Disqus - Latest Comments for R.J. Lehmann

Re: Reality & Representation

R.J. Lehmann — Wed, 12 Oct 2005 19:26:41 -0000

I always thought what The Jam Experiment mostly showed was that, after sampling 30 different jams, a customer will feel like a pig, and be in no mood whatsoever to buy yet MORE jam.

Re: Wearing John Malkovich

R.J. Lehmann — Tue, 01 Nov 2005 14:23:01 -0000

And this is in ADDITION to his mad marionette skillz. Clearly a renaissance man.

Re: The Myth of Public Interest and the Flourishing of Political Predation

R.J. Lehmann — Sat, 05 Nov 2005 18:11:01 -0000

odograph:

Wal-Mart does not have a per-hour week threshhold to achieve eligibility for health benefits. It has an aggregate hours worked threshhold. When you've worked 1,000 hours -- which works out to about six months for full-time employees and usually about two years for part-time employees -- you are fully eligible benefits.

In this respect, it offers much more than most big retailers do. And nearly half of those offered the benefits turn them down. I discuss some of the reasons why here:

http://lehmann.typepad.com/in_lehmanns_terms/2005/10/adverse_selecti.html

Re: The Myth of Public Interest and the Flourishing of Political Predation

R.J. Lehmann — Sun, 06 Nov 2005 05:57:03 -0000

What you're referring to are state laws in some places that MANDATE that benefits be offered to employees who work over a certain number of hours per week, although even where in place (Vermont and Hawaii come to mind -- California's was repealed) the laws only apply to something approximating full-time work and allow companies reasonable waiting periods (three to six months are typical) before the law kicks in. Wal-Mart has a universal vesting period for benefits for all employees nationwide. It's not an especially generous coverage, but it's typical for retail work, and the fact that it is extended to all part-time employees who pass the threshhold is actually pretty unusual for retailers. Nonetheless, as I said, about half of their employees (including the vast bulk of their part-time employees) do not take them up on the offer.

By the way, if you read the WaPo article more carefully, you'll the 600,000 figure you quoted is the number of employees who don't have COMPANY insurance. That's a very different thing from having 600,000 uninsured employees, as the bulk of those 600,000 draw their coverage from sources other than Wal-Mart. To be sure, Wal-Mart does have a significant uninsured contingent, but as in society at large, this contingent is heavily weighted toward younger, healthier employees who OPT not to pay premiums -- generally because they don't see health care as a priority and they'd rather pocket the cash.

Re: The Myth of Public Interest and the Flourishing of Political Predation

R.J. Lehmann — Sun, 06 Nov 2005 06:41:03 -0000

No, that's a pretty baseless assertion, if for no other reason than that, in those small handful of states that DO have these sorts of mandates, they don't actually apply to Wal-Mart! The federal Employee Retirement and Income Security Act of 1974 exempts large employers (those with more than 100 employees) from state-level mandates on what benefits they can or must offer.

The Hawaii law is a special case, in that it was passed before ERISA and is considered grandfathered. But in Vermont, for instance, the law can only be applied in the small group market -- those with less than 100 employees. Thanks to the ballot initiative, California's law never had a chance to implemented. If it were, though, the provisions that sought to dictate rules to the large group plans almost certainly would have been struck down as incompatible with ERISA. There were a number of suits prepared by the Chamber of Commerce to do exactly that if the ballot question failed.

It's to try to get around these sorts of state level laws that groups like the realtors and independent contractors have been lobbying for association health plans, which would put them on the same footing as the large group ERISA plans.

But, anyway, I think the part of the issue that is widely misunderstood by the general public -- certainly by the media -- is that health benefits are not something offered IN ADDITION to salary, but rather, they are offered IN LIEU of salary. Because health benefits aren't taxed as income, the same level expenditure on labor can purchase more employee compensation by way of benefits than by way of wages. All else being equal, an employer has a strong incentive to offer health coverage instead of pay increases.

