Friday, December 18, 2015

Reminder - Discussion Group

There is definitely no obligation for you to do this, but if you are interested in participating in the discussion group please lease me know.  Thanks.

Final Exam and Course Grades Uploaded into Moodle

Note that the Course Grade is in the Feedback area of the grade report.  I will upload the grades into Banner in a few minutes.

I believe the grading was generous.  I hope you feel likewise.

Happy Holidays.

Bah, Humbug. Scrooge was an economist!

Taking a little break from the grading.  I thought you might be amused by this paper, which is based on the following premise.  If you exchange real gifts with a distant cousin over the holidays, and the gifts have the same cash value, and each cousin doesn't really know what the other wants, wouldn't each of you be better off were there no gift exchange whatsoever?

Thursday, December 17, 2015

The class doesn't end even after it is over.

You may be unaware that I have some monitoring turned on at, where the course files (PowerPoints, PDFs, and Excel Spreadsheets) are posted.  Every time somebody downloads a file from the class site, I get an email update.  I do this not for any strategic reason.  That was the default when I set up the account and I've simply left it turned on.

Today somebody downloaded the Excel Homework on the Shapiro-Stiglitz model during our final.  Now it is possible that the monitoring is in error, meaning the person downloaded it earlier and I only get the message after a substantial lag.  I am testing that now to see how long it takes after I've downloaded the file to get the email message.  (It took 5 minutes to get the email.)

My reaction to this may be other than how you'd react if you were in my shoes.  First, I don't know who it is.  Second, I doubt it impacted the performance on the exam much if at all.  But, third, and this is really the most important one, it seems to me that many of you are very stressed out during exam week.  There is supposed to be both good stress and bad stress.   Even the best actors get stage fright.  That's good stress.  But if there is too much of it then it is bad, and overwhelms you, and you act other than you typically would.  There was a comedian, Flip Wilson, who was popular when I was your age.  His tag line was - the devil made me do it.

If you get into a position where you manage others, know that monitoring can cause stress.  Part of your job will be to keep the devil at bay in the people who work for you.  I wish there was some magic formula for that, but I don't know of any.  All I can say is that sometimes it is better to forgive and forget.

On that note, I will start in on the grading.

Monday, December 14, 2015

A little humor and....

.... if you've never seen it before an essential part of anyone's education about American culture.

Project Grades Uploaded

I did have to do this manually, but I've now done that and checked my work.  Each member of the team got the same grade and received the same comments.  The comments were about the presentation only, since that was new.  I gave extensive comments on the paper already.

I've uploaded all the PowerPoints to a folder.  If you are interested in seeing what your classmates have produced, you can take a look there.

All grades but the final exam have now been uploaded.  So you should know where you stand going into the final and can prepare accordingly.

Good luck on your other exams.

Sunday, December 13, 2015

The Projects Are Graded

I am having a technical issue importing what I've got into Moodle.  If needed I will manually post these grades, but it would be much better for all if I can simply import them from my spreadsheet.  I will get this done in the morning, one way or the other.

Generous Grading on the Projects

It was not my intention to cause additional stress for any student about the virtual elevator speeches.  Yet I may have done that inadvertently with my previous post.  So let me assert here that I will target the grading for that component of the class so the average is around 110 points.  (108 points is 90% of the maximum, 120 points.)

The point of the previous post is that while making the elevator speeches is seemingly straightforward, doing it well is a challenge that requires thought and much practice to cultivate a sense of taste about what makes for a good presentation. The class project was merely an introduction to that.

Saturday, December 12, 2015

Some Observations About the Virtual Elevator Speech

First, you can also think of this as a virtual executive summary of your (white) paper.  An executive summary is typically a one-pager that gives the highlights of the longer document.  The executive summary is longer than the abstract for your paper and the audience is probably different.  The abstract is written for insiders who will read the full paper.  The executive summary is written for interested generalists, who might very well not read the paper.  They get their entire impression of what is going on from the executive summary only.

Second, in evaluating your elevator speeches, I had already read drafts of your papers.  So it is not possible to return to the state of ignorance where I don't know anything about the paper you are reviewing or about what you've written on that score.  But I do try to imagine a reaction from that state of ignorance.  It is what you should have in mind about your audience when constructing the elevator speech.

Third, a good elevator speech is quite difficult to write.  You want to tell a simple story, because your audience is ignorant and they need to follow along with what you have to say.  On the other hand, you don't want it to be simplistic.  You want your audience to find your story compelling.  So you need to get at the gist and get rid of any detail that can be learned about later, if somebody in the audience wants more information.  Determining what is essential and what is detail that is not critical to include is itself a hard thing to do.

Then there is the matter of communicating the key ideas in a way the audience will understand them.  Here the issue is whether your metaphors work for an audience that is not as knowledgeable about the subject as you are.  Image choice is not a trivial matter.  Neither are the short phrases you come up with.

Because of the time we had available, you likely short changed the process required in generating a good elevator speech.  It was the best that could be done under the circumstances.  My goal for you with this project was not that you'd produce a great elevator speech this time around.  Rather it was to get you a little familiar with the process so you can better appreciate what it entails the next time you have to produce something similar.

Finally, let me talk about a few common errors that people make in doing these things.  The first comes when somebody makes a presentation to a muckety muck (a VIP).  There is then some desire for that somebody to use the presentation to establish one's own credential, thinking (incorrectly) that the muckety muck will pay more attention to the argument if it comes from an authoritative source, so using your presentation to show you've really done your homework as a way to establish your own authority.  Invariably this means too much detail will be presented.  While that may show you've done your homework, it also shows that you don't understand the purpose of the elevator speech.  So you will fail in this case.

A second error is including a lot of jargon that is unfamiliar to the audience and not being aware that you are doing it at the time.  This makes the presentation seem like it is in a foreign language to some in the audience.  It doesn't work for that reason.

The third error is that in the process of taking out the jargon the argument gets dumbed down too much and the message is only very broad strokes generalities, which don't communicate the value in the work that has been done.  Plain English messages can nonetheless make arguments that require intelligence to appreciate.  That is the goal, even if it is not readily reached.

Grades Uploaded

I have now uploaded grades for the last Excel homework, your comments in response to mine on the blog posts, and your blog posts in the second half.

I need to take a break.  Then I will get to the projects.  Realistically, I will not have that grading done till tomorrow, and possibly not till Monday.  But you should know where you stand in the course heading into the final, which is Thursday.

And, one more time, Moodle will actually say there are a total of 1020 points allocated for the course, because I gave the bonus on midterm 1 and had to up the max score on that as a result.  I will use the grade distribution reported in the syllabus to determine your letter grade.  In that there were 1000 points allocated.

