Some Follow Up On The Assessment By Students In The Final Blog Posts

Since I started to teach this class, the blogging has been a feature that students mainly like while students are more divided on the Excel homework.  I want to draw some meta lessons from that (as if we're looking down on the class from on high).

I've only taught one non-economics course at Illinois, which was a CHP class back in 2009.  (I have been involved in some adult education short courses, but not through the university.)  The title of the class was Designing for Effective Change.  It was the first time I taught with blogging and I published an article about it in Inside Higher Ed.  I learned several things from that experience.  The two I'll mention here are (1) the need to have aliases (though I'm guessing that potential future employers wouldn't be able to find your blog even if you used your real name) to help get students comfortable with blogging out in the open and (2) the benefit of reacting to what students say without trying to steer the students to some correct answer.   Had I taught an Econ class as the first experience with blogging, I don't think I would have come up with that.  So it was a happy accident. Sometimes we benefit from serendipity.  And we definitely benefit from learning by doing.

I was trained in graduate school on how to do math models for economics and I lectured on them for many years.  At the graduate students level, it went pretty well.  At the undergraduate level, the results have always been far more mixed.  Except for some spot lectures to clear up student confusion, what I've found is that a significant fraction of the students either can't penetrate the lecture or show no inclination to try, so within 5 minutes they have a glazed look on their faces.  The video lectures are a partial solution to that.  Experience suggests that iff students can complete the Excel homework without watching the video all the way through, most of them will do that.  But if students are bored with the face to face lecture and won't watch the video all the way through, what's a better alternative?

Now I'm going to put this a different way.  The class is heterogeneous regarding comfort with the type of math we used in this class.  The math types or those who are considering going to graduate school in economics, are quite comfortable with the modeling.  Other students are not.  Can the others still benefit from the Excel homework?  I don't have a good answer to that question.  But I do want to note that in class yesterday I suggested trying the Excel homework again, with a different alias, and see the second time through if you're comfortable with the material or if it is a struggle.  Practicing on the homework this way should make you more familiar with the model and improve your confidence for the final Moodle Quiz.

I want to note the following, which is not about our course per se but about having facility with models.  When I was a campus administrator, I would make simple models of the situation on the fly.  It helped to discuss the situation with colleagues.  I don't know that other administrators did that, so I'm pretty sure it was my economics training that made me feel the need for doing it.  This is different than applying pre-existing models that you've been taught, though the supply and demand paradigm is quite useful in this way; sometimes a pre-existing model can help.  But mainly it was doing something from scratch, keeping it pretty simple, and then knowing how to get some implications from that.  If you can develop that skill, it might help you when you reach the managerial rank.  It probably won't help at all, in your initial position, though you might get a better sense of what your company is doing by trying to have a model fit the situation.

From Today's Chronicle of Higher Education

In the last class we discussed examples of the triangle problem.  One of those happens at Universities, where the marketing arm has one view of what the university should be putting out there for public consumption while the faculty and students have quite other views.  It's a mere coincidence that this piece appeared so soon after making that point, but it's pretty telling (and it is about a different U of I, not us).

You should be able to access this piece if you are on the campus network.

As Universities See State Funding Threatened, Will They Be Less Outspoken About Climate Change?

Considering the Principal-Agent Model

This is the video I promised in the previous post.   It is intended for you to watch after you have completed the Excel homework on the principal-agent model which, in turn, expected you to watch a different video, on the algebra of the model.  The only reason I'm posting it now is that some students have already completed that homework.  If there are questions about the homework after having done it, or questions about this video, that is a reason to come to class tomorrow, to pose those questions and hear the responses to them.

Note that the Powerpoint on which the video is based is unlike those I posted at the beginning of the semester.  There are no images, only text.  And there is no content in the Notes pane.  This enabled me to make the presentation quickly.

PowerPoint file

My Moral Compass and Some Observations about Our Class

Today in class in discussing ideas behind the blog posts on punishment and getting an under-performing employee back up to speed, we briefly discussed the notion of moral compass.  If a person is guided that way, what interventions might then make sense, as the person likely will punish himself for the poor performance.   I'm going to do a bit of that in this post.

First, you might listen to this video, a famous song by B.B. King.  It captures my current mood about teaching our class.

The explanation for why I feel this way is simple enough.  I don't see connections that students in the class should be making to what I'm trying to teach.  The metaphor is the lightbulb going off in your head.  Evidence of that happening might be found in your blog posts or in your comments in class.  But it largely doesn't seem to be happening, as far as I can tell.

