Month: June 2011

If you’re an expert Web developer with Python experience and want to move to the Imperial City, this database-backed Web developer opening in Washington, D.C. should be appealing. You’ll get paid reasonably good money and have a chance to work with Nathan Cobb, the physician who founded QuitNet, which has helped literally hundreds of thousands of people quit smoking. QuitNet is a good reference for when folks ask “Has anyone ever done anything useful with social media?”

Cobb is notable for learning about Facebook and Web 2.0 in 2004 then developing a time machine in which to travel back to 1995 and start his online community with many Facebook-like features.

The job should be secure since the money is ultimately coming from the $206 billion Tobacco Master Settlement Agreement between the cigarette companies and the states. [Most of those states will probably soon need to start sending every retired public employee a free carton of cigarettes every week in hopes of reducing their pension liabilities.] Not that you’ll really need the cash since all of your entertainment will be free (museums, lectures, concerts, recreation, etc., all paid for by collecting taxes from people in Ohio, Michigan, and other struggling states). You’ll be getting good experience building applications that plug into all of the popular social networking sites. You’ll be living in a city where there are literally 10 jobs for everyone with a modicum of skill, so if you don’t like it you will have your choice of places to work next.

[In case you’re a single male Python nerd tempted to move to Silicon Valley, keep in mind that there is a huge surplus of single men in the San Francisco Bay area whereas the opposite situation applies in Washington, D.C. (see Boston Globe (written by a journalist and therefore not adjusted for overall population size). Would you rather be by yourself fighting California traffic or with a lovely young female government employee riding the Metro? Remember that your government worker companion will be well-paid and she won’t have to work long hours so she’ll have plenty of time for recreation.]

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I’m halfway through The Rational Optimist: How Prosperity Evolves by Matt Ridley, an English science journalist. The book covers 200,000 years of human history, but this blog posting concerns just one chapter “The feeding of the nine billion”.

Have you chuckled at the apparent inconsistency of a neighbor who drives a 7,000 lb. pavement-melting SUV to Whole Foods and then buys organic produce? It turns out that there is no inconsistency. She is destroying the planet with her SUV and with her purchases of hard-to-grow organic food.

Ridley notes that with genetically engineered crops, synthetic fertilizers, and Roundup to control weeds, the trend of feeding ever more people with less land could be continued. The biggest obstacle to returning land to its wild state is organic farming. Currently we are using 38 percent of the Earth’s land for growing food or grazing animals; at 1961 levels of productivity we would need to be using 82 percent of the land.

Organic farmers won’t use genetically engineered crops, so they spend a lot more time and energy fighting pests. Organic farmers won’t use Roundup and other herbicides, so they plow the weeds under, which kills a lot of small animals and loosens the soil enough that it erodes (or sometimes they resort to flame-throwers). Organic farmers won’t use standard fertilizer, but only manure from cows, which means we’ll need a lot more cows running around.

Organic cotton is an especially hard-on-the-Earth product, according to Ridley. Standard industrial cotton has Bacillus thuringiensis (“bt”) genes mixed in and these kill pests, cutting the need for sprayed pesticides in half.

Who knew that “sustainable” would mean a polyester shirt and a bag of Fritos?

[Update: Just a few days after this posting, a German E. coli outbreak that killed 22 people has been blamed on organic bean sprouts (story).]

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The continuing decline of U.S. house prices has been in the news lately, along with articles about how people love to rent. In some parts of the country, buying is definitely cheaper than renting, especially when you consider the 4-5 percent interest rates being offered. Can it be rational under those circumstances to rent?

One factor that has been covered is the high transaction cost of selling a house, perhaps 10 percent of the house price (5-6 percent real estate commission plus the cost of leaving the place vacant for 3-12 months). That’s equivalent to 1-3 years of rent. What if the person knows for sure that he or she will stay at least ten years and therefore it genuinely might be cheaper to buy. Why doesn’t he or she get out a checkbook?

Let’s consider an adjustment for the risk that, when it comes time to sell the house, there won’t be any jobs in the city or state and therefore the value of the house will be zero. If you’re a working-age renter, by definition your apartment is near a job and within a reasonably functional economy. Otherwise you wouldn’t be there paying rent! Between 1970 and 2008, a home buyer probably would not think to discount a house for the possibility that an entire city or state economy would essentially fall apart. Such things had not happened in recent memory (though they had happened, e.g., in Lowell and Lawrence, Massachusetts when the textile mills shut down and moved south; population fell and houses became surplus).

The potential home buyer today has seen pictures of Detroit, with former neighborhoods being gradually reclaimed by Nature or plowed under into farmland. Recognizing that his or her own city could become like that in 20 years time, the buyer will factor that into the price he or she is willing to pay. In the event of a Detroit-style decline, the house becomes worthless and the cost of ownership for 10 years or so effectively tripled (10 years x 5 percent is approximately equal to 50 percent of the home’s value, then add another 100 percent for the cost of throwing the house away). Suppose the buyer thinks that this has a 20 percent probability of happening. Given a typical person’s risk aversion, that might reduce the market-clearing price for a house by 25 percent.

I’m not quite sure how to test this theory. There are some parts of the U.S. where the risk of economic decline is much lower than others. For example, it is hard to imagine how Washington, D.C. could fail to prosper, even if much of the rest of the nation is impoverished. So the “discount for risk of write-off” should be near zero in Northwest DC and Bethesda, Maryland (though some neighborhoods of D.C. did decline to near worthlessness within recent memory). Manhattan seems also like a place where it is very likely there will be jobs. Perhaps Santa Monica and the nicer parts of San Francisco/Silicon Valley too (the data are pretty coarse, though, and the house market for Los Angeles overall may not correlate that well with Santa Monica when times are tough). Looking at the buy/rent ratio we would expect it to be higher in places with less of economic collapse.

http://economix.blogs.nytimes.com/2011/05/10/rent-vs-buy-a-longer-list/

has some suggestive data. Cities that seem at risk of being abandoned altogether, such as Detroit and Cleveland, are indeed theoretically very cheap places to buy. Washington, D.C. is expensive as well as some geographically blessed places such as San Francisco, Seattle, Orange County, and Honolulu. New York City, however, is only at an average ratio (maybe because Manhattan is not broken out separately?).

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