Tuesday, December 8, 2015

Big Picture Take Aways for Lifelong Learning

1.  A fundamental need to express your formative thinking

2.  Human decency/Kindness to others

3.  Making the circle larger.  This is sometimes called "Chin Up" Leadership.

Some background info for our review of the course

Credit Hours and Out of Class Time - In the old model that was in place, credits are given by "seat time" so our course is a 3-credit course because we are scheduled for 3 hours a week  (really for 160 minutes instead of 180 minutes because of the break between classes).  In that old model there was an implicit relation between out-of-class time and in-class time.  On average there should be 2 hours put in outside of class for every hour in the live class setting.  You can benchmark yourself by whether you were under, over, or approximately at that implicit standard.

National Survey of Student Engagement - This piece from twelve years ago was quite influential in defining "the problem" for much of undergraduate education in the U.S.  Note that this is not specific to the U of I.

Note that the U of I participated in the NSSE and some reforms on campus, particularly a push in undergraduate research, were a consequence of that participation.  But we never shared the results of the surveys done on campus in a public venue.  I saw some of the early results (from about 10 years ago).  They showed the campus ranked pretty high on rigor and having a demanding curriculum.  (Though I wonder if Engineering students were over surveyed in that.)  But we ranked pretty low in student-instructor interaction.  I'm afraid that one reason the results were not made public is that they weren't "brag points" across the board.  We had some strengths but we also had some deficiencies.  I believe it is quite difficult on campus to discuss the deficiencies.

NSSE and the Disengagement Compact

From Today's Chronicle of Higher Education 

Here the argument isn't so much about the intensity of the teaching and learning but rather about the move away from traditional approaches which produce critical thinking, toward vocational approaches that produce narrow competence only.
The Gutting of Gen Ed


Strategic Plan - Goals

Current Initiatives - Campus Conversation

What is your nature?

Two Views about How Engagement Might Be Generated (from Psychology)

Learning is hard work - Carol Dweck Mindset

Learning comes from self-actualization (Maslow) or from finding flow (Csikszentmihalyi)

Sunday, December 6, 2015

When should risk averse people take on risk they can't diversify?

Self-protection means taking action to lower the probability of loss, when there are limits to self-insurance and there is no commercial insurance offered.  The questions we want to get at here are:

(a)  Sometimes, does the individual desire to self-protect get in the way of taking on socially desirable risks?

(b)  What, if anything, can be done about this?

Here are a couple of examples to illustrate:

(1)  Grant System Leads Cancer Researchers to Play It Safe.  The big deal issue here is how to evaluate the next grant proposal written by the researcher.  The prior track record matters, a lot.  In other words, if under the previous grant the researcher could show that good results were obtained that serves as a strong credential for the next grant.  In turn, that encourages the research to be less ambitious in the previous grant proposal, so success is more likely.

(2)  Underdogs in sports competitions should be risk seeking, to maximize their chances of winning.  Favorites should be risk averse.   But many coaches, whether underdog or favorite, coach not to lose.  Can you provide a rationale for that?

What other forms of self-protection do we see in the workplace or in the classroom?

The dark side of being trusting

We've talked about this a little bit in class, in the sense that there needs to be some bonding experience up front for trust to be created.  But we never asked what a sufficient bonding experience looks like, and what happens when we make mistakes and start trusting too early.  The linked piece is a good read, in part because it shows we are all potentially at risk of being scammed by somebody else.  Incidentally, the second sentence in the paragraph below gives some insight as to why Economics is sometimes referred to as "The Dismal Science."

Wednesday, December 2, 2015

PowerPoint Template for Elevator Speech

We will review this presentation in class today.  It should help get you going on the last part of the project, the (virtual) elevator speech.

Last Year's Final

You can use this for practice.  We will review it in class next week.

Monday, November 30, 2015

Second Drafts of Your Papers

1.  Please proofread your document carefully before you submit it.  Silly errors should be absent from this submission.

2.  On many of the first drafts I suggested changing the order of the presentation.  You need to assure that with your new arrangement there is still a nice flow from one paragraph to the next.  If you see now way out of having a break in the discussion, put in a new section header to signify the change in topic.

3.  Along with your second draft, you should submit a document with my comments and your discussion of how you responded to them.  Each comment by me should be followed with a couple of sentences by you on how you disposed of it.  This will greatly assist in my reading of your drafts.

4.  If your paper is reasonable, I will simply send you an Okay email, which means you can proceed to the last stage of the project - your elevator speech qua PowerPoint presentation.  If your paper is not quite up to snuff, I will insist you make some more changes to it before you proceed to the last stage.

5.  If you would like to discuss you paper with me outside of class, I would be happy to meet you for that purpose.

Treating Workers Right

Perhaps this will be the start of a trend.

Saturday, November 21, 2015

Grades have been uploaded into Moodle

Sorry that this took me quite a long time.  But it is there now.  Please note the following.

1.  The exam questions were each worth 40 points.  So the maximum possible score was 120.  (On the test itself, it said each question was worth 50 point.  That was a mistake based on last year's exam.)

2.  The average score was about 84%, which is not bad.  So unlike the first midterm, I didn't give any further points to pad the score.

3.  Note that on the Excel homework, there are actually 9 of these.  So you get 10 free points, which is what is in the item labeled bonus.

4.  You can see the class grade distribution in a file labeled Midterm 2 Results.

Midterm 2 has been graded - exam scores will be uploaded in a few hours.

I need to take a break now.  I will upload not just the exam scores but the recent Excel homework and blog posts tracking will also be updated.   I will post the grade distribution for the exam.

Tomorrow I will read you blog posts on reputation.  If you haven't done one of those posts yet, you can still get that in so that I will read and respond to your post.

Wednesday, November 18, 2015

Reminders/Happy Thanksgiving

1.  There is a blog post due on Friday.  It is on reputations.

2.  The last Excel homework has been posted.  It is on the Shapiro-Stiglitz model.  There is a video for it that you should watch first.

3.  If you are going out of town for the holiday, have a good time.  If you are staying in the area and want ti meet with me, about your paper or about anything else, I'd be happy to do that.

Tuesday, November 17, 2015

Excel Homework Due December 1 at 11 PM

This is the last Excel Homework.

This homework is on extensions of the basic Shapiro and Stiglitz model, with a particular focus on making the monitoring intensity a choice variable.

You should watch the video presentation of the basic model first.   This is a full lecture on the math of the model.  It takes about a half hour.  (If you want the PowerPoint file, a link to it is in the description of the video.)

xlsx file

Sunday, November 15, 2015

About the marked up versions of your papers

I have just now finished marking up the 8th paper.  I'm hopeful that by the end of the day I can do 3 more of these and then perhaps a couple more tomorrow morning.  If you don't get your marked up paper by class tomorrow, give me a nudge and I will get it done in the afternoon.

I plan to spend a few minutes of class time tomorrow illustrating what you need to do from a Word Processing point of view to produce your second drafts and to show you have responded to my comments.  On the substance of what you write and what I've commented on, you are welcome to discuss that with me either via email or by setting up a meeting with me.

Do note that I am commenting as I read, one time through only.  I am not waiting to read through the whole paper and then return to make comments.  That might be fairer to you, but it is just too time consuming for me.  It also illustrates to you how I read.  I make argument with what I'm reading then and there.  What I hope your writing in response does is to grapple with that argument and to anticipate some further argument.