And until very recently, this worked out quite well for employers, as the 1990s were marked by flat or declining health premiums as managed care grew in popularity. The switch in emphasis has really only come over the past four or five years, when wage inflation has been flat or declining, while health inflation has skyrocketed.

Re: The Myth of Public Interest and the Flourishing of Political Predation

R.J. Lehmann — Mon, 07 Nov 2005 12:29:57 -0000

Cheating implies breaking the rules. Sure, it happens, and sometimes it happens in big, obvious ways. But for the most part, rule-breaking is the purview of fly-by-night operators who look only to make a few bucks before cutting and running.

Empires like Wal-Mart, like Microsoft, like ExxonMobil -- they usually don't have to break the rules. Instead, they rewrite the rules to better suit them.

Re: Status Frenzy

R.J. Lehmann — Thu, 22 Dec 2005 02:22:30 -0000

Allow me to unsheath the ubergeek who lives inside me to point out that, while Wolverine's bones are made of adamantium, Captain America's shield is made of a one-of-a-kind adamantium-vibranium compound, which is even stronger and harder than true adamantium. So, the answer, theoretically, is yes.

Re: Brangelina of the A.F.F. Set!

R.J. Lehmann — Thu, 05 Jan 2006 00:36:00 -0000

Anytime, hermano.

Re: Mozart, Bah!

R.J. Lehmann — Fri, 27 Jan 2006 17:53:09 -0000

Happy Birthday, old man!

Coincidentally, my own birth nuptials are overshadowed each year by Beethoven's (or, at least, what is usually given as his birthday, even though it's actually the date of his baptism and thus, almost certainly not his actual birthday.) Though I prefer to focus on the fact that I share a birthday with Milla Jovovich, and if she ever has any suggestions for a private celebration we might share, I'm all ears.

Incidentally, you also share a birthday with:

looking glass gazer Lewis Carroll,
batshit insane proto-fascist Kaiser Wilhelm II, composer Jerome Kern,
king of the slide guitar Elmore James,
America's sweetheart Donna Reed,
'guy from Ipanema' Antonio Carlos Jobim, surprisingly-NOT-gay Troy Donahue,
vegan pig-farmer James Cromwell,
egomanical casino magnate Steve Winn,
Pink Floyd drummer Nick Mason,
porn-face making SNL bandleader G.E. Smith, huge-jugged recovering Scientologist Mimi Rogers, comics uber-deity Frank Miller,
smarmy ESPN cast-off Keith Olbermann,
former Cincinnati Bengals wide-out Cris Collinsworth,
the least obnoxious Fonda -- Bridget, and
bisexual 'bamf'er Alan Cumming.

Now, don't you feel special?

Re: Zombie Reforms, Zombie Arguments

R.J. Lehmann — Thu, 09 Feb 2006 23:21:21 -0000

Social Security is a modest enough benefit that I can't see the moral hazard problem as a significant one. Certainly not significant enough to warrant anything like mandatory retirement accounts, which could just as easily force too MUCH savings as guard against too little. And in any case, unless you propose to have the government also manage what retirees do with the distributions from these accounts, what significant protection would they really offer? You can lead a horse to a savings account, but you can't stop him from blowing it all on Viagra once he turns 65.

Re: Zombie Reforms, Zombie Arguments

R.J. Lehmann — Thu, 09 Feb 2006 23:31:22 -0000

Reading your post a bit more closely, you seem to be making your argument based not primarily on how benefits are currently allocated, but on the prediction that the large mass of future retirees would vote for politicians who would increase their benefits. This is certainly a threat, but I still don't see how mandatory retirement accounts would help avert it. And in any case, it makes the first part of the policy prescription entirely moot. A voting public bent on increasing benefits to the elderly would, of course, begin by undoing any legislation passed in recent years that had limited those benefits, starting with progressive indexing.

