• Brookings Report Shows Suburbs Were Key to Poverty Growth Last Decade

    The last decade was a bad one for poverty in America, according to a new report from the Brookings Institution.  After the economic growth of the 1990s brought "near record lows in the poverty rate and considerable declines in the number of high-poverty neighborhoods", the early 2000s saw those numbers shoot back up.  And there is some data that shows that suburbs led that growth.  Brookings researchers Elizabeth Kneebone and Emily Garr write:

    In 2000, the greatest share of the poor lived in the primary cities of the country’s largest metro areas. These cities were home to almost 400,000 more poor than their suburbs, and the balance of the poor population was more likely to live in non-metropolitan communities than small metro areas. However, growth rates well above average in the suburban and small metro area poor populations have re-drawn the map over the course of the decade.

    Most notably, by 2008 a plurality of the nation’s poor lived in large metropolitan suburbs. Between 2000 and 2008, the number of these suburban poor increased by 25 percent—10 points above the national average and close to 5 times the growth rate for the poor in primary cities. Overall, suburbs gained more than 2.5 million poor individuals, accounting for almost half of the total increase in the nation’s poor population since 2000. Smaller metro areas saw their poor population increase almost 20 percent, a gain of 1.3 million poor over the eight-year period. At the same time, non-metro area and primary city poor populations also grew, but at much slower paces of 12.1 and 5.6 percent—or 842,000 and 582,000 people—respectively. As a result, by 2008 suburbs had overtaken primary cities as home to the largest share of the nation’s poor (almost one-third), and small metro areas housed more poor people than non-metro areas.

    Here's a look at the increase in the poverty rate in suburbs compared to other types of communities:

    And here's a look at the growth in the poverty rate for suburbs in the four major regions of the country:

    Read The Suburbanization of Poverty here.

  • 5.7% Growth for GDP in 4th Quarter

    The US economy grew at a rate of 5.7% in the fourth quarter of 2009, according to  data released by The Bureau of Economic Analysis this morning.  That represents the highest quarterly growth in 6 years, and the growth was largely on improving inventory data.  From the BEA release

    The increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, exports, and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, increased.

    The acceleration in real GDP in the fourth quarter primarily reflected an acceleration in private inventory investment, a deceleration in imports, and an upturn in nonresidential fixed investment that were partly offset by decelerations in federal government spending and in PCE.

    The Wall Street Journal's News Hub team--in this case Kelly Evans, Evan Newmark, and Dennis Berman--breaks down the data in their AM Report:

  • Jobless Recovery in Context

    Enrique Martínez-García and Janet Koech of the Federal Reserve Bank of Dallas take a look at the labor data of the past two years and compare our current situation with other post-World War II recessions.  And the comparison doesn't do our current situation any favors: 

    Looking at the evolution of the unemployment rate in depth and length, the 1973 and 1981 recessions are most similar to the current recession. The 1973 scenario warns us that unemployment could remain elevated for a long time. The 1981 scenario offers a more optimistic outlook, with a rather quick employment recovery and return to prerecession unemployment levels less than three years after the start of the recession.

    The jobless recoveries that followed the recessions of 1990 and 2001 suggest a bleak medium-term employment picture. Both recessions were rather mild in the short term, with small increases in the unemployment rate over the first year, but their effects lingered and kept unemployment above prerecession levels long afterward. Unlike the 1973 and 1981 episodes, the 1990 and 2001 experiences became closer to the post-World War II average over time.

    Read A Historical Look at the Labor Market During Recessions here.  

     

  • Richard Florida: 'Unleashing the Creative Economic Revolution'

    Richard Florida has been advising cities on how to appeal to the most innovative companies and employees for several years now.  And his books, especially The Rise of the Creative Class, have sparked some interesting public debates on just what urban centers need to do to become innovation centers.  Nearly a year ago we highlighted Florida's extensive article in The Atlantic in which he pushed the notion that the global economic crisis would "reshape" cities.  He is still pushing this idea, and in a recent interview with Big Think, he discussed how a "new class of thinkers," is set to emerge:

    Watch the full interview here.