Finally, on a technical note, please know that I'm putting in a section break between your title page and the first page of your paper.  I'm also using page numbering that utilizes the Different First Page feature, so that the first page with a page number is page 2 of the body of the paper (page 3 of the document).

Wednesday, November 11, 2015

For those who were in class today

The graph I drew on the blackboard today was taken from the paper Why Is Their Mandatory Retirement?  This paper is from 1979 and the labor market was quite different then.

Below is the comparable graph from he paper.  In the graph, W* is the wage that is actually paid, W tilde is the reservation wage, and V* is the marginal value product.   That the lines are straight is simply to make the graph more readable.  But we should note the slope.  That W* is steeper than W tilde connotes a seniority premium to the actual wage.  That W tilde is upward sloping suggests that with experience there is some of accumulation of general human capital that has value when working elsewhere.  Note that in class drew that reservation wage curve as humped.  It rises for a while but then it starts to decline.  I think that is more realistic.  After some age (perhaps 55 or so) the person slows down and that trumps the human capital accumulation part.  Where the peak is surely depends on the individual and the nature of the work the person does.  Also note that at some age, the reservation wage reflects more the value of leisure than the productivity in some other job.

Likewise, I drew the marginal value product curve as humped.  I think that is more realistic, though there is no doubt that the graph below is cleaner to look at.  Economics modeling says to look at the simplest possible model that illustrates the points the author wants to make.  So Lazear's graph wins over the one I drew in class today for that reason.

Finally, I forgot to say something very important in class with respect to this graph.  As the picture is drawn, the employee does not want to retire at T because W*(T) > W tilde (T).  So in Lazear's model mandatory retirement (which is no longer legal) gets the separation of the worker from the firm to happen when it should.  Absent mandatory retirement there needs to be some other mechanism to encourage separation (perhaps certain types of pensions will do this) or one can't rely on seniority premiums as much as one could when mandatory retirement was legal.

Interesting Example of Moving From Pay for Performance to a Fixed Wage

I found this one from the Facebook sidebar.  Not everything there is junk.

Tuesday, November 10, 2015

Getting into it

Nothing is really work unless you would rather be doing something else.
James M. Barrie
Scottish dramatist & novelist (1860 - 1937)

So the question for management might be framed, what do you need to do to shape the job so the employees wouldn't rather be doing something else.  

We'll discuss this in class tomorrow. 

Sunday, November 8, 2015

Note that the author of this piece is female!

Forecasting economic growth, as this essay discusses, is more art than science.  While I don't do a lot of economic forecasting in class, the hemline hypothesis is not one I'd bring up even if I were discussing a macroeconomic forecast.  And the problem with other indicators that might seem more sensible, like the number of cranes one sees in a major metropolitan area, is that when the number is high you are already in the boom.  It doesn't tell you when the boom might end and wasn't all that useful to help you know when the boom would begin.

Suggestions for Course Paper

The paper is meant to be formal writing, yet with the intended audience students who will take the class in the future.  I know much student to student communication is quite informal and full of abbreviations, driven by how texting has changed the way we communicate.  So what I mean here is that student readers should find your paper not too difficult to understand, if they put in the effort to read it.  This means that if you use jargon, you must define it in understandable terms.  It also means that you shouldn't take long excerpts from the paper you are reviewing and instead put the arguments in the paper into your own words.  Beyond that, here are several specific suggestions.

Chunk the paper and use section headings for each chunk.

Some specific sections that you should include are (You can have other sections as well and/or have multiple sections associated with any one of these.):

1.  What is the main issue that the paper deals with?  (You should come up with your one section heading for this and the remaining sections.)

2.  What is the contribution of the paper?  If others have also written on this issue how has this paper added to our understanding as compared to what came before?

3.  How do the issue of the paper tie into what we've done in the class?

4.  What are some lessons learned from the paper?

5.  Do you have your own views on the matter or some examples you can bring in that are not discussed in the paper but that might illustrate ideas in the paper?

6.  Conclusion

A big deal issue with formal writing is the sequencing of your presentation.  Even after you know what you are going to say, you need to order your presentation that will make it logical for the reader.  One thought that guides formal writing is that the authors do the work so the readers don't have to.

Each team member needs to own the whole paper.

This means, in particular, that if one team member writes a section of the paper, the other edits that section and makes changes to it in an effort to improve things.  It also means that each team member is concerned with whether one section flows into the next in a smooth way.  Abrupt transitions are to be avoided, because they confuse the reader.

Format of the paper

Please submit a Word document, preferably a docx file.  I may use Track Changes in giving my response.  I will try to give a demo in class of how to use Track Changes, as my prior experience is that some students are unfamiliar with it.

You need a title page.  It has the name of the paper, the team name, the date, and an abstract, which is a brief summary of what the paper is about.

Starting with the next page, the body of the paper should be between 6 and 10 pages, single space within paragraphs, line space between paragraphs.  Font size should be 11 or 12 point.  Margins should be 1 inch.  Since the paper this would be printed out on is 8.5 x 11 inches, this means the writing area is 6.5 x 9 inches.

Please use page numbers as it makes it easier to refer to parts of your paper in an email.  Do not number the title page.  I prefer page numbers to be on the bottom of the page.  If you start a New Section after the title page and you format page numbers so the new section begins with page 1, that will give you the desired result.

After the body of the paper you need a page for references, rather than put footnotes to references in the body of the paper.  My preferred way of doing this is that the first time you refer to the reference in your paper you list authors only, not the title of the piece.  If you make subsequent use of the references you can then repeat the authors names.  Then in the reference area, you can make a full reference.  I like to have those hyperlinked to the source if possible.  And if you are real slick, you can put in internal links in the paper from where you refer to the piece to the reference item.    That makes things quite convenient for the reader.

Wednesday, November 4, 2015

There is no Excel homework for next week

We will extend the discussion of the principal-agent model, but without doing further math.  This should also free up some time for you to work on the first drafts of your papers.

Monday, November 2, 2015

This Wednesday - A Celebration

I will bring donuts and cider.  We'll take 5 minutes or so to enjoy that we've made it this far into the semester.

Learning Rubrics

Value rubrics from the AACU

We will use this for a different purpose than it was originally intended.  (The original purpose is to provide guidelines for instructors in evaluating student work, so that there are common rubrics for making such an evaluation for all all classes to be used in addition to course specific ways of evaluating student work.)  Here we will use the rubrics as part of an exercise in metacognition.  Focus on the Creative Thinking rubrics (page3) and the Critical Thinking Rubrics (pages 4 and 5).


Video on Moral Hazard

This brief video begins our discussion of moral hazard by giving a definition of the term and providing some common examples.

Sunday, November 1, 2015

Video on Conflict in Organizations

This brief video gives some background on the issues including a brief discussion of chapter 8 in Bolman and Deal.

