PISA Comparisons Don’t Hold Up to Scrutiny

Yes, as the NYT reports, the Shanghai students did better than the Americans, and we are shamefully, tragically behind our competitors in investing in education. But the idea that this was a valid test of Chinese–or even Shanghai–student performance is absurd. The article notes that the PISA testers “worked with Chinese authorities” but doesn’t question why they would or should have to. It also allows that the Shanghai kids were told the test was important and would reflect on their country. No other kid in the world taking this “standardized” test, and certainly no American, was treated in this way. The author tried to bring some balance by comparing performance by kids in highly educated Massachusetts in 2007, but that says more about the weakness of PISA’s approach than it does about US kids’ performance. How about this: give the test to kids in the most expensive Manhattan private schools, and tell the parents and the kids well ahead of time that the outcome will determine the prestige of their school (and thus the kids’ chances of getting into the best Ivy League schools). That might be comparable to the motivation the Shanghai test subjects, under the eye of Chinese authorities, would have felt.
American students and teachers have enough problems, and we are falling behind. We need to change our culture so that teachers are respected as we respect, say, investment bankers. We need to understand that education is a strategic investment, as the Chinese do. But that doesn’t mean journalists should believe the hype.

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Review: Iron Man 2

Iron Man 2 isn’t better than the original, but considering it doesn’t have an origin story to drive it, the film more than satisfies in moving the franchise forward. The film does suffer from a proliferation of characters, a common mistake of sequel producers who think they have to provide more of everything, and Mickey Rourke is surprisingly flat as the new villain, Ivan Vanko. Scarlett Johansson is beautiful but deadly dull and completely unbelievable as a super spy/martial arts expert. She gets so many great movie roles yet does so little with them. Nonetheless, these weaknesses don’t bog the movie down because Robert Downey is so fun to watch. He makes it look effortless, but it’s important to note how much better he does compared to others who have tried out the superhero mantle. More than Tobey MacGuire or Christian Bale, Downey has made Tony Stark into a believable human being.  This is in good part because Downey is so well suited to play a brilliant, charming, wealthy man with deep flaws. He knows it and makes it work, bringing real sparkle and personality that keeps the movie from becoming a total cartoon, a job was made harder by overblown and overlong action scenes.

Bottom line: if you liked the first one, you should like the sequel. It’s a fun way to start the summer movie season.

You know you need to rethink when…

…you purport to represent Jesus but you sound increasingly like the Chinese Communist Party. Seriously. Take a look:

“With this spirit today we rally close around you, successor to (St.) Peter, bishop of Rome, the unfailing rock of the holy church.” –Cardinal Angelo Sodano to Pope Benedict, 5 April 2010

…let us rally closely around the Party Central Committee and work with one heart and one mind in a joint and unyielding effort to advance the cause of building socialism with Chinese characteristics and create a happier life and a better future for us all!” –Chinese President Jiang Zemin, 8 November 2002

Notably, the Vatican is also taking a page out of the CCP style book in claiming unsubstantiated victimhood at the hand of nameless attackers. Just as criticism or disagreement with Beijing policy necessarily “hurts the feelings of the Chinese people,” so questioning the Vatican’s handling of the most vile of crimes is an anti-Catholic “hate” campaign, an organized “vile defamation operation.”

The faithful deserve better than the brittle spin of the Chinese Politburo, but that’s what they are getting. The similarities speak volumes about what’s wrong with the Vatican.

Enough Already

The republic did not dissolve last night. We had a vote, and the majority ruled. Moreover, by the yardstick currently in vogue, we became “socialist” as early as the 1930s or as late as the 1960s. I remember communism and totalitarianism. I spent a long time studying them. Using such terms to describe American politicians cheapens the suffering of people who lived and often died under such systems. Unless and until you are willing to cast the least of your brothers and sisters into the street to die without medical attention, you have bought into “socialism,” American style. If you are not personally prepared to pull that plug, to watch people die without medical intervention, make peace with the fact that you will pay a tax to provide universal health care, either in the form of higher insurance premiums to pay for emergency room care, or in the form of government subsidies to help people buy insurance. Pick your poison.

While we’re on the subject, how did the move to take the country to war in Iraq, and subsequently to fund that war off-budget for years, elude all of us who are now so concerned about the deficit?

