China's Real Estate Bubble

ChinaLawBlog references a few datapoints on China's real estate market (Chovanec). I'd be curious how rising real estate prices compare to the rising incomes.

Chovanec argues that it's difficult to reconcile rising real estate prices and falling rental prices but not necessarily. If enough people decide that buying a house is better than renting, this will reduce the demand for rentals (the inverse has been happening recently in a lot of US cities where real estate prices have fallen while rental prices rise).

It would be more interesting (and convincing) to compare income levels to real estate prices compared with other developing countries around the world and the cap rate (Wikipedia, equivalent to the price/earnings ratio) of commercial real estate. It's useful to remember that real estate has intrinsic value based on the underlying productivity who live and work there (neoHouston).

Personally, I suspect when you look at both a bubble exists but I'm not entirely convinced that it's as overvalued as some people suspect given that incomes in larger cities rise faster than elsewhere and particularly in China (just based on some basic numbers in Guangzhou).

Whither the University?

A professor of Computer Science at Georgia Tech asks: "Could universities become extinct in the next twenty-five years?" If our goal is to encourage merit, this would be a good thing pre-supposing something will emerge / is emerging that's better.

His bottom up approach to examining how a university creates value and why the traditional advantages conferred to universities is disappearing is interesting. Indeed, quite a large number of interesting opportunities come to mind particularly in developing countries where leapfrog opportunities exist for implementing widescale post secondary education on a broad market.

Because some things are just useful to know...

Popular Mechanics: How to Fall 35,000 Feet—And Survive.

The Most Trusted Name in News...

I'm posting this because I know it will disproportionately bother some people - but the partisan divide sounds about right to me (PDF, and from a "Democratic polling firm" (Rasmussen), PublicPolicyPolling, no less):

A new poll asking Americans whether they trust each of the major television news operations in the country finds that the only one getting a positive review is Fox News. CNN does next best followed by NBC News, then CBS News, and finally ABC News.

49% of Americans say they trust Fox News to 37% who disagree. Predictably there is a large party split on this with 74% of Republicans but only 30% of Democrats saying they trust the right leaning network.

CNN does next best because it is the second most trusted of Democrats, Republicans, and independents. 39% say they trust it compared to 41% who do not, with 59% of Democrats, 33% of independents and 23% of Republicans saying it carries credibility with them.

Given how absurdly biased and partisan much of the mainstream networks have become, it doesn't seem surprising that Fox News, finally attempting to represent a rather large underserved community has rapidly become the most watched news network (though I generally find annoying to watch the rant sessions versus the news segments).

Update: Some are inclined to blame Fox News for everything and that's lead to an amusing correction from yesterday, made even more funny beyond the fact it wasn't caught by editors, was the fact it was written by a former cabinet member in the Clinton Administration (Salon):

The Jan. 25 article "Is the President Panicking" originally stated that Fox News led the charge against Bill Clinton in the '94 midterm elections. Fox News did not come into being until 1996. The story has been corrected. [Correction made 1/27/10]

Checklists Reconsidered

So I've ordered Atul Gawande's The Checklist Manifesto (Amazon). In the meantime, the Wall Street Journal's review disagrees with his approach to applying checklists to most things (WSJ):

In fact, many aspects of modern life suffer from too many checklists. Teachers, for example, are shackled to lists and protocols that prevent them from doing their jobs properly (e.g., disciplining students). Complying with the requirements of due process—a kind of legal checklist intended to protect against abuses of police power—has corroded the authority of teachers to maintain basic standards of order and respect. [...]

Accomplishment is personal. That's why giving people the freedom to take responsibility is so important. Organizational techniques can be useful—we all rely on checklists informally—but formal protocols can disrupt focus and undermine success in many life activities. Dr. Gawande is right to note that checklists are indispensable in situations where a small mistake can lead to tragic consequences, as in surgery. But his call for a broad checklist regime would be counterproductive—fraught with all the dangers of bureaucracy and excessive law.