Wednesday, October 28, 2015

Survey Results

For those of you not in class today, we did an experiment for 5 minutes where everyone put away electronic devices during that time.  I told a story about why I wanted to perform that experiment.  Afterward, a survey was administered to get the reactions of students.

I posted a link to the results in Moodle.  Not surprisingly, they were varied.  I found the comments interesting.  I suspect you'll find them interesting as well.

As I have a PowerPoint already prepared for next Monday, I will make a video of that.  Whether I do so for future sessions, I'll leave open now.  I'm still hopeful that we can generate some back and forth on the issues and I'd much prefer that to giving a straight lecture.

Excel Homework Due 11/3 at 11 PM

This homework is on the simplest possible version of the principal-agent model.  It is this model that produces pay for performance as a feature.  It is important to understand this base model before we delve into various realistic ways of complicating the model.  (Mostly we will talk about that but I might do some additional modeling in class after going over the basic model.)  There is a video I'd like you to watch first.  It should give you the background you need to do the homework.

Excel File

Notes for class session on Bargaining

Foreshadow next class session on conflict - Argyris and Schon Model 1 and Model 2.

Thinking Gray - The Contrarian's Guide to Leadership


A live example of negotiation in the classroom (and thus an illustration of today's topic, bargaining).

This issue isn't mentioned in the course syllabus.
Bargaining Homework Submissions  (This link will only work for me.)

Saichel - Yiddish Word


The Zen of Listening

Peter Doolittle Ted Talk - Working Memory


John Nash The Bargaining Problem

Co-Opetition Brandenburger and Nalebuff

The Diffeq from Hell

Monday, October 26, 2015

Notes and Links for Class on Sharing the Marbles/Intrinsic Motivation

Volunteering - Peter Drucker

The Essential Drucker, a collection of Peter Drucker essays. It is not a new book, but it is worth the read. He argues that people should have two jobs, one for pay, the other where they volunteer. It is the second job that gives the sense of social responsibilities and fills in all the needs that the market doesn't provide. He also makes clear that people volunteer for two reasons, both of which need to be satisfied - they have to feel their efforts matter and they have to feel they grow from the experience so training to encourage growth is paramount.

Drucker Institute

Justice and Fairness - John Rawls

Rawls offers an alternative to utilitarianism (for us this is maximizing the social surplus).  He allows for some inequality, provided it is needed to benefit all.  He looks at society from a "Veil of Ignorance" where people don't know what station in life they will hold - rich or poor, talented or infirmed.  From there he concludes that the aim of society is to make those worst off have the highest attainable welfare.  (You can think of this as a maximin strategy for society as a whole.)

A Theory of Justice

Justice as Fairness

Group Work - Web site from Carnegie Mellon

While the potential learning benefits of group work are significant, simply assigning group work is no guarantee that these goals will be achieved. In fact, group projects can – and often do – backfire badly when they are not designed, supervised, and assessed in a way that promotes meaningful teamwork and deep collaboration.

Intrinsic Motivation  Maslow and Self-Actualization

Web site from Shippensburg University

Properties of the Self-Actualizer (Abraham Lincoln may be the quintessential example.)
Truth, rather than dishonesty.
Goodness, rather than evil.
Beauty, not ugliness or vulgarity.
Unity, wholeness, and transcendence of opposites, not arbitrariness or forced choices.
Aliveness, not deadness or the mechanization of life.
Uniqueness, not bland uniformity.
Perfection and necessity, not sloppiness, inconsistency, or accident.
Completion, rather than incompleteness.
Justice and order, not injustice and lawlessness.
Simplicity, not unnecessary complexity.
Richness, not environmental impoverishment.
Effortlessness, not strain.
Playfulness, not grim, humorless, drudgery.
Self-sufficiency, not dependency.
Meaningfulness, rather than senselessness.

Thursday, October 22, 2015

Nobel Prize - Angus Deaton

The Economics Nobel Committee made a good and sound choice for this year's prize.  If you went to graduate school in Economics, you would study his work in some depth, such as this text co-authored with Muelbauer.

Reminder: When Blog Posts and Comments Are Due

I try to read and comment on your blog posts on Saturday and for some posts that come in early I might do some reading and commenting on Friday.  This is why the deadline for these posts is Friday evening.  Many of you have been getting your posts done after the deadline.  If you get it in on Saturday, you are probably okay, especially if I'm still reading other posts at the time yours comes in.   There have been one or two weekends where I couldn't finish all the posts on Saturdays and had to read some of them on Sunday morning.  It is then that I will accept posts coming in on Sunday.  However, once I'm done reading all the posts that have come in, I'm done for that week.  If you submit later than that I will not read your post and you won't get credit for submitting it.

Earlier in the semester I accommodated late posts because I wanted everyone to start on a good foot.  We're past that point now.  Please get your posts in before the deadline.

There is an additional requirement that you respond to my comment on your post with a comment of your own.  Preferably, that happens before class on Monday.  Truthfully, that is too hard for me to monitor on a regular basis.  However, when I graded your blog posts last week I did read all your comments.  Many students are not making them.  I urge you to do so.  Point-wise there are 50 points (5%) of your raw score allocated for comments.  More importantly for me as a teacher, I'd like to know that you've considered what I said and that we're having a little back and forth on your posts.  That is there to encourage your learning.

On Monday, I'll try to bring this mechanism into our discussion of the Daniel Pink video.  I wonder if you can connect the two before our class next meets.

Wednesday, October 21, 2015

Some further thoughts on effort/shirking

I really like this quote from Gertrude Stein,

It takes a lot of time to be a genius, you have to sit around so much doing nothing, really doing nothing.

My interpretation of this is first, that one needs fallow time for reflection and other time for chatting with friends to generate formative ideas.  This incubation phase looks like no work is being done.  But that is not right.  It is the way things get going.  Then second, conscious thought doesn't always do the trick and sometimes the subconscious is very helpful in coming up with solutions.  That is one reason for sleep and dreams.  But the subconscious may be working even when we are awake.  So if you are engaged in something light and not too taxing of your attention, such as watching a junky program on TV, your mind may be at work on problem solving for the idea at hand.

If this is correct, it means that when you are always busy with tasks that someone else can tell you are doing them, then you don't have "time to think."  So you can have the appearance of working quite hard, yet end up not being productive in the sense of coming up with a breakthrough idea.  

And if you are, like me, an introvert then if you are denied this down time for too long a period you start to go bonkers.  As you get older you learn that other introverts crave this time for thinking.  Of course, a career in Academia accommodates this sort of behavior. There is the issue of whether it can also be accommodated in the business world, and if so how.

This means that fundamentally we can only really tell about effort for knowledge work in retrospect, by seeing what ideas come from the work.  During the production it is near impossible to distinguish from idling that is properly called shirking.  And even in retrospect it is hard to tell because many potentially good ideas end in up in the trash.  You can't tell ahead of time.  You have to try them out.

For your amusement, below is a copy of Picasso's famous painting of Gertrude Stein.

Excel Homework Due 10/27 at 11 PM.

