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.

An example of opportunism - pyramid schemes

Since you are to write a blog post about your experience with opportunism this week, I thought the piece excerpted below would be of interest to you.  We will also spend a little time in class tomorrow talking about Ponzi schemes, which are similar.

Monday, September 14, 2015

Excel Homework on the Efficiency Principle
This is a deeper look at the Efficiency Principle from taking a strategic approach. Note that this content is not in Chapter 2 of M&R. We are covering it, because it fills in a logical gap to the approach. Excel File:

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

Does Monitoring Work?

The piece that is excerpted below was republished this afternoon on a listserv that I subscribe to.  It kind of makes you wonder, if professors loathe the evaluations of their students, by analogy shouldn't employees loathe the evaluations of their supervisors?  If not, why not?

At the U of I, there is a requirement that each employee receive an annual performance review.  Later in the course we'll talk about this sort of evaluation - its strengths and its weaknesses.

Since we talked about monitoring in class today as one source of transaction cost, I thought this piece below would be interesting to you.

Sunday, September 13, 2015

The U of I makes the grade

The Department of Education released a new Web site giving various pieces of information about college performance.  Illinois does pretty well there.  See below.

Saturday, September 12, 2015

Posts On Your Experience In Organizations

I've now read and commented on each post that has come in.  By my count, that is 17 out of 31 possible posts.  If you are one of those who has yet to write this post, if you get it done by tomorrow afternoon I will still read it and comment on it.  Otherwise, you will be out of luck.

And if you were one of those who did get this in on time, do note that I expect you to read my comments and respond to those with a comment of your own.  That is part of our process.  We'll discuss these in class on Monday.  I suspect there are not many of your classes where your experience is brought in to help explain the objects of study.  I hope that makes our class more enjoyable for you.

Thursday, September 10, 2015

"Podcast" - Overview of Class Session from Yesterday

Hi - I don't know if this is officially a podcast or not.  But it certainly is an audio recording.  I made it because several people were sick yesterday and missed class.  Also, even for those who were there, I encouraged them not to take notes so we could have more participation in the discussion.  This is meant for them too.

If you do listen to it, I'd be curious to know whether you found it useful or not.  You can indicate that as a comment to this post or if you prefer in an email to me.  Thanks.

First Grade Upload Into Moodle

I just did a grade upload.  Some students requested this is class yesterday.  There are three pieces of information that were uploaded:  the Excel Tutorial, the Excel on Efficiency and Equity Concepts, and the Blog Post about your alias.  If you got credit for the first it should be for 10 points and likewise for the second.  For the third, there should be an x mark in the Feedback column, but no points.

Moodle produces other information that I wish you wouldn't see but I don't know how to control and I'm not going to waste my time to figure that out better.  So just focus on those three bits.

If you think I erred by not giving you credit where you deserved, please do contact me.  This process is not entirely automatic and I can make mistakes in the recording keeping.

And if you haven't yet done some of this work, you can still get credit for doing it.  So get it done asap.  After this weekend it will be harder to get caught up with the class.  It is much better for you to stay current with the work.

Monday, September 7, 2015

The Excel Homework Due Tomorrow Night Is On Efficiency and Equity Concepts

Some people are submitting the homework for next week before they submit the homework for this week.  I don't know why.  It says when they are due in the calendar.  You won't get much from doing these assignments out of order.

Wednesday, September 2, 2015

Are we communicating?

The active party in any communication is the recipient. -----  Peter Drucker, business guru.

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For your amusement

Can you raed tihs? Tehre are mnay sepllnig erorrs but the fsirt and lsat ltteers of ecah wrod are crorcelty psotinoied. It truns out taht is waht is ipmrotnat in gettnig othres to udernsantd what you wrtie. Is trehe an alanog for taehcnig with tehcolngoy?

* * * * *

The first day of class I spent a little time talking about the results of a search at Google Scholar on my name, "Lanny Arvan."  In that discussion I said that if you tried to read any of the papers there, you likely couldn't penetrate them, at least the ones in Econ journals.  Those papers are written for professional economists (meaning a PhD in economics is presumed).  It is an example of insiders writing for other insiders.

The skill we want students to develop is generalist writing.  This means the writer has specialty skills (is an insider) but the readers don't necessarily have those skills.  This is the sort of writing I expect in the blogging and it is the sort of skill that all students at the U of I need to develop.

There are two things to do to learn how to do this.  One is to read as a generalist - a lot.  Newspapers produce writing of this sort.  So do many magazines.  The more generalist sort of reading you do, the better.  One of the most important things you learn this way is the type of writing that appeals to you.  Developing a sense of taste as to what constitutes good generalist writing is very important.  When you write, you will do so in accord with your own sense of taste.  Reading a lot of generalist writing develops your own sense of taste.

The other thing is to write a lot of generalist writing.  The blogging we will do in class might be a good starting point on that.  I hope that after a while, you begin to enjoy it, even though it takes time and forethought.  If you do enjoy it, then you might do more of it on your own.  You need to do that to get better in crafting what you write.  That is a learned skill.  The learning is by doing.

Tuesday, September 1, 2015

Efficiency and Equity Concepts

For some of you this homework will be entirely review.  For others, you may not have seen the Edgeworth Box before.  I'd appreciate learning which is your situation by mentioning it in the comments when you submit your key.

As with the other Excel Homework, this one is due in a week at 11 PM.  And if you have a question about the substance of what is going on, please post that as a comment to this post.