I'm quite willing to accept the blame for this outcome.  A younger teacher, one more in tune with the issues that are important in your lives, almost certainly would cast the course quite differently - both subject matter and method of instruction.   That said, I would be interested to know whether you are connecting well with the material in some of your other courses.  I'd appreciate a comment on this post or in an email if that's the case for you.

Also, in some ways I'm a pretty stubborn person.  The previous offering of the course, in 2017, did have some incentive built in for students to attend class which was there for about 3/5ths of the course.  After the incentive was taken away, attendance dropped off precipitously.  So, in some sense that many students in the class have made it essentially a distance learning course is not a surprise.  My stubbornness fits in here in that I really did want you to grasp the importance of working in a collegial environment - what we have been referring to as gift exchange - and learn this not just cognitively but experientially as well.   And in my view of how you should learn, your experiences precede my interventions, which are mainly about your reflections on those experiences. For our class the biggest gift you could offer would be to attend regularly and then participate in class discussion.  Wanting that as a goal, I focused only on it, and not at all on how to get from here to there.  If I got you to attend class by requiring it and taking attendance, it no longer would be a gift.  It would just be another hoop you'd have to jump through. So I simply hoped the lesson could be learned without providing the incentive.  It's quite apparent now that was wishful thinking.

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This mea culpa leads to an obvious question - how should the course play out for the remainder of the semester.  Let me note that the Syllabus is a kind of contract.  Also, I signed an Offer Letter about teaching the class that the Econ Department sent me.  That is also a contract.  I will honor these contracts as best as I can, but I do want to make some changes that seem fitting under the circumstances.

1.  Since so many students are missing class discussion and thus not connecting the homework to the subject matter in a way I'd hope to see, I will instead make a video before each class, I hope no more than 15 minutes, maybe less, which will present the ideas as presentation, not as dialogue as I've been trying to do in class.  The video will be available to everyone, so in that sense the incentive to come to class will be even less.

2. I'm planning on Thursday to treat the live class session like office hours.  In office hours, the students drive.  If they have questions about the Excel homework, we'll review that.  If they have questions about the video, those can be addressed.  And if they have questions about anything else in the course, for example, the next Moodle quiz is next week, we'll talk about that.   We'll go as long as students have questions they want to have answered.

3.  I'm going to take a wait and see approach after that.  If the session seems effective, we might repeat the approach.  I would also be willing to entertain other suggestions of how to conduct class sessions, recognizing that we are now well into the semester.

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We talked in class today somewhat about emotions and people underperforming because they feel aggrieved in some way.  The last few weeks I've been alternating between being sad about our class and being angry about it.  I used to think that my unusual methods (at least for teaching economics) were sufficient to address the various issues you face as students.  Now it is clear that the methods are not enough, are possibly wrong headed, and further that I simply lack the energy I had a few years ago, where that might have been an important factor in pulling this off.   The truth is that now I want the semester to be over and to focus on other things.  Let's try to get there as best as we can.

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?

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.

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.

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

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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.

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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.

Notes on Budgeting and Transfer Pricing

To be discussed in class on Thursday 10/3.  These notes will not help you do the Excel homework due Wednesday 10/2 at 11 PM.  As long as you use cell references for the calculations, particularly in the case of an external competitive market, the transfer pricing part of the homework should not be too difficult.

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For the most part I'm going to use the U of I as model, circa 2004 since I had some awareness of how budgeting worked then, but before I do that, I want to begin with this hypothetical, meant to be humorous. 

A spoiled brat kid whose parents are rich is starting college.  The parents give the kid $10,000 as spending money during the freshmen year.  During the first week in town, the kid manages to find a high stakes poker game, at which he loses the entire $10,000 on one all-in hand. The next day the kid asks the parents for more money since how else will he get through the school year without it.  What should the parents do?

Sometimes budgeting makes you feel like a parent with a teenager who is a bit reckless.  Other times it makes you feel like Yossarian in Catch-22.  

“Just because you're paranoid doesn't mean they aren't after you.”

