Philip Greenspun’s Weblog

Robert Shiller purports to explain “Why Land and Homes Actually Tend to Be Disappointing Investments” (nytimes). Given the number of rich people wandering around who say that they made their money in real estate, I’m wondering if Shiller can be correct. What do readers think? Suppose that the rent on a commercial property covers the mortgage and other expenses. In that case 1 percent appreciation will become 10 percent per year if buyer has made a down payment of 10 percent and used leverage for the rest. Suppose that Shiller is right about the average but it is a volatile market and the buyer typically unloads any big losses onto a bank while keeping any big winnings?

Maybe real estate is a bad investment if bought for cash and then left to sit. But an individual real estate investor is probably not doing things that way. There will be a mortgage and the bank will take on much of the risk. If it is a commercial property there is rent received. If it is a residential property in which the buyer lives there will be rent not paid somewhere else.

At a wedding in Paris this summer the groom’s father chided the “boy” (over 30!) for not being a property owner. The dad talked about how, even with an entry-level job at an investment bank in London he had been able to purchase a flat while still in his 20s. We dug into this a little and found out that the flat and the entry-level jobs were still available and easy to price. The dad paid a little less than one year of pre-tax income for the flat. Today the same flat would cost nearly 20 years of income for an entry level banker. With that kind of appreciation in any of the places around the world where a person might actually want to live, how can Shiller be right? And with the world population continuing to grow while the number of desirable places to live remains relatively fixed, how can Shiller continue to be right? (It is possible that, compared to 1900, the U.S. actually has fewer neighborhoods where people can walk to shops, friends’ houses, social events, cultural events, essential services, etc., yet the population has grown from 76 million to 320 million. This has got to put price pressure on real estate in the handful of desirable neighborhoods, no?)

Related:

• “Universities and Economic Growth” (see the minute-by-minute analysis of an Econ 252 lecture by Shiller)

 

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From our anonymous insider…

This week I learned about the National Board of Medical Examiners (NBME) Step I board exam. Typically taken after the second year of medical school, just before clinical rotations commence, the score on this exam is the most important criterion for the residency application (the first year of a residency is technically the future specialist’s “internship”). There is some bad news for nervous parents who worried about getting a child into the right preschool to ensure entrance to the right elementary school to ensure entrance to a prestigious high school to ensure entrance to a selective college to ensure admission to medical school: the real career-determining educational institution is the residency.

Our dean gave us some additional bad news this week: there is a worsening shortage of residency positions. (See “Squeeze Looms for Doctors; More Medical Students Are In the Pipeline, but Too Few Residencies Await Them” (WSJ).) Medical students have responded to this situation by applying to 15-20 hospital residencies rather than the traditional 4-5. Residency admission committees have responded to this flood of applications by increasingly their reliance on Step I board scores. All of our tests for the first two years are in fact covering the same material as the Step I test.

In our morning cellular/molecular biology lecture series, doctors and researchers may preface a detailed explanation with “don’t worry; you don’t need to know all of this detail for the test.” Nearly 20 percent of my classmates have at various points raised their hands to ask “is this going to be on The Test?” When the answer is “no,” I wonder how many tune out the nitty gritty details of a cancer signaling pathway or the extracellular matrix remodeling in vasculogenesis.

Three days this week, including the weekend, I joined a group of 6 or 7 classmates at a local bar’s happy hour for $2 beers and rail drinks. Roughly half of our class is female and one difference in conversation is that the men are less likely to talk about their romantic situation. Within the first 2-3 conversations with a woman, I’ve learned if she is single, dating, engaged, or married. About half of the women seem to be single, a fifth are engaged or married, and the rest are dating.

Though we have only recently met, it is already time for the class election. The positions up for grabs include president, vice-president, and a handful of Association of American Medical College student interest group representatives. Some eager beavers have been campaigning since the first week. There are three candidates for president and three for vice-president. All are male.

I did about six hours of homework total this week and went to bed every night before 11:00 pm.

The Whole Book: http://tinyurl.com/MedicalSchool2020

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“The Most Exclusive Restaurant in America” (New Yorker) is a fun article about how far some people will go for a meal and how far others will go to be known for cooking meals.

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It’s Happy Back to School Week nationwide. The Federal government’s regulation of bathroom usage was front-page news in the New York Times on August 22 (“Federal Transgender Bathroom Access Guidelines Blocked by Judge”). This leads me to wonder… why are there locally run schools in the U.S.? If the Constitution gives the Federal government the power to set bathroom policy in schools nationwide (let’s hope it isn’t part of the Interstate Commerce clause!), why not the non-bathroom parts of schools?

