Felix Salmon does a great job dismantling the latest wave of "how can I possibly get by on a quarter mil" stories (Jonathan Chait also has a suitably snark-filled take on the subject, though unfortunately it's behind the TNR paywall). Salmon takes apart the bad math, the poor reasoning and the general offensiveness of these articles so thoroughly that there's not much to add on the general level but I do have this one locale-specific observation.
I've lived in LA for a number of years with an income that has bounced from low (parochial school teacher) to high (corporate statistician) to really low (writer and board game designer), so I can tell you from experience that any individual who can't live well in this town on 100K is either incredibly extravagant or ridiculously bad with money. I can also say from experience that you can get by on thirty (barring the unexpected) and be quite comfortable at sixty.
If you're an Angelino and you're a individual who makes six figures or a member of a household with a combined income of over a quarter of a mil and you still find yourself in the red at the end of the year (barring special circumstance like a sudden drop in income, major illness, or the birth of a special needs child), you should admit to yourself that you have a problem and either seek financial counselling or consider finding someone to make your money decisions for you.
Thursday, May 19, 2011
Wednesday, May 18, 2011
Back to the future
I don't know if this has anything to do with Blogger's recent wave of weird glitches but my post comparing satiric views of the future somehow reverted to an earlier version that omitted one of the two primary examples -- the 1967 film The President's Analyst. I've restored it so if you have any interest in the subject or if you read the screwed-up version and would like to know what I was trying to say, take a look and let me know what you think.
Alternatives to Social Security
Matthew Ygelesias tackles the difficult question of what is the alternative to a government run universal pension plan. After all, if we want to replace the current system of government run pensions then it makes sense to have an alternative.
The results are pretty dismal.
I think the drawbacks to the first two approaches are well known. But the concerns about the government savings vehicles are very thought provoking. Instead of a single (fatal objection), like the first two options, he lists a series of smaller problems that add up to a big issue. That being said, the issue of people not saving enough is always a concern.
I'd say that there is one more issue, though, that we should consider. Older adults are more easily subject to fraud on the part of either third parties or their money managers. It's not always clear that they have strong advocates. So even if people saved enough, the third option has the sixth downside of being vulnerable to theft in a way that pensions and labor income are not.
The results are pretty dismal.
So where else does the money come from? Well:
— Defined benefit pensions.
— Labor income.
— Private savings.
These three alternatives are all deeply problematic. The problems with defined benefit pensions in the public sector (chronic underfunding, etc.) are well-known, and in the private sector those problems are even more severe. Labor income is not a realistic option for people over a certain age. And private savings are, frankly, a disaster. As a country, we’ve tried to deal with the decline of defined benefit pensions by encouraging the mass middle class to engage in private retirement savings with 401(k) plans, IRAs, etc. And it doesn’t work. On the one hand, people don’t save enough. On the second hand, the tax policy is deeply regressive. On the third hand, virtually 100 percent of the management fees extracted from customers through these vehicles are value-destroying rents. On the fourth hand, it’s extraordinarily difficult for a middle class person to properly diversify his portfolio. And on the fifth hand, widespread ownership of index funds and mutual funds undermines corporate governance.
I think the drawbacks to the first two approaches are well known. But the concerns about the government savings vehicles are very thought provoking. Instead of a single (fatal objection), like the first two options, he lists a series of smaller problems that add up to a big issue. That being said, the issue of people not saving enough is always a concern.
I'd say that there is one more issue, though, that we should consider. Older adults are more easily subject to fraud on the part of either third parties or their money managers. It's not always clear that they have strong advocates. So even if people saved enough, the third option has the sixth downside of being vulnerable to theft in a way that pensions and labor income are not.
It's too late tonight to do it justice...
But this post is another reminder why Dana Goldstein is probably the most important education blogger currently on the beat.
Tuesday, May 17, 2011
More weirdness from Blogger
A few days ago I was playing around with the idea of writing a post about the dangers of economists trying for cool, so I copied this link into a new post and saved it as a draft. I had pretty much forgotten about it until a few minutes ago when it showed up with a new time stamp claiming I had created it this afternoon.
This is starting to make me nervous. Does anyone know a good way to make a hard drive back-up of a blog?
This is starting to make me nervous. Does anyone know a good way to make a hard drive back-up of a blog?
I can think of some exceptions
But I suspect Donald Knuth was excluding books like Light in August and Huckleberry Finn when he said this.
Those who forget the future are doomed to repredict it
Mr. SHTEYNGART: There's no present left. This is the problem for a novelist, is the present is gone. We're all living in the future constantly. How I envy...Gary Shteyngart talking about his novel Super Sad True Love Story on Fresh Air.
GROSS: What do you mean by that? I'm not sure what that means.
