Note: if you can't view the GOOD site, click here for the full graphic.

"Gas Prices" is issue #4 in the free "GOOD Sheets" series from GOOD and Starbucks. Each issue focuses on one topic, and unfolds from a square about the size of a CD case into a large graphic that explores the topic in stats, pics, and captions.

This week's topic is the price of gas, while last week's was immigration. Tomorrow a new one hits the stores on "The State of America's Schools."

"Getting Gas" [GOOD]

You can also buy print versions through Lulu and Flat World Knowledge for anywhere from $11 to $60, but it's free to download in Word and PDF formats. (Note: unless you plan on downloading it, you may want to skip the link to avoid wasting the professor's bandwidth—here's a screencap of the otherwise unremarkable page for the curious.) The New York Time says that it's not a widely used text yet, but Harvard is among the colleges using it.

The article also takes a look at Connexions, an open source textbook project that allows users to mix and match existing content according to CC licenses and sees 850,000 unique users a month.

And then there's CourseSmart, an online service backed by five dead tree publishers that sells limited access to printed textbooks for a discount of up to 50% over the print version. We haven't tried CourseSmart ourselves, but the Times' description of it makes it sound like a deliberately constrained "service" dreamed up by companies that don't want to hurt their $200-a-copy golden goose, but want to take advantage of the market they created in the first place when they priced their books so high. Which, okay, sounds like good business, but we still think they suck.

"Don’t Buy That Textbook, Download It Free " [New York Times]

"The thing can be an object: a book; a bag of grain; phone credit or a service: vaccination; hair cut; dentist check-up; charity donation; taxi ride; massage - the more variety the better."

They already have some interesting examples, a lamp made from recycled parts, delivery service in South Korea, two cans of soup, etc.

What can you buy for five dollars?

[via Kottke]

Reader Neal's receipt:

Gawker Media polls require Javascript; if you're viewing this in an RSS reader, click through to view in your Javascript-enabled web browser.

Customers can present their checks at a cash register at Sears and Kmart to convert it into a gift card at the full value of the check, and to receive a bonus gift card worth 10% of the check.

The cards can be redeemed at any Sears, Kmart or Lands' End retail stores, as well as sears.com and landsend.com, Hoffman Estates, Ill.-based Sears (SHLD, Fortune 500) said.

The promotion is scheduled to last between May 14 and July 19. The gift cards have no expiration and no fees.

Sears representative Kirsten Whipple said details for shoppers who elect to receive the fiscal-stimulus check by direct deposit are still being worked out, but they will likely be able to register online to receive a coupon to bring to stores.

Sears offers bonus to stimulus check shoppers [CNNMoney]
(Photo:OctopusHat)

Horwitz describes how, in the hours before Katrina struck, Wal-Mart's CEO laid out a ground plan of autonomy to store managers to do what they felt was best—in effect, giving them permission to take fairly radical actions that in other circumstances would have been considered criminal:

Another element of Wal-Mart's successful response was the great degree of discretion that the company gave to district and store managers. Store managers have sufficient authority to make decisions based on local information and immediate needs. As the storm approached, CEO Lee Scott provided a guiding edict to his senior staff and told them to pass it down to regional, district, and store managers: "A lot of you are going to have to make decisions above your level. Make the best decision that you can with the information that's available to you at the time, and, above all, do the right thing."
 
In several cases, store managers allowed either emergency personnel or local residents to take store supplies as needed. They did not feel the need to get pre-approval from supervisors to do so. A Kenner, Louisiana employee used a forklift to knock open a warehouse door to get water for a local retirement home. In Marrero, Louisiana employees allowed local police officers to use the store as a headquarters and a sleeping place as many had lost their homes.
 
In Waveland, Mississippi assistant manager Jessica Lewis, who was unable to reach her superiors to get permission, decided to run a bulldozer through her store to collect basics that were not water-damaged, which she then piled in the parking lot and gave away to residents. She also broke into the store's locked pharmacy to supply critical drugs to a local hospital.