  • Twitter Local Trends and Small Business

    The social networking game-changer Twitter is releasing a new feature called Twitter Local Trends, which is designed to give users a read of what is hot in their local area or state.  Lisa Barone of Small Business Trends has high hopes for the new feature, and believes it has the potential to be very useful for small business owners:

    I’d like to see Twitter Local Trends be not only a way to create a feed for people who mention a specific area, but also a way for people to identify where they’re from, especially if Twitter starts breaking down locations to become more specific (which is what I hope happens). Location is what creates relevance in social media for a small business owner. The tighter these services allow SMB owners to narrow down, the better we’ll all be able to build awareness with the people who matter the most to our businesses. You can follow only the people in your area to let them know about events, what your business is up to and maybe to find partners. You can target your message to a much a smaller, much more relevant user base. It also gives business owners greater power to create a local street team when you can get local events to trend the way we see worldwide events trend right now.

    Read Twitter Begins Adding Twitter Local Trends here.  

  • Barry Ritholtz has Questions About Apple's Latest Product

    Apple is introducing a new product today, and the company has remained highly secretive about it.  But anticipation has been so high, that anyone should be excused for believing that an Apple e-reader--whether called a tablet or an iSlate--already exists.  There is a lot of pressure now on the new product to save publishing and reinvent advertising for magazines and newspapers in the digital era.  Barry Ritholtz,our favorite finance blogger, has 5 questions about the new product:

     Is the iSlate a category killer, like the iPod?

     Is the iSlate a game changer, like the iPhone?

     Can the iSlate rescue the publishing industry?

    • How does this position Apple versus its peers?

    • What does this do to the competitive landscape?

    Read the full post at The Big Picture, here.  

  • Case-Shiller Data for November: Prices Continue to Decline, But Rate of Decline Slows

    Standard & Poor's released data on the Case-Shiller Home Price Indices for November, and the news is, as the S&P release states, decidedly "mixed."  Housing prices were still falling in November, but the rate of decline improved for the 10th straight month.  From the report:

    The chart above shows the index levels for the 10-City and 20-City Composite Indices. As of November 2009, average home prices across the United States are at similar levels to where they were in late 2003. From the peak in the second quarter of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. The peak-to-date figures through November 2009 are -30.0% and -29.2%, respectively.

    California cities showed real improvement over October's data--Los Angeles, San Diego, and San Francisco all had prices go up in the month.  Phoenix had the biggest jump from October--a 1.1% gain--but is still behind only Las Vegas with the second largest decline in year-over-year data (Las Vegas has a 1-year change of -24.5%, compared to -14.2% for Phoenix).  Dallas (1.4%), Denver (0.5%), San Diego (0.4%), and San Francisco (1.0%) are the only cities included in the twenty-city composite indices to have positive 1-year changes. 

    Read the full report here.

  • Britain Exits Recession

    0.1.  Not a very imposing number.  But the very fact that it is 0.1 and not -0.1 or even 0.0 is the key.  Because in the lat quarter of 2009, Britain experienced 0.1% growth.  And that means the UK has finally joined the US and the other major economies in exiting recession.  Here's a map from the Guardian that marks European nations that have exited recession at this point:

    Use an interactive version of the map at The Guardian by clicking here.  

    The Guardian's Ashley Seager points out that the figures are disappointing and lower than economic forecasters projected.  And while the announcement brings about a sense of "relief," he is bracing for a slow and difficult recovery:

    That is not to say that the first quarter could not bring a nasty surprise and show contraction again, as has often happened at the tail-end of previous recessions. Indeed, we always need two consecutive quarters of contraction to say we are in recession. It might be safer to wait for a positive first quarter figure to declare this one definitely over.

    The question is, though, where do we go from here? The answer is, hopefully, upwards. But in truth the recovery could be a slow, protracted affair. The consumer is still weighed down by debt, and unemployment, though seemingly topping out, is still very high. Household finances are also going to get squeezed by a fiscal tightening that will begin some time after the general election.

    Remember, too, that the banking system remains extremely fragile and banks largely unwilling to lend. The conditions don't look to be in place for the sort of V-shaped rebound that the economy has seen in the past after recessions.

    Read Recession's over but we're now out of the woods yet here.

  • Sachs on Rebuilding Haiti

    In a Project Syndicate commentary, Jeffrey Sachs argues that rebuilding the Haitian economy will require creating an infrastructure that works, and focusing on a handful of key areas:

    The economy will have a simple structure in the coming years, with most economic activities focused in five sectors: smallholder, or peasant, agriculture; reconstruction; port services and light manufacturing; local small-scale trade; and public services, including health care and education. The key challenge is to support these five sectors in order to combine short-term relief with long-term reconstruction and development.

