While it is pretty icky outside now, at least the snow is not sticking ---- so far and the pavement, while wet, is not icy. So we had regular class today, though attendance was down. If, however, the temperature were a couple of degrees lower and I knew it would be that way the evening before, I will alert the class
I polled the students who did attend today on this matter. They requested email notification. That's what I will do and I will put the same message on the class site as an announcement.
Happy Halloween and here is to a warm rest of the semester.
Thursday, October 31, 2019
Excel Homework Due Nov. 6 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. To encourage you to read that part, there will be a concept quiz due the morning of Nov. 7, before class, that focuses on the procurement section.
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. To encourage you to read that part, there will be a concept quiz due the morning of Nov. 7, before class, that focuses on the procurement section.
Tuesday, October 29, 2019
Some follow up to today's class session 10-29-19
I'd like you to consider two different but related scenarios.
1. You've already begun doing an Excel homework, or writing a blog post for the class, or doing a quiz in Moodle for our class. What does thinking about your course grade at that juncture do to how you are performing in your task? Is it a distraction or an enhancement?
2. You've not yet begun doing some coursework that is due in the near future. What does thinking about your course grade do regarding getting started on the coursework?
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Now I'd like you to speculate/generalize on your conclusions above. Professional athletes and movie stars typically have agents. The agents facilitate contract negotiations and also facilitate identifying the next party to negotiate with after the previous contract has expired. An agent takes a pretty hefty cut of what their client gets in the next contract. So it might seem the stars might make more money if they did these negotiations themselves. Yet that rarely, if ever, happens. Can you explain why?
1. You've already begun doing an Excel homework, or writing a blog post for the class, or doing a quiz in Moodle for our class. What does thinking about your course grade at that juncture do to how you are performing in your task? Is it a distraction or an enhancement?
2. You've not yet begun doing some coursework that is due in the near future. What does thinking about your course grade do regarding getting started on the coursework?
---------
Now I'd like you to speculate/generalize on your conclusions above. Professional athletes and movie stars typically have agents. The agents facilitate contract negotiations and also facilitate identifying the next party to negotiate with after the previous contract has expired. An agent takes a pretty hefty cut of what their client gets in the next contract. So it might seem the stars might make more money if they did these negotiations themselves. Yet that rarely, if ever, happens. Can you explain why?
Monday, October 28, 2019
Grades Updated in Moodle
Three items were updated:
1. The Excel homework on the Math of Risk and Risk Preference,
2. The Blog Post on Managing Future Income Risk, and
3. The Concept Quiz on Risk Preference.
1. The Excel homework on the Math of Risk and Risk Preference,
2. The Blog Post on Managing Future Income Risk, and
3. The Concept Quiz on Risk Preference.
Sunday, October 27, 2019
Some Sobering Thoughts about Economic Incentives
The authors were selected for Nobel Prize in Economics this year. They know their stuff!
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Some Links For Class Session On Tuesday October 29
Musical PowerPoint (Developed back in 2012 for the course. I opted not to use it this semester but then I thought it might be a good gateway into students talking about their current listening to music, both the technology and what they listen to.)
Q: Does the technology impact the content?
NY Times Writers on Writing
E.L. Doctorow on how the movies influenced the novel. (He laments these changes.)
Dire Straits song Money for Nothing. (A similar lament about how MTV impacted music.)
Has something similar happened with the movies?
Professor Arvan on Really Good Movies and Blockbusters
Q: Are there more bad movies made now than in the 1970s? Are there too many movies being made based on comic books?
Q: Do those providing finance for a movie have a good sense whether the movie will be a success or a flop? When is it economically rational to invest in a likely flop?
Q: Does the technology impact the content?
NY Times Writers on Writing
E.L. Doctorow on how the movies influenced the novel. (He laments these changes.)
Dire Straits song Money for Nothing. (A similar lament about how MTV impacted music.)
Has something similar happened with the movies?
Professor Arvan on Really Good Movies and Blockbusters
Q: Are there more bad movies made now than in the 1970s? Are there too many movies being made based on comic books?
Q: Do those providing finance for a movie have a good sense whether the movie will be a success or a flop? When is it economically rational to invest in a likely flop?
Saturday, October 26, 2019
In case you are looking for Halloween ideas for economists
This picture is from 1955. Arnold Harberger is in a get up as Triangle Man. This was in the first course in graduate microeconomic theory at the University of Chicago.
Thursday, October 24, 2019
Some Links And A Simple Model Of Labor Productivity - For Class Session October 24
A Mature View of Uncertainty (Ten years ago I got about halfway in writing a book on teaching and learning. The book title was Guessing Games. The underlying idea was that we should mainly teach students to hone their own intuition - making good guesses. But then we need to also teach the accompanying skill of verification and follow up on the intuition. This is the last chapter that I wrote. I think it's not badly written, but on reading some earlier chapters, they were too pedantic. I was lecturing to the reader, not a good approach to sustain interest. So I stopped writing this.)
This is long read, maybe 45 minutes or so - but there is no blog post due this weekend. It talks about uncertainty in many dimensions, beyond how economists thinking about it. Ultimately the focus is on the choice (or not) to quit the current job and take on something else. What are the factors too consider? Here I'll mention do - the emotional side, how nervous are you about making the change? how miserable are you with the current situation? and that we don't really decided things by data, but rather by a good narrative - what story can you tell to convince yourself about the choice?