The homework is on bargaining.  Note that M&R have a discussion of bargaining in Chapter 5.  You should read that.  The model they go through has both the buyer and seller having two types.  In the Excel homework, the model has a continuum of types on each side of the bargain.  In that sense it is harder but also more elegant.  And, I believe, it should give you a better understanding about the relationship between the private information and the inefficiency  created.

There is a fiction in the model that helps to understand what is going on.  The fiction is that there is a third party - an arbitrator - who provides rules for how the bargaining will happen, when trade will occur, and at what price.  The fiction is necessary because the model is static.  Real world negotiations happen over time and to model that correctly one needs a dynamic model.  There are such models, but they are well beyond the scope of our class.  So we will keep the modeling relatively simple and wave our hands about what happens in real world bargaining.

There is a rather extensive discussion in this homework before you log in.  I encourage you to read that carefully and not gloss over it.  It is about how to bargain well and what happens in real-world procurement, which entails a good deal of such bargaining.  There are practical lessons here that you can carry over to your work life, even if you don't engage in procurement.

Monday, October 19, 2015

Buzzwords for class session

Life-Cycle Consumption   Graph
Income smoothing via borrowing and saving

Insurance - Savings as an income risk buffer

Experimental Consumption

Flexibility or Commitment

Human Capital Acquisation
En passant while working - professional development - further formal education

Job Ladder

Job Search


Sunday, October 18, 2015

Grades for Blog Posts First Half have been uploaded

This covers the five posts starting with your experience with teams and ending with managing income risk.  I did not count the post about your alias.  There are points allocated - the maximum was 125.  And there are some comments about your performance with suggestions on how to improve that in the second half of the course.

For those of you who did all the posts and got that done in a timely fashion, please know that I enjoyed this exercise of reviewing your work.   If you would like to meet with me one-on-one to further discuss your blogging, I would be delighted to do so at a mutually convenient time.  Please email me with a couple of times that works for you and we'll try set something up.

For those of you who did not do all the posts or got them in late and who have not previously spoken to me about your situation, please know that eventually i lost my patience on this and some of that carried into the comments.  It is a lot of work to provide this form of assessment and I get no pleasure at all from being your taskmaster rather than being your teacher.  With several of you I suggested that we do have a face to face meeting to see if we can right the ship for the second half of the course.  That would benefit both you and me.

Thursday, October 15, 2015

Two pieces worth reading

This first one is a book review written by Cass Sunstein of a new book by Akerlof and Schiller called Phishing for Phools: The Economics of Manipulation and Deception.

The other one is an Op-Ed in the NY Times written by Sherry Turkle called Stop Googling.  Let's Talk.  It is about the harmful effects in terms of developing empathy and good listening skills from always having your head on your phone or computer screen.

It might be interesting to put these two pieces together.  At the end of the first piece, Sunstein mentions a kind of individual called a sophisticate who is immune from phishing attempts because the person knows how to steer clear of them and devotes considerable attention to that purpose.  The good listening skills that Turkle talks about may be at the heart of what is necessary to become a sophisticate.

Wednesday, October 14, 2015

Random Seat Assignment or an Honor Code?

This piece is a fun read and touches on many course themes.  Have any of you experienced random seat assignment in a course?

Excel Homework Due 10/20 at 11 PM

This one you should find interesting.  It is on insurance under private information.  A person could be a low risk (low probability of loss) or a high risk (high probability of loss) but there are no distinguishing features that lets the insurance company know which type an individual is.  The individuals know which type they are, but if low risk types get better rates then both types have incentive to claim they are low risk.  The market must somehow address this incentive problem.

Monday, October 12, 2015

Examples for Essay Question on Midterm 1

Imperfect Monitoring

  • BP and Gulf Oil Spill
  • GM and faulty ignitions
  • Performance Enhancing Drugs and Pro Athletes
  • Exxon and Global Warming
  • StarKist (see previous post)
  • Procurement Example I did in class - WebCT Vista and Illiniois Compass
  • New President of U Iowa falsifying his resume
  • Concealed emails on Salaita matter
  • Black Sox Scandal
  • Bernie Madoff
Lack of alternative suppliers - local monopoly
  • Drug prices for patented drugs particularly those that treat life threatening illness. 
  • Strikes, such as by teacher unions
  • Cost overruns and project delays among defense contractors
Lack of alternative buyers - local monopsony
  • Amazon - employees put in extremely long hours and are very competitive with one another.  
  • Walmart - pays employees little, poor benefits.  
  • Apple Computers - squeezes parts suppliers.
Coordination Problems
Pure Coordination 
  • Technology Services (Campus) provides Illinois Compass.  ATLAS (LAS) provides Moodle.
  • MLB - American League has the designated hitter.  National League has the pitcher bat. 
  • Statistics taught on campus - from the Stat Department or the Academic Department.
  • Macs or Windows computers in the workplace (and in the classroom). 
  • Databases - Oracle or SQL (Microsoft)
Prisoner's Dilemma
  • How Markets Fail by John Cassidy - Do banks pursue a strategy of making only safe loans at low interest rates or pursue a strategy of also making risky loans at high interest rates?
  • The Ratings Agencies - Standard and Poors, Moodys - can they deliver low ratings to companies that pay them for their ratings? 
  • Grade Inflation
  • Doctors ordering unnecessary procedures to self-insure again malpractice.  (This one also has an element of pure coordination in it, in that really sick patients see multiple doctors who don't necessarily communicate with one another.)

Saturday, October 10, 2015

Sorry Charlie

In the process of grading the essay I became aware of this class action lawsuit against StarKist, which found they had too little tuna in their cans and too much water.  Presumably, a deliberate act of this sort is done expecting to get away with it, not to get caught.  On this one water is cheap, tuna expensive.  So in this fraud StarKist was clearly lowering its costs to an unsuspecting public.

Friday, October 9, 2015

The New Microsoft - A Zen-like approach in high tech

This piece is worth a read even if you are a diehard Apple fan.  The interesting part of it is about corporate tone, as set by the CEO.  One the one hand, it is a lot easier for a leader to embrace a Zen-like approach when the R&D the company has done the last few years has produced some blockbuster successes.  On the other hand, maybe real invention follows when leadership takes a calm and reflective approach.

Overview of Background Resources

This is a quick version of what I did in class a week ago Wednesday after assigning the students who were present to Project teams.  This video is mainly for those students who weren't present, but might also be useful to those who were there.

At this point, all students in the class have been assigned to project teams.  It would be good now for each team to identify the project they want to work on.  After tentatively deciding that, please contact me by email so I can agree with your plans or make some modifications that I think will improve your project.

Wednesday, October 7, 2015

No blog post this weekend/Graded exams returned in class on Monday.

Because I have exams to grade there is no blog post due this weekend.  It gives you some time when you can meet with your teammate and get going on your project.  Please let me know when you have an idea/topic for that.  I want to give the Okay on your projects and possibly tweak what you intend to do, to assure that it relevant to what the class is about.

In class on Monday I will return the graded exams.  We will also do a brief review of the exam, before starting in on our next topic.  Interesting your preparation before the exam offers some good real-world evidence about the topic, so we will discuss that too.