Mr. SHTEYNGART: Well, look, back in the day, Leo Tolstoy, what a sweetheart of accounts and [transcription error?] a writer. He wanted - in the 1860s he wanted to write about the Napoleonic campaign, about 1812. If you write about 1812, you know, in 1860, a horse is still a horse, and a carriage is still a carriage.
Obviously, there have been some technological advancements, et cetera, but you know, you don't have to worry about explaining the next killer app or the next, you know, Facebook or whatever, because right now things are happening so quickly.
Gary Shteyngart is a ludicrously credentialed writer, but the part of his interview that caught my attention had little to do with his fiction or his approach to writing. Instead it ... Well, maybe it would just be simpler to show you.
In 2010, here's what Mr. Shteyngart's near-future satire looked like:
And here's what near-future satire looked like almost forty-five years ago:A half-dozen of my fellow citizens were seated behind their chewed-up desks, mumbling lowly into their apparati. There was an earplug lying slug-dead on an empty chair and a sign reading: Insert earplug in ear. Place your apparat on desk and disable all security settings. I did as I was told.
An electronic version of John Cougar Mellencamp's "Pink Houses" - ain't that America, something to see, baby - twanged in my ear, and then a pixilated version of the plucky otter shuffled onto my apparat screen, carrying on his back the letters A-R-A, which dissolved into the shimmering legend: American Restoration Authority.
The otter stood up on his hind legs and made a show of dusting himself off. Hi there, partner, he said, his electronic voice dripping with adorably carnivalesque. My name is Jeffrey Otter(ph), and I bet we're going to be friends.
Feelings of loss and aloneness overwhelmed me. Hi, I said. Hi, Jeffrey. Hi there yourself, the otter said. Now, I'm going to ask you some friendly questions for statistical purposes only. If you don't want to answer a question, just say I don't want to answer this question. Remember, I'm here to help you.
OK, then, let's start simple. What's your name and Social Security number? I looked around. People were urgently whispering things to their otters. Leonard or Lenny Abramov, I muttered, followed by Social Security.
Hi, Leonard or Lenny Abramov, 205-32-8714. On behalf of the American Restoration Authority, I would love to welcome you back to the New United States of America. Look out, world, there's no stopping us now. A bar from the McFadden and Whitehead disco hit "Ain't No Stopping Us Now" played loudly in my ear.
The inescapable communication device, the cheerful tone covering the ominous totalitarianism, the cute cartoon icon. All in a big budget movie made five years before Gary Shteyngart was born.
Go back a few more years to 1953 and you can find antecedents for Shteyngart's satiric take on corporations and consumerism in the Space Merchants * (where mergers were actually resolved through armed conflict) and in any number of books and movies since then. And as for the jokes about the decline of books and reading found in Shteyngart's story, the challenge is finding a science fiction book that doesn't have them.
None of this is meant to imply any kind of plagiarism or even to suggest the book is derivative. Shteyngart is a sharp and funny writer and though I haven't read it, there's every reason to expect Super Sad True Love Story to be a terrific book.
It is, however, a book that approaches the topic of the future in a way we've seen before and that fact leads to an interesting observation: for over half a century, people have seen themselves as being at that point in history where the world was about to undergo radical and unimaginable changes. What's more they've discussed these approaches using much the same language and often similar jokes.
I suspect that it was initially a reaction to the explosive technological and social changes from around 1875 to 1945. If one man could have witnessed the first phonograph, telephone, light bulb, airplane, radio, movie, television, and an atomic bomb (not to mention two world wars, enfranchisement of half the population and too many literary and artistic forms and schools to count), just imagine what the next few decades would hold. (It is probably not a coincidence that during this period, the time travel genre was introduced by Twain and Wells and became an established part of popular fiction.)
Once established it's easy to see why the idea of the hurtling future proved so popular. There is a natural tendency to underestimate the contemporary impact of what we think of as antiquated technology. Check out Shteyngart's quote about Tolstoy that seems to imply that the development of photography, telegraphs and locomotives changed the world less than Facebook and Angry Birds.
Besides, most people like the idea of an exciting future (particularly since so few of us alive today have actually had to live through one).
* You'll notice that some seniors have had no trouble keeping up with the future.
Monday, May 16, 2011
Sure $172,200 sounds high but you do get room and board
I wish I had time to give this the treatment it deserves:
For all the hand-wringing over the cost of a full-time MBA, it turns out that the most expensive graduate business degrees in the world are not the highly publicized two-year, full-time experiences at places like Harvard and Stanford. Instead, the bulging price tags are on elite part-time programs designed for mid-career executives.
The most costly Executive MBA in the world? It's Wharton's 24-month MBA for executives at its West Coast campus in downtown San Francisco. At a cost of $172,200, students are effectively paying nearly $250 an hour for the pleasure of sitting in a class with 50 other people. That's nearly $100 more per contact hour with faculty than the regular full-time MBAs at Wharton pay. For every one of the roughly 700 hours a Wharton professor teaches Executive MBAs, the school is collecting a tidy $12,300.