You might argue that bathroom use is a Civil Rights issue for transgender American youth. But access to an education of at least some minimum quality should also be a Civil Right, no? (“no” is the California Supreme Court’s answer to this question, actually) Access to a bathroom can be urgent, especially in our Starbucks era. But access to education, or lack of such access, may have substantial long-term effects. The central limit theorem tells us that about half of American children have access to below-average education and that millions attend spectacularly bad classes.

If the Federal government were to take over schools it would be able to ensure adequate resources and minimum standards, regardless of the local tax base. As a bonus, since the schools would be Federally operated, they could have the same policies nationwide with regard to transgendered students.

Could Federally run public schools work? Wikipedia suggests that this is how it is done in France: “All educational programmes in France are regulated by the Ministry of National Education (officially called Ministère de l’Éducation nationale, de la Jeunesse et de la Vie associative). … The teachers in public primary and secondary schools are all state civil servants, making the ministère the largest employer in the country. Professors and researchers in France’s universities are also employed by the state.” Obviously the French are able to do a lot of things that we can’t do, e.g., run nuclear power stations and health care without bankrupting themselves. But given the number of things that the Federales want to control when it comes to our public schools, wouldn’t it be simpler if they just took them over?

Related:

• Transgender Bathroom Solution from the Harvard Club: “Powder Room”
• Transgender Hostility in Massachusetts, the Commonwealth of Love
• How are any of the transgender-locker room laws supposed to work in practice?
• Can women be superior human beings in a transgender age?
• What does it mean for art museums to run single-gender shows in a transgender age?
• New York Times suggests that companies other than the New York Times hire transgender workers
• Rational employees will come out as gay or transgender prior to the next performance review?

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Some of my Facebook friends are celebrating the death of Phyllis Schlafly, most famous for her opposition to the Equal Rights Amendment:

Section 1. Equality of rights under the law shall not be denied or abridged by the United States or by any State on account of sex.

Section 2. The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article.

Section 3. This amendment shall take effect two years after the date of ratification

Here’s a question for readers then… How would our world be different if the Equal Rights Amendment had passed? Most of these Constitutional provisions don’t have much effect until lawsuits are filed. Therefore we could ask “What litigation would have been spawned by this amendment?”

Related:

• “Why America Needs More Housewives Like Phyllis Schlafly” (Atlantic)

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Finishing up the Labor Day roundup…

Last month I got the Honda Odyssey (review) cleaned out at the beyond-awesome Allston Car Wash. It was about 95 degrees outside. One hundred percent of the folks whom I saw actually doing the cleaning were men. They were toiling with vacuum cleaners at the entrance. They were cleaning interior glass at the exit like the Karate Kid. There were only two women whom I encountered at the operation that 95-degree day. They were sitting behind the counter in an air-conditioned shop collecting money from customers.

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Another Labor Day posting…

Three years ago I wrote about how the tourist industry in Bar Harbor, Maine seems to depend on Eastern Europeans who come over for the summer (August 2013 posting). I was back on MDI this summer and the situation doesn’t seem to have changed. In my quest for restaurant meals, ice cream, etc., I encountered eager young workers from Moldova, Lithuania, Romania, Bulgaria, Poland, etc. I’m still kind of surprised that Americans don’t want to take these jobs, though I guess the author of the Redistribution Recession wouldn’t be (falling labor force participation rate). Even if you’re comfortably collecting welfare in the South or Texas, why not escape the heat for a few months in Maine?

[The majority of the Eastern European summer workers seemed to be young women. As the typical visitor to Bar Harbor is fairly prosperous, why weren’t they having sex with visitors and then returning home to harvest 18 years of child support at a minimum of $24,024 per year (see the Maine child support guidelines; if one were to have sex with a visitor from Boston and sue under Massachusetts family law the profit potential would be 23 years times $40,000)? The average monthly wage in Moldova is about $262 (source then converted with Google) or $3,144 per year. A pregnancy established in Maine with a high-income visitor would thus be 7.6X more lucrative than a full-time job in Moldova. I asked a few of the workers and they all expressed surprise that it was possible to collect child support at the Maine rates while back in Eastern Europe (see “Child Support Litigation without a Marriage” for more on the mechanics). They estimated the practical revenue available from a U.S. pregnancy at $0. Based on a hypothetical of a sexual encounter with a rich Wall Street visitor, their estimate of the maximum revenue obtainable by an American from an out-of-wedlock pregnancy was roughly $5,000/year (not too different from the actual German maximum).]