Moneyball (the book, not the movie)
The interesting part for us is that scouts for major league baseball teams make errors in evaluating talent. The errors are systematic. (Or at least they used to be before the book came out.) We should attribute such errors to cognitive bias. This suggests, more generally, that in the labor market recruiters may make errors in evaluation talent because of cognitive bias.
The Financial Perks of Being Tall
A well studied consequence of cognitive bias.
Randy Newman song - Short People
An ironical lyric that plays into the cognitive bias and implicitly criticizes our many other prejudices.
Favorites versus Underdogs
For the mathematically inclined. If the objective is to maximize the chance of winning, then the favorite should risk averse while the underdog should be risk seeking.
Simple Model of Labor Productivity
Q = F(a,h,e)
where Q is the individual's output, a is the individual's ability, h is the individual's human capital, and e is the individual's effort. Note that each of these variables may themselves be multi-dimensional. For example, we've already spoken of general human capital (which is valuable with any employer) and specific human capital (which is valuable only to the current employer).
How does moral hazard manifest in each of these job types?
Is procrastination moral hazard?
This is long read, maybe 45 minutes or so - but there is no blog post due this weekend. It talks about uncertainty in many dimensions, beyond how economists thinking about it. Ultimately the focus is on the choice (or not) to quit the current job and take on something else. What are the factors too consider? Here I'll mention do - the emotional side, how nervous are you about making the change? how miserable are you with the current situation? and that we don't really decided things by data, but rather by a good narrative - what story can you tell to convince yourself about the choice?
Moneyball (the book, not the movie)
The interesting part for us is that scouts for major league baseball teams make errors in evaluating talent. The errors are systematic. (Or at least they used to be before the book came out.) We should attribute such errors to cognitive bias. This suggests, more generally, that in the labor market recruiters may make errors in evaluation talent because of cognitive bias.
The Financial Perks of Being Tall
A well studied consequence of cognitive bias.
Randy Newman song - Short People
An ironical lyric that plays into the cognitive bias and implicitly criticizes our many other prejudices.
Favorites versus Underdogs
For the mathematically inclined. If the objective is to maximize the chance of winning, then the favorite should risk averse while the underdog should be risk seeking.
Simple Model of Labor Productivity
Q = F(a,h,e)
where Q is the individual's output, a is the individual's ability, h is the individual's human capital, and e is the individual's effort. Note that each of these variables may themselves be multi-dimensional. For example, we've already spoken of general human capital (which is valuable with any employer) and specific human capital (which is valuable only to the current employer).
How does moral hazard manifest in each of these job types?
- Real Estate Agent
- Bank Manager (In a few weeks we'll look at the example from M&R on this during the S&L crisis of the 1980s
- Tenured Professor Teaching Undergraduates
- Scientist Doing Cancer Research
- Educational Technologists
Is procrastination moral hazard?
Excel Homework Due Wednesday October 30 At 11 PM
This homework takes the insurance model we did in the last class and applies it to Akerlof's Market for Lemons, which is a very well known approach to Adverse Selection (hidden information). Depending on the underlying distribution over types, the competitive market may not work very well in this instance - the bad risks drive out the good risks.
The economics here is more sophisticated, because there is a possibility of a pooling equilibrium or a separating equilibrium and students may not understand what determines which will occur. We will discuss this in class, after the homework is due.
If you have questions about doing the homework itself, please post them as comments on this post.
I want to note two bits of reality that aren't in the model in the homework.
(a) In the homework it is assumed that the insurance company faces no costs in issuing a policy nor costs in administering the coverage when loss occurs. Under this assumption, a competitive market will produce equilibrium policies where the fixed load, F, is 0. More realistically, you should consider that F is positive, to cover these type of costs. In that case the good risk type really might buy no insurance whatsoever. Our model doesn't predict that but instead predicts that the good risks may get only a little coverage.
(b) In the homework it is assumed that regardless of type the insured can afford to pay the premium. (We would say the insured is not liquidity constrained.) But in reality, fair insurance premiums for bad risks may be too high for people to afford. So rather than buy full coverage, as in the case of a separating equilibrium in our model, the people will go entirely without purchasing insurance.
Of course, you can model both of these considerations, but then the model itself becomes much harder. So the homework is suggestive of what happens, without giving the full picture.
The economics here is more sophisticated, because there is a possibility of a pooling equilibrium or a separating equilibrium and students may not understand what determines which will occur. We will discuss this in class, after the homework is due.
If you have questions about doing the homework itself, please post them as comments on this post.
I want to note two bits of reality that aren't in the model in the homework.
(a) In the homework it is assumed that the insurance company faces no costs in issuing a policy nor costs in administering the coverage when loss occurs. Under this assumption, a competitive market will produce equilibrium policies where the fixed load, F, is 0. More realistically, you should consider that F is positive, to cover these type of costs. In that case the good risk type really might buy no insurance whatsoever. Our model doesn't predict that but instead predicts that the good risks may get only a little coverage.
(b) In the homework it is assumed that regardless of type the insured can afford to pay the premium. (We would say the insured is not liquidity constrained.) But in reality, fair insurance premiums for bad risks may be too high for people to afford. So rather than buy full coverage, as in the case of a separating equilibrium in our model, the people will go entirely without purchasing insurance.
Of course, you can model both of these considerations, but then the model itself becomes much harder. So the homework is suggestive of what happens, without giving the full picture.
Monday, October 21, 2019
Lecture Tomorrow
Please note that tomorrow I will present the basic insurance model and do so in lecture format. I have decided to do that live rather than as a video, in part so you can ask questions then and there. This model will underlie other models well will consider over the next several weeks. The homework that is due a week from this Wednesday, on adverse selection in insurance markets, depends on it. Another homework on the principal-agent model can best be understood as a variant of the insurance model.
