Free Markets – Page 26 – artdiamondblog.com

Reducing the Cost of Hotels: Prefab Rooms from China

“The Travelodge chain in Britain is building two hotels from stackable metal containers imported from China. One of the hotels, in Uxbridge in West London, is shown under construction at right and in a rendering at left.” Source of the caption and photo: online version of the NYT article quoted and cited below.

(p. 23) TRAVELODGE, one of the largest budget hotel chains in Britain, is a company in a hurry.
. . .
Once the company finds a location, it turns to a construction partner with equally aggressive plans: Verbus Systems, a London-based company that builds rooms in metal containers in factories near Shenzhen, China, and delivers them ready to be stacked into buildings up to 16 stories tall.
Verbus Systems’ commercial director, Paul Rollett, said his company “can build a 300-room hotel anywhere on the planet in 20 weeks.”
. . .
When they arrive at Heathrow, the containers will be hoisted into place by crane. The containers, which are as large as 12 by 47 feet, will support one another just as they do when they are crossing the ocean by ship, Mr. Rollett said. No additional structure is necessary.
. . .
DON CARLSON, the editor and publisher of Automated Builder, a trade magazine based in Ventura, Calif., said that in hotels, “modular is definitely the wave of the future.” Modular buildings, he said, are stronger, and more soundproof, because stacking units — each a fully enclosed room — “gives you double walls, double floors, double everything.”
Mr. Rollett agreed, saying that with the steel shipping container approach, “You could have a party in your room, and people in the next room wouldn’t hear a thing.”
. . .
He is working with his British clients, which, he said, include a Travelodge competitor, Premier Inn, to make the best possible use of the assembly-line method. “We’re increasing the degree of modularity,” he said, noting that the latest units come with fully fitted bathrooms and “even the paint on the walls.”
The only thing they don’t have, he said, “is the girl to put a chocolate on your pillow.”

For the full article, see:
FRED A. BERNSTEIN. “CHECKING IN; Arriving in London: Hotels Made in China.” The New York Times, SundayBusiness Section (Sun., May 11, 2008): 23.
(Note: ellipses added.)

“The Nature of Freedom of Choice”

Former Senator George McGovern was the Democratic candidate for president in 1972. In the commentary below, he defends our freedom of choice:

(p. A15) Economic paternalism takes its newest form with the campaign against short-term small loans, commonly known as “payday lending.”
With payday lending, people in need of immediate money can borrow against their future paychecks, allowing emergency purchases or bill payments they could not otherwise make. The service comes at the cost of a significant fee — usually $15 for every $100 borrowed for two weeks. But the cost seems reasonable when all your other options, such as bounced checks or skipped credit-card payments, are obviously more expensive and play havoc with your credit rating.
Anguished at the fact that payday lending isn’t perfect, some people would outlaw the service entirely, or cap fees at such low levels that no lender will provide the service. Anyone who’s familiar with the law of unintended consequences should be able to guess what happens next.
Researchers from the Federal Reserve Bank of New York went one step further and laid the data out: Payday lending bans simply push low-income borrowers into less pleasant options, including increased rates of bankruptcy. Net result: After a lending ban, the consumer has the same amount of debt but fewer ways to manage it.
Since leaving office I’ve written about public policy from a new perspective: outside looking in. I’ve come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society.
. . .
The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.

For the full commentary, see:
GEORGE MCGOVERN. “Freedom Means Responsibility.” The Wall Street Journal (Fri., March 7, 2008): A15.
(Note: ellipsis added.)