Re: Commuting and Consuming

R.J. Lehmann — Thu, 16 Feb 2006 22:33:26 -0000

I may have had an even stranger Bay Area commute than yours, Nicholas. I used to live in work in Oakland and live in Alameda, and voluntarily chose to move somewhere both more expensive and further away -- Palo Alto. But at least I never really faced any traffic once you'd get over the Dumbo bridge.

Re: Bad Marriages

R.J. Lehmann — Wed, 08 Mar 2006 02:23:33 -0000

The means of raising funds for the federal treasury and...

Social policy w/r/t home ownership
Social policy w/r/t provision of health care
Social policy w/r/t religious institutions
Social policy w/r/t charitable giving
Social policy w/r/t savings and investment patterns
Social policy w/r/t family size
Social policy w/r/t smoking, alcohol, and other vices
Social policy w/r/t (insert favorite tax code loophole here)

Re: Bad Marriages

R.J. Lehmann — Sun, 12 Mar 2006 00:21:48 -0000

But if you lose your job, you are immediately uninsured.

Well, that's not exactly true. You can continue to pay your premiums into the same group policy for up to a year under COBR coverage. And if you don't want that policy, you can always purchase another. It isn't that individual health insurance doesn't EXIST -- it's that it's granted a tax preference in the employer group setting that isn't extended to the direct individual setting.

Re: Are We Desperate Yet?

R.J. Lehmann — Mon, 13 Mar 2006 00:24:42 -0000

Even if I had no preconceived opinions about socialized medicine, I'd hardly consider it a recomendation that it would help subsidize a proliferation of whiney and tuneless crackas who can't play their instruments.

Re: Opposite Day

R.J. Lehmann — Tue, 14 Mar 2006 15:56:48 -0000

I think he's referring to "internalities," as in, people should be saved from themselves. But you may not disagree with that either, in certain circumstances.

Re: Health Care Fantasia

R.J. Lehmann — Wed, 22 Mar 2006 13:02:53 -0000

we’re forcing people to buy catastrophic health, like we force drivers to have collision

By and large, we DON'T force drivers to have collision. We force drivers to carry third-party liability. Collision covers property damage done to your own car in an accident. Third party liability covers the property damage and bodily injury that an at-fault driver inflicts on OTHER people.

It's not a trivial distinction. The idea of requiring TPL (or personal injury protection, PIP, in no fault states) is to force the driver to internalize costs that he might otherwise be tempted to ignore. But even in the current highly regulated insurance markets, we still generally recognize that individuals ought be able to decide for themselves how to handle risks whose impact only they would bear. A lender could require that a driver carry enough collision to cover the outstanding principle on the car, but the overwhelming majority of states have no such requirement as a matter of law or regulation.

Requiring it in health insurance would represent a fundamental break from established insurance law, and would likely have a non-trivial impact on the prices health insurers could extract.

Re: Health Care Fantasia

R.J. Lehmann — Wed, 22 Mar 2006 13:25:44 -0000

Why isn’t there a Manny’s Stitches Joint!

Actully, various "Mannys" and his ilk DO exist in the black market. Visit certain immigrant communities, and you can find them.

But if the question is why there isn't a legally-sanctioned Manny's Stictches Joint, I'd break down the causal factors thusly:

26% -- Rent-seeking exercise of monopoly priviledge by the AMA
25% -- Legitimate concerns of policymakers about the ability of lay public to make ex ante evaluations of the minimum basic competency of doctors
9% -- Reluctance of consumers to use less thoroughly-trained medical staff
Remaining 40% -- Because NO ONE would choose to cover Manny's liability

Re: Health Care Fantasia

R.J. Lehmann — Wed, 22 Mar 2006 23:32:39 -0000

Actuarial analysis is useful where variables are reasonably finite and some measure of the law of big numbers is at play. Take a look at the variance in claims outcomes in the field of malpractice, and you'll quickly just how little use actuarial analysis is on an individual risk basis. The most it can tell you appropriate aggregate premium should be, and how overall rates need to change from year to year. From that, you'll make adjustments for specialty and based on state-level data, or, in states with territorial rating, in a given territory. You might also makes individual rate adjustments based on other criteria, such as whether a person is working part time, or is new to practice coming out of medical school.