At this point it seems most of the class has yet to do the Excel homework due on Wednesday evening, which really should be preliminary to the insurance model. I'm going to push ahead anyway, in part so students get a chance to see where we are heading and in part because we really need to get this done.
At this point it seems most of the class has yet to do the Excel homework due on Wednesday evening, which really should be preliminary to the insurance model. I'm going to push ahead anyway, in part so students get a chance to see where we are heading and in part because we really need to get this done.
Thursday, October 17, 2019
Comments First Half Grades Uploaded
Here is an explanation for how your scores were determined.
First, only a few students diligently commented on the posts of other students, which was required in the syllabus. The students who did this ended up getting the maximum number of points, 50 points.
Second, I needed to figure out how to give credit for those students who did respond to my comments on their own blog. What I ended up doing, was to give 9 points for each post they commented on. This would give a maximum of 45 points, obtained if the students commented on each of their posts, and less if they missed posts where I did comment.
I want to acknowledge that on some posts a few students wrote multiple comments and some wrote very long and impassioned comments. It is good to demonstrate such enthusiasm and I thank you for doing it. But in terms of accounting for it in the scores, I didn't.
Do note that commenting on other students posts is still certainly okay to do, but there won't be points assigned for it in the second half.
First, only a few students diligently commented on the posts of other students, which was required in the syllabus. The students who did this ended up getting the maximum number of points, 50 points.
Second, I needed to figure out how to give credit for those students who did respond to my comments on their own blog. What I ended up doing, was to give 9 points for each post they commented on. This would give a maximum of 45 points, obtained if the students commented on each of their posts, and less if they missed posts where I did comment.
I want to acknowledge that on some posts a few students wrote multiple comments and some wrote very long and impassioned comments. It is good to demonstrate such enthusiasm and I thank you for doing it. But in terms of accounting for it in the scores, I didn't.
Do note that commenting on other students posts is still certainly okay to do, but there won't be points assigned for it in the second half.
Tuesday, October 15, 2019
Grades Uploaded Into Moodle
This grade upload includes the scores you were assigned on the blog posts first half, comments on those, and then 100 points bonus that I gave everyone.
I did not upload the tracking of the most recent post on connecting the dots. Given the scores I gave that seemed redundant to do.
I have also yet to give you scores for the comments first half. I'm pretty tired now so will get that done when I'm fresher, on Thursday. I will be out of town tomorrow.
I did not upload the tracking of the most recent post on connecting the dots. Given the scores I gave that seemed redundant to do.
I have also yet to give you scores for the comments first half. I'm pretty tired now so will get that done when I'm fresher, on Thursday. I will be out of town tomorrow.
Anonymous and Unknown Comments
As I'm going through the blog posts I'm seeing comments from Anonymous or Unknown. When that happens on your own blog, I believe I can figure out that it is you posting. When it happens on somebody else's blog, then it is too hard for me to figure it out.
If you want to get credit for those comments, you will need to claim them as your. Send me an email with a link to the post. I know this is a hassle, but think how I feel about it. You were supposed to use your alias when making comments. That would clearly identify you (to me).
Updated Syllabus - No More Commenting On Other Student Posts
You should still comment in response to my comment. Here is the new point allocation to put this into effect.
Blog Posts First Half (150 points - 5 posts (not counting the one about your alias) for 30 points per post).
Blog Posts Second Half (210 points - 7 posts for 30 points per post.)
This gives the same total points for the Blog posts as was allocated before.
Comments First Half (50 points)
Comments Second Half (50 points)
Bonus (100 points) - everyone gets this automatically.
This gives the same total points as what was allocated for Comments in the original syllabus.
Blog Posts First Half (150 points - 5 posts (not counting the one about your alias) for 30 points per post).
Blog Posts Second Half (210 points - 7 posts for 30 points per post.)
This gives the same total points for the Blog posts as was allocated before.
Comments First Half (50 points)
Comments Second Half (50 points)
Bonus (100 points) - everyone gets this automatically.
This gives the same total points as what was allocated for Comments in the original syllabus.
Monday, October 14, 2019
Links and ideas for class session on Oct. 15
First Class Session - Slide 16
Online Writing Lab at Purdue (General Writing)
The section on procrastination is quite good, especially if you've been struggling to get the blog posts done. The other sections are also useful.
The Inquiry Page
The U of I is a research university. Researchers take an inquiry approach in going about learning. Inquiry is depicted as an ongoing cycle rather than as getting to an end point. Students in many undergraduate courses don't see such an inquiry approach. It might help students to know that we're trying for such an approach in our class.
Writing to Learn (Donald Murray)
Murray was a journalist who had a good deal of insight about how writing as a process is part and parcel of thinking and learning. The core idea is that thinking is sequential rather than one big Gestalt. You don't have the whole picture at first. You work through something. Then after a while something related occurs to you. I like to imagine a piece of paper folded many times over. Each juncture is an unfolding. You see more of it after that. The goal is to see as much as you can. Those who found the reflection of value did so because they saw things about the post that they didn't see while they were composing it.
Suggestions for the Blogging in the Second Half of the Course
1. Break your post into two parts. Part a would be a reflection about the post in the previous week, like the reflection you just did. Part b would be writing to the current prompt. Part a can be any length. Part b should still satisfy the 600 word minimum requirement. So this is not for making it easier to satisfy the requirement. It is for making reflection a more regular part of your thinking.
