Unlivable Vancouver

Just in time for the winter Olympics, The Economist has rated Vancouver as the world’s most livable city. The Economist rates cities (presumably metropolitan areas or urban areas) “over 30 qualitative and quantitative factors across five broad categories: stability, healthcare, culture and environment, education and infrastructure.” There is no doubt that Vancouver is in a setting that is among the most attractive in the world. It is also clear that the quality of life is good in Vancouver.

Vancouver won another honor in the last month, that of most unaffordable housing market in the six nations surveyed by the Demographia International Housing Affordability Survey (United States, United Kingdom, Canada, Australia, Ireland and New Zealand). In Vancouver, housing costs 9.3 times annual gross household incomes and is rated severely unaffordable. This measure, the Median Multiple, would be 3.0 or less in a properly functioning urban market. The second most expensive major “city” in Canada was Toronto, far behind Vancouver, but still severely unaffordable at a Median Multiple of 5.2.

Meanwhile, Pittsburgh, the ranked highest city in the United States (yes, higher than Portland, Seattle or San Diego) shows that affordability and livability are not incompatible. Pittsburgh has a Median Multiple of 2.6.

Vancouver’s high ranking, however, makes it clear that the cost of housing (and by extension, the cost of living), has little to do with The Economist ratings. As Owen McShane wrote here to commemorate the last release of The Economist ratings, the cities are ranked based upon their attractiveness to expatriate executives. These are not ordinary Canadians. At historic credit underwriting standards, 85% of Canadians households could not qualify for a mortgage on the median priced house in Vancouver.

Vancouver is doubtless among the most livable cities in the world for those for whom money is no object. But for ordinary Canadians, affordability is a prerequisite to livability. This makes Vancouver Canada’s least livable city.

What Houston can learn from the Israeli model to boost entrepreneurship

While Houston is not a Silicon Valley, or even an Austin, it has come a long way in cultivating a small but vibrant entrepreneurial scene in the last decade. But there's always room for improvement, and we might be able to learn some lessons from Israel, of all places. First, there is this conclusion from an Economist article on the mostly-sad story of government strategies for cultivating entrepreneurship:

The country that has led the world in promoting entrepreneurship has also done the most to plug itself into global markets. The Israeli government’s venture-capital fund, which was founded in 1992 with $100m of public money, was designed to attract foreign venture capital and, just as importantly, expertise. The government let foreigners decide what to invest in, and then stumped up a hefty share of the money required. Foreign venture capital poured into the country, high-tech companies boomed, domestic venture capitalists learned from their foreign counterparts and the government felt able to sell off the fund after just five years.

Last year Israel, a country of just over 7m people, attracted as much venture capital as France and Germany combined. Israel has more start-ups per head than any other country (a total of 3,850, or one for every 1,844 Israelis), and more companies listed on the NASDAQ exchange, a hub for fledgling technology firms, than China and India combined. It may not have the same comforting ring as “the Swedish model” or “the polder model”, but when it comes to promoting entrepreneurship, “the Israeli model” is the one to emulate.

What's Israel's 'secret sauce'? This book review from Newsweek lays it out:

How does Israel—with fewer people than the state of New Jersey, no natural resources, and hostile nations all around—produce more tech companies listed on the NASDAQ than all of Europe, Japan, South Korea, India, and China combined? How does Israel attract, per person, 30 times as much venture capital as Europe and more than twice the flow to American companies? How does it produce, for its size, the most cutting-edge technology startups in the world?

There are many components to the answer, but one of the most central and surprising is the Israeli military's role in breaking down hierarchies and—serendipitously—becoming a boot camp for new tech entrepreneurs.

While students in other countries are preoccupied with deciding which college to attend, Israeli high-school seniors are readying themselves for military service—three years for men, two for women—and jockeying to be chosen by elite units in the Israeli military, known as the Israel Defense Forces, or IDF.

I goes on to detail the elements of the military culture there that carry over into the entrepreneurial world: innovation, improvisation, flat, anti-hierarchical, informal, flexible, multi-disciplinary, diversity, challenging, meritocratic, and intense 'crucible leadership experiences' to forge deep social bonds and networks that are later leveraged to create startups.