Excel Homework Due Tuesday 10/13 at 11 PM

This is the homework on the Math of Risk and Risk Preference.   While you might be able to grind through it without viewing the content in the previous post, my expectation is that you will have done so.  It will greatly increase your understanding of what is going on.

Also, if you are an eager beaver in the crowd and do the homework before class next Monday (I applaud the eager beavers in the class) note that when you get to line 86 of the spreadsheet it says we have covered these ideas in class already.  We should get to those ideas on Monday, if only briefly.

Please look at this before you start the next Excel homeowrk

Each of these should be reviewed before doing the next Excel homework, which assumes that such a review has been performed.  They should be familiar already, based on what you've been exposed to in Econ 202 and 203. There may be some new stuff on risk preference. I'd be curious to learn what is old hat and what is new for you. Note that there is a bit of overlap between each of these. Nonetheless, I strongly encourage you to review them all, so you have a firm understanding of the fundamentals. The second one emphasizes and algebraic approach. The third, a graphical approach. You should be familiar with both.

Notes on the Math and Philosophy of Probability  (This is a pdf file.)

Increasing Risk and Risk Aversion (This a video in YouTube.  You can find a link to the PowerPoint file on which it is based in the description of the video.)

Expected Utility and Jensen's Inequality (This a video in YouTube.  You can find a link to the PowerPoint file on which it is based in the description of the video.)

You should be able to get through all of this in under 45 minutes.  Of course, the less familiar it is to you, the longer it will take to get a good understanding.

Tuesday, October 6, 2015

Student Questions About The Coming Midterm

Student questions about the exam should be posted here.  That is where I will answer them.  There already are some questions and answers posted.

Friday, October 2, 2015


I just received the email below from Google. I believe our Upcoming Course Items in the left sidebar of the class site relies on this XML feed.  So it will stop working soon before the Thanksgiving break.  As there is nothing I can do about it, do note that there is a full class calendar on one of the Tabbed pages.  You will have to use that instead.  It is a little less convenient.  I regret that but its the best we can do under the circumstances.


From: “The Google Calendar Team“
Reply-To: “The Google Calendar Team“
Date: Friday, October 2, 2015 at 2:51 PM
To: Lanny Arvan
Subject: Important announcement about XML feeds in Google Calendar

Important announcement about XML feeds in Google Calendar

Because of low usage, and in an effort to streamline our services, from 18 November 2015, XML feeds will no longer be available in Google Calendar. You're getting this message because you're currently viewing or sharing a link to one or more of your calendars using an XML feed.
We apologise for any inconvenience caused. Google Calendar will continue to support three ways of viewing your calendars in other applications or on websites. You can:
  • Access your calendar in other applications, such as Microsoft Outlook or Apple Calendar, using iCal.
  • Embed your calendar in your website or blog using HTML.
  • Use the Google Calendar API to display, create and modify calendar events if you're a developer.
Finally, you can always view and manage your calendars using the Google Calendar app for Android, iPhone or on the web.

- The Calendar team

© 2015 Google Inc. 1600 Amphitheatre Parkway, Mountain View, CA 94043, USA
You have received this mandatory email service announcement to update you about important changes to your Calendar product or account.

Thursday, October 1, 2015

About the Class Project - Reasons

There are two possible types of class project.  One is a review of a scholarly paper written by professional economists on a topic that is relevant to the class.  The other is a case study, again on a topic that is relevant to the class.  These alternatives do offer teams a choice as to the type of project they will do.

Each type of project has a goal associated with it and these goals are quite distinct.  If we did this course over both the fall and the spring then perhaps each team would do both types of project.  Given our current circumstance, one project is all we can squeeze in.

* * * * *

The review of a scholarly paper is meant to give students some experience with how academic economists communicate their research ideas with other economists.  I suspect most if not every student in the class has never read such a scholarly paper, although most of the students in the class are economics majors.  In graduate school for PhD students, the bulk of what students read are such papers, at least after they have finished the first year set of core courses.  The thought here is that undergraduates should have a little bit of this sort of experience as well.

There are two barriers of skill that I hope we can avoid via selection of the papers that are candidates for review.  The first is math modeling.  The second is econometric analysis of the data and the results of the various hypothesis testing done in the paper.  I suggest that students don't read those sort of papers.  They likely will find them impenetrable.  Not that long ago I tried to read a paper I had written in the late 1980s.  Some of the argument was over my head now - and I was the author of the piece!

This leaves papers that are without equations and multiple regression results but where the writing is for economists, not generalists.  This may still be difficult to penetrate, but based on the extra credit projects students did for the class last year, I believe it is possible with some effort.  One reason for doing this with another student this time around is that the two of you can hash out what the paper is saying.

Understanding the issues in the paper is indicated by being able to translate the arguments to a generalist.  The purpose of your review is to provide such a translation.

* * * * *

Our course is taught in a fairly theoretical manner.  While I do try to include examples from when I was an administrator, there is the issue of whether those carry over outside of higher education into the business world that many of you will enter.

Students want to learn practical stuff.  I've known that for some time and have written a bit on it about ten years ago.  The case study project is meant to appeal to this student motivation.  The idea is to find a rather rich real world example, explore its features, and then generalize the lessons learned from the example.  Sometimes cases suggest hypotheses that others have not yet articulated.  Other times cases offer evidence in support of a hypothesis that is widely regarded as possible.  (Note - it is very hard to confirm an economic hypothesis with the same sort of precision as confirming an astronomy hypothesis, such as the one about the earth revolves around the sun.  The evidence we have for an economic hypothesis may be insufficient to "prove" the hypothesis is true.  The absence of controlled experiments in economics means many hypotheses can't really be tested.)

For the case study an additional aspect of the project is to tie the case to subject matter of our class.  In that sense the case study is like the blog posts.  The difference is that for the blog posts you are using your own prior experience.  With the case study you are using experience from the business world that you've read about.

As I said in class yesterday, I've not taught with case studies in an econ class before.  The reason, apart from never being trained in the case method, is that I've been unsure whether students can make the connections between the case and the course subject matter.  I said yesterday that these projects are an experiment.  One aspect of the experiment is to see whether students can make the right sort of connections between the case and course content.

* * * * *

There is one other reason for the projects that is worth mentioning here. While I try to teach the class where a foundation is built early and then we build on that later, there is no doubt that the course has elements of going from one topic to the next, with none covered in much depth.  For example, we could make the entire course focus on transfer pricing and really understand transfer pricing as a consequence.  As it is we have one Excel homework that is partially on it and likewise one blog post.  So the topic is covered, but not so deeply.  The project is meant to give you some experience in learning an economics idea with greater depth.  How you go about doing the project will determine whether that purpose is met.

Wednesday, September 30, 2015

Deadlines for Project Milestones

It is important to note in considering this that:
(a) you need to complete the prior step in order to do the next step and
(b) you need to get feedback from me on your work in the prior step before you can proceed on the next step.