    First, special efforts should be made to boost peasant agriculture and rural communities. This will enable hundreds of thousands of displaced people to return to their village communities and live from farming. With fertilizer, improved seeds, small-scale irrigation, rapid training and extension services, and low-cost storage silos, Haiti’s food production could double or triple in the next few years, sustaining the country and building a new rural economy.

    Reconstruction – of roads, buildings, and water and sanitation systems – will employ tens of thousands, perhaps hundreds of thousands, of Haitian construction workers, and boost the regeneration of towns. The World Food Program can help peasant farmers to produce more food in the countryside and then purchase the food to use in food-for-work programs oriented to construction projects.

    Read Reconstructing Haiti here.

  • The Hayek vs Keynes Rap

    The highly anticipated (at least in some circles) Hayek vs. Keynes rap video is now available from Econstories.tv.  Creative director John Papola.  "Creative economist": Russ Roberts of Cafe Hayek and George Mason University:

    Lyrics and a free download are available here.

    And NPR's Planet Money brought Roberts and Papola together with pop superstar Kesha to discuss the project.  Take a listen here.  

  • Four Vulnerabilities in the World Economy

    Philip Suttle--longtime J.P. Morgan economist and now Director of Global Macroeconomic Analysis at the Institute for International Finance--shared his big worries about the global economy in 2010 at a Carnegie Endowment panel discussion earlier this month.  Suttle said there are many reasons to feel good about the state of things moving forward, but that he sees four potential vulnerabilities: oil, turmoil in the US treasury market, tensions in the Euro Zone, overly aggressive actions "to curtail bank activity."

    You can watch the full panel discussion, titled Happy New Year?: The World Economy in 2010 here.  

  • Mark Thoma Calls for More Attention to Automatic Stabilizers

    Mark Thoma stresses the importance of automatic stabilizers--food stamps and other "taxes and transfers" that "automatically change with changes in economic conditions in a way that dampens economic cycles."  Over at MoneywatchThoma writes that these stabilizers are key in mitigating the impact of economic downturns.  And yet we have spent so little time discussing them during the past two years, largely because, Thoma writes "automatic stabilizers bypass this difficulty by doing exactly what their name implies, they kick in automatically without the need for Congressional action."  

    We need to do a careful and thorough assessment of the strengths and weaknesses of existing automatic stabilizers, to identify missing pieces and extraneous parts, and we need to design new stabilizers that can improve our ability to smooth fluctuations in the economy (e.g. payroll taxes that decline automatically when conditions deteriorate, investment tax credits that vary countercyclically, or a continuously updated list of infrastructure projects that can be started ahead of schedule or brought online anew if the economy goes into recession). Then we need to begin the difficult political process of getting the needed change through Congress and signed into law before the next crisis hits.

    Read The Importance of Automatic Stabilizers here.

  • Google Revenue Up 17% in 4th Quarter

    Google rode strong advertising income to revenues of $6.67 billion last quarter.  That marked a 17% increase from October.  Net profits were $1.97 billion.  And while the figures were not as high as many investors expected--Google shares fell 5% late yesterday--the Wall Street Journal's Julia Angwin finds it remarkable that the internet giant can still be viewed as a "growth" company, even as it controls two-thirds of the search market. Angwin and Barron's Eric Savitz discuss the earnings report and other Google news at the Wall Street Journal's News Hub:

  • Public Pessimism on Recovery

    Over at the Freakonomics blog, Justin Wolfers takes a look at these findings from a recent Gallup Poll in which the pollsters asked people how long until recovery begins:

    This is very different from the view of economic forecasters.  And, Wolfers writes, it might have something to do with the variable weight of economic terms for the general public:

    It’s clear people are pessimistic about the economy. Very pessimistic. (I should quibble that the question is sort of leading; while any response was allowed, negative numbers don’t seem like a natural response.)

    But I think there’s something else at play here. There’s a disjunction between how economists use words like “recession” and “recovery,” versus how the general public understand these terms. According to the NBER approach, “A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.” So the recession has ended and the recovery has begun, but only because things got as bad as they are going to get. The “recovery” that we are in will take us from this low point, through some hard times, and hopefully, eventually, to a brighter place.

    Read What Is an Economic Recovery? Levels, Changes, and Changes-in-Changes here.