Competition in an Ice Cream Duopoly

“Jose Martinez parked his Good Humor truck Tuesday at an Upper West Side corner that is said to be Mister Softee territory.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C13) On Tuesday afternoon, new battle lines were drawn on the Upper West Side at the corner of Columbus Avenue and 83rd Street, where Ceasar Ruiz, 50, the Mister Softee man, said he had been selling ice cream without any competition for more than eight years.
He said his routine was the same every season. He arrives at the corner by about 2:30 each afternoon, mostly to catch the students getting out of Public School 9 and the Anderson School, just a few yards from the corner. He stays for about an hour and a half, then moves to his next location, he said.
But Tuesday afternoon was different. When he arrived, there sat the freshly painted Good Humor truck and Mr. Martinez, decked out in a crisp uniform, ringing his bell.
“I sell Good Humor, too,” Mr. Ruiz said. “But his is more cheap. I sell bar for $2. He might sell for $1.50. Not good. Not good.”
Over the din of children clamoring for Dora the Explorer ice cream bars and Mega Missile Pops (red, white and blue rocket-shaped popsicles), Mr. Martinez rang his bell louder, openly competing for customers.
“I’m trying to make a dollar just like he is,” said Mr. Martinez, his voice rising loud enough for the other driver to hear. “He’s telling me I have to go. But he doesn’t own this spot.”
. . .
About five minutes before 4 o’clock, Mr. Ruiz leaned out of his Mister Softee truck, looking over at Mr. Martinez.
“Tomorrow, I’m going to beat him here,” he said. “I’ll be the first one here.”

For the full story, see:
TRYMAINE LEE. “It’s Still Spring, but the Ice Cream Truck War Revs Up.” The New York Times (Weds., May 14, 2008): C13.
(Note: ellipsis added.)

Haley Barbour Proves the Economic Benefits of Tort Reform

“Haley Barbour, left, with Toyota officials in February 2007 moments after announcing Toyota Motor Corp. will build a $1.3 billion assembly plant in northeast Mississippi.” Source of caption and photo: online version of the WSJ commentary quoted and cited below.

(p. A9) Jackson, Miss. Shortly after winning election in 2003 by running on a tort-reform platform, Mr. Barbour stitched together a coalition of doctors, business groups, taxpayers and even unions to roll back the trial lawyer lobby.
“It was not just a battle,” recalls Charlie Ross, the Senate sponsor of the reform bill, “it was a five-year war.” The law that eventually passed was every trial lawyers’ worst nightmare. It capped awards for noneconomic damages, and prevented the popular practice whereby a plaintiff attorney seeking to bring a class-action shops around for a court where he’ll be likely to get a favorable ruling or judgment.
Almost overnight, the flow of lawsuits began to dry up and businesses started to trickle in. Federal Express invested $1 billion in a new facility in the state. Toyota chose Mississippi over about a dozen other states for a new $1.2 billion, 2,000-worker auto plant. The auto maker has stipulated that the company would pull up stakes if the tort reforms were overturned by the legislature or activist judges.
That hasn’t happened. About 60,000 new jobs have arrived in four years – not a small number in a workforce of about 1.3 million – and a sharp improvement from the 30,000 jobs lost in the four years before Mr. Barbour took office. Since the law took effect, the number of medical malpractice lawsuits has fallen by nearly 90%, which in turn has cut malpractice insurance costs by 30% to 45%, depending on the county.
Another encouraging sign: Fewer Mississippians are heading to law school and more are looking at business school as the best way to get rich. Many in the younger generation are pursuing a career path that will make them wealth creators, not wealth redistributors.
. . .
Thanks to Mr. Barbour, the state’s unemployment rate is down to about 6% from nearly 9%. Last year, Mississippi’s per capita income growth was 6.7%, third highest of the 50 states and well above the national average of 5.2%. Mississippi tort reform is making the poor richer, and the rich lawyers less fabulously rich. Now that’s a good way to close the income gap.

For the full commentary, see:
STEPHEN MOORE. “CROSS COUNTRY; Mississippi’s Tort Reform Triumph.” The Wall Street Journal (Sat., May 10, 2008): A9.
(Note: ellipsis added.)

Airline Deregulation Allowed Entry, Lower Prices, and More Routes

Source of graphic: online version of the NYT column quoted and cited below.

The top graph above usefully summarizes one of the main results of airline deregulation–lower fares. Other results are sketched below in a couple of passages from a Leonhardt column.