Aside from the fact that they took jobs that Americans, if motivated by a lack of available Welfare benefits, might have wanted, these immigrants seemed to be having a purely positive impact on the economy. They were showing up for 3-4 months, working hard, spending some of their wages on the local economy, and looking forward to returning home at the end of the season (between mid-September and October 1, depending on the worker). “I like it here but I miss my family,” said a Lithuanian. Maybe the secret to a successful guest worker program is to have it in a place where the customers disappear on a predictable date and the temperature drops well below zero.

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Happy Labor Day!

“Graduate Students Clear Hurdle in Effort to Form Union” (nytimes) says that graduate students, at least at Columbia, will be paying a fraction of their starvation wages to the United Automobile Workers, which the correct-thinking Democrats running the university will now be forced to recognize (university faculty and administrators have historically supported Democrats and unions everywhere except in this one little area of their own employees).

Given the glut of PhDs and the low cost of adjuncts I’m wondering if the unionization of graduate student labor will result in a heavier reliance on post-docs and adjuncts with PhDs. Why deal with the UAW when you can hire a fully trained PhD for less than a grad student?

Readers: What do you think? Will this lead to some restructuring?

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Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez contains an explanation of the H-1B visa system:

Skilled immigrant tech workers in the United States have effectively one method of entry: the famous H-1B visa. Capped at a small yearly number, it’s the ticket to the American Dream for a few tens of thousands of foreigners per year. Lasting anywhere from three to six years, the H-1B allows foreigners to prove themselves and eventually apply for permanent residency, the colloquial “green card.” Like the masters of old buying servants off the ship, tech companies are required to spend nontrivial sums for foreign hires. Many companies, particularly smaller startups, don’t want the hassle, and hire only American citizens, an imposed nativism nobody talks about, and which is possibly illegal. Big companies, which know they’ll be around for the years it will take to recoup their investment, are the real beneficiaries of this peonage system. Large but unexciting tech outfits like Oracle, Intel, Qualcomm, and IBM that have trouble recruiting the best American talent hire foreign engineers by the boatload. Consultancy firms that bill inflated project costs by the man-hour, such as Accenture and Deloitte, shanghai their foreign laborers, who can’t quit without being eventually deported. By paying them relatively slim H-1B-stipulated salaries while eating the fat consultancy fees, such companies get rich off the artificial employment monopoly created by the visa barrier. It’s a shit deal for the immigrant visa holders, but they put up with the five or so years of stultifying, exploitive labor as an admissions ticket to the tech First World. After that, they’re free. Everyone abandons his or her place at the oar inside the Intel war galley immediately, but there’s always someone waiting to take over.

Strictly speaking, H-1B visas are nonimmigrant and temporary, and so this hazing ritual of immigrant initiation is unlawful. Yet everyone’s on the take, including the government, which charges thousands in filing fees. The entire system is so riven with institutionalized lies, political intrigue, and illegal but overlooked manipulation, it’s a wonder the American tech industry exists at all. So into this bustling slave market, echoing with the clink of leg irons and the auctioneer’s cry, did we ignorantly wade. If Argyris was to join our as-yet-unnamed company, he’d need a work visa. In fact, forget working: he couldn’t even legally stay in the United States once Adchemy terminated him. Immigration law stipulates a former H-1 holder must leave the country within days. Thanks for building our tech industry, you dirty foreigner, now beat it. Was there a way out? Argyris, a proud Greek with an admirable display of Southern European enterprise and skill at sniffing out legal loopholes, found a solution. His longtime Turkish girlfriend, Simla, was studying for a PhD at Stanford under an F-1 student visa. Were they to marry, Argyris would qualify for an F-2 student spouse visa. This wouldn’t let him officially work in the States, but it would let him remain there.

More: read Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley

Related:

• Shift of power from publishers to advertisers

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How much would you pay me to take you on a tour of most of the countries hit hardest by the Zika virus? Unless your job is public health or biomedical research, I’m guessing the answer is “not much.” Yet isn’t this precisely the offer made by Caribbean cruise lines? The cruises are planned out a couple of years in advance so at this point I guess they are locked into the route. But wouldn’t it make sense for everyone who is currently going to the Caribbean to instead cruise around the Indian Ocean or South Pacific?

Related:

• “Baltic Sea on Royal Caribbean’s Serenade of the Seas”

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