Wharton Rakes It In
The second most expensive? It's also Wharton's Executive MBA program, this time on the East Coast, where the tuition and fees now come to $162,300. Those considerable sums compare with the $108,000 in total tuition and fees forked over by the full-time students back on the main Philadelphia campus. Wharton's Executive MBA business alone now brings in more than $35 million in annual revenues, with little more than 400 total students.
Why the Difference In Cost
Why is there such a big difference in the cost of these top-ranked EMBA programs over those at other schools? "It's like anything else, whether you're talking about buying Pepsi or Sam's brand of cola," says Michael Desiderio, executive director of the Executive MBA Council, the trade group representing EMBA programs. "There is a value inherently tied to a brand."
In fact, the average cost of an EMBA program, says Desiderio, is only $65,655. "So it's a huge continuum, ranging from a low of $30,000 to a high of $170,000."
Anjani Jain, Wharton's vice dean, MBA Program for Executives, obviously thinks Wharton programs are worth the premium. "The cost of the program, when normalized with respect to the number of contact hours and the inclusion of room and board during program weekends, is actually comparable to that of peer institutions," Jain insists. "Many other EMBA programs have substantially fewer contact hours, or don't include room and board in the base tuition."
Of course, at the high end, as Jain points out, Wharton's program is a premium experience that includes meals, accommodations, and professors who are among the best business faculty in the world. In Philadelphia, execs stay on alternating Friday nights in Wharton's fairly plush executive education residence facility, while in San Francisco, they're put up in at the upscale Hotel Le Meridian in the financial district within walking distance of Wharton's West Coast campus. For another, many business schools believe there is less price sensitivity in a market catering to already successful executives in their mid-to-late 30s who don't have to quit their jobs to get the executive version of the MBA degree.
Executive MBA Programs Tend to Be Costly
No wonder there are now nearly two dozen Executive MBA programs around the world that cost six figures. Increasingly, the most expensive programs feature international excursions for which meals and accommodations are covered (though airfare is not). Duke University's Global Executive MBA program, for example, boasts five residential sessions, with 60% of the classroom time in Asia, Europe and the Middle East. It carries a $146,600 price tag that includes lodging and meals. Or there is Trium, a three-way collaborative program among New York University, the London School of Economics, and HEC Paris. That program costs $140,000.
Noah Smith leaves out an important distinction
There's a good post at Noahpinion wondering where the opposition to high-skilled immigration is coming from. I suspect Smith is too quick to dismiss the role of xenophobes who see any increase in immigration as the first step down the slippery slope toward an open border, but it was this paragraph that really bothered me.
At least not without one important caveat.
When we talk about naturalized citizens, students and green card holders,* it really does tend to be a net gain when we bring smart, highly-educated people into this country. Putting aside students (whose contribution is a topic for a different post), the positive impact of these highly skilled immigrants is due in large part to a labor market that does a reasonably good job matching employer and employee and setting compensation levels that reflect skills and productivity.
For H-1B visas, however, the labor market is severely distorted. Though the situation seems to have improved somewhat,** employees still face significant hurdles when changing jobs and limitations on what sort of jobs they can take, a situation sharply satirized by John Oliver in the clip below.
Having said all that, there's still a strong case to be made for increasing our H-1B quotas and this country could certainly use a good, healthy debate on the subject, but the specifics make a difference. You could argue that every time we bring someone smart and creative into the U.S.A it's a win for us, but the win is bigger when that person is allowed to participate in a more efficient labor market.
* Green cards are a bit more restricted than many people realize, but probably not to the extent that it affects this conversation.
** See the American Competitiveness in the Twenty-First Century Act of 2000
What about high-skilled native-born Americans? Are American-born computer programmers, engineers, and entrepreneurs afraid that high-skilled immigrants will take their jobs? I guess this is conceivable. I've heard some low-level grumbling from American-born engineers about the low wages and long hours that immigrant engineers are willing to accept, but I know of nothing even slightly resembling an organized movement or lobbying effort. And my guess is that smart Americans are smart enough to know that it's a positive-sum game - that the positive impact of the businesses started by smart immigrants vastly outweighs the effects of wage competition.I may be opening myself up to an obvious insult here but having worked as a statistician in companies that used highly skilled immigrant labor, I'm not sure that this is automatically a positive-sum game.
At least not without one important caveat.
When we talk about naturalized citizens, students and green card holders,* it really does tend to be a net gain when we bring smart, highly-educated people into this country. Putting aside students (whose contribution is a topic for a different post), the positive impact of these highly skilled immigrants is due in large part to a labor market that does a reasonably good job matching employer and employee and setting compensation levels that reflect skills and productivity.