For (b), in other words, you may want to get going but you are waiting on me to give you feedback and give you the go ahead.  I will try not to be the bottleneck on this, but if you are worried that I might be (and there is some reason that is a realistic concern because getting a pile of papers all at once is discouraging and my energy level isn't what it used to be) then the solution is to get your work in well before the deadlines.  Indeed, that way you are likely to get more feedback and get a better grade on the project overall.

That said, this is now what is posted on the class calendar:

First Draft of Paper Due -  Friday, November 13 at Noon.
Second Draft of Paper Due - Friday, December 4 at Noon.
Final Presentation Due - Reading Day, Thursday December 10 at Noon.

Please email me your project team name, member names, and copy your teammate on the message

So far, I've heard from 5 of 9 teams that were created in class today.  Below is a listing of what I have at present.  Note that team members are listed by the economist from whom their alias was derived.

If I have heard from you and your team is listed here, you should have gotten a confirmation email from me.  For the time being you are all set.  When you have more information on your project, send it to me.

If I have not yet heard from you but your were there today and assigned to a team, please email me with your team name and team members.  I need this in large part to determine who wasn't there today.  I will do that by the process of elimination from the class roster.

Later today I will make another post (it might be tomorrow morning) with instructions for you on the class project including the deadline for the first draft of the paper.

Thanks for your attent. - some links

General Motors - Acting Strategically?

The Termination of U.S. Auto Dealerships in 2009

When Workers Share in Profits: Effort and Responses to Shirking

Corporate Responsibility and Strategic Management

The Value of Stock Options to Non-Executive Employees 

The forming of social capital skills

In the last class we talked about responsibility or ownership - what is necessary for a group to become an effective team.  I don't want to redo the entire argument, but as a quick reminder, there are many acts that will benefit the team but for which the individual performing the acts will get no recognition.  The question then is why the individual does this.

Here I'd like to step outside of economics and discuss learning - mostly outside of school that either encourages the development of this sense of responsibility or retards it.   These are a few things you might read at your leisure on the matter.  I think you'll find them quite interesting.  (None of this will be on the test.  Reading interesting stuff for its own sake is a different form of responsibility - to yourself.)

  • The Overprotected Kid by Hanna Rosin - Today children in middle class families always seemingly have an adult around when they play.  The adult keeps an eye on the kids and might serve as referee when they have disputes.  Near term, this probably is a benefit.  Longer term, it likely serves to keep the kids from learning to negotiate these matters themselves and might make them overly fearful of taking reasonable risks.  
  • Slapball from my blog - A nostalgic look at my own childhood where we played a variety of ball games right on the street.  (I lived in Bayside, a residential neighborhood in Queens, a borough in NYC.)  There were no adults present then. 
  • Stop Googling. Let's talk. by Sherry Turkle - Conversation is the way we learn to have empathy for others.  Listening to what they have to say (and holding up your own end of the discussion) are crucial life skills.  If we have our heads always in our devices, thinking we can multi-process more than one conversation at a time, we are fooling ourselves.  We learn to be very impatient and want immediate reward.  We focus on that rather than on the struggles others are having. 
  • Bowling Alone by Robert Putnam - The title is meant as an example of the issue.  There used to bowling leagues.  You were on a team that competed with other teams one or two nights a week.  It was mainly for good fun - friendly competition if you will.  Your teammates might socialize with you afterward.  People used to have many sorts of social connections of that sort.  It made everyone feel like their part of a community.  Campus may have some of those with RSOs.  Of that I'm less sure.  But the larger society is losing that sort of connection with others outside of work.  Putnam's book got a lot of attention.  It hit a nerve with quite a few people. 
  • Miss Manner's Guide to Excruciatingly Correct Behavior by Judith Martin - Some of it is quite funny.  Much of it gets at the operative principle behind manners in awkward situations.  There usually is a larger goal one is trying to achieve by polite behavior or by scolding rude behavior.  Bringing out those larger goals makes manners seem like sensible social conventions rather than a bunch of arbitrary rules. 

Tuesday, September 29, 2015

Is Honesty for Suckers?

The NY Times has a regular Room for Debate section where it invites commentary from people with different perspectives on the issue at hand.  Given our recent focus on opportunism, as well as the prominence of the Volkswagen cheating scandal, I thought today's room for debate would be of interest to the class.  Also note that 3 out of the 5 commentators are prominent economists.

Assignment of Teams for Class Project

A big part of what we will do in class tomorrow is to assign you to project teams.  We will spend quite a bit of time describing the project and seeing if we can get your team into a project it is willing to undertake.  I encourage you to attend this class session.

Monday, September 28, 2015

Last Year's Midterm 1 - for practice

You can view and download a copy of the exam from last year.  The format this time around will be identical and the content will be similar.

Next Monday in class, part of the time will be devoted to a review of that exam.  It would be very good, as preparation, that you write up you own answers to the questions ahead of time and that if you have any problems or issues in doing so that you come ready with these to the review session.  It will be a much more productive activity that way.

Grades Uploaded Into Moodle

I just completed another grade upload.

Thursday, September 24, 2015

Quotas and Transfer Prices - A good or bad idea?

Yesterday I surveyed the class about how many have experienced being closed out of a course they wanted to take.  My impression from that query is that it is fairly common.  I probably should have followed that up with some additional questions:

(1) Has being closed out of the same course persisted for more than one semester?
(2)  Has it happened in a course that was a pre-requisite for other courses you wanted to take?
(3) Has it slowed down your time to graduation?

These questions are meant at getting at the economics issue - is this evidence of severe and persistent excess demand or is it more of the incidental and temporary variety?  After all, the reality of how registration works is that course times, the classroom where the course is taught, and frequently but not always the instructor who will teach the course are set before students register for the class.  Thus there is a similarity, from an economics perspective, between course registration and retail sales.

You will recall that we discussed using an inventory as a buffer to discourage stockouts of merchandise that can occur in the presence of random demand.  We said that the retailer does this to maintain goodwill with customers, who respond by frequenting the store in the future.  That is the nature of the implicit contract in retail.  What does that implicit contract look like for course registration?

If all courses were free electives and if students could assemble their programs of courses as they saw fit (in consultation with their advisers) then the course registration problem would look similar to the retail inventory management problem.  But we know there are a variety of course requirements - Gen Ed, for the major, and then for a minor or a second major if the student happens to be doing one of those.  Those requirements are significant drivers of demand for certain courses.  That demand will be there irrespective of how the department offering the course has honored its side of the implicit contract (or not).  That fact can have a significant impact on the underlying incentives.

Now a tiny bit about what I know regarding transfer prices as they pertain to the student registration problem.  In the 1990s the campus went to a budgeting regime called Responsibility Center Management.  In theory, RCM has each Department receive revenues in accord with the productive activities it engages in and then incur costs for its use of product generated elsewhere in the organization.  The activities and use of other product are metered.  There are transfer prices for each that then determine the department's budget.  For teaching on campus the RCM formula has at least two pieces.  One is per instructional unit.  (IUs are number of students times the number of credit hours per course.)  Another is per number of majors in the department.  There may be a third piece based on minors.  If so, that would reflect a modification in the RCM formulas to encourage more interdisciplinary education.  There was no bit for minors when the RCM formulas were first constructed, about 20 years ago.