(p. C8) Flying is less expensive, as fares have fallen steadily, adjusted for inflation, and there are more flights to more cities. The barrier to entry is lower. Over the last 30 years, more than 150 airlines have sought bankruptcy protection or disappeared, but more keep springing up as investors continue to put hope over experience, said Denis O’Connor, managing director with AlixPartners, a restructuring firm.
“People don’t understand how easy it is to start an airline,” Mr. O’Connor said, because of a ready supply of pilots and other employees, as well as used airplanes. “Why would you put capital in something if you can’t make a go of it? Southwest is an example of why you would.”
. . .
. . . Southwest’s transformation from a Texas puddle jumper to the biggest airline in terms of domestic traffic (at least until the Delta-Northwest merger is completed) would not have happened without deregulation.
That airline’s evolution is what some experts point to as the best proof of why deregulation, for all its troubles, ultimately is better than a regulated environment.
“This is the free market at work, and we’re not used to it,” said Mo Garfinkle, a lawyer and a longtime airline industry consultant. “The idea of deregulation was to allow entry, whether it was successful or not.”

For the full commentary, see:
MICHELINE MAYNARD. “Did Ending Regulation Help Fliers?” The New York Times (Thurs., April 17, 2008): C1 & C8.
(Note: ellipses added.)

Private Space Companies Compete on Price and Quality

“A rendering of XCOR’s Lynx rocket-powered vehicle.” Source of the caption and image: online version of the WSJ article quoted and cited below.

(p. B1) A price war already is brewing among companies seeking to sign up would-be space tourists, years before the first privately financed rocketplanes are scheduled to begin flying.
XCOR Aerospace of Mojave, Calif., the latest entrant to the derby to blast thrill-seekers into the upper reaches of the atmosphere, is expected to unveil plans Wednesday for a rocket-powered vehicle that is substantially smaller, slower and less expensive to build than any of those proposed by rivals. With tickets projected at $100,000 a pop, the low-fare carrier to the heavens would hardly be cheap.
Anticipated to cost less than $10 million to build and to be more compact than many propeller planes used by recreational pilots, XCOR’s Lynx vehicle is intended to carry a pilot and a single passenger at twice the speed of sound to about 37 miles above the earth. The entire outing, which would begin and end at a conventional airport and include about two minutes of suborbital zero gravity, would take less than half an hour.
That is a significantly shorter trip — and only about half the ticket price — envisioned by British billionaire Sir Richard Branson on his Virgin Galactic spaceship. A sleek and more powerful six-passenger craft, it is designed to travel at about four times the speed of sound and zoom completely out of the atmosphere — reaching true space more than 60 miles above the earth.

For the full story, see:
ANDY PASZTOR. “Economy Fare ( $100,000) Lifts Space-Tourism Race.” The Wall Street Journal (Weds., March 26, 2008): B1-B2.

“Virgin Galactic will launch its rocket from a plane.” Source of the caption and image: online version of the WSJ article quoted and cited above.

Candy Competition

Source of graphic: online version of the WSJ article quoted and cited below.

In class, we discuss how consumers pay higher prices for candy and soft drinks because the U.S. government limits on how much foregin sugar we can import. Sometimes a student will claim that candy companies would not lower prices if the price of sugar declined. And sometimes that issue leads to a discussion of whether the candy industry is competitive.
The graphic above, and the quotation below, provide some relevant evidence.

(p. B1) The global confectionary industry has long lacked a dominant player. The top 10 manufacturers controlled just 47% of the $141 billion market as of 2006, the most recent available data. . . .
. . .
If the Wrigley acquisition is successful, Mars will become the world’s largest confectionary company with about 14.4% of the market, overtaking Cadbury’s 10.1%, based on 2006 figures, the latest available, from Euromonitor International.