Now we'll stop kidding and get into it. Budgeting is typically done on an annual basis.  There are two basic types of funding model, and then there can be hybrids of these two.   The first is called funding off the top.  The second is called cost recovery.   With funding off the top, the source of revenue for the unit is from another unit at least one rung up in the hierarchy and maybe several rungs up in the hierarchy.   With cost recovery, the unit sells services of some sort to other units on campus.  The revenues from sales of the service are the source of funding.  Cost recovery is like transfer pricing, with the price at which the unit sells its service the transfer price.  The only real difference is that when talking about transfer pricing we consider the transaction between an upstream division that produces an intermediate product and sells that to a downstream division which uses the intermediate product to produce final product for sale on the open market.  Recall this diagram, which we already showed in class.  While it is true that cost recovery units are providing intermediate product of some sort, it is probably not right to consider the units that buy from them as downstream, selling their product on the open market.  So the analogy only goes so far.

With off the top funding, the budget is typically divided into two pieces.  The first is the total earnings of all people on salary in the unit.  This is typically a large fraction of the unit's overall budget, roughly 70% or more.  The other part of the budget is for everything else - wages for hourly workers, equipment purchases, expenditure on travel to conferences or for bringing in outside visitors or consultants, etc.

The critical thing is to understand how next year's budget depends on this year's budget. The typical approach is for for the campus to have some salary program, say 3%, so the revenues for paying salary are now 1.03 times what they were in the previous year. We will talk about how salary decisions are made in a moment.  The non-salary part of the budget remains flat, it is the same as what it was last year.   Among the bigger decisions that a unit manager decides is how to allocate salary among the members of the unit.  (But not for himself or herself.  The unit manager's salary is decided by the person the unit manager reports to.)  One way to think of this is to break the salary increase into two components.  The first is for cost of living.  The second is for merit raises.  Note that while often the staff expect a cost of living increase, that is not guaranteed.  But it is not possible to lower a person's salary (in nominal terms.  If there were high inflation then a salary increase less than the rate of inflation would lower the salary in real terms.)  If an employee gets significant merit increases over several years, the person probably is in line for a promotion, which means a change of duties and a bigger bump up in salary.  But those must be approved by the campus.

A cost recovery unit has the same approach to salaries, but now has to project future revenue to be able to cover paying staff and their salary increases.

A significant issue is what happens near the end of the fiscal year when:  (a) the unit is carrying a positive balance and (b) if it is running a negative balance.  Let's talk first about a unit that has no banking function itself.  With a positive balance it's use it or lose it or the unit tries to park the money further up in the hierarchy so it can use it in the next fiscal year. If the unit can't park the money, then you'll occasionally observe some odd spending patterns at the end of the fiscal year, purchasing items that would have seemed extravagant earlier.   Alternatively, if a budget surplus can be anticipated earlier in the fiscal year, then the money is "burning a whole in the manager's pocket."  This enables some creative uses of the funds that are sensible but wouldn't be entertained if not for the budget surplus.  Let's turn to the case of a negative balance.  In this case the budget needs to be brought to balance somehow, probably out of the budget of the unit manager's boss  or even one rung higher than that in organization.  Closer to the top, the unit may have a banking function and/or have some accounts that enable banking, while other accounts zero out at the end of the fiscal year.

If the overage is a small fraction of the overall budget, this is no big deal.  But what is small or not is likely not specified ahead of time so, like beauty, it is in the eye of the beholder.  The manager may be fearful that running a large negative balance will be treated as a black mark at performance review time.  In my experience, units typically come in with a small positive balance, on these grounds.  Where I've seen large negative balances, there was a structural issue with the budget.  The unit had many more obligations than it could meet with available funding.   This happens on occasion and is very uncomfortable, but not altogether surprising.

Let me make a little diversion here to illustrate.  On our campus at the time I'm referring to the campus had a huge unfunded deferred maintenance obligation, somewhere between $500 million  and $1 billion dollars.  Performing deferred maintenance is necessary, just as replacing old equipment is necessary.  But it is unglamorous so managers with budget authority would cheat on that and fund other things that would give them more credit.  Eventually the campus "solved" the problem by having a fee that students pay to cover deferred maintenance.  The funds raised with that fee can only be used on a deferred maintenance project.  DKH was one of the first buildings to get an upgrade under the new approach.  The air conditioning in the building is still not great (it is an old building) but it is much better than it was before they did the project.   Getting back to the concluding point in the previous paragraph, if the unit has a large fraction of its expenditure to replace equipment, the funder of that unit may not have allocated the appropriate amount for that purpose.  Instead, they will have allocated much less, or even nothing at all.  This is passing the buck rather than assuming the obligation.  It happens, more often than I care to explain further.