Now obviously Houston (or Texas or the U.S.) won't be instituting mandatory military service anytime soon. But could we form a local civilian corps of high school and pre-college youth to create a similar environment, focused on tough social problems and charitable work. If we modeled the corps on Israel's military culture, and made sure to craft the experience to be very attractive to college admissions departments, there's a lot of potential here to attract youth, work on some of the city's toughest problems, and cultivate a generation of entrepreneurs to add economic vibrancy to our city for decades to come. Oh, and we could match them up with older philanthropists and retirees to provide both funding and mentorship.

Combine that with new sources of local venture capital, and we could really turbocharge the local startup scene. I'd love to hear your thoughts on how we might structure such a corps and the problems it might work on in the comments.

Australian Treasurer Calls for Reasonable Land Regulation

Australia’s Treasurer Wayne Swan called for reducing restrictions on building houses, to improve housing affordability. The Treasurer’s comments came amid growing concern about housing cost escalation that has been highlighted by recent reports, including the 6th Annual Demographia International Housing Affordability Survey (which identified Australia as the most expensive nation surveyed).

Treasurer Swan told the Herald Sun in Melbourne “Unless constraints to the supply side of the market are addressed, our cities will not adapt to meet the needs of a growing population and we will see continued problems of affordability for ordinary Australians.” He continued: “We are not building enough houses and if this continues then we will all be paying increasingly more and more for our housing whether it be in terms of repayments or in terms of rent.”

Australia’s housing affordability crisis, has been the result of overly restrictive land use policies (called “urban consolidation” or “smart growth”), which by intensively controlling the land supply, raise its price and that of housing. This association between prescriptive land use regulations and the loss of housing affordability has been documented by a number of the world’s most eminent economists, such as Kate Barker, a member of the Monetary Policy Committee of the Bank of England and Donald Brash, former Governor of the Reserve Bank of New Zealand. Brash has said that “the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land.

Indicating the “can do” attitude so typical of Australia, the Treasurer said: “We can and must do better than this.”

Buffett and Paulson: Part of the Problem

Warren Buffet, CEO of Berkshire Hathaway, and Henry “Hank” Paulson, former Treasury Secretary, were guests of honor at the annual meeting of the Omaha Chamber of Commerce this week.

That the two of them are together should be no surprise: Paulson orchestrated the largest bailout of financial institutions in the history of the world – and Buffett is an owner of some of the largest financial institutions. To put it bluntly, Paulson helped bailed out Buffett’s financial institutions and now Buffett is helping Paulson tout his book. It’s not a pretty picture.

Yet, the event sold out well in advance. Granted, Buffett’s contribution to Omaha’s economy cannot be minimized. Warren Buffet keeps Omaha on the global map – travel anywhere in the world, tell them you’re from Omaha and see whose name comes up first. He is also a regular contributor to charitable and social causes throughout the region. Berkshire Hathaway’s (NYSE: BRK) companies employ about 246,000 people – though only 19 of them are at the Omaha headquarters. None of BRK’s companies are among the top 25 employers in greater Omaha. (Nebraska Furniture Mart, with just over 2,700, ranks 32nd and is the only one in the Top 100.)

We all have 20/20 vision in hindsight, including Senator Chuck Grassley (R-IA). In April 2009, seven months after the Bailout passed, Senator Grassley said of Paulson that Congress “was awed by a person who comes off of Wall Street, making tens of millions of dollars. … You think he knows all the answers and when it’s all said and done you realize he didn’t know anything more about it than you did.”

The Troubled Asset Relief Program (TARP) was sold to Congress and the American public as an absolute necessity to save the American Dream of homeownership. It was supposed to be used to help homeowners with mortgages bigger than the market value of their homes. As soon as Paulson’s Treasury got the money they decided to bailout big banks instead. Since then, Paulson, along with current Treasury Secretary Timothy Geithner, and Federal Reserve Chairman Ben Bernanke have refused to comply with demands from Congress to produce documents about the TARP recipients’ use of funds. The legislation was passed and the funds were released, and Treasury gave the money to banks with no restrictions on its use – no monitoring, no reporting requirements, no nothing.

So, why would Warren Buffett look so favorably on Paulson? Warren Buffett – our widely revered Oracle of Omaha – is one of those who built the boom in the capital markets and are benefiting from the bust. No surprise then that Buffett whose primary business vehicle is a financial holding company, supported the bailout of financial institutions. BRK’s businesses include, among others, property and casualty insurance and financial holding companies.

