Sunday, November 18, 2012

Awesome Post At

Jodi Beggs was giving the following task: “Could you talk a little bit about what behavioral economics is? And about your site? And about the economics of The Simpsons? Oh, and this meeting is joint with the Finance and Investing Club, so could you make it relevant to finance as well? By the way, you have 40 minutes.”

Here is what she came up with.

Wednesday, September 26, 2012

Proposed Ban on Demand Pricing for Uber.

In an article about regulating Uber,  a new kind of car service, in DC:
"Also in the proposed rules is a ban on “demand pricing” — a direct shot at a key part of the Uber business model, which hikes prices during periods of high demand to guarantee a supply of cars."

Saturday, September 22, 2012

Is Mancur Olson Right About Tax Rates?

I read Mancur Olson's “Dictatorship, Democracy, and Development” for a class last semester. In the paper is a prediction that autocratic regimes  will have tax rates higher than democratic regimes. This, Olson said, would be especially true when the current dictator felt their time was drawing to an end. He explained that leaders would press the population for as much money as they could. This didn’t seem intuitive to me, so I decided to look at some of the effective personal income tax rates from around the world and compare the results to the prediction Olson made.

The countries below are not randomly chosen. They are picked to represent various types of regimes existing around the world today. This blog post is only a toe dipped in the pool of data and not an attempt at finding empirical evidence.

Each of the regime examples includes a reason why it was picked. Some general information about the country is also provided. I chose the effective personal income tax rate because the mobility of people is very different than the mobility of a corporation. I feel it is also more in the spirit of Olson’s research, beginning with roving bandits and soon the settling of warlords in an area providing stability to the people (Olson, 1993).

The effective tax rate data comes from KPMG; Klynveld, Peat, Marwick, and Goerdeler. KPMG is one of the “Big Four” international auditing companies. They release the results of “The Corporate and Indirect Tax Rate Survey”. The survey is given to people all around the world and finds, among a number of tax rates inside countries, the effective individual income tax rates. The tax data used in this paper is from the most recent survey in 2011. All dollar amounts are in US dollars unless otherwise noted (KPMG, 2011).

So here they are: eight types of regimes currently in power. Two countries are examined under each regime type, when possible.

Parliamentary republic: India, Greece

India: The highest personal income tax rate is 30% and has remained at that level for the past nine years. The effective personal income tax rate of $100,000 of income is 27.4%. The highest rates for taxable income begin at $17,592. India has the highest personal income tax rate in southern Asia. Married couples file individual returns, except in certain circumstances of clubbed income.

Greece: The highest personal income tax rate is 45%. This was increased in 2010 and was previously 40%. The effective tax rate on $100,000 is 27.5%. Greece's personal income tax rate is not remarkable for the OECD countries. The highest rate for taxable income begins at $142,776. Married couples are taxed separately, but a joint return is filed.

Presidential republic: United States, Brazil

United States: The highest personal income tax rate is 35%. In has remained at that level for the past nine years. The effective tax rate on $100,000 is 18.6%. The personal income tax rate in the United States is not remarkable for an OECD country. The highest rates for taxable income begin at $379,150. This is the largest income amount for a highest tax bracket of all the samples. Married couples may choose to file jointly or separately, but the tax law provides some benefits for couples filing jointly.

Brazil: The highest personal income tax rate is 27.5%. This has remained the tax rate for the past nine years. The effective tax rate on $100,000 is 27.5%. The personal income tax rate is not remarkable for South America or the rest of Latin America. The highest rates for taxable income begin at $28,015. Married couples may choose to file jointly or separately.

Constitutional monarch: Kuwait, Monaco

Kuwait: There are no personal income taxes in Kuwait. Kuwait is one of five western Asian countries that do not have personal income taxes.

Monaco: There are no personal income taxes in Monaco unless the person is a French national. Even then there are three exceptions that can exclude a French national from income tax in Monaco.

Democratic parliament, constitutional monarch: Japan, United Kingdom

Japan:  The highest personal income tax rate is 50%. This has remained the tax rate for the past nine years. The effective tax rate on $100,000 is 16.1%. This is the lowest non-zero rate in the sample. Japan's nominal personal income tax rate is the highest in eastern Asia. But again, the effective tax rate on $100,000 is lower than any other country (with personal income taxes) listed in this paper. The highest taxable income begins at $221,400. Married couples, and even children, file separately in Japan.

United Kingdom: The highest personal income tax rate is 50%. This is an increase from 40% the previous eight years. The effective tax rate on $100,000 is 23.3%. The rate is not remarkable for OECD or European countries. The highest taxable income begins at $245,667. Married couples file tax returns separately.