For H-1B visas, however, the labor market is severely distorted. Though the situation seems to have improved somewhat,** employees still face significant hurdles when changing jobs and limitations on what sort of jobs they can take, a situation sharply satirized by John Oliver in the clip below.
Having said all that, there's still a strong case to be made for increasing our H-1B quotas and this country could certainly use a good, healthy debate on the subject, but the specifics make a difference. You could argue that every time we bring someone smart and creative into the U.S.A it's a win for us, but the win is bigger when that person is allowed to participate in a more efficient labor market.
* Green cards are a bit more restricted than many people realize, but probably not to the extent that it affects this conversation.
** See the American Competitiveness in the Twenty-First Century Act of 2000
Again with the comic books
And again from Mippyville.
Admittedly, it's the three cents figure in this ad from a 1950 comic book that grabs the attention of the Twenty-first Century reader, but when you actually get into the text you may be surprised at how little things have changed.
Admittedly, it's the three cents figure in this ad from a 1950 comic book that grabs the attention of the Twenty-first Century reader, but when you actually get into the text you may be surprised at how little things have changed.
Sunday, May 15, 2011
Taxes and Growth via Yglesias
This entire piece is worth reading. In particular:
I think that this is a very strong argument and one that we really need to give more thought to. The empirical data for the effects on growth for taxing high incomes is mixed (at best) and the consequences for accelerating our current recession are non-trivial. After all, we are firing people from government jobs at the same time as there is tepid growth in private sector employment. The stated reason is to try and prevent our budget deficit from growing out of control.
However, if restoring the Clinton-era tax rates did not have a direct mechanism to retard economic growth then perhaps we could fire fewer public sector workers? That would help with the large unemployment rate that we have in the United States and the culture focus of self-worth via paid employment.
I think that the question of higher marginal tax rates on very high income earners does bear some thought.
The other mechanism that seems to be on offer is labor supply. This makes a lot of sense to me as applied to low-income people. If you work at McDonald’s or drive a taxi then you face a real choice about whether or not to increase your hours worked at the margin in exchange for more money. Driving a cab at 2AM is obviously a huge pain in the ass and not especially lucrative. To the extent that cab drivers face higher income taxes, they have even more reason not to work so late since it becomes even less lucrative. And the availability or non-availability of late night cabs has a variety of downstream impacts on bars & restaurants, drunk driving, etc.
But it’s a lot harder to see this at the high end. A very large share of high-income professionals basically have a marginal wage of $0. The CEO of WalMart can’t cut back his hours by 5 percent in exchange for a 5 percent pay cut. What’s more, a lot of high-end work is characterized by zero-sum competition. It’s plausible to imagine higher income tax rates making veteran NBA players more likely at the margin to retire rather than play one more season at the minimum. But what are the downstream economic implications of Mike Bibby retiring? There overall quantity of NBA players is fixed and there are plenty of other people willing to step up and do that job. The average quality of NBA talent might decline, but so what? The players just play against each other. And it’s not just athletes. Fancy lawyers and high-frequency traders are playing against each other. Marginal changes in average quality don’t matter. If anything, reducing the average quality of America’s lawyers and finance guys would be beneficial if it inspired more people to do something else with their time.
Last, of course, one of the main reasons for taxing the rich is precisely that the utility of a rich person’s marginal dollar is so low. Giving the dollar to someone else will increase overall well-being.
I think that this is a very strong argument and one that we really need to give more thought to. The empirical data for the effects on growth for taxing high incomes is mixed (at best) and the consequences for accelerating our current recession are non-trivial. After all, we are firing people from government jobs at the same time as there is tepid growth in private sector employment. The stated reason is to try and prevent our budget deficit from growing out of control.
However, if restoring the Clinton-era tax rates did not have a direct mechanism to retard economic growth then perhaps we could fire fewer public sector workers? That would help with the large unemployment rate that we have in the United States and the culture focus of self-worth via paid employment.
I think that the question of higher marginal tax rates on very high income earners does bear some thought.
Saturday, May 14, 2011
Weekend Gaming -- the greatest board game series ever?
I was never entirely clear on why 3M decided to get into the board game business, but for more than a dozen years they put out 3M's Bookshelf Games (so called because the boxes were designed to look like large hardcover books when placed in their slip covers). The line-up was a mixture of traditional games like chess and go and new games designed by freelancers like the incomparable Sid Sackson (Sackson's classic Acquire was a 3M game). The weakest of the series were still pretty good while the best have become, as mentioned before, classics.
Software developer Dennis Matheson has a detailed and affectionate website devoted to the series, Wikipedia has a good write-up as well, and, if your bookshelf has more space than mine, you can buy most of the games on EBay.
Software developer Dennis Matheson has a detailed and affectionate website devoted to the series, Wikipedia has a good write-up as well, and, if your bookshelf has more space than mine, you can buy most of the games on EBay.
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