Of course Buffett was in favor of the bailout – his companies directly benefited as did the investments made by his companies. He put $5 billion into Goldman Sachs preferred stock with a 10 percent dividend – a substantially better rate of return than the US government got on our $10 billion bailout. Berkshire Hathaway was the largest shareholder in American Express Co. when they received $3.4 billion from Uncle Sam. Paulson is now insisting that US taxpayers will profit from the TARP bailout – if we do, which I doubt, I’m sure we won’t profit as much as Buffett did.

Paulson claims, in his book, that he turned to Buffett for advice about saving Lehman Brothers from demise. This strikes me as a very odd story, considering that Buffett told the press in March 2009 that he couldn’t understand the financial statements of the banks getting the bailout money. Add to this the fact that Senator Ben Nelson (D-NE) told me that he talked with Warren before voting for the first bailout package. (I button-holed him after lunch with the Sarpy County Chamber of Commerce) and you begin to get the real picture – the government was taking advice from financial institutions about the bailing out financial institutions.

To bring the problem full circle, consider this. In January, a bi-partisan Financial Crisis Inquiry Commission was appointed to find the answers to the causes of the financial crisis. They may not have to look any further than the nearest mirror. USA Today reported earlier this month that the members of the panel “have consulted for legal firms involved in lawsuits over the crisis.” A Commission composed of members who earn their livelihood from financial institutions is unlikely to solve the mystery of the causes of the greatest financial collapse in the history of the world.

Like the Commission, Hank Paulson and Warren Buffett are part of the problem – not the solution.

Housing Affordability in Darwin, Australia: Still Dreadful

Darwin, capital of Australia’s Northern Territory is located next to the sea, across from the Indonesian archipelago. Darwin is also located next to a sea of developable land in one of the world’s least developed nations. Only 0.3% of Australia’s land is developed, approximately 1/10th the rate of the United States or Canada (in the agricultural belt) and even less compared to European nations.

Local Officials Report Erroneous Data: Yet, Darwin has severely unaffordable housing in our 6th Annual Demographia International Housing Affordability Survey. Upon initial publication of this year’s report, local officials identified a mistake in the median house price figure that they had made available to the press (and that we had used). Rather than a median house price of $607,000 (US$510,000), they announced that the median house price in September 2009 was $499,000 (US$425,000). Officials also corrected the median house price figure for the previous quarter.

Housing Affordability: Still Dreadful” The result was that the Median Multiple (median house price divided by median household income) fell from 8.6 to 7.1. Affordable markets have a Median Multiple of 3.0 or below. As originally reported Darwin was the 4th least affordable market out of 272. We have revised our report to reflect the newly revised data. Darwin is now rated as 13th least affordable market, which is only marginally less dreadful.

Still As Unaffordable as New York or London: This was cause for celebration by the Chief Minister (Premier) of the Northern Territory, Paul Henderson, who noted that housing was less expensive in Darwin than in Tokyo. We do not know the Median Multiple for the Tokyo metropolitan area, because data is not readily available. However, Darwin is as expensive relative to incomes as New York and London.

Darwin: A Metropolitan Area in Housing Stress: At the median house price, the median household will pay half its income for the mortgage. This is well above the "mortgage stress" level of 30% as defined by government agencies. The overwhelming majority of Darwin’s future households will be faced with housing stress or could be life-long renters. The price for most residential building lots (blocks) in the new suburb of Johnston is approximately the same as the US median house price, even after adjusting for currency differences.

High Demand Markets are More Affordable: Atlanta and Dallas-Fort Worth each have added the equivalent of Darwin’s population annually during the 2000s and have exhibited far higher underlying demand for housing. Yet housing is affordable (Median Multiples under 3.0). If Darwin had the same price to income ratio as Atlanta, the median house price would be little more than $150,000.

Extinguishing the “Great Australian Dream:” It was not always this way. Before the widespread adoption of “urban consolidation” policies (also called growth management, smart growth or compact city policies), sufficient land was always available to build on across Australia. In the last two decades, however, urban consolidation policies have ravaged Australia’s household wealth, driving prices to the highest levels in the English speaking world.

Few places in the world are more unaffordable than Darwin. Few places have more land to grow. Heavy handed and stingy planning has extinguished the Great Australian Dream in Darwin.