Absolute monarch: Saudi Arabia

Saudi Arabia: In tradition with Islam, a Zakat “tax” on income and property is paid instead of an income tax. The money collected from Zakat is given to the poor. There is no other personal income tax in Saudi Arabia.

Military junta: Egypt, Fiji

Egypt (prior to revolution): The highest personal income tax rate was 20%. Prior to 2006 the highest personal income tax rate was 35%. The effective personal income tax rate on $100,000 was 20%. The rate was in line with other North African countries. The highest taxable income begins at $6,739. This is the second lowest top tax bracket in the sample. Only Vietnam is lower. Tax filing was the responsibility of the employer. Currently the country of Egypt is in transition. The data here is from before the recent fall of the regime.

Fiji: The highest personal income tax rate is 31%. This has been the rate for the past nine years. The effective personal income tax rate for $100,000 is 28.3%. The nominal tax rate is low for Oceana. The highest taxable income begins at $8,838. This is the third lowest of the countries listed in this paper

Single political movement state: China, Vietnam

China: The highest personal income tax rate is 45%. This rate has been unchanged in the past nine years. The effective personal income tax rate on $100,000 is 22.1%. The nominal tax rate is not remarkable for eastern Asia. The highest taxable income begins at $185,748. Married couples file taxes separately.

Vietnam: The highest personal income tax rate is 35%. This has steadily declined since being a rate of 50% in 2003. Even 35% is high for Southeast Asia. The effective personal income tax rate on $100,000 is 28.5%. The highest taxable income begins at $3,877. This is the lowest of the sample.

Directorial system: Switzerland

Switzerland: The highest personal income tax rate is 40%. It has been this rate since 2008 and prior to that the rate was 40.4%. The effective personal income tax rate on $100,000 is 11.4%. Locations inside Switzerland alter tax brackets and rates. No simple amount can be given for the beginning of the highest taxable income bracket. Married couples file jointly.

Putting the Information Together:

Highest Top Nominal Personal Income Tax Rate Bracket:

The four countries with the highest nominal personal income tax rates in the sample are: Japan and United Kingdom at 50%, China and Greece are at 45%. It's interesting that both Japan and the UK share the highest nominal rate and they are both Ceremonial Monarchies. Greece, a Parliamentary Republic is similar enough to fall into the same observations of the UK and Japan. Olson predicted regimes such as an Absolute Monarchy and other autocratic regime types would have these high tax rates. One thing to consider when seeing these high nominal rates is these three countries also have high incomes for their top tax bracket and the fact that all three countries have married couples file separately. This lowers the number of people inside the country that actually pay the high nominal rate on personal income. China, too, has a high income for the highest tax bracket and separate filing for couples. This would be expected with the collective goals of the Chinese government and in line with Olson's observations.

Lowest Top Nominal Personal Income Tax Rate Bracket:

Of the countries with personal income taxes, the three with the lowest top nominal personal income tax bracket on this list are Egypt (prior to collapse of the government), India and Fiji. India has a top nominal tax bracket rate of 30% and is a Parliamentary Republic. Olson’s prediction would hold because the government of India would not want to raise taxes in such a way that the people could become dissatisfied and vote elected officials out of office. However, Egypt and Fiji are the two Military Junta governments on the list and instead of the expected high nominal tax rates Olson might imagine, we see them having two of the lowest.

Highest Effective Personal Income Tax Rates (on $100,000 of income):

Three of the four countries with the highest effective tax rates are countries that put importance on social services of citizens. Vietnam is at 28.5%, Brazil and Greece are both at 27.5% for an effective tax rate on $100,000 of income. These high tax rates are to be expected due to the cost of distributing goods and services to others with less. Fiji is second only to India for its high effective tax rate of 28.3%. Olson’s prediction holds here because Fiji has a Military Junta regime.

Lowest Effective Personal Income Tax Rates (on $100,000 of income):

Switzerland, Japan and the United States have the lowest effective personal income tax rates on $100,000 of income. But the Military Junta of Egypt is fourth with a 20% effective tax rate. So the low rates of 11.4% in Switzerland’s Directorial System and the 16.1% rate in Japan’s Ceremonial Monarch system, and 18.6% in the United States’ Presidential Republic support Olson’s thoughts that citizens being able to vote politicians out of office keep the tax rates low. Yet Egypt is fourth on the list and this goes against the prediction. Note, though, that Egypt has the second lowest dollar amount for their highest tax bracket. There are a broad section of people in Egypt paying this top tax amount.