For the full story, see:
JULIE JARGON and AARON O. PATRICK. “More Sweet Deals in the Candy Aisle?; Cadbury and Hershey in the Spotlight in the Wake of Mars-Wrigley Linkup.” The Wall Street Journal (Tues., April 29, 2008): B1-B2.
(Note: ellipses added.)

New York Rent Control Limits Incentives to Build Apartments

“Tryn Collins, left, and Mary Hill share small quarters at a loft building in Brooklyn that was transformed from a factory.” Source of caption and photo: online version of the NYT article quoted and cited below.

New York City has had rent control in effect for decades. Economists predict that one effect of rent control is that incentives are reduced to build and maintain apartments. As a result, those seeking living space, have fewer options. (For example, the WSJ a few years ago ran a front page article explaining how some enterprising New Yorkers were living in abandoned elevator shafts.)
The article quoted below, provides additional evidence.

(p. A1) One “room” is a cramped cubby that measures, in all, perhaps 25 square feet, just enough for a full-size mattress and whatever can be stashed beneath. The first-floor rooms, in the basement, are musty and windowless, like caves. The second-floor rooms have plywood walls but no doors, only cut-out windows that overlook a kitchen cluttered with day-old dishes, a chore wheel and the odd paintbrush.
One of the residents likens her home to a “giant treehouse.” Another says it is like “living in a public bathroom.”
“Where the stalls are just superficial sight lines that block the other person, but you can hear everything they do,” said Robyn Frank, a 23-year-old artist. She had just moved in to the McKibbin lofts in East Williamsburg, Brooklyn, and sometimes they literally become bathrooms. They are known for their giant, raucous parties; revelers occasionally urinate in the halls.
This is life in what some refer to as the McKibbin “dorms,” a landing pad for hundreds of postcollegiate creative types yearning to make it as artists, and live like them too, in today’s New York.
Newcomers marvel that such a place exists: two sprawling, almost identical five-story former factories filled with mostly white hip young things, smack in the middle of a neighborhood that has little in common with Williamsburg proper, its cocktail-mixing neighbor to the west.
Perhaps 300 people live in each building, which face each other and sit, respectively, at 248 and 255 McKibbin Street. Between one and eight people live in each loft. Few were born before the mid-1980s. Rents can range from $375 for one person to roughly $800 for a space.

For the full story, see:
CARA BUCKLEY. “Young Artists Find a Private Space, Only Without the Privacy.” The New York Times (Weds., May 7, 2008): A1 & A17.

Franklin Roosevelt Exposed in The Forgotten Man

Source of book image: http://blog.syracuse.com/shelflife/forgotten.jpg

Amity Shlaes’s new history of the Great Depression is at once depressing and encouraging. It is depressing in showing how vulnerable human progress is to the threat from a dishonest, slick orator, who has not a clue about how the economy works. It is encouraging in that it shows so clearly that the length and depth of the Great Depression was due to easily avoidable mistakes in policy, rather than due to some fundamental flaw in capitalism, as has occasionally been claimed.
Although the book does not shy away from pointing out the flaws of Coolidge, Hoover and Willke, it mainly shows how F.D.R.’s routine whimsical policy reversals and double-dealings, alienated not only his original opponents, but many of his early friends and allies.
The New Deal policies to seize business profits, reduced business incentives to take risks: if the risks turned out badly, the business would lose the investment, while if the risks turned out well, the profits would be taxed away by the federal government.
In addition, the sheer unpredictability of New Deal policies further led the prudent to delay investments, thereby further impeding recovery.
The book is well-written, and should be equally well-read.

The reference for the book is:
Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: HarperCollins, 2007.

Federal Subsidies for “Those Who Choose to Live Far from a City”

Source of graphic: the online version of the Omaha World-Herald article quoted and cited below.