2. Write a paragraph about the prompt. Why was it selected? What's the purpose of the prompt? Do this before you try to address the prompt. Then write your post. Go back to the paragraph and see if you still agree with what you said there or not?
3. Consider writing to your own prompt. This is a way to direct your own inquiry. Do note that you need to write a paragraph in this case which ties what you are writing about to course themes.
Online Writing Lab at Purdue (General Writing)
The section on procrastination is quite good, especially if you've been struggling to get the blog posts done. The other sections are also useful.
The Inquiry Page
The U of I is a research university. Researchers take an inquiry approach in going about learning. Inquiry is depicted as an ongoing cycle rather than as getting to an end point. Students in many undergraduate courses don't see such an inquiry approach. It might help students to know that we're trying for such an approach in our class.
Writing to Learn (Donald Murray)
Murray was a journalist who had a good deal of insight about how writing as a process is part and parcel of thinking and learning. The core idea is that thinking is sequential rather than one big Gestalt. You don't have the whole picture at first. You work through something. Then after a while something related occurs to you. I like to imagine a piece of paper folded many times over. Each juncture is an unfolding. You see more of it after that. The goal is to see as much as you can. Those who found the reflection of value did so because they saw things about the post that they didn't see while they were composing it.
Suggestions for the Blogging in the Second Half of the Course
1. Break your post into two parts. Part a would be a reflection about the post in the previous week, like the reflection you just did. Part b would be writing to the current prompt. Part a can be any length. Part b should still satisfy the 600 word minimum requirement. So this is not for making it easier to satisfy the requirement. It is for making reflection a more regular part of your thinking.
2. Write a paragraph about the prompt. Why was it selected? What's the purpose of the prompt? Do this before you try to address the prompt. Then write your post. Go back to the paragraph and see if you still agree with what you said there or not?
3. Consider writing to your own prompt. This is a way to direct your own inquiry. Do note that you need to write a paragraph in this case which ties what you are writing about to course themes.
Please Look At The Items Here Before You Start the Excel Homework Due Oct 23 at 11 PM
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 an 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.) There is a slight error in this - a line I attributed to Keynes actually comes from Mark Twain. Otherwise, it is pretty basic stuff.
Increasing Risk and Risk Aversion (This is 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.
The last bit on expected utility is based on the book by John von Neumann and Oskar Morgenstern called Theory of Games. Maximizing expected utility is what economists think of when they refer to economic rationality. The Behavioral Economists have shown that most people don't behave according to this theory. Even professional economists don't always behave as the theory says, but they are more likely to be rational this way than the rest of the population.
Notes on the Math and Philosophy of Probability (This is a pdf file.) There is a slight error in this - a line I attributed to Keynes actually comes from Mark Twain. Otherwise, it is pretty basic stuff.
Increasing Risk and Risk Aversion (This is 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.
The last bit on expected utility is based on the book by John von Neumann and Oskar Morgenstern called Theory of Games. Maximizing expected utility is what economists think of when they refer to economic rationality. The Behavioral Economists have shown that most people don't behave according to this theory. Even professional economists don't always behave as the theory says, but they are more likely to be rational this way than the rest of the population.
Friday, October 11, 2019
Some follow up to yesterday's class session.
This is the PowerPoint presentation I used.
I did a tiny bit of research on duration of Patents and Copyrights in the U.S. It looks like the patent term is now 20 years, so I was wrong about that. The copyright term is life of the author plus 70 years. Note that when the author is doing that work as an employee or as a contractor, the copyright is owned by the hiring company. Also, it is my experience that companies are very quick to use non-disclosure agreements about anything they deem interesting and innovative. Given that, you might ask how companies incentivize employees to be innovative.
I will add here that faculty (not the university) typically own the copyright to their research papers. Then the normal exchange is to assign the copyright to the publisher when the article has been accepted in a journal within the publisher's sphere. Before the Internet that was uncontroversial. Now it is pretty common to find articles that are under copyright made publicly available by somebody other than the publisher.
Regarding another example of change that doesn't improve things, though it is intended to, consider the use of Banner for doing course registering. Before there wasn't any online system for registering, the phenomenon of course hoarding didn't exist, because to drop a course was an onerous process. Once that became easy, you have this pernicious development.
Progress may have excellent benefits for most people, but it also can produce unanticipated side effects. We should be aware of both.
I did a tiny bit of research on duration of Patents and Copyrights in the U.S. It looks like the patent term is now 20 years, so I was wrong about that. The copyright term is life of the author plus 70 years. Note that when the author is doing that work as an employee or as a contractor, the copyright is owned by the hiring company. Also, it is my experience that companies are very quick to use non-disclosure agreements about anything they deem interesting and innovative. Given that, you might ask how companies incentivize employees to be innovative.
I will add here that faculty (not the university) typically own the copyright to their research papers. Then the normal exchange is to assign the copyright to the publisher when the article has been accepted in a journal within the publisher's sphere. Before the Internet that was uncontroversial. Now it is pretty common to find articles that are under copyright made publicly available by somebody other than the publisher.
Regarding another example of change that doesn't improve things, though it is intended to, consider the use of Banner for doing course registering. Before there wasn't any online system for registering, the phenomenon of course hoarding didn't exist, because to drop a course was an onerous process. Once that became easy, you have this pernicious development.
Progress may have excellent benefits for most people, but it also can produce unanticipated side effects. We should be aware of both.
Thursday, October 10, 2019
Please get your blog posts due tomorrow in NO LATER THAN SUNDAY!