But while large medical groups often are loss- or experience-rated, whereby the insurer's statewide experience is matched up against the group's own experience to determine how much variance that group should be granted from statewide rate levels, an individual doctor's own historical experience level generally isn't considered enough of an actuarially credible factor to support substantial deviation from a standard rate.

At most, you might build some parameters into the rate structure to recognize the individual risk characteristics of an individual insured to allow for some variation around the statewide rate, so that rate can be adjusted up or down based on objective criteria — such as the absence or presence of previous losses. For instance, if a person went an extended period of time claim-free, they would earn a credit off of their rates. But if a person had a $100,000 paid claim or a $200,000 paid claim, you're going to treat those in a similar fashion.

Contributing to the futility of rating individual doctors based on their claims experience is the fact that the vast majority of doctors will be sued at some point during their careers, and most on multiple occasions. While a majority of the cases are dropped or dismissed, defense costs will be paid by means of claims against a doctor's policy. That doesn't mean that all doctors are bad, but it means that even good doctors are going to pay like they're bad doctors in the current environment.

Hence, as with all forms of insurance, the first determination to be made is whether a particular doctor, hospital or medical group represents an acceptable risk to underwrite at all.

If the only thing you have to segregate acceptable risks from unacceptable risks is a four-year medical degree, then you can bet dollars to donuts that Manny's going to get the short end of that stick.

Re: The Beauty Duty

R.J. Lehmann — Mon, 27 Mar 2006 22:29:19 -0000

So what responsibilities do you owe, in return?

Re: Beards

R.J. Lehmann — Tue, 28 Mar 2006 17:33:40 -0000

I don't know, dude. I think you can only really pull that if you're gay. Or a cop. Or a gay cop. Named Bruce.

Re: Class, Education, and Meaning Manufacture

R.J. Lehmann — Thu, 20 Apr 2006 00:00:35 -0000

With all due respect, W.W., but have you considered that perhaps there might be some misalignment between your circumscribed view of what your job IS, and the actual function that your job serves in the economy?

Certainly, the group of folks that could do precisely what you do is quite small. Certainly, you have skills that could be applied to a broad range of potential projects.

But -- and again I mean no disrespect to what you do -- do you not see the irony of promoting your job in the field of "meaning manufacture" as an example of "indispensiblity" when, in fact, your employer is a non-profit organization? And but for certain vagaries of the tax code and reliance upon the kindness of certain deep-pocketed strangers, it likely would not even exist?

I'm generally not comfortable doling out advice on child-rearing, in large part because I have none myself. But since these are just hypothetical children at this point, I guess I can say that the program you describe sounds to me like a very good way to rear to future academics, but I don't see it being any more effective at inculcating future entrepreneurs than the current factory-style schooling paradigm.

Based on my own humble career in the world of business, I would opine that "creativity" is largely an in-born trait that can be alternately encouraged or quashed, but not truly "taught." And I think people of a certain romantic bent tend to overrate its importance to being a successful entrepreneur.

Again, in my own experience, many very successful entrepreneurs do quite well despite displaying no outward signs of any more than average levels of creativity. But I've yet to meet one who excelled without having mastered those more mundane skills you mention -- punctuality, the ability to navigate bureaucracy, and notable skill in social word/power games. And I say this, fully cognizant of the fact that most of my own greatest faults lie in having failed to fully master those things myself.

Re: Class, Education, and Meaning Manufacture

R.J. Lehmann — Thu, 20 Apr 2006 00:35:08 -0000

I would say you have far more competition from robots and Chinamen than you realize. Cato gets its money from grants. Those grants largely come from foundations established and funded to exploit tax loopholes in a way the givers find appealing. Remove the loopholes, and you remove the comparative attractiveness of charitable giving. Thus, more funds would divert from foundations to other, more highly valued ends -- like, for instance, building robots and investing in China.