Ryan Streeter Making Poverty History: A Short History

Former chief economist of the Organization for Economic Cooperation and Development David Henderson coined the appellation, “Global Salvationism,” to describe the kind of behavior one witnesses at gatherings such as this past week’s World Economic Forum (WEF) in Davos, Switzerland. WEF was created in 1971 so that elites from around the world could gather to “map out solutions to global challenges,” according to WEF’s website. This year’s forum is entitled, “Improve the State of the World: Rethink, Redesign, Rebuild.” WEF’s program summary explains the urgency of the task facing those gathered in beautiful eastern Switzerland this way: “Improving the state of the world requires catalyzing global cooperation to address pressing challenges and future risks.” In an effort to compound jargon with alliteration, WEF uses “rethinking” in the titles of 29 conference sessions, “redesign” 16 times, and “rebuild” 9 times, for a total of nearly one-quarter of all the sessions. With all the turmoil created by the global recession and other “pressing challenges” in 2009, the world’s elites came together this week ready to re-do about everything.

Central to WEF’s annual objectives is what to do about life’s inequities and imbalances. Hardly anything warrants “catalyzing global cooperation” more than the ongoing effort to make poverty history, reduce inequality, and correct global imbalances. WEF has announced that global development is taking center stage on the third day of the event.

How ironic, then, that just prior to their gathering, Maxim Pinkovskiy and Xavier Sala-i-Martin updated findings from their 2009 National Bureau of Economic Research paper, “Parametric Estimations of the World Distribution of Income,” on the economics website VOX. Their findings show precipitous drops in global poverty since 1970—just about the same time WEF began meeting in Davos (Mark Perry wrote about the original paper here).

Between 1970 and 2006, the global poverty rate fell nearly 75 percent. During this period, the percentage of the world’s population living on less than a dollar a day fell from 26.8 to 5.4 percent. The world’s population grew 80 percent during the same period, which makes the poverty reduction all the more astounding. The global Gini coefficient, a standard measure of inequality, fell from 67.6 to 61.2 percent, indicating a drop in inequality as well as poverty. The same trend is found in other measures of inequality besides Gini.

And when one computes a measure of global “welfare” understood in the old-fashioned sense of well-being, we find that life has gotten better faster for a larger share of the world’s population than perhaps any time in history. By deriving a calculation of well-being from GDP and inequality measures, the authors show that between 1970 and 2006, global welfare more than doubled, growing faster than GDP.

The authors also consider the World Bank’s new purchasing power parity (PPP)–adjusted measures of GDP and find that while global poverty increases overall, the rate of poverty actually drops faster since 1970 than it does under more conventional GDP measures. In other words, under the PPP model, the world looks a lot poorer in 1970 than it does using more traditional measures of poverty, but today, the poverty rate is nearly the same regardless of whether one uses the PPP or more traditional measures (see the graph below). Using the World Bank’s adjustment actually has the effect of making it look like we have been doing a better job of reducing poverty over the past three decades, despite how the world looks poorer in any given year.


(Chart available at

Now, just days before Pinkovskiy and Sala-i-Martin published their VOX article, Princeton’s Angus Deaton shot to pieces the idea that one can accurately measure global poverty and inequality across countries in his presidential address to the American Economic Association. Deaton’s argument is persuasive and serves as a good reminder that economic measures across different societies are nearly impossible to establish with perfection and complete accuracy. That said, it is interesting that Pinkovskiy and Sala-i-Martin find the same drops in poverty across the various methodologies they test. Something is going on here.

One might draw the conclusion that the precipitous drop in poverty corresponds with the beginning of the WEF meetings in 1971. Maybe the elite gathering has worked! Or, one might conclude liberalization of states and economies is working. During roughly the same period covered by the authors, the percentage of free countries in the world increased from 29 to 46 percent, according to Freedom House’s annual ratings. Liberalization and economic growth go together. One might also conclude that China’s explosive growth, which has carried Asia as a whole from 19 percent to 28 percent of the global economy during this period, has had a significant impact on poverty reduction, not to mention India’s rapid rise in its share of global GDP.

Instead of rethinking, redesigning, and rebuilding the world, WEF’s best minds might consider devoting a full day to understanding what worked the past forty years and figuring out how to “repeat” it.

This post originally appeared at The Enterprise Blog at The American.

Ryan Streeter is a senior fellow at the London-based Legatum Institute and can be followed on Twitter here.