Soft deadlines notwithstanding, this is not a good time to be tardy with your blog posts. This one is on Connecting The Dots. For your convenience, the prompt is reproduced below.
Connecting the dots - This is a chance for you to read through your prior posts and then try to answer the following questions: (1) Are the themes from one post that tie into other posts? if so, what are those connections? (2) Aside from addressing the prompt are there ways to connect what you wrote about to course themes? Were there connections that are more obvious to you now than at the time you wrote the post? if so, can you elaborate on that? (3) Has your process for writing these posts evolved? Please explain how that has come about. (4) Now put yourself in the position of writing the prompt (this one or other prompts for future posts). What would you like to see? Can you give some reasons for that.
Connecting the dots - This is a chance for you to read through your prior posts and then try to answer the following questions: (1) Are the themes from one post that tie into other posts? if so, what are those connections? (2) Aside from addressing the prompt are there ways to connect what you wrote about to course themes? Were there connections that are more obvious to you now than at the time you wrote the post? if so, can you elaborate on that? (3) Has your process for writing these posts evolved? Please explain how that has come about. (4) Now put yourself in the position of writing the prompt (this one or other prompts for future posts). What would you like to see? Can you give some reasons for that.
Wednesday, October 9, 2019
Some follow up to yesterday's class session.
On Class Scheduling and Excess Demand for Some Classes
In our discussion we did not consider other factors that might influence student demand for a course. These include the time of day the course is offered and whether the offering is contiguous to another class the student is already scheduled to take. I don't know if this is a universal preference or not, but I've learned from students in the past that they prefer having classes back to back, which gives them more free time of their own.
Given the above, perhaps one way to manage excess demand in popular courses is to schedule them at 8 AM. This would be a deliberate attempt for the scheduling itself to screen out the non-serious students, knowing that 8 AM classes are not high on the preferences of most students. There might be another reason for scheduling more 8 AM classes. As enrollment growth continues to happen, it is university strategy now to encourage that growth, classrooms will become increasingly scarce. We did talk about moving demand from the peak to off the peak, but we didn't do that with respect to class scheduling. Insisting on more course offerings at 8 AM would be a way to do that. It would require for the expectations of students to change, in a way they might not like at first. I wonder if it became the usual practice whether students would get used to it.
Now let my suggest a hypothetical that would offer an alternative to the current course registration process. Instead, students would submit their preferences about what courses they would like to take, what courses they need to take for their degree requirements, and other related preferences (courses in the same building, preferred times, and perhaps other factors as well. Then an algorithm (something like the Medical Intern Matching Program) would produce initial schedules for all students. The regular add/drop process would follow after that. Further, how the students did with their allocation in previous semesters would be tracked as follows. Students who dropped courses after day 10, without getting the consent of their advisor, would have their priority lowered in the next registration round. The idea is to punish the course hoarding approach. The schedules that were produced by the algorithm would deliberately not be perfect from the point of view of their preferences. In other words, if the campus deliberately went to an approach that emphasized 8 AM classes, then the burden of taking those classes would need to be shared. So the algorithm would include this obligation, but then try to give students their first preference in some other course offering.
I want to close this section with a different observation. When this class was taught at 11 AM, some students regularly came late to class. I queried a few of them about it and among them many reported that they took another class before mine, which was on the Engineering Quad. Getting from there to my classroom took more than the 10 minutes allowed between classes. So, in this case it seemed unavoidable. This semester there are several students who are arriving late to class. I'm guessing that for most of them our class is the first one in the day for them. So, I'd like to know what explains the lateness and if there is any way to prevent it from happening in the future.
Ethics and Procurement
As I recently had to complete the University's mandatory ethics training, I want to note that it has specific prohibitions regarding accepting gifts from vendors, particularly those already doing business with the University and/or those submitting proposals under an RFP process. Let me also note that it is pretty common business practice, including by units of the University, to give out tchothcke with the company's branding to clients and to potential customers. Items include pens, tee shirts, coffee mugs, and squeeze balls (for reducing stress). The practice is so widespread that an absolute ban on acceptance of this type of stuff seems foolhardy. The University rules on not accepting gifts from vendors refer to "bribes" that are one or two orders of magnitude more expensive.
But the reality is that in most cases the University can't monitor that these vendor gifts are being accepted. So we should ask why a person in a position to grease his or her own pockets refrains from doing so. I think it is easier to first consider the opposite. If the person is angry at the University for feeling the person has been treated poorly, that mindset encourages accepting the vendor's gifts. More generally, if the employer wants to encourage employees to act ethically, treating them well might be an effective approach. One way to look at it is that the employee then fears loss of a good job, so the taking of the vendor gift comes with some risk. A different way, however, is from an Akerlof gift-exchange point of view. If the employee feels well treated, the employee is more inclined to honor the wishes of the employer.
There is a temptation by regulators and policy makers to solve this problems via extensive rules that requires lots of monitoring and indeed may become so cumbersome as to be counterproductive. My own view is that broad guidelines coupled with an approach that encourages trust in the employees is a better way to go.
In our discussion we did not consider other factors that might influence student demand for a course. These include the time of day the course is offered and whether the offering is contiguous to another class the student is already scheduled to take. I don't know if this is a universal preference or not, but I've learned from students in the past that they prefer having classes back to back, which gives them more free time of their own.
