E could also be developed to better account for economic substitution by older consumers, but doing so would require collecting significantly more data about the purchasing patterns of the elderly.

It is unclear, however, whether the cost of living actually grows at a faster rate for the elderly than for younger people, despite the fact that changes in health care prices play a disproportionate role in their cost of living. Determining the impact of rising health care prices on the cost of someone’s standard of living is problematic because it is difficult to measure the prices that individuals actually pay and to accurately account for changes in the quality of health care. (When the price of a good or service changes, it can be difficult to determine what portion of the price growth is attributable to underlying improvements in the quality of the good or service and what portion is attributable to inflation.) Both treatment costs and the value of improved treatments often increase rapidly. Thus, more uncertainty exists about measures of price growth for health care than for other goods and services. Many analysts think that BLS underestimates the rate of improvement in the quality of health care, and some research suggests that such improvement may make the true increase in the price of health care more than 1 percentage point a year smaller, on average, than the increase in that price measured in the CPI. If that is the case, then all versions of the CPI overstate growth in the cost of living, with the overstatement being especially large for the CPI-E because of the large weight on health care in that index. However, if health care increases in both price and quality, the previous lower-quality care may become less accessible, reducing patients’ options for making lower-cost substitutions.

CBO Explains Differences Between Traditional And Chained Inflation Indexes: Chained CPI About 0.25 Percent Lower Per Year Than Traditional CPI

Posted by Milton Recht:

The President and Congress are considering switching inflation indexing in the US tax code and in inflation adjusted benefits, such as Social Security, from the Traditional CPI to the Chained CPI to increase future tax revenues and to lower future benefit payment increases.

From Congressional Budget Office, "Differences Between the Traditional CPI and the Chained CPI" by Rob McClelland on April 19, 2013:

The Traditional CPI***The traditional versions of the CPI are based on spending patterns from a point in the past, and so do not fully incorporate the effects of consumers’ substitution between various goods and services when their relative prices change. As a result, those traditional versions of the CPI overstate the amount by which consumers’ well being declines when prices rise and understate the benefit of reductions in prices. Therefore, the traditional versions tend to grow faster than the cost of living does.

The traditional versions of the CPI also suffer from a statistical bias that occurs because the index is calculated using prices for only a small portion of the items in the economy.***The Chained CPI-U

BLS has developed another approach to measuring price increases that avoids both substitution bias and small-sample bias. Since August 2002, BLS has published an alternative index, the chained CPI-U, which attempts to account for the effects of substitution on changes in the cost of living. The chained CPI-U provides a more accurate estimate of changes in the cost of living from one month to the next by using market baskets from both months, thus “chaining” the two months together.

The chained CPI-U is also largely free of small-sample bias because of the way in which it is computed. Both the traditional CPI and the chained CPI-U are based on the same item-area indexes, which are calculated using a geometric average. To combine those indexes into an overall estimate of price growth in the United States, however, BLS uses a geometric-average formula for the chained CPI-U, as opposed to an arithmetic average formula for the traditional CPI. The use of a geometric-average formula to combine the item-area indexes effectively makes the number of elements in the geometric average much larger, which essentially eliminates small-sample bias.

The chained CPI-U results in lower estimates of inflation than the traditional CPI does. CBO expects that annual inflation as measured by the chained CPI-U will be about 0.25 percentage points lower, on average, than annual inflation as measured by the traditional CPI. That estimate is based in part on the observed past differences between the chained CPI-U and the traditional CPI-U and CPI-W. [Emphasis added.]

The difference has generally been smaller when overall inflation has been lower—perhaps reflecting fewer increases in the relative prices of goods and services for which consumers spend a great deal and less interest by consumers in substituting between goods and services when price increases are mostly smaller. In addition, the gap between the traditional and the chained CPI-U has generally been smaller when prices for energy have been declining and larger when those prices have been rising rapidly.

Although many analysts consider the chained CPI to be a more accurate measure of the cost of living than the traditional CPI, using it for indexing could have disadvantages. The values of the chained CPI are revised over a period of several years, so affected programs and the tax code would have to be indexed to a preliminary estimate of the chained CPI that is subject to estimation error. Also, the chained CPI may understate growth in the cost of living for some groups, as discussed in another blog posttoday.

48 Million People Get Sick From Food Contamination Every Year

Posted by Milton Recht:

From The Wall Street Journal, "Food-Linked Infections Rose Last Year" by Bill Tomson:

The number of infection cases [from bacteria linked to food contamination] reported in a sample group of states increased 3% in 2012 from the previous year, an agency [Centers for Disease Control and Prevention] calculation showed.
***About 48 million people get sick from contaminated food every year, according to the CDC.

Source: The Wall Street Journal

Market Forces Lower Energy Related Carbon Dioxide Emissions To 1994 Levels

Posted by Milton Recht:

From The Wall Street Journal, "Rise in U.S. Gas Production Fuels Unexpected Plunge in Emissions" by Russell Gold:

Energy-related emissions of carbon dioxide, the greenhouse gas that is widely believed to contribute to global warming, have fallen 12% between 2005 and 2012 and are at their lowest level since 1994, according to a recent estimate by the Energy Information Administration, the statistical arm of the U.S. Energy Department.

While other factors, including a sluggish U.S. economy and increasing energy efficiency, have contributed to the decline in carbon emissions from factories, automobiles and power plants, many experts believe the switch from coal to natural gas for electricity generation has been the biggest factor.***But the U.S., which has decreased its carbon-dioxide output tonnage more than any other nation, demonstrates that market forces can have an impact on greenhouse gases even as politicians continue to disagree over what, if any, federal regulations are needed to force industries to reduce their emissions.