Opposition to High Speed Rail Grows

The St. Louis Post Dispatch characterizes high speed rail as a “bridge to the 19th century,” in noting its opposition.

I couldn’t have said it better, though I tried in my Wall Street Journal Oped (“Runaway Subsidy Train”). As usual, some of the best lines in this article fell on the “cutting room floor,” as editors can allow only so many words. The two most important points were:

  • Significant community opposition is developing. Within the last 10 days there have been community and neighborhood protests against new high speed rail lines in France, Italy, Spain and Hong Kong. Further, opposition to the greenhouse gas belching Mag Lev (magnetic levitation) extension from Shanghai to Hangzhou (China) has blocked that project. There is a burgeoning opposition to the swath that high speed rail will cut through the communities on the peninsula south of San Francisco.
  • A traveler using high speed rail from Orlando to Tampa who gets caught at a rental car counter line might not save any time over driving even if the train reached the speed of light.

The biggest problem with high speed rail is that it requires huge expenditures of public funding in a market (intercity passenger transport) that does not require subsidies. Much of the impetus comes from generous donations to political campaigns by vendors who live off public funding and by a naive cadre of virtual sheep who believe anything that runs on rails walks on water.

RNC Retreats to Once-Republican Hawaii

As the Republican National Committee retreats to Hawaii this week, it’s worth remembering that the archipelago was once staunchly Republican territory.  In fact, it was southern Senate Democrats who blocked its statehood for decades over fears that the minority-majority state would elect two senators who would tip the balance in the civil rights debate.

Therefore, Hawaii’s prospects at statehood were tied to Alaska’s, which many thought would be more Democratic.  They would only be admitted as a package deal – a modern day Missouri Compromise of sorts. As Hawaii Free Press reporter Ryan Yasukawa explained in a 2009 article, “The state of Hawaii being the 50th state and not the 49th is no coincidence.”

“With a Republican President Eisenhower and Democratic majority in Congress, Democrats first sent an Alaska bill to the president to see if he would sign the bill admitting a state which at the time was expected to elect two Democrat senators.  If Eisenhower signed the Alaska bill, a Hawaii bill would be sent up thereafter.”

Hawaii Statehood

It was an unjust reality for the island territory.  Hawaii had 499,000 people in 1950 (more than Wyoming’s 290,000 or Nevada’s 160,000) while Alaska had only 128,000.  “Hawaii also had a competent private sector economy (tourism) while Alaska’s economy was government-dependent,” Michael Barone told me an email. “Nevertheless, Hawaii subordinated its case to Alaska.”

With fervent opposition from leading Democrats such as Sens. William Fulbright (Ark.), Albert Gore Sr. (Tenn.), Sam Ervin (N.C.) and Richard Russell (Ga.), it’s understandable that Hawaii favored Republicans.  But Barone explained that southern Democratic segregationalists were not the only reason why Hawaii was traditionally Republican.

Another reason was that New England Yankee missionaries founded the ruling Anglo culture there.   Vermonter Hiram Bingham brought the Good Book to the islands in 1820 and translated it into Hawaiian.  His grandson, Hiram Bingham III, was born and raised in Hawaii, although he went to Phillips Andover and Yale, and later became U.S. senator from and governor of Connecticut (he also discovered Machu Picchu).

The island was officially annexed by the United States in 1898 by Ohio Republican William McKinley.  Over the ensuing decades, a sugar cartel known as the Big Five seized control of all the islands’ economies and propped up a series of white Republican governors and congressional delegates.

It wasn’t until 1954 that Democrats had success there.  Labor leader John Burns and longshoreman Harry Bridges teamed up with Japanese American World War II veterans to support Democrats.  Honolulu Advertiser reporter Michael Tsai related a story from the book “The Island Edge of America” in a 2009 article about how Hawaii vets used their service as leverage for statehood.

Chuck Mau, a staunch statehood proponent and delegate to the 1948 Democratic National Convention, talked his way into a meeting of the platform committee and, once there, ingratiated himself to Texas Gov. Lyndon Johnson by retelling the story of how 442nd soldiers had rescued the ‘Lost Battalion’ of the Texas National Guardsmen.”