Now that Iraq War movies sell…

…how about taking another look at my screenplay, Honor Bound?  It’s the story of a young Latina US soldier in Iraq who heroically saves the lives of her men in combat, but is traumatized by the experience. When she returns home to civilian life in America, she struggles to control the violent skills learned in war when faced with brutal injustice. I wrote it because as a veteran, I could see early on in the war that the multiple combat tours my fellow veterans were serving would inevitably lead to an explosion of psychological casualties. I won some awards for my work, but couldn’t get anyone to buy the script. Following the lead of Josh Klein, I’ve now decided to give my screenplay away through a Creative Commons license to anybody who wants to adapt or produce it. Check it out, Hollywood! You can download a copy of this award winning script here.

Why Mortgages Don’t Get Renegotiated

As I have watched the second bubble of my adult life decimate the value of my home, one question has eluded me: why would lenders that want to maximize profit not bargain with their mortgage customers? After all, businesses renegotiate debt as a matter of course, and arguably lenders stand to profit more from cutting a deal and keeping a customer than from foreclosure, which drives down asset values. As an example close to home, a foreclosed house in my neighborhood is about to be auctioned. It’s a nice place. The person who was living there took pretty good care of it, and there was no vandalism or stripping as happens so often now in foreclosures here. The real estate agent who has the listing on the house draws attention to the fact that the house sold in 2006 for $416,000. The agent’s logic speaks to the persistent madness of the bubble–what bearing does the 2006 sale price have on the current or future value of the home? Absolutely none. But I digress. The reason I wanted to cite the 2006 sales price is because today, the lender that owns the house is willing to accept $99,000 as the minimum auction bid on the house. Sure, it will probably sell for more than that–the listing is currently at $275,000, down from $299,000–but assuming the lender’s ex-customer owed $300,000 on the property, the bank is now willing to accept 33 cents on the dollar. It makes no sense. If they had instead met the borrower halfway, might both parties be better off? Of course.

So why does this continue to happen? I’ve been asking myself and friends this question, but got no decent answer. Greed and evil would seem to be great explanations, but greed would seem to make a lender play a good game, then blink rather than foreclose and become the owner of a sharply less valuable property. I can’t think of any other business in which lenders deliberately and consistently devalue their assets. Finally, the good folks at Slate provided an answer:

If foreclosure is so costly, why don’t lenders avoid this cost through renegotiation? Renegotiations aren’t happening because so many mortgages are securitized. In the old days, if you wanted to renegotiate your loan, you just called your bank. Now you have to deal with the loan servicer, who acts on behalf of the thousands of mortgage-security holders who have a right to a share of your payment. The loan servicer gains little and loses a lot if it attempts to renegotiate a loan. Securities holders don’t trust servicers and threaten to sue them if they renegotiate loans; servicers usually don’t lose much money if the mortgage defaults.

Finally, an answer. Yes, the securitization of the housing market, the market perversion that wiped out billions of dollars of taxpayer wealth and that has cost billions more in taxpayer bailouts, is the gift that keeps on giving. The fact that nobody really owns our homes makes it impossible for the people who receive our mortgage check to cut a deal with us. They are free to foreclose, but face legal action if they try to renegotiate mortgages. This is exactly the opposite of what we need. What can we do? Fortunately, the authors of the Slate article propose an elegant, market-friendly, and fair solution:

The solution to this problem is for the government to force renegotiations to occur. A simple plan could do this. The plan would give all homeowners who live in a ZIP code where house prices have dropped more than 20 percent the option to have their mortgage reduced to the current market value of the house. In exchange, these homeowners would yield to their lenders 50 percent of the future appreciation of the house. To avoid any gaming and future moral hazard, both the current and the future value of the house will be determined by multiplying the purchase price and the variation in the housing price index. So if you bought your house for $300,000, and the average house in your ZIP code has lost 20 percent of its value, then your new house is assumed to have a value of $240,000. If your mortgage was $280,000, now it is $240,000 (the new value of the house). You are no longer underwater.

It’s beautiful, but you should read the rest of the article to see just how much sense it makes. We are going to have to do something like this, because otherwise the lenders are simply going to continue to run home values into the ground. They are on autopilot, which is scarier than just thinking they were stupid or evil.

The Great Consolidation

I keep seeing indications that emerging technologies and business models could save me money and simplify my life. Since these are two of my top objectives for the new year, I’m going to give it a go, but I need a decent place to track my efforts. My initial research tells me that there are tradeoffs that require me to dust off my GRE test prep books, and I’ve already spotted some serious pitfalls. I’m going to keep track of my work here in the spirit of using the most elegant tools I know of.