Given the above, perhaps one way to manage excess demand in popular courses is to schedule them at 8 AM. This would be a deliberate attempt for the scheduling itself to screen out the non-serious students, knowing that 8 AM classes are not high on the preferences of most students. There might be another reason for scheduling more 8 AM classes. As enrollment growth continues to happen, it is university strategy now to encourage that growth, classrooms will become increasingly scarce. We did talk about moving demand from the peak to off the peak, but we didn't do that with respect to class scheduling. Insisting on more course offerings at 8 AM would be a way to do that. It would require for the expectations of students to change, in a way they might not like at first. I wonder if it became the usual practice whether students would get used to it.
Now let my suggest a hypothetical that would offer an alternative to the current course registration process. Instead, students would submit their preferences about what courses they would like to take, what courses they need to take for their degree requirements, and other related preferences (courses in the same building, preferred times, and perhaps other factors as well. Then an algorithm (something like the Medical Intern Matching Program) would produce initial schedules for all students. The regular add/drop process would follow after that. Further, how the students did with their allocation in previous semesters would be tracked as follows. Students who dropped courses after day 10, without getting the consent of their advisor, would have their priority lowered in the next registration round. The idea is to punish the course hoarding approach. The schedules that were produced by the algorithm would deliberately not be perfect from the point of view of their preferences. In other words, if the campus deliberately went to an approach that emphasized 8 AM classes, then the burden of taking those classes would need to be shared. So the algorithm would include this obligation, but then try to give students their first preference in some other course offering.
I want to close this section with a different observation. When this class was taught at 11 AM, some students regularly came late to class. I queried a few of them about it and among them many reported that they took another class before mine, which was on the Engineering Quad. Getting from there to my classroom took more than the 10 minutes allowed between classes. So, in this case it seemed unavoidable. This semester there are several students who are arriving late to class. I'm guessing that for most of them our class is the first one in the day for them. So, I'd like to know what explains the lateness and if there is any way to prevent it from happening in the future.
Ethics and Procurement
As I recently had to complete the University's mandatory ethics training, I want to note that it has specific prohibitions regarding accepting gifts from vendors, particularly those already doing business with the University and/or those submitting proposals under an RFP process. Let me also note that it is pretty common business practice, including by units of the University, to give out tchothcke with the company's branding to clients and to potential customers. Items include pens, tee shirts, coffee mugs, and squeeze balls (for reducing stress). The practice is so widespread that an absolute ban on acceptance of this type of stuff seems foolhardy. The University rules on not accepting gifts from vendors refer to "bribes" that are one or two orders of magnitude more expensive.
But the reality is that in most cases the University can't monitor that these vendor gifts are being accepted. So we should ask why a person in a position to grease his or her own pockets refrains from doing so. I think it is easier to first consider the opposite. If the person is angry at the University for feeling the person has been treated poorly, that mindset encourages accepting the vendor's gifts. More generally, if the employer wants to encourage employees to act ethically, treating them well might be an effective approach. One way to look at it is that the employee then fears loss of a good job, so the taking of the vendor gift comes with some risk. A different way, however, is from an Akerlof gift-exchange point of view. If the employee feels well treated, the employee is more inclined to honor the wishes of the employer.
There is a temptation by regulators and policy makers to solve this problems via extensive rules that requires lots of monitoring and indeed may become so cumbersome as to be counterproductive. My own view is that broad guidelines coupled with an approach that encourages trust in the employees is a better way to go.
Tuesday, October 8, 2019
Monday, October 7, 2019
Some Announcements
Reminder: The quiz in Moodle begins after class tomorrow, at 11 AM. It concludes the following evening at 11 PM. It can be taken any time in between. You are free to review your Excel homework while taking the quiz. The grades on the quiz will be available after the quiz closes.
Drop Date/Grades for Blogging During the First Part of the Course
The deadline to drop is Friday October 18. You'll want to know where you stand in the class. So I will try to give you the points for your blogging in the first part. This is not quite halfway (we didn't do blogging the first two weeks) so I need to figure out the proportional allocation of points possible.
This part takes me a while to do. I will also provide a brief written evaluation of your work. To do that I read through what you've written again and the comments your've written as well. I will start doing this after the first few posts this week come in and I plan to devote a lot of time next Monday to this. But I have an eye doctor appointment Monday afternoon. I am planning on being out of town Wednesday of that week, so I hope I get it done before that. If not, I'll make some general announcement so you can get some sense of how your points are determined and how you will be evaluated.
Ballgame Tonight
The Yankees play the Twins starting at 7:40 pm, which is pretty late for me. I still haven't figured out whether I'll watch it live or tape it and watch it in the morning. If the Yankees sweep, your professor will be a happy camper.
Drop Date/Grades for Blogging During the First Part of the Course
The deadline to drop is Friday October 18. You'll want to know where you stand in the class. So I will try to give you the points for your blogging in the first part. This is not quite halfway (we didn't do blogging the first two weeks) so I need to figure out the proportional allocation of points possible.
This part takes me a while to do. I will also provide a brief written evaluation of your work. To do that I read through what you've written again and the comments your've written as well. I will start doing this after the first few posts this week come in and I plan to devote a lot of time next Monday to this. But I have an eye doctor appointment Monday afternoon. I am planning on being out of town Wednesday of that week, so I hope I get it done before that. If not, I'll make some general announcement so you can get some sense of how your points are determined and how you will be evaluated.
Ballgame Tonight
The Yankees play the Twins starting at 7:40 pm, which is pretty late for me. I still haven't figured out whether I'll watch it live or tape it and watch it in the morning. If the Yankees sweep, your professor will be a happy camper.