Hawaii ultimately gained statehood in 1959.  “John Kennedy carried it in 1960 by just 115 votes,” notes the Almanac of American Politics.  “But from 1962 to 2002, its politics was dominated by a Democratic machine that had its beginning in the 1950s.”  Democrats such as Sen. Daniel Inouye became the voice of the islands.

Ronald Reagan won it 1984.  Dick Cheney visited in 2004 when polls showed the state in the single-digits in late October, joking to a crowd, “I was in the neighborhood, so I thought I’d drop by and say ‘Aloha.’”  But in 2008, native Barack Obama made it the bluest state with 72% of the vote.  Republicans are optimistic about retaining the governors seat in 2010, but this state is likely going to be as blue as Waimea Bay for the long run.

This piece is a cross post from

How the new Apple iPad (and other mobile tech) changes the commuting equation

Apple's much anticipated iPad tablet computer was announced today, albeit to some mixed reviews. While the iPad itself may or may not succeed, the overall technology trend line is clear: increasingly rich mobile access to the Internet and email. Oddly, this Business Week columnist thinks the iPad may lead to more telecommuting, when what it really favors is tipping the balance for commuters from driving to transit, where the usually "dead" commuting time can become really productive. Most people are already spending more than two hours a day on email and the Internet - why not put those hours at the beginning and end of the day while commuting so you can spend less time in the office and more time with your family?

A decade ago, the workplace was much more call and voice-mail driven, which matched up just fine with long driving commutes and cell phones. But the shift has moved strongly towards email and other data-driven communications (texting, Twitter, Facebook, collaboration applications, etc.). Most messages have multiple recipients and can expect to have a string of replies - something voice mail simply can't handle. People are trying to do this data-driven communication while driving, with very bad effects that are leading rapidly to a comprehensive legal ban.

As more people realize the productivity advantage of a transit commute, I think there could be a substantial shift. But it might not be quite what you'd expect. Mobile productivity favors one long ride in a comfortable seat - no transfers, no standing 'strap-hanging' (like on a subway or full light rail or local bus), and minimal walking (which is not only incompatible with mobile productivity, but also has weather risk and is especially hard on women in heels). That argues for express buses over trains. I recently met with a friend that lives in Manhattan but works in Connecticut. Does he take the subway and then ride the train? Nope - a luxury shuttle bus with wi-fi picks him (and the other Manhattan employees) up right near his apartment and drops him at the front door of work. Point-to-point express buses are the future of commuting. All you need are a couple dozen people that need to get from the same neighborhood to the same job cluster on roughly a similar schedule to justify a daily round trip - and they can all be productive the whole way, whether through individual 3G data connections on their devices or wi-fi on the bus (by far the cheapest option).

While the climate-concerned may cheer increased transit use, an ironic side effect may actually be increased sprawl. When commuting is truly unproductive time, as driving is, people really hesitate for it to be more than an hour a day, which puts a pretty hard limit on how far home can be from work. But if you can be productive on a bus doing work you'd have to do anyway, you might consider two or more hours a day commuting (as my Manhattan friend does) and look at exurban communities you wouldn't have even considered before, especially if they have more affordable or newer houses with better amenities and public schools.

This is the commute of the future, and cities that offer it conveniently, affordably, and comprehensively (all neighborhoods to all job centers) through some combination of public transit, private buses, and HOT lanes will continue to grow and thrive in the coming decades, while those that don't, won't.

This piece is a cross-post from


Almost three years ago, shortly after graduating from college, Jeffrey Rogers found himself with a degree and no job. The economy had just taken a dramatic turn for the worse and he was struggling to get by.

“He was literally living off peanut butter and jelly sandwiches,” said Kathryn Rogers, his younger sister and a first-year graduate student at Chapman University in Southern California.

Jeffrey went to their father for help in a last-ditch effort to meet his monthly living expenses, but his Dad refused. “He definitely is into tough love," said Kathryn. “He said, ‘He’ll make ends meet in one way or another...' [his] attitude is, ‘Once you graduate, you’re cut off’.”

Jeffrey ended up borrowing money from friends to pay rent for the next six months. But Kathryn is grateful for her father’s “tough love”. She believes it has strongly contributed to her own sense of financial responsibility. While her parents paid her rent and tuition, with the help of an academic scholarship during her four years of undergraduate studies, she was in charge of everything else. “I paid for food, I paid for gas, I paid for activities, I paid for my sorority,” she said.