To the extent that Wal-Mart (and market capitalism more generally) have both encouraged people to deal with each other on the basis of voluntary exchange rather than force and have raised the standard of living so greatly, especially of the poor, they have made the world a more peaceful place. And in the long run, their contributions to peace are probably far greater and longer-lasting than the politicians and social missionaries who normally get the Prize.

Thanks for linking to my study on Wal-Mart and Katrina. I've been reading the comments section and rather than post myself, I thought I'd email you with three clarifications/corrections that you can either add yourself or tack to the end of the entry or just ignore. :)
 
1. I do NOT work for Wal-Mart. I sometimes shop there though. I'm a college professor at the opposite end of the country from the Gulf Coast and equally far from Bentonville. [He's a professor of economics at St. Lawrence University in New York.]
 
2. The wikipedia entry on Austrian economics is pretty good explanation of what the school of thought is about: http://en.wikipedia.org/wiki/Austrian_School
 
3. The 1112am commenter about what an Austrian economist supposedly said about 20-30% unemployment etc, is simply false. Nor does Austrian economics say everything should be "left to corporations."

Consumer Confidence Down Sharply [NYT]
(Photo: Getty)

There are mounting anecdotal signs that beginning in December Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy.

A raft of consumer companies — high-end stores like Nordstrom and Tiffany, and middle-of-the-road ones like Target and J. C. Penney — reported a pronounced slowdown in growth last month, and in several cases an outright drop in business.

American Express said that starting in early December the growth in the rate of spending by its 52 million cardholders, a generally affluent group of consumers, fell 3 percentage points, from 13 percent to 10 percent, the first slowdown since the 2001 recession.

And consumer confidence, an important barometer of economic health, has plunged. Andrew Kohut, president of the Pew Research Center, says consumer satisfaction with the economy has reached a 15-year low, according to the firm's polling.

Even wealthier consumers, who were seen as invulnerable to rising gasoline prices and falling home values, are feeling the squeeze.

"People are clearly concerned that we are headed into a recession," said Stephen I. Sadove, the chief executive of Saks Fifth Avenue, the upscale department store whose runaway growth throughout much of the year slowed markedly in December.

Even in tough economic times Americans rarely reduce their consumption, preferring instead to slow the growth in their spending. Since 1980, they have cut spending in only five quarters — a total of 15 months — most of them in the depths of a recession. The 2001 recession passed without a cutback in consumer spending.

Only once before, in 1980, did consumer spending fall during a presidential election year, helping Ronald Reagan in his campaign against Jimmy Carter, the Democratic incumbent.

Americans Cut Back Sharply on Spending [NYT] (Thanks, Molly!)
(Photo:Ben Popken)

One reason the Times selected the book is that, unlike so many "problem" books, it provides a series of possible solutions at the end.

It includes some steps that should be widely popular, like giving doctors incentives to explain the risks and benefits of procedures more clearly than they do now. Research has shown that patients frequently decide against marginal care when they know the true risks and benefits. Malpractice laws would also need to be changed so doctors were not sued by patients who later changed their minds.

Other solutions would be more difficult—because medical evidence is often murky, because hospitals and insurers would fight to keep their revenues and because most Americans think it's the other guy who's getting unnecessary treatment. These are the reasons that presidential candidates don't focus on wasteful treatment.

But models for reform are out there. Hospitals that don't use the fee-for-service model, like those run by the Veterans Health Administration, are already getting better results for less money. They closely track their performance—that is, the health of their patients—and motivate employees to improve it.

The U.S. also enjoys far greater access to the Chinese market than the other way around:

When it comes to foreign direct investment — or the corporate presence of the U.S. in China versus China's presence in the U.S. — the U.S. enjoys an overwhelming advantage over the mainland. In 2006, for instance, U.S. foreign investment in China on a historic cost basis totaled $22.2 billion, a figure well in excess of China's investment stakes in the U.S. The latter totaled just $600 million last year — a fraction (2.7%) of U.S. investment in China.

Read all ten facts about Chinese-U.S. trade at Kiplinger.

"The Top 10 Things Every Investor Should Know About U.S.-China Relations" [Kiplinger]
(Photo: Getty)

One is that not only should we not be giving corporations the special rights that humans are given, but we also shouldn't expect them to behave morally.