Zero Personal Income Tax:

There are three countries in this group. The two constitutional monarchs, Kuwait and Monaco have no personal income taxes. Monaco does have a tax provision for French nationals inside the country, but even that comes with three wide exceptions. The third country is the absolute monarch of Saudi Arabia. Instead of a personal income tax, Saudi Arabia uses a traditional Islamic tax law called Zakat. Zakat is not a personal income tax and the payments made with Zakat are a very small percentage of a person’s money and are given to the poor.

These are three governments Olson would expect to tax citizens at very high rates. Instead they are the lowest in the survey. While Kuwait and Saudi Arabia are both large producers of oil and see huge incomes from its sale, Monaco does not export oil, it has tourism and gambling. These three examples of regimes that could dominate the citizens, but instead charge no personal income taxes, are evidence of Olson’s prediction being wrong for countries existing today. Seeing these as outliers because of their large profits from oil or casinos, I began to search for other autocratic countries. But what current countries with this type of regime don’t have some odd trait that sets them as an outlier? If there was a correlation between a country’s main streams of income and its regime type, would these examples still be outliers?

The Future:

I'd be interested in collecting data from ALL countries, instead of these few, and see what patterns are found. Especially worth researching would be the tax rates of certain regimes prior to “unplanned” changes in leadership (seems like a great time since the Arab Spring and continuing unrest in other spots around the globe).

For Olson to be right we should see modern autocrats taxing at elevated rates and then increasing the rates even higher when they suspect their time is drawing to an end. The beginning of the end for Egypt is shown in the above data and instead of seeing taxing going up, we see tax rates in 2011 lower than they were prior to 2006. This could be evidence against Olson or it could be a regime trying to keep the citizens from uprising. One data point is much too little to make any arguments, but it is interesting to note.

Olson does seem to be correct that governments with democratic elections do not have the highest effective tax rates. His theory that politicians fear taxing too high will cost them reelection does have merit when looking at the small sample set in this paper.

A pattern that is found in the sample is countries that put importance on equity and redistribution have some of the highest effective tax rates. This makes perfect sense because it is in line with their goals and social services are expensive to fund.

A better prediction than Olson’s might be that elected officials in democratic governments tend not to raise taxes so high they will not get reelected and countries with a taste for social justice have to tax at levels to meet their goals. Still, when it comes to the modern autocrats in the post, it’s not clear if they still tax like the warlords of the past.


Dictatorship, Democracy, and Development, Mancur Olson, The American Political Science Review , Vol. 87, No. 3 (Sep., 1993), pp. 567-576 Published by: American Political Science Association

KPMG’s individual income tax and social security rate survey 2011. (2011). KPMG INTERNATIONAL.

Tuesday, September 4, 2012

Loose Seat in a Ford Focus

I've got the tiniest little wiggle in the driver seat of my car. It just started. The area that is loose is a yellow plastic grommet that is part of the arm controlling the seat height. The bolt and nut are tight, but there is still play because of space between the bolt and this grommet. I don't have a solution for this problem yet, but I will update this post when I do. In the meantime, check this area if your Ford has a loose seat and try to think of solutions to keep the seat from jiggling.


Monday, September 3, 2012

Fix a Loose Fog Light on a 2010 Ford Focus SES

The driver side fog light was a little loose on my car. Tightening it turned out to be more of a chore than it should be.

Start by removing the plastic splash guard under the front bumper of the car. There are a set of 7mm screws around the underside edge of the bumper and three plastic fasteners in the middle of the plate. The plastic fasteners are removed by first popping the center disc away with a small screwdriver and then pulling the remaining fastener out.

Once all the connectors are removed you can pry the shield away from the bumper. I found it easier to only pry open the edge you'll be working on because putting the guard back in place is a pain for the little amount of time you're going to be working under the car.

The fog light is secured with a set of 7mm screws. Tighten them until the lamp no longer moves.


Put the splash shield back and tighten it down. Installing the screws first and the plastic fasteners last will help line everything up.

Sunday, September 2, 2012

Cleaning the Throttle Body on a 2010 Ford Focus SES

The main symptom I found was rough idle and surging while the car was stopped. The engine would move up to 1200 RPM and then drop down to under 500 RPM before recovering. Having the AC on or off would not change this. The car had 40, 000 miles at the time and I would bet the throttle body had not ever been cleaned before. So expect to clean the throttle body about every 30,000 miles so it doesn't get to the point where the engine struggles.


