Monthly Archives: July 2004

The futures market for books

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Bill Clinton’s autobiography may be hot, and the Harry Potter series continues to set records, but this National Endowment for the Arts survey indicates that such books are becoming an aberration. The study describes a precipitous downward trend in Americans’ book consumption and a particular decline in the reading of fiction, poetry and drama.
Among its findings are that fewer than half of Americans over 18 now read novels, short stories, plays or poetry; that the consumer pool for books of all kinds has diminished; and that the pace at which the nation is losing readers is accelerating; and that the downward trend is occurring in virtually all demographic areas.
The survey also makes an interesting correlation between readers of literature and those who are socially engaged, noting that readers are far more likely than nonreaders to do volunteer and charity work and go to art museums, performing arts events and ballgames. Of literary readers, 43 percent perform charity work while only 17 percent of nonreaders do.
The Census Bureau study upon which the survey was based measured the number of adult Americans who attended live performances of theater, music, dance and other arts; visited museums; watched broadcasts of arts programs; or read literature in the past year. The survey sample ? 17,135 people ? is one of the largest studies ever conducted on the subject of arts participation, and the data was compared with similar studies from 1982 and 1992.
In the literature segment of the study, respondents were asked whether they had, during the previous 12 months, without the impetus of a school or work assignment, read any novels, short stories, poems or plays in their leisure time. Their answers show that just over half ? 56.6 percent ? read a book of any kind in the previous year, down from 60.9 percent a decade earlier. Readers of literature fell even more dramatically, to 46.7 percent of the adult population, down from 54 percent in 1992 and 56.9 percent in 1982. Although the number of readers of literature is about the same now as it was in 1982 ? about 96 million people ? the American population has increased by almost 40 million.
Last month the Association of American Publishers released worldwide sales figures for 2003, indicating that total sales of consumer book products increased 6 percent for the year. Much of the increase can be accounted for by sales of audio books, juvenile titles and nonpaper e-books that are sold online. Adult hardbound books, adult paperbacks and mass-market paperbacks all showed relatively flat revenues in spite of price increases. Interestingly, the one category of book to rise markedly was that of religious texts, with total sales of $337.9 million, 36.8 percent over the previous year.

California expects Shell charity

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In what can only be described as bizarre governmental intervention, this Wall Street Journal ($) article describes a politically-motivated Federal Trade Commission investigation that has been launched into the planned closing of an unprofitable Royal Dutch/Shell Group refinery in California and the FTC’s reinstatement of an antitrust complaint against Unocal Corp.
Shell announced plans last year to close its Bakersfield, California refinery Oct. 1 because a nearby oil field will run out of crude in coming decades and because the refinery is too expensive to repair and profitably operate. Given that relatively few refineries in the United States produce the type of environmentally-favored gasoline that California requires, the closure will likely crimp gasoline supply further in the West, where supplies are already tight and prices the highest in the nation. The small refinery handles 70,000 barrels of oil a day, providing 20,000 barrels of gasoline that amounts to 2 percent of California’s needs. It provides a larger percentage of diesel fuel, 15,000 barrels a day, which is the equivalent of 6 percent.
Shell lost more than $50 million over the past three years on the Bakersfield refinery and is facing between $30 million and $50 million in turnaround and environmental costs on the facility, which is old (the original portion of the facility was built in 1932).
So, let’s see here. Rather than encouraging companies to invest and build new refineries that would address the economic problem of tight supplies in the Western part of the United States, our federal government is taking expensive legal actions against one of the relatively few companies in the refining business to minimize its losses in the business. My sense is that forcing companies to operate refineries at a loss is not a sound policy for addressing the problem of tight gasoline supplies in the West.
Separately, the FTC overruled an administrative-law judge and reinstated an antitrust complaint against Unocal for pursuing patents for a special low-emissions gasoline at the same time that the company was helping California regulators mandate that gasoline as a state standard. The complaint originally was filed in March 2003, but was overruled by the judge in November.

