Author: philg

I spent last night reading Coming Clean: A Memoir. The author comes from a middle-class family with a lot of challenges. Emerson College here in Boston extracts every possible dollar that she and her family can come up with:

In mid-July, a letter came from the Emerson financial aid department. I had a small trust in my name from an accident I’d had as a child that was set up so that I wouldn’t be able to access the funds until I was twenty-one. But because that trust existed, the school decided that I no longer qualified for financial aid. Without financial aid, I couldn’t go back to Emerson. I couldn’t take out the kinds of loans necessary to pay for the pricey private school. I was majoring in theater, and even at eighteen, I knew that I would never be able to pay back that kind of debt on a waitress’s salary. I called the school and tried to explain, but the financial aid officer professed that until those funds were utilized they wouldn’t be required to give me any need-based aid. But I wouldn’t be able to touch that money until halfway through my senior year of college.

(Translate “financial aid” to “discount off an insanely high list price.”)

It seems that Obama has given up a plan to kill off the 529 college savings plans (nytimes). Aside from further plunging Americans into a tangle of paperwork and government-approved vendors (not just anyone can offer a 529 plan! It has to be a financial institution that is somehow a crony of a state government), I wonder if 529 plans actually help anyone other than colleges. If parents on average save more for college because the government encourages them to set up 529 plans, won’t colleges just raise their prices to absorb the newly available funds?

One of our students at MIT this week provided an illustration of this. He was in a one-year MBA program at MIT. Over the lunch break I said “That’s great compared to the two-year program since you’ll be saving $50,000.” [The real number is $63,750 per year for tuition.] He responded “Actually the price is about the same as for a two-year MBA program.” In other words, the price has no relationship to marginal cost and instead MIT can charge whatever it is worth to the customer (monopoly pricing power ). This led to a group discussion about how a lot of people might be willing to pay the full cost of a two-year MBA program for a two-week MBA and imagine what kinds of profits could be earned from that.

So while it is painful to pay taxes on savings (which is why we should spend all of our money on McMansions and SUVs and let the Chinese do the saving for us), I think Obama may have been on the right track. American’s university system does not need new sources of easy money. Unless we think that the U.S. is spending too little on its higher education system, why does putting money aside to save for college get more favorable tax treatment than putting money aside to save for an investment in a business?

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Folks:

Our three-day RDBMS programming class at MIT got snowed out today. We were already using Google Drive for collaboration with a shared workspace Doc into which everyone could paste a solution. So we decided to hold the class virtually using Drive and Google Hangouts.

It should have worked great. All that we had to do was tell folks via audio and in the chat window alongside the Google Doc to start working on Problem N. Then they could ask questions in the chat window or by pasting stuff into the Doc.

We ran into the following problems:

• a Google Hangout won’t allow 30 people to join as contributors; we resorted to a feature in which the teachers were in the Hangout and students could watch a broadcast version on YouTube (delayed about 20 seconds)
• a teacher with a MacBook Pro introduced a horrific echo any time that his microphone was not muted
• there was no way for us teachers to tell what the students were doing or to require each student to participate in any way
• not too many students posted questions or solutions voluntarily (shy about having the wrong answer?)

Are there any better free tools that we could have used with a little more structure? Something that would have enabled us to figure out that students were or were not paying attention? Something that would have prodded students to post progress reports? Kept track of contributions by student? Enabled anyone in a class of 25 (plus about 5 teachers) to inject some audio and video for a question? Enabled everyone to share at least one window of their screen at all times (to replace what we had available to us when we already around the classroom and could see at what stage people were with each problem)?

How does it work at University of Phoenix and similar online schools? How do the teachers know that the students are engaged?

Related: “Using Google Docs for Classroom Instruction”

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I don’t trade individual stocks but if I did I would be buying shares of Shack Shack (New Yorker has the history) in its upcoming IPO. A visit to Harvard Square is sufficient to show how well-managed Shack Shack is compared to the competition. Tasty Burger and Shack Shack opened up at roughly the same time. A visit to Tasty Burger involves multiple return trips to the counter so that the order can be corrected. The staff have trouble taking orders and making change. Although they are hiring from the same labor pool, Shake Shack is full of energetic workers who seem competent and, indeed, have never messed up one of my orders.

Because IPOs are nearly always overvalued due to hype I am going to predict that Shake Shack does well but not spectacularly. My guess is that an investment in Shake Shack will outperform the S&P 500, between now and January 2020, by 20 percent.

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I finally sorted through a stack of mail and came across the latest Robinson Helicopter newsletter. There is a good story about two Robinson owners who found and rescued a missing hunter and his dog Maggie, who kept him warm and chased away a bear (newspaper story; TV story) I found a YouTube video corresponding to the story about Paul Bissonnette having an ice bucket dumped on his head from an R44 (legality under Part 91 seems questionable since it would have been tough to avoid hitting Mr. Bissonnette with the helicopter, rather than just the ice-water, in the event of an engine failure). Taxpayers in Jordan can rest easy now that their military turbine trainers have been replaced by R44s that cost about $325/hour to run (the turbine trainers cost about $1000 per hour to run or $4000 per hour if it is U.S. tax dollars being spent (see second to last paragraph of my first Heli-Expo 2014 posting)).

