Explaining Southern California's economy

The outlook is poor for office demand, in the U.S. and California

Los Angeles

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If you think there's recovering demand for all that office space, a UCLA economist says you're mistaken.

Economist David Shulman of the UCLA Ziman Center for Real Estate doesn’t sugarcoat it: beyond a few important markets, the prospects for an office space expansion look grim.

A weak recovery and companies' rethinking of how much space they require has kept vacancy rates at 17 percent. Shulman calls that figure “elevated” in a December report issued by Ziman and the Anderson Forecast.

"Even before the Great Recession, the office business was sick," he writes.

Shulman warns that his exceptions to this trend - San Francisco and the Westside of Los Angeles - shouldn’t get cocky. Office rents in those California cities haven’t recovered to their dot-com era peaks in more than a decade.

Shulman sees the vacancy rate declining, but at a slow pace. He also points out that the way we work, especially at high-tech companies, has changed.


FAQ: All you need to know about Al Roth and Lloyd Shapley's economics Nobel Prize

Nobel Economics

Reed Saxon/AP

Shortly after being awakened and learning the news, Lloyd Shapley, one of two Americans who were awarded the Nobel economics prize, talks to a reporter from his home in the Pacific Palisades area of Los Angeles. A giant of "game theory," Shapley, retired from UCLA, shared the prices with Al Roth, who's coming to Stanford from Harvard.

Harvard Business School Professor Alvin Roth, now a visiting professor at Stanford University, and UCLA mathematician-economist Lloyd Shapley have been awarded the 2012 Nobel Prize for Economics (which isn't exactly like other Nobel Prizes; being awarded only since 1969).

They didn't really work together but developed complementary insights into something called "game theory" and its real-world applications.  

Q: What is game theory?

A: Game theory is a branch of mathematics that was developed by ultra-super-mega genius John von Neumann. It concerns, in a vulgar nutshell, decision-making in a competitive framework. Ever heard of a "zero-sum game?" That's game theory — two players, one total winner and one total loser, as in a chess match. The math is 1 + -1 = 0, hence a "zero-sum game," with one point up for grabs. The dynamics of this type of reasoning were immediately attractive to Cold War strategists, who had to figure out how to "win" a nuclear war. Shapley, 89, is at UCLA now but based on a statement that the university released, is retired. He spent nearly 30 years at the RAND Corp. in Santa Monica, which was the global epicenter of game theory as a geopolitical discipline. Ever seen the movie "War Games?" It's the most famous example ever of (simplified) game theory in pop culture:


UCLA MBAs are cut loose as Anderson School of Management goes solo


Photo by Chris Radcliff via Flickr Creative Commons

At UCLA, the MBA program will no longer be supported by funds from the State of California.

The UCLA Academic Senate approved a plan today to shift the Anderson School of Management's daytime MBA program to a self-funded model. Anderson's MBA program has been around since 1939 and has always been state-funded. But now it will be supported only by tuition and donations, according to UCLA.

The total savings will be $8.8 million, which would be diverted to other programs at UCLA, making up for budget cuts brought on by the ongoing fiscal crisis in state-supported higher education in California.

UCLA Anderson is generally considered an elite, top-20 business school, as ranked by publications such as Forbes and U.S. News & World Report. Tuition is currently over $45,000 per year for California residents and over $52,000 per year for out-of-state students studying full-time. 

The vote in the UCLA Academic Senate was 53-46 in favor of the move, with three abstentions. The proposal now goes to the full University of California Academic Senate and UC President Mark Yudof for a final vote.


California colleges top professor pay in survey

Professor Salaries

Chronicle of Higher Education

Two California colleges pay their professors top 20 salaries.

According to the Chronicle of Higher Education, California has two colleges in the top 20 of average faculty compensation for 2011-12.

Full professors at Caltech make $172,800 per year, while full profs at UCLA make $162,600.

This puts full professors at both admittedly quote prestigious institutions at or very near the highest U.S. income quintile, as defined by the Tax Policy Center.

For the record, both California schools are in the lower half of the top 20. Harvard is number one, with full professors who earn $198,400.

I was curious about which schools full professors finished at the bottom of the survey. That would be Villa Maria College of Buffalo, at $42,200. Strangely, associate professors there make $49,300. Things get weird at the bottom. However, these professors are still solidly in the third U.S. income quintile. They're also right about at the median for U.S. individual wages, roughly $44,000.