Kathryn has always had a job since the age of 16. Being aware of how much things actually cost has helped her keep her budget balanced now that she is on her own. But not having that awareness is a huge problem for many college students. “If you’ve always had everything given to you, you wouldn’t think about [cost of things] because it wouldn’t be an issue,” she said.

A majority of Kathryn’s student acquaintances don’t know the basics of personal finances. “You talk to people our age, they’re 18 and they have $12,000 in credit card debt or they don’t know how to pay bills or how to do their taxes,” she said.

Kathryn believes a financial management class in high school should be mandatory. “If your parents don’t teach you, where are you supposed to learn?” she asks.

Catie Robbins, a senior screenwriting major at Chapman, agrees. “Your parents figure you’re going to learn along the way. But then you always feel so much guilt and disappointment when you’re not being responsible with your money. It’d be nice if there was more guidance available.”

Robbins has taken out student loans and receives financial aid, which helps her parents pay for her tuition. But they also take care of her rent, food, and other necessities.

“Basically I don’t have to pay for anything. But it’s scary because they only send me enough money for my food and lodging, so I can’t buy anything else,” she said. “If you want to do fun, random stuff or if you go overboard on your food expenditures, you can be very poor. It’s fine – it’s just kind of sad to be dependent on my parents.”

Robbins looks forward to graduating and getting a job. But right now her financial aid package limits the amount of money she can make from employment to $2,000 a year, which she said she can easily earn during the summer. “As soon as I make that much, I have to quit,” she said. She points out that, counter-intuitive as it is, students are given financial aid because they don’t have enough money, but then are stopped from earning more because of the aid they receive.

There is also a certain irony in being given dreams and goals during college, and then being unable to fulfill them because of the financial burden of college.

“Originally, I had all these ideas for traveling,” said Robbins, who has studied abroad. “But you definitely can’t just take off after school and be youthful and pursue all these silly things. You have to be responsible. I am kind of excited to finally be free and living on my own, and not having to ask my parents for money,” she added.

While financial aid is limiting for some students, and asking your parents for money is never easy, it is definitely a preferable alternative to being entirely dependent on student loans. That’s the situation in which junior Dave Casey finds himself.

Without the minimum required 2.0 GPA, Casey was not eligible for federal student aid this semester. Taking out loans was his only option for staying in college. Currently, he owes about $60,000 with two more years of school to go. He is paying a monthly $187 in interest alone.

“I could have gone to the University of Rhode Island for $6,000 a year,” said Casey, a native of Warwick, R.I. “But I didn’t want to. I was willing to pay because I wanted to go off, I wanted to experience something else, I wanted to be surrounded by a different environment, different people. And I think that’s how you really learn.”

Casey’s father helps him out with rent, and he works over 20 hours a week at a local restaurant. “What stresses me out is that my mother is on food stamps, and I have no money to give her,” said Casey, whose parents are divorced. “I can’t [help], because I’m in a hole myself. Do I send hundreds of dollars a month back to my mom, or do I pay off these loans and then turn to help her? Either way there’s not enough money to go around.” Like Kathryn Rogers and Robbins, Casey’s only hope is to get a steady job after he’s graduated and start paying off his mountainous debt.

“The only reason why I’m not freaking out hardcore about this is because I can’t comprehend it. Set $60,000 in front of me; I’d like to see it. It’s so abstract to me,” he said. “These loan agencies definitely benefit from our naiveté.”

Donald Booth, a professor of economics at Chapman and board member of Consumer Credit Counseling Service, thinks that technology is a major contributor to the lack of financial knowledge.

“The traditional way was the bill came to your house, you wrote a check, licked a stamp and mailed it back. Now you have automatic pay, it withdraws it from your account,” he said. “[People] don’t even know what they have in their checking account.”

The transition to so much financial activity online has been difficult for generations both young and old. “Don’t think it’s just students who don’t know how to manage money – it’s almost everybody,” he said.

Older people are naturally resistant to new technology because they like doing things the way they’re used to, according to Booth. On the other hand, there was no one to teach students to use the Internet as a financial tool.

So we’re basically in the banks’ pockets now, because people aren’t keeping track of the money they’re spending, how much they have, how much they owe. "And everything seems free. You almost never get turned down anytime you want to buy something. Until it catches up with you.”

Rachel Yeung is a senior at Chapman University in Orange County, California.