California has good universities!

From the Academic rankings of world universities:

1. Harvard University (private)

2. Stanford University (private)

3. Massachusetts Institute of Technology (MIT) (private)

4. University of California, Berkeley (public)

5. University of Cambridge (British)

6. California Institute of Technology (private)

7. Princeton University (private)

8. Columbia University (private)

9. University of Chicago (private)

10. University of Oxford (British)

11. Yale University (private)

12. University of California, Los Angeles (public)

13. Cornell University (private)

14. University of Pennsylvania (private)

15. University of California, San Diego (public)

16. University of Washington (public)

17. University of California, San Francisco (public)

18. The Johns Hopkins University (private)

19. University of Wisconsin - Madison (public)

20. University College London (British)

Some interesting patterns immediately jump out.  Of the top 20 schools,  17 are American, which is pretty impressive given the share of the world population held by the United States.  Of the 17 American schools, six of them are public (which is amazing given how many resources the private schools have).  Of the public schools, 4 of them are in California.

So why are we discussing the need to privatize California higher education, which combines extremely high quality with relatively low tuition?  I mean seriously, is there no other public university system in the nation that we can focus on?  Or is it merely that reformers want to destroy the example of well done public education?

The whole argument strikes me as insane.

Mortgage Questions

This post had a very perceptive take on a question from Megan McArdle:

McArdle: “Let’s turn it around,” I asked. “What if the bank decided that it wanted to exercise the same sort of option?…What if the bank foreclosed on your house, even though you made the payments, because it figured it could make more money taking the house and selling it?” (Not a likely scenario, I know, but a useful thought experiment.).

Response:

Banks exercise the same sort of option all the time when they resell mortgages (and hopefully notes!) from one entity to another entity. That’s the problem we have right now, that this reselling option banks use was so sloppy it’s tearing up the economy.

This is why if you are the type of person who thinks markets self-regulate through consumer demand and reputation there’s a major problem, as consumers have no choice over their mortgage servicer. If you don’t like your servicer, and refinance your mortgage with another bank, that bank can still sell off your mortgage and you can still end up serviced by the same institution.

I never quite thought of the decision to resell mortgages in this light, but this is a remarkably good point. It's not quite the same scenario as "seize the house" (which I think was the actual tactic that McArdle had in mind) but it certainly does put the decision to resell mortgages in perspective.

In a more pragmatic light, the decision to try and do regulation by reputation (long a bad idea) has even less relevance in the modern world. First of all, job tenures at banks may be quite short so the people making decisions that undermine a firms reputation may be elsewhere at the end of this period. Second, firms themselves often vanish or are absorbed by other firms (consider Washington Mutual as an example). These features of the modern corporate environment make it difficult to use a reputation based system as the primary check on the system.

This is not to say that homeowners who are in default should be given free houses (I'd think that was obviously an incorrect conclusion) but rather that we should give the regulatory structure of banks some serious thought.