Re: Class, Education, and Meaning Manufacture

R.J. Lehmann — Sat, 22 Apr 2006 01:15:50 -0000

If everyone CAN become more creative, and moreover, everyone DID become more creative, then wouldn't that suggest the marginal returns from such training would slope sharply downward as the supply of creative product grew?

I know you're not solely focused here on artisitc creativity, but taking that as an example, the trends in that arena have all been running directly counter to what you suggest. As technology has allowed the cost barriers to entry in so many artistic fields -- from filmmaking to publishing to music recording -- to drop precipitously, public demand is not nearly keeping pace with the explosion of supply. This has a depressing effect on the profits and wages artistic entrepreneurs can capture across the board. A certain cream may always rise, but marginal artist is giving way in many more areas than ever before to the unpaid amateur. I know I find a lot more enjoyment out of YouTube than I do the whole mass of 600 channels I get through digital cable.

And I'm not as sure as you are that the process of "making" carries over so neatly into the world of entrepreneurship. The first distinction I'd make is in the focus of the entrepreneur rather than the artist. It is less important to "create" than to "create that which other people NEED." Moreover, the conventional wisdom, and I'm inclined to agree with it, is that developing the great idea, the killer ap, the visionary business model...is the EASY part. Executing it, convincing others to sign on to your vision, navigating how to deliver that product or service to those who would most value it, learning from your mistakes, spotting and adapting to changes in the market -- THOSE are the hard parts.

And most of those things have to do with social dynamics, the ability to read people, to manage expectations, to play politics, the willingness to humble oneself (or to engage in blatant self-promotion) when necessary, and so on.

Some of those things can be taught. Most of them, though, are honed over time through social interraction. Which is why, though I have no philosophical objection to home-schooling, I just can't help but feel whenever I hear parents or would-be parents talking about it, that they seem to be missing what exactly what is most important about what kids learn in school. There is no class more important than recess, because the lessons you learn on the playground will take you a lot further than any curriculum, no matter what its substance.

Re: Who’s Afraid of Mexicans?

R.J. Lehmann — Tue, 04 Sep 2007 18:19:13 -0000

I have a related quibble in that the study Kerry is quoting indulges in the same maddening error so much of the media indulges in that more or less assumes immigrants=illegals, immigrants=Hispanics, and Hispanic=immigrant. Speaking from my own personal experience, I grew up in an immigrant ghetto and am myself a first generation American, but in my old hood -- the South Ward of Newark -- the immigrants were from Portugal, mostly legal, and we check off "Caucasian" on the census form. Move to the North Ward of Newark, and you'll find the rate of Hispanics approaches 100%, but since they are overwhelmingly Puerto Rican, not only are they not "illegals," but they aren't technically immigrants either.

The flip side of the North Ward can be found in areas like Colorado Springs or Charlotte or even, recently, New Orleans. There, as opposed to many Hispanics, all of whom are legal, you'll find very few Hispanics, nearly all of whom are likely to be illegal (and only a portion of whom are likely to be Mexican.)

Meanwhile, I personally participated in harboring an illegal immigrant for nearly a year -- my (caucasian) Canadian girlfriend.

Re: Folks Songs for Classical Liberals

R.J. Lehmann — Thu, 02 Feb 2006 07:10:28 -0000

Though the authors (Marvin Gaye and Sting, respectively) certainly wouldn't have shared my politics, I always thought there were some great individualist and anti-state messages in the ostensibly lefty tunes "Inner City Blues" and "Spirits in the Material World":

Inner City Blues

Rockets, moon shots

Spend it on the have nots

Money, we make it

'Fore we see it, you take it

Oh, make you wanna holler

The way they do my life

Make me wanna holler

The way they do my life

This ain't livin', This ain't livin'

No, no baby, this ain't livin'