  • St. Louis Fed's Kliesen on the Threat of Inflation

    Is the threat of inflation in the eye of the beholder?  The St. Louis Fed's Kevin Kliesen has a new analysis of the potential threat of Inflation.  Kliesen suggests that it is important at this stage--the post recession period--to determine how big a threat inflation is to help steer Fed policy.  But in his analysis, he highlights how complicated this is, and he looks at how wide ranging opinion on the threat of inflation can be:

    A considerable amount of disagreement seems to exist among economists about the inflation outlook over the next few years. Some economists are quite worried about the potential for much higher inflation, while others are more concerned about the potential risk of inflation falling to uncomfortably low levels—or even the possibility of deflation (a fall in the aggregate price level). Much of this disagreement reflects, on the one hand, the Federal Reserve's aggressive response to the deep recession, the financial crisis and the exceptionally large federal budget deficits, and on the other hand, the downward pressure on wages and prices that typically occurs in the aftermath of a deep recession.

    Figure 2 depicts one way to gauge this disagreement. In Figure 2, the history of the Blue Chip forecasts of the average Consumer Price Index (CPI) inflation rate over the next five years is presented. The chart shows the average of the least optimistic inflation forecasts and the most optimistic inflation forecasts, as well as their difference (disagreement). During periods when inflation tends to be relatively high and variable, such as the late-1980s and early 1990s, there tend to be some sizable differences among forecasters about the medium-term inflation outlook. By contrast, during periods when inflation tends to be relatively low and stable, such as the mid-1990s to mid-2000s, forecasters tend to disagree less about the inflation outlook. Since early 2007, though, the level of inflation disagreement among forecasters has increased.

    Here is the figure to which Kliesen is referring:

    The blue line is the difference between the average projection for CPI inflation by the least optimistic and the most optimistic forecasters. 

    Read Inflation May Be the Next Dragon To Slay here.  And watch Kliesen discuss the threat of inflation in this interview:

  • As Risks in Publishing Go Down, Will Authors Benefit?: Amazon To Give Some Authors 70% Royalties on Kindle Texts

    Amazon announced a new royalty option for authors of some Kindle books yesterday.  From the news release:

    "Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books," said Russ Grandinetti, Vice President of Kindle Content. "We're excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books."

    This represents a significant change for authors, and potentially another blow to publishers.  But it also makes us remember something noted tech guru/author Clay Shirky said in a speech at the 2008 Web 2.0 Expo in NY.  The speech was titled "It's Not Information Overload.  It's Filter Failure."  It wasn't directly about pricing.  But in the first few minutes of the speech, Shirky discussed how the invention of the printing press created "information abundance," because the cost of producing manuscripts dropped precipitously.  Then with the advent of the Internet (550 years later), the cost of publishing changed drastically again.  Anyone could publish.  And the key change was that the risk attached to publishing all but disappeared.  (Think about the Amazon announcement in this context: with digital platforms the "publisher" does not have to guess how many books to publish--so the risk of projection goes away.  Thus the author gets more of the revenue).  The rest of the speech may be less relevant, but still worth a look:

  • A Case for Small Businesses Lowering Prices

    Small Business Trends has reprinted an article by Susan Reid--business coach and author of Discovering Your Inner Samurai: The Entrepreneurial Woman's Journey to Business Success--in which she writes that now is the time to drop prices.  This period of early but slow recovery is the right spot because "things are about to take off" for small businesses.  She points to the film Mr. Mom, set in the recession of the early 1980s (Terri Garr and Michael Keaton fans: you'll have to read the full article--link below--to catch the relevance).  And she outlines the right approach with these key pieces of advice:

    Create an esprit de corps.
    Don’t set yourself apart from your target market. Find a way to connect with them emotionally and show them you are all in the same boat.  Example: We’ve all been through a lot during this recession and have gone through some tough times.
    Make sure you use strong wording when lowering your prices.
    Don’t be namby-pamby. Let folks know exactly what you are doing in bold, strong language. Example: We’re slashing the price of our services in half!
    Be entirely transparent and upfront about why you are lowing your prices.
    Don’t let there be a whiff of anything slightly off about your offer. Let people know exactly why you are lowering prices. Example: We know that many of you have wanted to use our services but found our prices were out of your budget.
    Be entirely clear in your call to action.
    Don’t apologize for asking them to take action. Tell them exactly what you want them to do and why.  Example: Check us out again! We’ve dramatically lowered the price on most of our products.
    Tell folks when you will be going back to your regular prices.
    Don’t waffle around about when you will return to regular pricing. Tell them what you’ll be doing and when. Example: In six months, when the economic crisis is over, we’ll go back to our regular prices.