Stros break latest three game skid

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Roy O had his game face on and Jose Vizcaino did his best imitation of Lance Berkman as the Stros salvaged the final game of their series against the Padres, 5-1.
Oswalt was steady and unyielding, giving up six hits, three walks and a run in seven and a third quickly paced innings. After he uncharacteristically walked two straight with one out in the eighth, Jimy Williams pulled Oswalt in favor of Brad Lidge who secured the win by fanning four of the six batters he faced.
Viz had a two run yak in the first and three more hits (including two doubles) later in the game, which is an anecdotal performance that has the bad side effect of prompting Williams to overplay the normally light-hitting Viz (.319 OBP and .345 SLG. in 15 MLB seasons) for the forseeable future. The Stros had twelve hits — a veritable offensive explosion for them — but left 14 runners on base and failed to score after loading the bases in the first, second, and sixth.
The sixth inning situation was particularly egregious as the Stros loaded the sacks with no outs, and then Bags and Lamb whiffed, and Everett popped out weakly to second.
It is becoming increasingly difficult to watch Bags struggle at the plate. He has had a Hall of Fame quality career, but is now a tremendous burden to the Stros — a singles hitting first baseman who whiffs often and is owed an incredible $39 million over the next three seasons (at least Bags has an All-Star quality agent). Bags’ contract is the last big one the Stros have stemming from the overheated players’ market from several years ago, and it is my sense that the Stros simply need to bite the bullet and arrange the best deal possible either to pay a large portion of Bags’ contract in connection with a trade or simply buy out Bags’ contract. The Stros will lose between $10-13 million over each of the next three seasons on any such deal, but the first loss is always the best loss in this type of situation.
Bags is still the fifth most productive hitter on the team (behind Berkman, Beltran, Bidg, and Lamb), but he is now a relatively unproductive first basemen (currently ninth in hitting among first basemen in the National League) and it is much more likely that his decline will continue (his hitting statistics have been declining for over five straight seasons now) than turn around. Moreover, his continued presence prevents the Stros from retooling their club, including the move of Berkman to first, trying to ink Beltran to a deal, and playing younger players such as Jason Lane in the OF spot that opens by moving Berkman to 1B. Finally, by moving or releasing Bags, perhaps that would have the fringe benefit of prompting the Stros to release Bags’ buddy Brad Ausmus (-18 RCAA, explained here), who is now competing neck and neck with Neifi Perez in the race to become the most unproductive hitter among regular National League ballplayers this season.
The Stros now bus up the West Coast to Dodger Stadium for a four game weekend series with the Dodgers leading up to the All-Star break. The Stros’ starting pitching for the series is a bit up in the air, as the Stros recalled Brandon “Launching Pad” Duckworth (he has given up an incredible 10 yaks in only 25 innings this season) from AAA New Orleans to start one of the games. Andy Pettitte will start the Friday night game.

Ken Lay indicted

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A Houston federal grand jury has charged former Enron Chairman and CEO Kenneth Lay with an unknown number of crimes today under a sealed indictment. The indictment will be unsealed in a hearing tomorrow morning, at which time Mr. Lay is expected to make his initial appearance in the criminal case. At the same time, the Securities and Exchange Commission is expected to charge Mr. Lay with an assortment of civil securities fraud charges.
Mr. Lay served as Enron’s chief executive for 15 years and was running the company when it collapsed into bankruptcy in December 2001. The indictment is expected to charge Mr. Lay for his alleged role in a broad scheme to manipulate Enron’s financial statements, similar to the charges that are pending against former Enron CEO and COO, Jeffrey Skilling and former chief Enron accountant, Richard Causey. Assuming that the indictment is as broad as the one against Messrs. Skilling and Causey, Mr. Lay will be facing what amounts to a life sentence in prison.
Meanwhile, this NY Times piece provides a good overview of the going concern liquidation of Enron’s assets that has been taking place in the company’s chapter 11 case.

Wacky World of Japanese Ice Cream

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It’s hot in Houston right now, so thoughts turn toward ice cream. But not these Japanese ice cream flavors. Hat tip to my nephew Richard for the link, I think. ;^)

Inquiry finds that chief Medicare actuary threatened over disclosure of true cost of prescription drug plan

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This NY Times article reports on the finding of an internal Department of Health and Human Services investigation that Thomas A. Scully, the former top Medicare administrator, threatened to fire Richard S. Foster, the program’s chief actuary, if Mr. Foster told Congress the true probable cost of the drug benefits to be provided under the Bush Administration’s Medicare prescription drug benefit legislation passed last year. Here is an earlier post on this flap.
Interestingly, the report concluded that neither the threat nor the withholding of information violated any criminal law. The report accepted the Justice Department’s view that Mr. Scully had the final authority to determine the flow of information to Congress and that the actuary had no independent authority to disclose information to Congress. Mr. Scully, who resigned in December, 2003, denied threatening Mr. Foster but acknowledged having told him to withhold the information from Congress.