It's kind of an anthropomorphic fallacy, and it's very dangerous. Corporate social responsibility is a nice idea, but corporations will not be socially responsible, if by socially responsible we are suggesting that they sacrifice consumer deals and investor returns. They won't.

"Consumer-Driven Culture Is Killing Our Democracy" [AlterNet]

RELATED
"Do We Need "Separation Of Store And State"?"
"Has "Super-Capitalism" Outmoded Democracy?"

In general, those with loans get relief, those with savings get less.

Savings Accounts
Most banks take their lead from the Fed and are already starting to cut rates. High interest savings accounts closely follow the Fed; CDs and money market accounts have been reluctant to cut rates to stay competitive: "Savers are benefiting from the shaky credit markets, even as the Fed cuts rates. That's because banks are still looking to CDs and money-market accounts as a way to bring in funds, according to [Greg McBride.]"

Credit Cards
Variable rate interest cards are tied to the prime rate, which is in turn pegged to the Fed funds rate. Even though rates have dipped slightly, do not carry a balance on your credit card. Pay it off every single month, without fail.

Home Equity Loans/Lines of Credit
Home Equity Loans: No savings for you. Home equity loans usually come with fixed rates, and are not affected by rate shifts. Future borrowers may see a slight rate reduction as local banks respond to local conditions.

Home Equity Lines of Credit: So-called HELOCs are tied to the prime rate. Enjoy your savings.

Mortgages
Fixed-rate mortgages are tied to the 10-year Treasury note, not the Fed funds rate. These mortgages shift in response to long-term trends, not short-term rate adjustments.

Regular ARMs that reset annually are usually tied to the 1-year Treasury note, and may see some relief: "A borrower with a 5/1 ARM who five years ago started with a 5.3% loan, for example, will likely see a reset to 6.75% this year. Before the Fed's moves in September and today, that adjustment might have been to 7.5% or more."

Option ARMs are the sticklers responsible for the subprime meltdown. They are tied to the LIBOR, the London Interbank Offered Rate, upon which the Fed has no direct impact.

Assessing the Impact of the Rate Cut on Consumers [SmartMoney]
(Photo: Elsie esq.)

Wal-Mart could afford to give its employees better pay and benefits, but would it remain competitive if it did? In 2005 its profit margin on sales was around 3.5 percent. This came to about $6,000 per employee. So at least in theory, Wal-Mart has some maneuverability. If it boosted wages and benefits of all full-time employees by $3.50 an hour, the extra cost would still total less than 3 percent of Wal-Mart's sales in the United States. It could absorb that cost by raising its prices a bit or settling for somewhat lower profits. But few of us as Wal-Mart consumers would be happy to pay the higher prices. We might go elsewhere in search of better bargains. Certainly, few of us as Wal-Mart investors would be pleased with lower profits. We might move our money to where it could earn a higher return.

As power has shifted to us as consumers and investors, these issues have been eclipsed. We've entered into a Faustian bargain. Today's economy can give us great deals largely because it punishes us in other ways. We can blame big corporations, but we've mostly made this bargain with ourselves.

"The Conflicted Consumer" [AlterNet]

•The option to pay less than the minimum monthly interest owed on the loan is valuable for people with good self-control whose income fluctuates a lot. They can pay just a little in lean months and catch up in fat months. It's good for lenders, too, because they don't have to foreclose on people who fall behind, which is an expensive process. People with steady incomes don't need this feature, but having it doesn't hurt them.

•The fact that the loan is an ARM—namely, its rate fluctuates with market interest rates—is especially valuable to lenders. This is a subtler notion, but the idea is that if there are going to be a certain number of defaults in a pool of mortgages because of random bits of bad luck like a job loss or a divorce, the lender would prefer that they be concentrated during periods of high interest rates. Why? Because when market interest rates are high, the lender that forecloses and gets back (most of) its money can redeploy the cash in high-yielding alternatives. The lender would prefer not to foreclose and get its money back when rates are low and other options are unattractive. An ARM loan achieves what the lender wants. Borrowers, meanwhile, are neutral about whether they default in periods of high or low market interest rates.