    Read Begin Your Economic Recovery. Lower Your Prices Now! here.

  • IMF's Strauss-Kahn Calls on Asian Leadership to 'Secure New Economic Order'

    In a speech today at the Asian Financial Forum in Hong Kong, International Monetary Fund Managing Director Dominique Strauss-Kahn said he expects growth to exceed 3% around the globe in 2010, and he shared his "thoughts on how Asian leadership can help bring about the changes needed to secure a successful new economic order":

    In many Asian economies, stepping up public investment is an important part of the solution. Asia has significant long-term development needs, including in infrastructure and education.

    Investment in low-carbon, or “green” growth would also be useful. Technological innovation is key to managing climate change at a reasonable cost. And innovation in Asia is already making major contributions.

    And as I already noted earlier, in China a shift towards stronger private consumption will be essential for developing new sources of growth.

    The region’s long-term success will also depend critically on the active participation of Asian nations in international efforts to build a stronger global economy. As Asia’s economies have risen in global stature, so too has their voice on the international stage—and their responsibility to help find solutions to global policy challenges. As I mentioned, Asia is represented at the G-20 by six countries. And as you know, Asia will host the G-20 Leaders Summit in November.

    You can read the speech here.  Strauss-Kahn also addressed many of the issues in his speech in this interview with Hong Kong Trader Development Council:

  • Home Builder Confidence Lowest Since June

    Attendance is down at the International Home Builders Show in Las Vegas this week.  And so is confidence among builders across the US.  From the National Association of Home Builders:

    Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

    The January HMI fell one point to 15, its lowest point since June of 2009. Two of its three component indexes registered one-point declines, with the index gauging current sales conditions and the index gauging traffic of prospective buyers falling to 15 and 12, respectively. The index gauging sales expectations in the next six months held even, at 26.

    The HMI edged down by a single point in three regions, with the Northeast falling to 22, the Midwest down to 11 and the South declining to 16. The HMI fell three points in the West, to 16. 

    Read the NAHB report here.

  • Marketplace Whiteboard: Understanding Ratings Agencies and Potential Conflicts of Interest

    Key members of the Obama Administration testified before the Financial Crisis Inquiry Commission last week and pointed to insufficient regulation as a primary cause of the the near-meltdown of the US financial sector.  Among the targets for blame: ratings agencies.  Mary Schapiro, Chair of the SEC, argued that financial firms were too reliant on the agencies.  And others have criticized the agencies themselves for being too cozy with the institutions they rate.  Marketplace's Paddy Hirsch--himself a former Standard & Poor's employee--breaks down the criticism at The Marketplace Whiteboard:

    Ratings conflict from Marketplace on Vimeo.

  • John Bogle on Insitituional Investors and Lost Faith in the Markets

    John C. Bogle, founder of the Vanguard Group, writes, in today's Wall Street Journal, that corporate stewards have betrayed the trust of investors: "far too many of our corporate and financial agents have failed to honor the interests of their principals—the mutual fund investors and pension beneficiaries to whom they owed a fiduciary duty."  Bogle traces this betrayal to the rise of "institutional investors" over the last half of the Twentieth Century.  Institutional investors--mutual funds, and private and government pension plans--now control nearly 70% of stocks for US corporations, according to Bogle.  This is nearly double the percentage they controlled in 1975.  This growth in institutional investors has "linked the agents of corporate America with the agents of investment America," Bogle writes, and has brought several major changes to the way the US financial system operates.  Here are two examples:

    First, the folly of short-term speculation has replaced the wisdom of long-term investing as the star of capitalism. A rent-a-stock system has replaced the earlier own-a-stock system. In 2009, the average stock turnover appears to have exceeded 250% (changed hands two and a half times), compared to 78% a decade ago, and 21% barely 30 years ago.

    Result: The momentary illusion of the price of a stock took center stage, replacing the enduring reality of the company's intrinsic value—the discounted value of its future cash flow. Our newly empowered agents ignored the famous warning of Benjamin Graham in "The Intelligent Investor" that "in the short run, the market is a voting machine; in the long run, it is a weighing machine."

    Two, the financial sector became the driving force in the U.S. economy. During the past decade, revenues of stock exchange firms (excluding trading gains or losses) rose to an estimated $375 billion from $200 billion, and mutual fund fees and expenses rose to nearly $100 billion from $47 billion. The higher these intermediation costs, of course, the lower the returns to investors as a group. Alas, in this Alice-in-Wonderland world of the financial markets, the investor feeds at the bottom of the food chain.