No, no, no

Inflation, no chance

To increase finance

Bills pile up sky high

Send that boy off to die

Make me wanna holler

The way they do my life

Make me wanna holler

The way they do my life

Dah, dah, dah

Hang ups, let downs

Bad breaks, set backs

Natural fact is

I can't pay my taxes

Oh, make me wanna holler

And throw up both my hands

Yea, it makes me wanna holler

And throw up both my hands

Crime is increasing

Trigger happy policing

Panic is spreading

God know where we're heading

Oh, make me wanna holler

They don't understand

Dah, dah, dah

***

Spirits in the Material World

There is no political solution

To our troubled evolution

Have no faith in constitution

There is no bloody revolution

Our so-called leaders speak

With words they try to jail you

The subjugate the meek

But it’s the rhetoric of failure

We are spirits in the material world

Are spirits in the material world

Are spirits in the material world

Are spirits in the material world

Where does the answer lie?

We live from day to day

If it’s something we can’t buy

There must be another way

We are spirits in the material world...

Re: Which Economist Do You Trust?

R.J. Lehmann — Wed, 08 Mar 2006 18:28:04 -0000

The problem with the HSA/HDHP structure is that it encourages scrimping on first-dollar care (much of which -- simple check-ups, breast exams, blood cultures, etc. -- is, on net extremely cost-effective) but does absolutely nothing about LAST dollar care, which is where almost all of the system's true cost drivers lie.

In the current system, 22% of costs are accounted for by just 1% of the people, and 50% of costs are accounted for by 5% of patients. Those patients will all be covered by catastrophic insurance coverage and HSAs wouldn't provide any savings there whatsoever. In fact, once they pass that deductible threshold, they have an incentive to pile on.

Moreover, if you're looking at the real cost drivers of the third party payer system, it lies in the blind and uncritical adoption by doctors of whatever is the latest drug or device to come to market. And here, HSAs provide a very strong incentive for exactly the wrong kind of technology development.

Just think -- if you're a medical tech or pharmaceutical company executive, the best way to guarantee money back on your investment is to ensure you pass that $5,000 threshold, so it will be covered by insurance rather than the discretion of individuals. It practically builds the sort of inflationary trend we've been seeing right into the system.

Clearly, yes, cost transparency and evidence based medicine are the keys to improving the system. But as currently constructed, HSAs do terribly little to address either of those issues, and in some ways they actually make the problems worse.

Re: Which Economist Do You Trust?

R.J. Lehmann — Wed, 08 Mar 2006 19:31:58 -0000

Yeah, pardon me if I ventured slightly off topic, but I was reacting just to the general notion of HSA/HDHPs as the "end all-be all" of consumer-directed care. In some ways, they are a step in the right direction, but the flaws also run pretty deep.

As to trusting the consumer, there are a great many medical decisions where it is clear that no one BUT the consumer is qualified to make the call. Does a breast cancer patient want the greatest certainty against recurrence? Or does she want to at least try to preserve her breasts? If the former, she'll likely want masectomy, if the latter, lumpectomy. No doctor is in a position to tell the patient which things they should value.

But then, I also think you have to at least tacitly concede that there are other areas about which consumers really CAN'T be presumed perfectly qualified to assess. There are reasons why we send doctors to school for a decade. This doesn't necessarily mean that decisions shouldn't be left, ultimately, to their discretion (hell, I don't have any idea if my mechanic is telling the truth when he tells me what's wrong with my car, but I still want final say in whether something gets done) but it does suggest that a better health care system will include incentives for fiduciary agents to assist consumers in making these decisions. And those agents probably ought be someone other than the doctors, who may be in a conflict of interests.

As it is, we're a long way from worrying about such problems. Let's focus first on getting good data on what things actually cost, because as it stands, not even the providers or the payors tend to know that with any reasonable degree of certainty.

Re: Which Economist Do You Trust?