(p. 1A) WASHINGTON — Opponents of federal air travel subsidies make two points: that subsidized airports are relatively close to regular commercial air service and subsidized flights are used by only a few people a day.
Both are true in Nebraska.
For example, U.S. taxpayers spend nearly $1.4 million a year so that fewer than two dozen travelers a day, on average, can fly out of Grand Island rather than drive the 100 miles to Lincoln.
Taxpayers also chip in $748,635 annually to maintain two daily flights from Alliance to Denver, even though only about a half dozen people a day board the planes.
. . .
(p. 2A) Groups such as Taxpayers for Common Sense and Citizens Against Government Waste say that although the subsidies might have made sense 30 years ago, to prevent communities from losing air service overnight, people know what they’re getting into today if they choose to live far from a city with regular air service.
It’s a matter of prioritizing public spending, said Steve Ellis, vice president of Taxpayers for Common Sense.
“People have the right to food and clean water,” Ellis said. “We don’t need to make sure it’s a chicken in every pot and air service in every community.”

For the full story, see:
JOSEPH MORTON. “Rural travel subsidies still up in the air.” Omaha World-Herald (Sunday, February 24, 2008): 1A & 2A.
(Note: ellipses added.)

Federal spending on Essential Air Service
——————————————————————————–
Year   # of communities    Total funding for subsidies *
1998   101   $50
1999   100   $50
2000   106   $50
2001   115   $50
2002   123   $113
2003   126   $101.3
2004   140   $101.7
2005   146   $101.6
2006   151   $109.4
2007   145   $109.4
2008   142   $125
*Figures in millions
Source of data: Government Accountability Office; U.S. Department of Transportation
Source of version of table above: very slightly modified from the online version of the Omaha World-Herald article quoted and cited above.

Wal-Mart Designs Health Care Around the Needs of Consumers

“Alicia Ledlie, senior director of health business development for Wal-Mart, said walk-in medical clinics would look like the mockup behind her, in a warehouse in Bentonville, Ark.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C4) Moving to upgrade its walk-in medical clinic business, Wal-Mart is set to announce on Thursday plans for several hundred new clinics at its stores, using a standardized format and jointly branded with hospitals and medical groups.
. . .
Walk-in medical clinics are a growing industry, with numerous competitors that include big-box retailers, drugstores and even grocery chains around the country. Industry executives say 1,500 to 1,800 clinics will be open by the end of the year.
Propelled by the drugstore chains CVS and Walgreens, by far the biggest sponsors of the clinics to date, more than 700 clinics have opened in the last 15 months. But the business model is unproven so far.
Few, if any, clinics are profitable, according to industry analysts, and only a handful have broken even on daily operations. Most have been open a year or less, and executives say it takes up to three years for a clinic to become profitable enough to recover start-up costs.
Medical societies are inclined to be skeptical of the clinics. The American Academy of Pediatrics opposes them, saying they add to fragmentation in the health care system.
Dr. Edward Zissman, a pediatrician in central Florida, said he had qualms about hospitals that hook up with the clinics. “Putting their name on a product that I don’t think has the highest quality,” he said, “is going to cost them dearly with physicians.”
The American Academy of Family Physicians and the American Medical Association have set forth principles for clinics to observe, including sending patients’ medical record to their doctors and finding doctors for patients who do not already have them. Most states require varying degrees of physician supervision of the clinic nurses. Clinic operators say they are complying.
Many patients have said they like the convenience of the walk-in clinics’ weekend and evening hours, the short waiting times to see a nurse practitioner, and the posted price lists for a limited menu of care like tests and prescriptions for sore throats and ear infections and seasonal flu shots.
. . .
“The clinics are the latest big example of how you could think about consumers and what their needs are, rather than a health care system exclusively designed around the needs of providers,” said Margaret Laws, director of an innovations program at the California Health Care Foundation, an independent group that finances health policy research.

For the full story, see:
MILT FREUDENHEIM. “Wal-Mart Will Expand In-Store Medical Clinics.” The New York Times (Thurs., February 7, 2008): C4.
(Note: ellipses added.)

“The design of the Wal-Mart medical clinic is intended to look like a doctor’s office, complete with the usual medical hardware.” Source of caption and photo: online version of the NYT article quoted and cited above.