    Bogle calls for Congress to establish "a federal principle of fiduciary duty."  Read Restoring Faith in Financial Markets here.

  • COP January Report: Time For a Clear Plan to Unwind TARP

    In December, Treasury Secretary Timothy Geithner announced that his department is extending the Troubled Assets Relief Program through October 3, 2010.  So with less than ten months to go, part of the Treasury's responsibility will be to manage the end of TARP.  But as the Congressional Oversight Panel's January report points out, the impact of TARP will be felt for long after October.  And in their January report, the COP members call on Treasury to be more transparent in the department's effort to "unwind its stake in the financial markets":

    As Treasury enters the next stage of its administration of the TARP, it must learn from the mistakes it has made in the past – in particular, its failure to follow the money used to bail out large financial institutions. Because Treasury never required the institutions that received the first infusions of TARP funding to account for their use of these funds, taxpayers have not had a clear understanding of how their money has been used. As Treasury embarks on new programs, it must require that future recipients provide much greater disclosure of their use of TARP dollars.

    Finally, and perhaps most significantly, the TARP has raised the long-term challenge of how best to eliminate implicit guarantees. Belief remains widespread in the marketplace that, if the economy once again approaches the brink of collapse, the federal government will inevitably rush in to rescue financial institutions deemed too big to fail. This belief distorts prices, giving large financial institutions an advantage in raising capital that mid-sized and smaller banks – those not too big to fail – do not enjoy. These implicit guarantees also encourage major financial institutions to take unreasonable risks out of the belief that, no matter what happens, taxpayers will not allow their failure. So long as markets continue to believe that an implicit guarantee exists, moral hazard will continue to distort prices and endanger the nation’s economy, even after the last TARP program has been closed and the last TARP dollar has been repaid.

    Here is COP Chair Elizabeth Warren discussing the January report:

    Read the full report here.

  • Kauffman Foundation Study on the Consistency of Firm Formation

    Dane Stangler and Paul Kedrosky--senior analyst and senior fellow, respectively, at the Ewing Marion Kauffman Foundation--have put together a comprehensive paper on the number of companies started in the U.S. year over year.  They find the number surprisingly consistent.  Here's a look at the numbers from the Census Bureau:

    The data does not include our recent global recession, but it is striking to be sure.  The Stangler and Kedrosky examine several possible explanations in this early study of the data.  But the numbers available do seem to back up the notion that the U.S. is a highly entrepreneurial country.

    It remains to be seen, too, how the severe recession of 2007 09 will affect new-firm formation in the United States. Early indicators are mixed, with some showing a rise in entrepreneurship and others showing a decline. Nevertheless, it's clear from the evidence presented here that entrepreneurship the creation of new firms and the jobs and innovations they bring is a persistent phenomenon in the United States economy. At any given time, hundreds of thousands of Americans are prepared to take a leap into the unknown and pursue an idea. Policies will affect this number at the margins, but the most important thing we can do to promote entrepreneurship is to provide a hospitable environment. Entrepreneurs are the bearers of often-discomfiting change and we must continue to ensure that such change is not prospectively discouraged, but welcomed and celebrated.

    Read EXPLORING FIRM FORMATION: WHY IS THE NUMBER OF NEW FIRMS CONSTANT? here.

  • Starwood's Barry Sternlicht Says Real Estate Remains Good Investment, For Those Who Use Common Sense

    There has not been much good news for the commercial real estate market of late.  But Barry Sternlicht, chairman and CEO of Starwood Capital Group, argues it is a good place to invest.  As long as you are patient, he says in this interview from the Knowledge@Wharton Real Estate Forum, "growth will bail you out."  He also says investing in real estate is "not that hard," as long you "keep common sense":

  • Vernon Smith on Bubbles, and Why This One Was Different

    2002 Nobel Memorial Prize winner Vernon Smith, Professor of Law and Economics at Chapman University School of Law, is at the forefront of research into market bubbles.  He says the more cash in the system, the bigger the bubble--even if all other factors remain the same.  And, he says, past bubbles, like the dot.com bust at the beginning of this century, have not had the power to drag down the economy when they pop.  But the housing bubble was different.  With bubbles in the stock market, investors take a hit when things go wrong.  But with the housing bubble, banks took a massive hit, which then spread throughout the entire economy:

    Watch the full interview with Smith here.