R.J. Lehmann — Thu, 09 Mar 2006 18:52:08 -0000

I gave poor examples in that, yes, procedures deemed by the plan to be "preventative" are covered. But, by definition, a high deductible plan does not cover "first dollar" care -- that's what your deductible is.

Anyway, that's sort of tangential to my point. The point is that the problem of health care costs in this country is not one of a large number of people overconsuming routine and inexpensive medical care. If it were, then yes, slapping a $1,000 deductible on an individual policy or a $5,000 deductible on a family policy would help stem that tide.

Of course, the HSA part of the HSA/HDHP structure can also eat away at most of the disincentive, so I'm not convinced, even there, that they make all that much of a difference.

But no, the problem is almost entirely at the other end of the spectrum -- a vanishingly small number of people with chronic or terminal conditions who consume an amazingly outsized portion of health care resources. HSA/HDHPs do nothing to address that problem, and without addressing it, you're just rearranging deck chairs on the Titanic.

Re: Are Real Estate Agents Overpaid?

R.J. Lehmann — Fri, 10 Mar 2006 09:29:15 -0000

I blogged about this a while back:

http://lehmann.typepad.com/in_lehmanns_terms/2005/05/the_6_solution.html

Re: Are Real Estate Agents Overpaid?

R.J. Lehmann — Fri, 10 Mar 2006 11:29:19 -0000

I've been a realtor since the day I turned 18, and I can tell you that residential real estate commissions are by no means fixed. You can always negotiate rates, and average rates fluctuate up and down depending on the type of market. In markets that favor buyers, home prices go down and commissions tend to go up. In markets that favor sellers, commissions go down and home prices go up. This doesn't make one type of market more or less attractive to the realtor -- it depends on whether you represent sellers or buyers more often, and what your particular skill set is.

Also Levitt seems to equate "time a home is listed" to "work done by the realtor" in a way that doesn't reflect actual practice. I've had plenty of clients with wildly unrealistic views of what their home is worth. I'll try to persuade them to be more realistic, but if they absolutely won't budge on the price, there's no reason why I can't take the listing and just let it sit on the market. I just won't do much to service it. Sometimes, you get lucky and someone comes along, sees the listing, and is willing to meet the asking. Most of the time you don't. But there really isn't this "pressure to sell quickly" that he assumes there is. It's not as if a realtor must wait to sell his last listing before moving on to the next one.

And more often than not, it is the CLIENT who determines how patient they are willing to be -- if you're closing on another home at the same time you're trying to sell your own, you often don't have the option of just waiting it out and seeing what happens. Believe you me, the amount of work required to service a client who is in a rush to sell is much MUCH greater than for one who just wants to hold out for the best deal as long as it takes.

Yes, there are all sorts of distortionary and rent-seeking regulations in the real estate market. I talk about a few in the blog post I link to. But the metrics Levitt uses to try to assess the market just miss the boat entirely.

Re: Are Real Estate Agents Overpaid?

R.J. Lehmann — Fri, 10 Mar 2006 16:46:47 -0000

"Can somebody explain to me why the seller pays both sides of the commission?"

This is really a matter of semantics. Since it is the buyer who is actually putting up the cash, one could just as easily say HE'S the one who pays both sides of the commission. In practical terms, though, the seller pays the whole commission because it is the seller who establishes what the commission will be when he lists the property. If it's 6%, then the agency (meaning the agent, the agent's broker, or another agent who shares that broker) can capture the whole commission if they sell it in-house. If another agency brings in a buyer through the MLS, then the listing agency agrees to share the commission with that agency.

Re: Are Real Estate Agents Overpaid?

R.J. Lehmann — Fri, 10 Mar 2006 17:03:48 -0000

Incidentally, on this question:

"Why shouldn't the buyer have to pay his own R/E agent for the services rendered?"