Of course the coolest stuff is happening in Africa. Coena Smith and his R44 were called out to help 11 people stranded when their “safari vehicle” was swept away by a river current. Smith picked up all 11 with a tow cable (photos). (Search for “helicopter Christmas tree harvest” on YouTube if you want to see some skilled long-line work.)

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“The Talking Cure” is kind of a TED talk in the form of a New Yorker article. Some folks noticed a correlation between unsuccessful children and the fact that their parents hadn’t talked to them as much as the parents of successful children. Now an army of do-gooders are fanning out into the homes of the unsuccessful trying to encourage parents to talk more to their young children.

One thing that was interesting was the ratio of praise to correction:

Among the more affluent families studied by Hart and Risley, a higher proportion of the talk directed at children was affirming, which was defined to include not just compliments like “Good job!” but also responses in which parents repeat and build on a child’s comments: “Yes, it is a bunny! It’s a bunny eating a carrot!” In those families, the average child heard thirty-two affirmations and five prohibitions (“Stop that”; “That’s the wrong way!”) per hour—a ratio of six to one. For the kids in the working-class families, the ratio was twelve affirmatives to seven prohibitions, and in the welfare families it was five affirmatives to eleven prohibitions.

There does not seem to be any attempt to figure out to what extent these differences are a consequence of the children’s natural behavior. I spend a lot of time with young children of “the more affluent.” One thing that is a constant source of wonder to me is how little correction these children need. They generally aren’t breaking things in the house, writing on the walls, hitting each other, shouting or screaming, etc. The classic summary of all of the relevant literature, The Nurture Assumption by Judith Harris, concludes that their good behavior is unlikely to be a result of something special their parents are doing in the home. The children get credit for having a good personality. I don’t get credit for not yelling at them to shut up (a classic parenting strategy from the 1970s).

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The New York Times has a story about how a party they characterize as “left-wing” and “anti-austerity” has won an election in Greece. Given that the country does not have its own currency, what can such a party do as a practical matter? If they can’t print money because other nations control the Euro and they can’t borrow because investors won’t lend more, what can these new leaders do?

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This New Yorker story about sociologist Howard Becker is an efficient way to learn about the field. I wonder if it also shows why American politics is more fragmented today than 50 years ago when everyone watched the same TV shows at night (since there were only three channels). It seems that each group has its own rules and considers other groups to be “deviant.” If there is no popular culture that is truly universally popular then a society can support more groups.

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Friends have been asking me what our forthcoming book has to say about gay marriage, now that the U.S. Supreme Court may force all states to provide and recognize same-sex marriage. (Forbes article by Ilya Shapiro, who says “marriage is yet another area of policy government should exit”) One thing that we’re quoting came from this weblog, in a comment on Maryland’s new custody dispute resolution laws: “How about let’s focus on ending marriage in this country. It’s well past the point of saving. The ticks weigh more than the dog.”

Here’s an excerpt on the mess caused by the current situation, from our Kentucky chapter:

“One tsunami moving across the country is the gay marriage situation,” said Haynes [our litigator-interviewee]. “We have a statute from 1998 that defines marriage as being between one man and one woman, but a federal court judge has ruled that it is unconstitutional.” Where do Kentuckians stand on the issue? “There has been a shift in public approval and it is now about 50/50,” said Haynes, “while lawyers ask ‘What’s so special about gay people that they get to avoid the horror of divorce?'” How does it work to be a state where gay marriage is illegal in a country where at least some states allow same-sex marriage? “I’ve got a case right now [August 2014] that a local judge is hanging onto. It is a lesbian couple with no children. They were legally married in Massachusetts. One spouse is a disabled Iraqi war veteran. The court system refuses to divorce them, which means they would have to go back to Massachusetts and live there for a year to get Massachusetts jurisdiction for the divorce.” What does Haynes think of the conundrum? “If you’re against gay marriage, why aren’t you in favor of gay divorce?”

The rest is in a chapter on the History of Divorce in America:

None of the attorneys interviewed expressed opposition to gay marriage. “That’s inventory,” a divorce lawyer was reported to have said (in the Divorce Corp. movie) every time he drove by a wedding. Attorneys generally looked forwarded to having a larger base of clients and some expressed the opinion that judges hearing gay divorces might ultimately revisit their gender biases when handling divorces between men and women. “If they get used to the idea of awarding shared custody to two moms,” one lawyer said, “then they might start thinking that it was okay for a mom and a dad to do 50/50 shared parenting.”