Start by opening the box holding the air filter. There are three clips that keep the top latched. Pull them away from the lid to loosen them. It can take some pressure to get them to move. Get ready, it'll take even more pressure to put them back on at the end of the job. Some earlier Focus models had a life-time air filter in a sealed box. I don't have any experience with these filters, but the removal process for these models will be different.


Once the lid to the cold air box is undone, remove the air filter and set it aside to protect it from damage. The hose attached to the lid goes to the throttle body. One hose clamp holds it on and it can be removed by twisting the screw on the clamp.


Move the hose and air box lid as far out of the way as you can. You're limited on movement because of sensors still attached to the air intake, but it doesn't have to move far for you to get to the area you'll need to clean.


This is what the inside of the throttle body looks like. I was surprised how clean it looked for as bad as the car was idling. It turned out all the gunk was on the other side of the bronze colored throttle plate.

Find a soft plastic shim to hold the throttle body butterfly plate open while you clean the inside. I used the handle of a small screwdriver. Use something big enough to hold the plate wide open and so it won't fall in, but small enough you can work around it.



Use a can of throttle body cleaner to wet the walls and plate of the throttle body. Let it soak for a few seconds and start cleaning everything with a rag. Make sure to clean the thin edge of the butterfly and as much of the walls as you can. Really focus on the edge of the plate and the wall area it butts up against. That's the gunk causing the issues. Respray and wipe away the dirt until you've got it as clean as you can. Close it all up and start the car. It might not start or run like normal at first because of the liquid cleaner still in the intake and the computer trying to control the newly cleaned throttle body, but after a few moments the idle will even out and should remain even from now on.

Thursday, June 7, 2012

Larger Oil Filter For The Ford Focus

The stock oil filter for the second generation Ford Focus (2007-2011) is Motorcraft FL910S. This is the same size as the stock oil filter for a 2.3L SAAB 9-5. That means the same extended oil filter that is about an inch longer than the stock filter will also work on the Focus.

Before switching to a larger oil filter on your Focus, I do have one warning about the location of the oil filter. Because the oil filter sits straight up and down near the front of the car, adding an inch to the filter length opens you up for someday damaging the filter if you run over something. I haven't installed this larger filter and I didn't get under the car with a measuring tape, but it looks like the larger filter would hang almost as low as the front lip of the car. So do this mod at your own risk. The Focus won't go far if it's missing the oil filter because you ran over a log or something.

But don't use Motorcraft filters if you're going to go for a larger size because they shrank the size of the FL-400S a few years ago.

 The stock oil filter part numbers for a 2.0L Ford Focus are:

Motorcraft: FL910S
Fram (xx)3614
STP S3614
Bosch 3330
Mobile M1-102
K&N (xx)-1001 

The longer oil filters that will also fit are:

Fram (xx)3600
STP S3600
Bosch 3422
Mobile M1-209
K&N HP 2009


Personally, I'm not going to use the bigger filters on my Focus. The risk of hitting the filter is too high in my view and the 2.0L Duratec 20 engines don't have the oil issues of the SAAB 9-5. But if you're looking for larger oil capacity or increased oil filtering, these long filters are available.


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Tuesday, May 22, 2012

Stop Rattling Noise From Sunroof

I was getting a "plastic on plastic" rattling noise from the sunroof area. It didn't take long to figure out what was going on and how to stop the sound.

The plastic finger grip knocks against the plastic trim of the headliner when the sunroof shade is completely closed.

Pulling the shade back a half inch keeps the two plastic parts from touching and stops the annoying noise from the sunroof. The edge of the shade extends about an inch past the hand grip cutout, so moving the shade a little doesn't let light in.

It seems obvious once you see what is going on; but it only happens while the car is moving. It's hard to figure out where the sound is coming from while you're busy driving down the street. I figure people with the same issue might search the internet for a solution and find this post.

Wednesday, May 9, 2012

Charging A Phone From Ford Sync USB Port

I use my phone as a GPS and I like to charge it while driving around. In my SAAB I used the 12-volt charger and it worked great because the socket in the 9-5 had switched power. It was only on when the car was running.

My Ford Focus has two 12-volt accessory power ports, but both are non-switched power and anything plugged into them runs if the car is on or not. Someday I'm going to wire one of these sockets to switched power. Until that day, I've been using the USB port for the Ford Sync system to charge my phone.

The first issue is my phone sees the Sync as something to connect to and I get a message asking if I want to go into USB device mode every time I plug my phone in. The second issue is the phone doesn't really charge from the Sync USB port. It is getting power, but the GPS program can pull more than the USB can give. So here's the solution to both problems:

Satechi makes a car charger to USB plug. You can find it on Amazon. It's tiny and sits nearly flush with the 12-volt port when it's plugged in. A bonus is it's rated for up to 2.1 amps so it can power just about any USB device out there.