There are, in fact, fee-based agencies dedicated specifically to serving buyers. In fact, there's a trade organization devoted to them:

http://www.naeba.org/

There has always been something of a fiduciary agency problem when it comes to the buyer's side of the deal. One of the sticky points is the means of compensation -- if buyer's agents are paid by commission, just like seller's agents, then they are at cross-purposes to the buyer's interests. If they overpay for a house, you do better, if they get a good deal, you do worse.

Different states have attempted to tackle this in different ways from a regulatory perspective, but most have settled on a model that mandates one disclose if one is representing the seller.

The murky area becomes what the burden of fiduciary agency is when you're not directly representing the seller, but don't have a contractual relationship to represent the buyer. You get into a lot of "implicit" agency problems. Some things would be clearly out of bounds. If you tell me in confidence how high you'd be willing to offer, and I slip that info to the seller or seller's agent, then obviously I've mistreated an implicit trust. But say it's something more ambiguous. If, for instance, I believe a home to be overpriced, do I have a responsibility to share that assessment with the buyer? If they've contracted with me to represent them, then yes. If they haven't, then I'm not quite so sure.

Anyway, despite the fiduciary advantages, most buyers resist signing a contract saying they will only use one realtor, as this would bind them to pay a fee or a commission even if they ultimately find a house on their own.

Re: Are Real Estate Agents Overpaid?

R.J. Lehmann — Fri, 10 Mar 2006 20:33:01 -0000

Bob, if contract law actually meant something in the services industy, you'd have a valid point. Contracts continue to attempt to build thicker and thicker liability shields because the courts routinely treat real estate transactions as if they were product liability cases, with the realtor, in effect, serving as the "manufacturer." I agree wholeheartedly that the boiler plate language reads as ludicrous, but if any of it actually held up (usually it's struck during attorney review, much less ever getting before a judge in a dispute), my E&O policy wouldn't be $12,000 a year.

I think most realtors would gladly agree to mutual disarmament with the trial bar: you drop the nonsense claims, and we'll drop the nonsense contract language. They're not about to agree to that, and with good reason -- put a sympathetic plaintiff before a jury, and they'll always win, regardless of what the contract says. There's no incentive on their side to bargain back to rationality.

Re: Are Real Estate Agents Overpaid?

R.J. Lehmann — Fri, 10 Mar 2006 20:35:57 -0000

"Marketing to a smaller segment *is* harder work. You can't throw out prospective buyers as easily, because when you only get one prospect a week, throwing it away means no sale that week."

While that may well be true, it's just simply not the case that high end real estate sells on the same commission basis as low end real estate. Go to Palm Beach, for instance (where I have sold real estate) and you won't even find many who work on commission at all. More commonly, it's flat fee, and very often, the seller won't even grant any one agency an exclusive listing.

Re: Are Real Estate Agents Overpaid?

R.J. Lehmann — Fri, 10 Mar 2006 20:46:23 -0000

"All (?) states permit dual agency, a clear conflict of interest."

Not all states permit it, but then, not all states actually have a legal notion of a "buyer's agent," either (30 years ago, no states did.)

Where dual agency is permitted, it is always required to be disclosed. And yes, it is a conflict of interest, which is why no realtor voluntarily seeks to BECOME a dual agent, because it's also an invitation to a lawsuit from both sides no matter how the deal turns out.

Where it happens, it happens more or less by accident, and it typically goes like this: you take on a client to show them homes in the MLS. They agree to a contract of exclusivity, and you become their legal "buyer's agent." In the course of your dealings, they happen see a home that's listed by your agency, and decide they want to purchase it. Since the entire firm is already contracted as the agent of the seller, and you are contracted as the agent of the buyer, if the law doesn't grant SOME sort of legal status to the deal -- be it disclosed dual agent, or transaction broker -- the only way your client could purchase the home they want is to either terminate your contract with them, to terminate the listing, or be forced to grant them a waiver from the contract and refer them to another agency to show them the house they already know they want.

Re: Grover Cleveland

R.J. Lehmann — Tue, 08 Aug 2006 04:28:20 -0000

And just think -- two out of those three were Democrats from New York.