•Finally, the economists say the optimal loan contract would outright ban getting a new loan from a different lender. There are no such bans. But they say that the prepayment penalties that are common in subprime loans are a good second best. How could that be? Because lenders will offer more favorable terms if they know that they'll be able to hang onto the loan long enough for it to be profitable. If they fear that the borrower will refinance at the drop of a hat, they'll give less favorable terms.

BusinessWeek cutely suggests that if the research is right:

...maybe it makes sense to get people to behave rationally through extensive, even expensive, consumer education.

• Savings yields: You'll earn less interest from money market funds, certificates of deposit, and the like.
• Stocks: As we've seen, there's been a big rally.
• People with option-ARM mortgages: Oops, you're still screwed.

What a Fed rate cut would mean to you [AZ Central via Money Crashers]
(Photo: Ms. President)

No longer. Now we are depressed. We've lost our confidence, consumers. Bloomberg reports that consumer confidence took its biggest hit since Hurricane Katrina made us all feel vulnerable and sad. From Bloomberg:

The New York-based Conference Board's index of confidence declined to 105 from 111.9 in July. Economists had expected a reading of 104, according to a Bloomberg survey. Earlier today, another report showed home prices in the U.S. dropped by a record amount in the second quarter.

The housing recession is making it harder for Americans to tap home equity to finance the spending that accounts for 70 percent of the economy. A slowdown in hiring and slimmer pay raises may further weaken consumer sentiment and buying power.

U.S. Consumer Confidence Falls by Most Since 2005 [Bloomberg]
(Photo:Jimmy Legs)

(Photo: amyadoyzie)

On June 4, corn sold for $3.77 a bushel. A year ago, the price was just $2.25 a bushel. That's a 67% jump in price in a year. (The futures markets say prices will stay here, too, with corn for December delivery selling at $3.83 a bushel on June 4.)"

Dairy market forecasters are warning that consumers can expect a sharp increase in dairy prices this summer. By June, the milk futures market predicts, the price paid to farmers will have increased 50 percent this year — driven by higher costs of transporting milk to market and increased demand for corn to produce ethanol. University of Illinois dairy specialist Michael Hutjens forecasts further increases of up to 40 cents a gallon for milk over the next few months. That would drive the cost of a gallon of whole milk around the country to an average of $3.78, based on the USDA's monthly survey of milk prices in 30 metro areas.

With corn so profitable to plant, farmers have shifted acreage from soybeans, for example, to corn. So it's not especially surprising that the price of a bushel of soybeans was up 36% as of June 4 from a year earlier."

How ethanol bites you in the wallet [MoneyCentral]
Forget worries about $4 gas ... now it's $4 milk [MSNBC]

RELATED: You Are What You Grow

So, what class are you? When you get done playing with that, the NYT has a special section on class that looks like it could eat up a chunk of our reading time. —MEGHANN MARCO

How Class Works [NYT]
Class Matters [NYT]

"The United States is the only country saying that what is happening in Darfur is a genocide," Ukec shouted, gesticulating wildly and perspiring from his bald crown. "I think this is a pretext."
...
"I want you to know that the gum arabic which runs all the soft drinks all over the world, including the United States, mainly 80 percent is imported from my country," the ambassador said after raising a bottle of Coca-Cola.

A reporter asked if Sudan was threatening to "stop the export of gum arabic and bring down the Western world."

"I can stop that gum arabic and all of us will have lost this," [Ukec] warned anew, beckoning to the Coke bottle. "But I don't want to go that way."

Denying Genocide in Darfur — and Americans Their Coca-Cola [Washington Post]

Coke itself was taxed first as a medicine, then as a soft drink, and survived sugar rationing. All the while, the price stayed at a nickel.

Part of Coke's problem was the cost of replacing vending machines that accepted only nickels—and the fact that the alternative, dimes, represented a 100 percent price hike. (The boss of Coca-Cola wrote to his friend President Eisenhower in 1953 to suggest, in all seriousness, a 7-and-a-half-cent coin.)