Departments in their budget don't pay for classroom space.  Instead, for smaller classrooms, like ours in 123 DKH, the Econ department has priority in scheduling the space.  Only after the Econ department is done can the campus then schedule other classes into that classroom.  In any event, smaller classrooms are not that scarce on campus though there are time of day and day of week issues that make classrooms more scarce.  At 8 AM classrooms are much more available than at 10 AM.  On Friday, classrooms are more available than on Mon - Thurs.

Larger lecture halls, in contrast, are quite scarce and heavily scheduled.  One reason to offer online classes to on campus students is to try to relax the constraint from limited large lecture hall space.

We can now look at the incentives that underlie students being closed out of courses by asking: what would it take for the department to offer another (currently not scheduled) section of the course?  There would be additional costs regarding the personnel to teach that class.  There might also be an opportunity cost for classroom space to consider, particularly if that additional section were itself a large lecture.  For the moment let's consider only the personnel costs.

If demand exceeds the current number of seats in the offering of a class, but one more section would cover all the excess demand, then one can compute the marginal revenue so generated by using the RCM formula and compare that to the marginal cost from the additional personnel needed.  Chronic close outs in the same course would be evidence that the IU piece of the RCM formula is too low.  Indeed, I've heard from an administrator quite recently that is the case.

Now add the classroom issue onto this.  It might be that the additional demand could be handled if the section were held in Foellinger or Lincoln Hall theater, but not in smaller lecture halls.  So then, more than one section would be needed to handle the excess demand.  But that raises marginal cost because now you need personnel to teach multiple sections.  So the limited classroom space for large lecture halls further discourages departments from increasing their capacity in specific courses.

When course requirements are firm, close outs in a class boost future demand for the course, and can exacerbate the issue.  (For Gen Ed requirements, students can often fill those during the summer, quite possibly at the local community college near their home.  That is like buying from the market rather than buying from the upstream division.)

For courses where there is no external substitute, one solution to the excess demand would be to allow other on campus courses to fill the requirement.  There are lots of fights on campus about this, which courses can qualify to satisfy requirement x.  The department that currently offers the course which satisfies the requirement typically does not want competition for IUs from other departments.  They have incentive to block that other course from being considered acceptable.

Another alternative would be to have the IU piece of the RCM formulas vary, so that if there are chronically over subscribed classes, those would get more per IU as incentive to increase supply.  To my knowledge we don't do this sort of thing.  It might seem unfair to do so.  Unfair or not, the current budgeting practice may encourage persistent excess demand for some courses.

Let me close with noting there is some measurement issues with determining how severe the excess demand for classes actually is.  Let me give our class as example to illustrate.  We have two capacity limits.  In the undergraduate section the capacity is 30.  In the graduate section capacity is 6.  There are more seats in the classroom than 36.  These capacities are set by the Econ department.  We have never reached capacity in the graduate section, but we were at capacity in the undergraduate section during much of the first 10-day period when students can add.  Was there excess demand for the course then that never got satisfied?  Or did everyone who wanted to get into the class eventually?

We are no longer at capacity in the undergrad section.  That would seem to show there was no persistent excess demand.  But that is not completely correct.  I can only observe students who want in but can't get in, if those students contact me.  Other students who try to get in but were frustrated in doing so are entirely invisible to me.  Eventually, of course, they have to firm up their schedules and take something else.  That, however, does not mean they prefer their current schedule of courses.

Reminder - Al Roth Talk

I mentioned this in class yesterday.  If you are interested in attending the talk, you can either register at the link or please send me an email about attending.  They do want to have a count of who will show up.

Monday, September 21, 2015

Tips for Excel Homework Due Tuesday Evening

Please remember to use cell references when entering parameter values.  You will save yourself a lot of time that way, even if it is a bit of effort to identify the appropriate cell to use.  Also, remember to use the Split menu item which is in the Window menu.  You can delete the left right split by double clicking on that bar and you move the up down split to a position that is most useful for you.  You do this by dragging on the bar.  You should do this to keep the parameters you need in plain view and/or to be able to see the graph and fill in the answer to the next question at the same time.   Otherwise, you will find yourself scrolling up and down repeatedly and that can be annoying. If you scroll in one pane but leave the other pane fixed, that is the best approach.

I would not watch this movie below till after you have finished the Excel Homework.  It works through the algebra that is behind the graphs and explains the quality choice part in greater depth.  I will not do this in class, because I've learned the extensive algebraic derivations tend to stupefy the students and their eyes glaze over.  But you should watch this eventually and see if you can work through the algebra yourself.  One advantage of the video is that you can stop it at any point to do some calculations with pencil and paper to test your own understanding.  If you have questions about the video, please post them here as a comment.

Sunday, September 20, 2015

Opportunism By Disinformation

Suppose you are a high level executive in a company and in possession of closely held information that if broadly disseminated would lower company profitability substantially but with its release would improve the general welfare.  What do you do?

The Insider is a movie about a whistle blower on Big Tobacco who is in the position of the high level executive considered in the premise of this post.  

Saturday, September 19, 2015

If I don't get to your blog post tonight, my apologies.

The Internet at home has been going on and off.  With the water damage in our basement, I fear the connection will be unreliable for the rest of this evening.  I've already lost a couple of my comments due to the connection going out.  That is frustrating.  I will try to get the rest of them done this evening, but if I don't make it, know I'll get it done first thing in the morning.

Another Grade Upload in Moodle

I just uploaded grades for the Excel homework due last Tuesday, Strategic Approach to Efficiency, and for the blog post due a week ago Friday, on Experience in Organizations.  I will be reading the blog posts due yesterday a little later today.

Unfortunately, my house has a flooded basement now and they are pumping the water out.  It is quite loud and a bit hard to concentrate.  I will try to get this done but I probably will be slower at it than usual.

Friday, September 18, 2015

Excel Homework on Coordination Failure and Coordination Mechanisms.

This homework is about coordination failure and coordination mechanisms. The last two worksheets coincide with material from M&R. Chapter 2 pages 43 - end of chapter on the medical intern matching program.  And all of Chapter 3.  Transfer pricing starts on page 79.

The homework is due next Tuesday evening 9/22 at 11 PM.

If you have a question about the homework, please post it as a comment to this post.

Tuesday, September 15, 2015

Arthur Okun - Inventor of the expression "The Invisible Handshake"

We will spend some more time tomorrow talking about implicit contracts.  Your homework gives you one idea - about how such contracts can be self-enforcing.  But it really doesn't tell you much about the nature of the agreement.  The paper linked below (you have access to this if you are on the campus network) talks about implicit contracts between a firm and its employees.  It explains why wages are "rigid" and how the agreement offers a kind of co-insurance.