Saturday, October 5, 2019
Grades Uploaded into Moodle
There were two items added. The Excel homework due this past Wednesday on Coordination Failures and Coordination Mechanisms and the blog post on Effective Teams. I also updated some earlier scores for people who are trying to catch up.
Thursday, October 3, 2019
Some links for class session on 10/3
The Princess and the Pea
A blog post from me on my regular blogging site that gives some diagnosis of what's going on with our class (and with your entire program of study).
The Dead Grandmother Problem
I'm pleased to say not one student in our class has used this line. But several have told me they are going to miss my class because they have a midterm in another class. This does not compute for me me, though it must make sense to the students who are telling me this. What is evident is that many of you feel you are under a lot of stress. If that is a new thing, perhaps it will help your planning in the future. If you've experienced it in previous semesters, however, maybe you should consider lightening your load.
Doing a Post Mortem
The core idea is to better understand yourself, both your process and your thinking, by looking back at how you performed and asking why your performance was as it was.
Analysis of Experiment on Tuesday
I encourage you to identify yourself among the results and then ask why you behaved as you did behave. Take this as your baseline. Not only should the efficient volume of trade been reached (3 units exchanged), but it is also reasonable to expect that the gains from trade be split equally between the buyer and the seller. If that happened, then you did what the model predicts. If it didn't happen, however, why didn't it? When you've reached some conclusions from that, you can either leave them as a comment to this post, which makes sense if you are willing to make those conclusions public, or you can email me about that. I will report back to the class with the aggregate results, but not try to single out any one student.
If you haven't ever seen The Bat and Ball Problem, you might try it first before doing your post mortem. It might reveal some things to you.
Excel Tutorial
In light of so many students seemingly struggling with cell references on the most recent homework, I think it would be useful to go back to the Tutorial and do it again (but don't submit the key). This is to ask yourself, whether you might have gotten more out of that exercise which would have prepared you better for the most recent homework. As with the Experiment, you might comment on whether you got anything from the Tutorial or not and if not, why that was.
The most recent Excel homework
We'll cover that some today. Some students are evidently struggling with the algebra that one must do to answer the questions. That is a different issue, we'll talk about ti some today.
The Blog Posts
After the post on Illinibucks due tomorrow, the next post wants you to reflect and try to connect the various posts as best as you can. You can also use it to do a post mortem on your blogging.
A blog post from me on my regular blogging site that gives some diagnosis of what's going on with our class (and with your entire program of study).
The Dead Grandmother Problem
I'm pleased to say not one student in our class has used this line. But several have told me they are going to miss my class because they have a midterm in another class. This does not compute for me me, though it must make sense to the students who are telling me this. What is evident is that many of you feel you are under a lot of stress. If that is a new thing, perhaps it will help your planning in the future. If you've experienced it in previous semesters, however, maybe you should consider lightening your load.
Doing a Post Mortem
The core idea is to better understand yourself, both your process and your thinking, by looking back at how you performed and asking why your performance was as it was.
Analysis of Experiment on Tuesday
I encourage you to identify yourself among the results and then ask why you behaved as you did behave. Take this as your baseline. Not only should the efficient volume of trade been reached (3 units exchanged), but it is also reasonable to expect that the gains from trade be split equally between the buyer and the seller. If that happened, then you did what the model predicts. If it didn't happen, however, why didn't it? When you've reached some conclusions from that, you can either leave them as a comment to this post, which makes sense if you are willing to make those conclusions public, or you can email me about that. I will report back to the class with the aggregate results, but not try to single out any one student.
If you haven't ever seen The Bat and Ball Problem, you might try it first before doing your post mortem. It might reveal some things to you.
Excel Tutorial
In light of so many students seemingly struggling with cell references on the most recent homework, I think it would be useful to go back to the Tutorial and do it again (but don't submit the key). This is to ask yourself, whether you might have gotten more out of that exercise which would have prepared you better for the most recent homework. As with the Experiment, you might comment on whether you got anything from the Tutorial or not and if not, why that was.
The most recent Excel homework
We'll cover that some today. Some students are evidently struggling with the algebra that one must do to answer the questions. That is a different issue, we'll talk about ti some today.
The Blog Posts
After the post on Illinibucks due tomorrow, the next post wants you to reflect and try to connect the various posts as best as you can. You can also use it to do a post mortem on your blogging.
About the First Quiz in Moodle
There is no Excel homework due next week. Instead you will do an online quiz in Moodle that is based on the three prior Excel homeworks.
The quiz will be available starting at 11 AM on Tuesday October 8. It will close at 11 PM on Wednesday October 9. That is a hard deadline, enforced by the Moodle software.
I anticipate the quiz taking you under an hour, but if you want to take two or three hours that is fine as long as you submit before the deadline. You have only one try at this.
There will be minimal feedback when you submit. After the deadline you can see your score and which questions you got right, as well as the correct answers for those you got wrong.
One last thing. To get more screen real estate when you take the quiz, click on the box with the three horizontal bars, which is just to the right of the I-mark at the the upper left of your screen. The should get rid of the left sidebar and make sure all the information in a quiz question does show up.
The quiz will be available starting at 11 AM on Tuesday October 8. It will close at 11 PM on Wednesday October 9. That is a hard deadline, enforced by the Moodle software.
I anticipate the quiz taking you under an hour, but if you want to take two or three hours that is fine as long as you submit before the deadline. You have only one try at this.
There will be minimal feedback when you submit. After the deadline you can see your score and which questions you got right, as well as the correct answers for those you got wrong.