The Mystery of the 5-Cent Coca-Cola [Slate]
(Photo: damageinc86)

To measure the "Wal-Mart effect" on profits across different industries, Forbes analyzed information compiled by Revere to compare the percentage of sales that various firms generated through Wal-Mart in fiscal 2006 to the gross margins those firms produced during the same period, as compiled by FactSet . The survey covered 333 companies in six industry sectors—apparel & accessories, consumer games & electronics, household accessories, food & beverage, personal care and leisure goods—that Revere identified as heavy Wal-Mart sellers and their competitors.

Here's the basic idea. The more stuff you sell at Walmart the more dependant your company is on their various whims. The result? The most stuff you sell, the smaller your profit margin is. The gross profit margin is "percentage of profit realized before items like fixed costs and interest expense are considered,"

Forbes also has a nifty slide show showing the "Walmart Effect" on several companies. Yes, we know this isn't an economics blog, but we thought it was really interesting! —MEGHANN MARCO

The Wal-Mart Squeeze [Forbes]

In Pictures: The Wal-Mart Squeeze [Forbes]

For example, "Why hasn't Nintendo apologized for the shortage?" And, "Why haven't they ramped up production?" And, "Is this hurting game developers?" And, "Where's my damn Wii?"

3. Game vendors (including Nintendo) are hurt by this, since their TAM/CAM is held artificially lower. Since shelf life of a game is very much based on release date, this hurts the game developers.

4. It is unclear how much this has pushed sales of XBox360, PS3, PS2, and even older Gamecube devices. Since Wii has a quite different controller design, people are attracted to it. Normally, this would have benefited their competitors a lot according to economic theory.

We Want a Wii! (Still) [Freakonomics]
(Photo:Michael T. Gilbert)

World of Walmart [via Kottke]

The Economist hosted a day of web-discussion and there was a national PBS broadcast of The Power of Choice: The Life and Ideas of Milton Friedman.

If you missed that, you can check out the wealth of Friedman videos on YouTube, from which we've selected a few:

The 4 Ways to Spend Money
Milton Friedman Advocates Legalizing Drugs
Free To Choose free webcast

— BEN POPKEN

The late Friedman was a leading economist, free-market proponent, and Nobel prize laureate.

The Economist will host a day of web-discussion and there will be a national PBS broadcast of The Power of Choice: The Life and Ideas of Milton Friedman.

Keep track of the events at Miltonfriedmanday.org.

— BEN POPKEN

Miltonfriedmanday.org [via Freakonomics]

He predicted the staglation of the 70's and argued that the Great Depression was exacerbated by the government's contraction of the money supply.

Friedman believed free markets lead to free people.

As seen in the clip above, Friedman was no fan of tariffs as he felt they imposed artificial restraints on consumer choice.

You can also thank him for developing the withholding tax, as well as the earned income tax credit. — BEN POPKEN

Milton Friedman NYT obit.

"As a result, wages and salaries now make up the lowest share of the nation's gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960's. UBS, the investment bank, recently described the current period as "the golden era of profitability."

And yet, somehow they can't afford meatier customer service.

I hate change. Not the variety beget by motion: that stuff's okay, at least until the Big Crunch. No, I loathe pockets full of rattling coin. I hated it when small, snot-nosed children would walk into the comic book store where I worked as a teenager and empty several moist, fungous socks full of pennies on the counter to pay for a funny book. I hate it now that I live in the EU and change comes in denominations up to 2 euro.

The penny is the most hated of all coins: when it's wet, it smells like semen. It's small. It's worthless. It had a tendency to go mossy. So good news! Now that it costs more to mint a penny than the loathed thing is actually worth, the penny is singing it's swan song.

Since you can't buy anything for a penny anyway, the only impact this would have is by rounding prices to the nearest nickel. Some critics claim this would screw poor people who can ill afford to pay an extra penny when their Hostess Crumb Cake is rounded up from 99 cents to 1 dollar. I don't know any poor people who don't look at a penny as imminently disposable, but if such people exist, the US Government can systematically execute them all if it will just get pennies out of my fucking life forever.

The Penny's End Is Near