I get the sense though that where consistency is important and where similar problems arise with a known series of outcomes, using checklists is a good approach. However, ineffective checklists as outlined by the WSJ, may not be a question of a problem with checklists but rather what's in the checklists and how they get applied... but at least that's what I'm thinking for now. I'm looking forward to getting and reading the book and will, with luck and time, draft a summary of it to post.

"The Problems that Dollars Can't Fix"

Another contrarian view on the humanitarian efforts and the plight of Haitians even prior to this disaster (Ottawa Citizen): "Haiti is not a basket case from the absence of foreign aid. Quite the contrary."

One also hopes that this was because of bureaucratic incompetence and not political correctness (USA Today).

The Dramatic Fall of Global Poverty

The best remedy for human suffering and tragedy following natural disasters is to reduce poverty - for this and innumerable other reasons, the dramatic fall in poverty around the world is great news (voxeu via kedrosky):

More on the Forces of Good

Newsflash: Markets work! The more baggage fees that US airlines have been charging customers, the faster their overall revenue has been collapsing.

A Win for the Forces of Good

Republican Scott Brown Wins (Boston Globe) in Massachusetts.

More on Bias & Food Science

After reading a bit more about the endocrinologist Dr. Robert Lustig, I found Gary Taubes (who is apparently more reknowned). Taubes is a science journalist who wrote Good Calories, Bad Calories (Amazon), a follow up to New York Times' most controversial piece in 2002 (which is saying a lot for the New York Times) asking if "What if it's all been a Big Fat Lie?" (NYT).

Arguing virtually the same things as Lustig, Taubes points to study after study showing why what we thought we knew about obesity and nutrition has been wrong. The basic premise is this: Atkins was right all along. We get fat because of the way our bodies process carbohydrates. Cut out the processed carbs and simple sugars (especially the fructose as Lustig will tell you), and we can dramatically reduce obesity. By focusing on low glycemic index foods, you prevent obesity, diabetes and heart disease - a few tables here of what foods fall into which categories (PDF, UCLA).

What made this particularly post worthy (which, let's face it, is a pretty low threshold here) was one of Taubes' closing paragraphs in his book (Overcoming Bias):

The institutionalized vigilance, “this unending exchange of critical judgment,” is nowhere to be found in the study of nutrition, chronic disease, and obesity, and it hasn’t been for decades. For this reason, it is difficult to use the term “scientists” to describe those individuals who work in these disciplines, and, indeed, I have actively avoided doing so in this book. It’s simply debatable, at best, whether what these individuals have practiced for the past fifty years, and whether the culture they have created, as a result, can reasonably be described as science.

This doesn't seem to be a problem confined to nutrition. The Sunday Times (UK) reported yesterday that an oversight caused the disproved alarmist claim that the Himalayan glaciers would melt by 2035 to be included in the latest official IPCC report on global warming. With the embarrassing disclosures in the Climategate emails, one wonders what other 'oversights' will ultimately be uncovered.

For more on Gary Taubes' work, have a look at one of his lectures here (though as forewarning, it's 70 minutes long):

Why is/(was) Haiti so Poor?

Tyler Cowen (Marginal Revolution) asked this question a few days ago. Tunku Varadarajan makes the political case for why France owes Haiti (the Daily Beast): "first a brutal colonizer, and then a usurious bully."

While I'm generally not one to shy away from 'blame France' rhetoric (and while I have little doubt as to their historical culpability and the state of many of its former colonies), the clues for their more recent causes of poverty can be found here (World Bank's Doing Business) and here (Heritage Foundation's Economic Freedom Index):

Haiti scores below the world average in business freedom, investment freedom, financial freedom, property rights, and freedom from corruption. Starting a business takes four times longer than the world average, and commercial laws are applied inconsistently and non-transparently. Restrictions on foreign capital are significant, and investment is subject to an arbitrary bureaucracy. Prolonged instability has weakened the rule of law.

While I'm not nearly as pessimistic as to believe that this will be the end of Haiti (the Economist blog), one prays that in the aftermath of this massive tragedy, Haitians will be able to rebuild stronger than they were before.