One last thing. To get more screen real estate when you take the quiz, click on the box with the three horizontal bars, which is just to the right of the I-mark at the the upper left of your screen. The should get rid of the left sidebar and make sure all the information in a quiz question does show up.
Tuesday, October 1, 2019
The Experiment We Did Today - Our Class versus Economic Rationality
Before getting to the commentary here are the results. You can look at them for yourself. Below is a summary.
In the complete information scenario Cases A, B, C, and E, produced 3 units of trade, the efficient level. Cases D, F, G, and I produced 5 units of trade, above the efficient level. Case H did not trade, but I need to be filled in as to why that was.
In cases A, B, and C, the situation was symmetric for buyer and seller. Absent any other information about the traders, the prediction would be split-the-difference pricing, so the pie is divided in half. That happened in case A. In case B, the seller got a slightly greater share of the pie. In case C, the seller got the whole pie. The prices equaled the buyer's values. This is sometimes referred to as first degree or perfect price discrimination, which can happen what a monopolist with all the bargaining power sets the price, while knowing the buyer's demand curve exactly.
Case E, which also produced 3 units of trade, was not symmetric. If there were split-the-difference pricing here, then prices would have declined, as the seller's cost was constant but the buyer's value was declining. However, this solution opted for was a uniform price alternative, and that price was higher than the buyer's value for the third unit. So the buyer made negative surplus on that trade. Negative surplus on a trade is inconsistent with economic rationality.
For the other four cases, where all 5 units were traded, there were some trades that yield negative surplus. So each of those also were inconsistent with economic rationality. This is puzzling to analyze. I wonder why it happened. Also, it seemed some of you didn't try to maximize your own surplus and thus sandbagged on the experiment. It would be good to know this was.
The particular trader who captured the most surplus under complete information was the case C
------
Let's turn to the incomplete information case. Here we had 5 cases with the efficient volume of trade and 4 cases where the trade volume was larger than that. Among the cases that produced the efficient volume of trade, case 9 had one trade that produced negative surplus for the buyer and that buyer earned negative surplus overall. In the other cases that produced the efficient volume of trade, all the trades produced nonnegative surplus for each side of the transaction. That is consistent with economic rationality.
The overall surplus maximizer in the incomplete information case was the seller in case 6, but that is because this seller received hefty subsidies from the buyer, who lost out on every trade.
--------
The question I'm struck with here is why about half the class performed in this experiment like the theory predicts, but the other half performed in a way that was irrational. I doubt that any student was deliberately trying to sabotage the experiment. (If you were, congratulations. You achieved your goal.) A more likely explanation to me is that some of the students weren't getting it about how they should behave in the experiment.
I would like to discuss that some in class on Thursday. There is very little point in teaching something if the students never get it. In contrast, sometimes a failure of this sort can be a stepping stone to doing things in a better way where students do get it.
You can't find that better way unless you do a full post mortem on the experiment and why things went wrong. If you have thoughts on that you can leave them as a comment to this post. We'll use those as a launch point for the discussion on Thursday.
In the complete information scenario Cases A, B, C, and E, produced 3 units of trade, the efficient level. Cases D, F, G, and I produced 5 units of trade, above the efficient level. Case H did not trade, but I need to be filled in as to why that was.
In cases A, B, and C, the situation was symmetric for buyer and seller. Absent any other information about the traders, the prediction would be split-the-difference pricing, so the pie is divided in half. That happened in case A. In case B, the seller got a slightly greater share of the pie. In case C, the seller got the whole pie. The prices equaled the buyer's values. This is sometimes referred to as first degree or perfect price discrimination, which can happen what a monopolist with all the bargaining power sets the price, while knowing the buyer's demand curve exactly.
Case E, which also produced 3 units of trade, was not symmetric. If there were split-the-difference pricing here, then prices would have declined, as the seller's cost was constant but the buyer's value was declining. However, this solution opted for was a uniform price alternative, and that price was higher than the buyer's value for the third unit. So the buyer made negative surplus on that trade. Negative surplus on a trade is inconsistent with economic rationality.
For the other four cases, where all 5 units were traded, there were some trades that yield negative surplus. So each of those also were inconsistent with economic rationality. This is puzzling to analyze. I wonder why it happened. Also, it seemed some of you didn't try to maximize your own surplus and thus sandbagged on the experiment. It would be good to know this was.
The particular trader who captured the most surplus under complete information was the case C
------
Let's turn to the incomplete information case. Here we had 5 cases with the efficient volume of trade and 4 cases where the trade volume was larger than that. Among the cases that produced the efficient volume of trade, case 9 had one trade that produced negative surplus for the buyer and that buyer earned negative surplus overall. In the other cases that produced the efficient volume of trade, all the trades produced nonnegative surplus for each side of the transaction. That is consistent with economic rationality.
The overall surplus maximizer in the incomplete information case was the seller in case 6, but that is because this seller received hefty subsidies from the buyer, who lost out on every trade.
--------
The question I'm struck with here is why about half the class performed in this experiment like the theory predicts, but the other half performed in a way that was irrational. I doubt that any student was deliberately trying to sabotage the experiment. (If you were, congratulations. You achieved your goal.) A more likely explanation to me is that some of the students weren't getting it about how they should behave in the experiment.
I would like to discuss that some in class on Thursday. There is very little point in teaching something if the students never get it. In contrast, sometimes a failure of this sort can be a stepping stone to doing things in a better way where students do get it.
You can't find that better way unless you do a full post mortem on the experiment and why things went wrong. If you have thoughts on that you can leave them as a comment to this post. We'll use those as a launch point for the discussion on Thursday.
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