Stros lose again

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The punchless Stros continued their quest to become an afterthought in the race for a playoff spot as they lost their second straight game to the Padres at Petco Park on Tuesday night, 5-3. The hapless Stros are now 42-41 on the season and nine games behind the Cards in the NL Central.
This game was fairly typical for this Stros team as they cranked out their usual 8 total bases, 4 of which came on Ausmus‘ solo yak in the fifth. With that crank, Ausmus finally achieved double figures in extra base hits this season — it took him “only” 67 games to do so. Alas, he still has hit into more double plays than extra base hits. Bags — the highest paid singles hitters in baseball — had a 2 run single, which completed the Stros’ offensive outburst. Starting pitcher Pete Munro was equally mediocre, giving up four runs and seven hits in four innings.
Roy O at least gives the Stros a chance on Wednesday night against the Pads’ Jake Peavy, who has one of the best ERA’s in the league. Just what the Stros’ hitters need at this point. After this game, the Stros travel to L.A. to face the Dodgers over the weekend in a four game set.

UT School of Public Health announces new dean

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Guy S. Parcel, Ph.D has been appointed to a three-year term as dean of The University of Texas School of Public Health at Houston in the Texas Medical Center.
Dr. Parcel, who is currently executive dean, will take over the deanship when Dr. R. Palmer Beasley retires in December. Beasley has served as UT School of Public Health dean for more than 17 years and is now completing a two-year term as chairman of the Association of Schools of Public Health. The appointment makes Parcel only the third dean in the 35-year history of what is the oldest school of public health in Texas. Dr. Parcel, a John P. McGovern Professor in Health Promotion at UT School of Public Health, was appointed executive dean in February 2003 and had previously served as acting dean of the school on several occasions.
The UT School of Public Health is ranked as the fifth-largest in student enrollment and seventh in research funding. About 50 percent of the school’s more than 3,000 graduates work in Texas.

The economic absurdity of light rail systems

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Molly D. Castelazo is a research associate and Thomas A. Garrett is a senior economist at the Federal Reserve Bank of St. Louis. They authored this article that analyzes the bad economics of the St. Louis light rail system and includes a devastating chart reflecting how it would have been much more economically prudent to buy a new Toyota Prius for all the light rail riders than to build and maintain the light rail system. The entire article is well worth reading, particularly for Houstonians who have funded a similar boondoggle, and the authors make the following concluding observation:

If light rail is not cost-efficient, nor an effective way to reduce pollution and traffic congestion, nor the least costly means of providing transportation to the poor, why do voters continue to approve new taxes for the construction and expansion of light-rail systems?

One economic reason is that the benefits of light rail are highly concentrated, while the costs are widely dispersed. The direct benefits of a light-rail project can be quite large for a relatively small group of people, such as elected officials, environmental groups, labor organizations, engineering and architectural firms, developers and regional businesses, which often campaign vigorously for the passage of light-rail funding. These groups would benefit from light rail, not from the subsidization of cars and money to all potential riders of light rail.
The costs of light rail, while large in aggregate, are often small when spread over the tax-paying population. (The cost of light rail in St. Louis totals about $6 per taxpayer annually). A large group of taxpayers facing relatively minimal costs can be persuaded to vote for light rail based on benefits shaped by the interested minority, such as helping the poor, reducing congestion and pollution, and fostering development. Even if these benefits are exaggerated and the taxpayer realizes the cost-ineffectiveness of light rail, it is probably not worth the $6 for that person to spend significant time lobbying against light rail.
Proponents of light rail argue that it will create jobs, foster economic development and boost property values. While there is some academic evidence of these benefits, it is important to realize that they are not free to society?light rail is kept afloat by taxpayer-funded subsidies that amount to hundreds of millions of dollars each year.
Concentrated benefits and dispersed costs are one economic reason for the existence of inefficient public projects. The many who stand to lose will lose only a little, whereas the few who stand to gain will gain a lot. Of course, if other public projects exist where overall costs outweigh benefits, then $6 a year per project could add up to quite a hefty boondoggler?s bill.

Dr. Barton Smith, University of Houston professor of economics and director of the UH Institute for Regional Forecasting, is the leading expert on the regional economics of the Houston metropolitan area and has prepared a similar analysis regarding the Houston Metro light rail system.
Alas, I do not expect the Houston Chronicle to address this issue anytime soon. Hat tip to Professor Gordon for the link to this study.