Trying to imagine the plight of Haiti's 9.4 million inhabitants in the immediate aftermath is sobering. (See the before and after satellite imagery here, ReadWriteWeb)

Update: According to the World Bank: great natural disasters are often a catalyst for huge, positive change.

How *Not* to Help in Haiti

Whatever you do, don't text your donation (GigaOm):

It usually takes 90 days from the time of donation to the time it is received by the intended charity, in part because they are collected through each customer’s normal cell phone billing cycle. That’s eons in disaster recovery time

Update: Please don't contribute to anything to related to the United Nations: "U.S. Sends Help, UN Wants Money" (Claudia Rosett). With the lack of transparency, lack of operational urgency and taking credit for those who have it, it's not difficult to understand how some might conclude the organization were a scam or something.

How to Help in Haiti

Disaster relief is one of the few areas where I advocate giving and giving generously. But like all charity, not every dollar has an equal impact. Aid Watchers has an overview of what you can do for Haiti, probably one of the most depressing corners of the world and where Tyler Cowen highlighted the hopes for progress only yesterday before the quake.

As an aside, Jonah Lehrer talks about the psychology of giving.

Doing the Right Thing: Google Considers Pulling Out of China

Both remarkable and refreshing - Google's new approach to China (GoogleBlog):

We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

Google has been under increasing political pressure elsewhere and while this will undoubtedly also help with those public relations efforts, it's a bold move that I suspect users will reward. The post implies they have proof that the Chinese Government has been enabling hackers who have not only been attacking their corporate servers but have been attempting to infiltrate gmail accounts linked to human rights activists.

I suspect this will only be a short term loss restricted to China on this move. When a "glastnost" comes to China, as it did Russia, if they're clever about marketing, using Google could ultimately be a symbol of new found freedoms. The fact that the Chinese government has made it difficult for them to operate, given competitors an operational advantage and enabled hackers that attack them and other firms, must make it an easier risk to take.

While I imagine they've weighed the business calculus on this, being the idealist I am, I want to believe, and I think there's a good probability that doing the right thing here, will mean greater profits both now and in the future.

Update: A more cynical viewpoint - It's more about business than thwarting evil (TechCrunch)

Update #2: More here from Imagethief, a PR expert based in China.

Missing the Point of Comparative Advantage

Daniel Hamermesh seems to miss the irony in his post on "Sticking to What I'm Good At" where he talks about volunteering two hours of his time basically weeding a sea plant (Freakonomics):

Productive groups generally learn quickly how to maximize output in situations like this, even with no guidance from a manager. Some people in the group (like me) were uniformly relatively good (or bad) at all tasks (had no obvious comparative advantage), so that their skills (or lack thereof) led them to spend the time alternating among all the tasks. I would think that primitive farming groups and, even further back, groups of hunters quickly learned who was relatively and absolutely good at which tasks.

Unless he gets true value in getting rid of sea grape, presuming that he makes more as a professor rather than a menial laborer (ditto for the opthalmic surgeon), it would seem somewhat more economically productive for them to just pay for the menial labor. It's sort of like people who supposedly go and volunteer to plant trees or dig ditches in developing countries - as if they didn't have much cheaper labor to do it with.

I'll side with one commenter here who says it's about the liberal guilt: "The point of doing something like this is to help rich people feel less guilty about vacationing in an island paradise."

Was it "Cheap Money that Made Us Stupid"?

I suspect it'll take an additional number of years for there to be greater consensus over what caused the financial crash that led to our "great recession". Two recent pieces by Megan McArdle, formerly of The Economist and now the Business and Economics Editor at the Atlantic, and Edward Chancellor from the Financial Times offer clues.

From McArdle who points out that it's inconvenient to place the blame on sophisticated bankers who took advantage of unsophisticated home buyers especially in the face of the new collapse in commercial real estate (the Atlantic):

The best explanation for the calamity that has overtaken us may simply be that cheap money makes us all stupid. The massive inflows of international capital, which Ben Bernanke has called the “global savings glut,” poured into our loan markets, driving interest rates lower—and, since most real estate is purchased with borrowed funds, pushing up the price of property in both the commercial and residential sectors. Rising prices, in turn, disguised any potential problems with the borrowers, because if they ran into cash-flow problems, they could always refinance, or sell. Everyone was getting bad signals from the market, and outlandish purchases looked almost rational.