What do they make of the public fight over gay marriage? “What would surprise people from 100 years ago the most is not that two people of the same sex wanted to live within a framework of laws that were designed for two people of the opposite sex,” said one attorney. “What I think would surprise them is how the benefits of civil marriage cited by gay marriage advocates have nothing to do with marriage per se. The public discussion is about potential tax or Social Security benefits from being married or that it isn’t necessary to execute a health care proxy to get control over an unconscious person’s health care. But nobody talks about what used to be considered the main benefit of a civil marriage, i.e., that you had a life partner on whom you could rely.”

An attorney who’d been practicing for nearly 40 years said “Today’s civil marriage is a shadow of its former self. In the old days, if your partner was having an affair you could have him or her arrested on charges of adultery. If your partner decided to repudiate his or her marriage vows, the state would assist you in trying to enforce those vows. He or she could negotiate with you to end the marriage but there was no equivalent to no-fault divorce in which your partner could sue you and be guaranteed of winning the lawsuit. Gays and straights today are fighting over the scraps of marriage.”

What about the moral and philosophical dispute regarding gay marriage? “When I read arguments by opponents of gay marriage,” said one attorney, “I don’t recognize their description of straight marriage as some sort of sanctified institution. With no-fault statutes that kept the old alimony, property division, and child support rules, straight people made a mockery of civil marriage a long time ago. Marriage today is a way for a smart person with a low income to make money from a stupid person with a high income. What difference does it make whether the gold digger and mark are of the same sex?”

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This New York Times story says that Sheldon Silver, recently arrested for violating corruption laws, was repeatedly reelected by voters “despite years of investigations, suspicions and rumors of impropriety.” In other words, most voters knew that he was corrupt but still wanted him as their representative in the state legislature. Does it make sense for the Feds to say “You voters cannot have the politician that you want”? Should a state be able to opt out of Federal anti-corruption rules? The stuff that Silver was doing doesn’t affect interstate commerce. Why wasn’t this a matter for New York prosecutors and courts to handle as they saw fit?

Separately, I don’t see why it is a news story that political corruption is common in New York. The state and local government is a larger fraction of the economy in New York than anywhere else in the U.S. (Tax Foundation), which means that there is more at stake and therefore more potentially for sale. The New York Post says “Virtually nothing happens [in Albany] that isn’t driven by self-dealing” and suggests that it isn’t too different at the federal level (story).

Coincidentally we’ve been trying to interview some New York legislators this week, trying to add some color to our book. We start by sending them email background such as the following:

We’re interested in the thought process that goes into making family law and are wondering if you can answer some questions for us about New York. Compared to most other states, New York is an outlier in at least the following areas: (1) children who would have a 50/50 shared parenting arrangement in other states would be in the sole custody of one parent in New York (seeing the other parent as an every-other-weekend “visitor”), (2) a custody lawsuit victor earning $10 million per year can collect 50 percent of the defeated parent’s after-tax middle class income (because New York does not use an “income shares” model of child support, unlike most states).

What is the public policy rationale for New York being the land of the winner-take-all custody and child support lawsuit? If this makes sense for children why did neighboring Pennsylvania become more or less a 50/50 shared parenting state?

What is the public policy rationale for taking half of the spending power from a middle class parent who lost a custody lawsuit and giving that money to a rich investment banker or physician? How are children served if one biological parent is more or less impoverished while the other one is made a few percent richer?

What is the rationale for different children having different cash values depending on the judge assigned to the case? Attorneys told us that judges all use the same percentage-of-income formula for calculating child support but they cap the quantity of income used at different levels. So a child support plaintiff in front of one judge could end up with 17 percent of $400,000 every year and a plaintiff in front of a different judge could end up with 17 percent of $200,000 every year. How can it be “justice” when children who live next door to each other yield different amounts of cash given equivalent incomes for the defendant parents? Why doesn’t New York have a state-wide statutory cap on child support like Minnesota, Nevada, North Dakota, Alaska, or Texas?

What is the public policy rationale for different children having different cash values depending on when the defendant parent was sued? As noted in our book, “The co-parent of the first child is entitled to 17 percent of the defendant’s income. The co-parent of the second child is entitled to only 17 percent of the remaining 83 percent. The co-parent of the third child is entitled to only 17 percent of the remaining 69 percent. At this point the defendant has been reduced to poverty by a combination of child support orders and taxes. A fourth plaintiff would be unable to collect anything for a fourth child, even if the previous three plaintiffs had all married into households with high incomes.” If the system is supposed to be for the benefit of children why does one child have superior rights to another depending on when a parent chose to file a lawsuit?

So far most of them are ducking us with creative excuses!

[Mayor de Blasio also likes Silver, according to the New York Post: “Although the charges announced today certainly are very serious, I want to note that I’ve always known Shelly Silver to be a man of integrity, and he certainly has due-process rights, and I think it’s important that we let the judicial process play out,” the mayor said at City Hall.]

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Anant Agarwal, an MIT EECS professor who is now running edX, gave an interesting interview on the subject of unbundling the functions of the university (see also this article he wrote). The core explanation of unbundling in the interview starts at 10:30. Well worth a listen!

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