The secret is it comes with a "smart converter" that goes between the USB port and the USB cable. The little dongle allows micro USB phones to connect to computers and USB wall chargers without triggering the "connect as a USB device?" prompt. Instead it enables quick charge.

The USB cable to keep in the car is one I found on Amazon and is a black and red cloth jacketed USB 2.0 to Micro B cable. I think it looks real nice. I keep it plugged into the car all the time (with the smart converter attached) and have routed it under the steering wheel, hiding the excess cable behind the dash.

Satechi 2.1 Amp Car Lighter USB Charger Adapter with Smart Converter

Cloth Jacketed USB 2.0 A Male to Micro B Cable

Sunday, April 29, 2012

2010 Ford Focus SES Original Invoice Prices for Car and Options

2010 Focus SES invoice price:

$17,489 +$725 destination charge


Options and invoice prices on my Ford Focus:

Power sunroof, upgraded sound system (401A Rapid Spec) $1,036

4-speed automatic transmission $709

Heated leather seats $704


Total invoice price for this Focus in 2010: $20,663

Used sticker price in 2012 (w/38k miles): $13,998


Options not included on my Ford Focus, with invoice prices:

Remote engine start: $363

Cargo mat: $63

Rubber floor mats: $66

Hood deflector: $74

Wednesday, April 18, 2012

"The Running Man" Vending Machine Scene

The Home Alone post got me thinking about prices in movies.

I thought of the scene in The Running Man (1987) where one of the characters is buying a $6 drink from a vending machine and she runs out of change after putting a handful of coins in the machine. The movie is set in the near future of 2017, so drinks from a vending machine being $6 at that time is plausible. The character even says "Six dollars, geez, this place" shows that the high price is still notable in 2017.

Depending on the drink, I'm paying $.60 for a can or $1.25-1.50 for a bottle. Our local grocery store has a machine that sells generic drinks for $.35. The college campus has machines that sell energy drinks, juices and chilled coffees for around $3. I'm sure $6 drinks in a vending machine already exists today in some places and will still exist in 2017. So the movie is in line with current prices, no problems yet.

The part that seems quaint today is that the machine only takes coins.

Saturday, April 14, 2012

The End of My SAAB Story

In April I sold the SAAB 9-5 and purchased a 2010 Ford Focus. I guess this will be the end of my SAAB posts.

It was a good car and I enjoyed it. But it was 12 years old and the worry of future repairs (along with the current shortage of some SAAB parts) made me realize I should sell it while it was still running good. I found a Focus with all the features I loved in the 9-5 (minus the beautiful turbocharged SAAB engine) and the Focus has the added benefits of being smaller, newer, cheaper to maintain, and better fuel mileage (it takes regular, my 9-5 was never happy unless it had premium). So here is the new car:


I can still do my best to assist with SAAB questions. I just won't be able to run to the garage and check a physical 9-5 to make sure my memory is correct. Meanwhile, expect occasional economics posts and posts about the Focus.

Tuesday, January 10, 2012

Hood Lift Support Replacement on the Saab 9-5

The lift support socks on my Saab went out awhile back and I had never got around to replacing them. I wish I had done it sooner because the removal and installation took less than five minutes.

The aftermarket part number from StrongArm for Saab 9-5 hood lift supports is 4800. It lists as being for a 280ZX, but it fits the Saab 9-5 hood.  I got the set for my hood from Amazon. There is also a set of lift supports for the trunk. They are StrongArm 6143; don't get the two numbers confused because they're not interchangeable.

Start by opening the hood and propping it as wide as possible. An additional person can be of help here, but I used a screw-type hood stop on the opposite shock from where I was working instead.

Use a small flat-head screwdriver to slightly pry up the metal tabs at the ends of the support. Don't remove completely. They only need to come out a little before the support will be free. Do this on the top and bottom and set the old support aside. The new lift support installs the say way. Again, don't totally pull the metal tabs with the screwdriver. A little movement goes a long way. Start at the bottom and then clip on the top. You may need to lift the hood a little higher to get the end of the shock up to the little ball connector on the hood. Do the same thing for the other side. I kept the hood propped open until both sides were installed so one side was not holding all the weight of the hood at any time.

The replacement lifts come with new ball style connectors for the hood. You can use them or set them aside.


There you go. Reading this will take longer than the actual repair.