Chancellor goes on to note the bubble wasn't restricted to the US (FT):

For a start, securitisation is unlikely to be a prime cause of the global housing bubble since home prices soared in many countries, such as Spain and Australia, which didn’t abound with exotic mortgage products. Given the dollar’s role as the global reserve currency, the Fed’s loose monetary policy had a far more extensive effect. [...] The connection between a loose monetary policy and asset price bubbles is pretty obvious to anyone with the slightest economic intuition: low rates make it cheaper to borrow, while acquisitions financed with credit drive up asset prices.

He goes on to warn that the US Fed seems to have learned little from the unravelling:

The Fed has returned to its old view, maintained during the Greenspan years, that bubbles cannot be recognised ex ante. Nor does the Bernanke Fed accept that glaring macroeconomic imbalances that characterised the last decade – such as the rapid growth of private sector credit, the falling savings rate, and the gaping current account deficit of the mid-2000s – were useful leading indicators of an approaching crisis.

Meanwhile, some economists are already warning that expansive monetary and spending policies today are already repeating the mistakes that caused this recent bubble and creating the environment for yet another asset bubble. From the WSJ, December 14: "Some analysts believe certain asset prices, including in emerging markets and corporate bond markets, may already be rising unsustainably, following a speedy recovery in recent months."

PSA: The Problem with Fructose and Why a Calorie is not a Calorie

I'm pleased to say that while I've reached most of my rather superficial health goals, I do have a couple more pounds that I want to lose. If you've got 90 minutes, this video by a UCSF endocrinologist, Robert H. Lustig, is worth watching on why everything you thought you knew about nutrition and obesity is wrong:

The basic notes:

• a calorie is not just a calorie: eating less and exercising more alone does not work; sugar/calories are processed by the body differently
  
• a high sucrose/fructose diet IS a high fat diet and fructose/sucrose makes you feel hungrier; limit fructose, sucrose and alcohol consumption
• fructose/sucrose gets processed by body like ethanol (alcohol) without the buzz - for this reason, chronic fructose consumption results in 8/12 chronic diseases associated with alcohol abuse - metabolic syndrome: insulin resistance (type 2 diabetes), high blood pressure, high LDL cholsterol
• exercise is important as it speeds up the metabolism of calories and is the single thing that reduces stress and stress also causes obesity
• fiber reduces carb absorption - eat carbs with fiber: fruit ok (includes the fiber); fruit juice is not
• drink only milk and water, cut out everything else
  

More on that Race to replace Senator Ted Kennedy

Quote of the day (Instapundit):

It must be troubling when your push-pollers ask people if it would affect their vote if the guy was a Nazi and the respondents say “Nope, he’d still be better than Coakley.”

Of course, the Democrats don't intend to play fair even if Coakley loses (Sissy Willis): "Democrats have admitted to a scheme to ram through the Healthcare Rationing vote before Scott Brown can be sworn in as Senator, should he defeat his Democrat opponent on January 19th." Is there a better reason for why Coakley shouldn't be elected?

Should you be allowed to sell a kidney?

If you ask Alex Tabarrok, the answer's yes (WSJ). I watched Daybreakers (imdb) a few days ago - which incidentally, is a movie that could have been great but made somewhat churlish on the editing floor. I suggested to my hippie friend that if there had been a true market for blood, there wouldn't ever have been a shortage of humans. He was less than appreciative.

With the unending parade of ineptitude and corrupt bureau/politicians, it boggles the mind there are people who continue to say "xyz is so important, how can we possibly trust markets?" The real burden of proof should be "if xyz is so important, how can you trust the government to act in your best interest?"

Update: Also apropos to ensuring a violent vampire outbreak doesn't happen, this is what we need to do (PopularMechanics)

"We are all Spartacus Now"

Them's fighting words. From the newly launched, "BigJournalism", the first editorial by Michael Walsh.