This brings up the next point, which is about sizing a unit's activities (and thus sizing its budget).  If it is right sized and the activity level is stable over time, then the off the top funding approach I described above should work reasonably well, though it is possible that inflation on the expenditure items in the non-salary piece can be an issue.  On the other hand that means falling prices on the expenditure items would produce a windfall for the unit.

What happens, however, if the unit's activity level is growing as there is more demand for the services that the unit provides?  In the off the top model there will be scarcity and rationing of some sort.  This gives one explanation why in certain departments students might not be able to get into the classes they want to register for.  There simply isn't enough capacity to handle all the demand.  If the unit were cost recovery, in contrast, then as the demand was increasing, revenues would be increasing as well, and the unit could afford to add capacity.  There may still be near term bottlenecks, but it would be much easier to match the growth in demand to the growth in capacity, so that long term there wouldn't be excess demand.  Indeed, the same argument suggest that cost recovery units can shrink when demand is falling off.  In contrast, units funded off the top will start to appear as if they have idle capacity or underutilized capacity.   Thus, in a dynamic environment where growth or shrinkage can't be forecasted perfectly, the cost recovery approach probably does a better job of matching capacity to demand.

That said,  I want to note that in my work I preferred being in an off the top funded unit.  To explain why, let's recall at the beginning of the semester we did the Akerlof Gift Exchange model.  Gift exchange is how I'd like my units to operate, and it is hard if not impossible to do with a cost recovery approach.  So we should note that the funding model does impact the nature of how work is done.  Under cost recovery, the unit is more or less like a profit maximizing entity in the business world.   That approach may have a place at the university, but the mainstay of what the university does shouldn't be driven by that model, in my opinion.  Profit maximizing is anti-collegial.

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I briefly want to touch here on the other role that transfer pricing plays in the world outside the university, which is to impact division profitability and thereby serve as a performance measure of how the division is doing.  Such performance measures are often linked to the compensation of the division's executive team.  So division leadership may be more interested in division profitability  than they are with overall organization profitability.  This means that organizations have to balance incentives at the division level with maximizing overall organization profit.  The Excel homework does consider this some.

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There is one other way that transfer pricing works for multinationals that is important in actuality, but we won't talk about it in our class.  This is to move profit around geographically, from a high tax area to a low tax area.  Transfer pricing re-sites the profit so the organization can retain a greater share of it.  In other words, even if the economic activity of a company happens in one location, transfer pricing can then be use to "ship" profit to a different location.  If this was done to make heavy investments in the destination location, that would be one thing.  But if the profits are merely held as retained earnings, then there would seem to be no productivity argument in support of the transfer pricing.  As such it looks like pure opportunism, from the point of view of the locality where the economic activity actually takes place and where tax revenues to fund public expenditures would be useful to the community overall.   This begins to make the issue sound political.  I don't want to bring politics into our class, as the last time I did that it blew up in my face.  So I will close here, simply noting that the practice does exist. 

A More Practical Approach to the Assignment Problem

While the Medical Intern Matching Program offers a very elegant (in the sense of economic theory) solution to the assignment problem, we should recognize that the model is a one-shot deal.  Once the algorithm runs and interns are assigned to hospitals, that's it.   But most of us are solving some assignment problem quite regularly, perhaps on a daily basis, maybe even more frequently than that.  New work regularly flows in.  How does it get prioritized?  Each of you have been dealing with that question as college students.  In this post I'd like to discuss task allocation some, both from the perspective of the individual decision maker, and from the perspective of a manager.  The world is much different now than it was 30 years ago, as a consequence of electronic communication.  It is possible to do work anytime and any place.  The old 9-5 paradigm is dead.  The new way of doing things is both a blessing and a curse and we should explore both sides of that, which is what I intend to do below.

We have previously discussed in class how much time students spend out of class doing coursework and the discrepancy in expectations between professors and students about how much out of class time should be devoted to a course.  The reality about knowledge work, as distinct from manual labor like mowing the lawn or washing the dishes, is that there is no a priori way to know how long it will take.  Sometimes you can zip right through it.  Then other times, you are engaged in an inquiry that is quite absorbing but of unknown duration, though it surely is not immediate.  Still other times you might get stuck.  Getting unstuck takes time, an unpredictable amount of time.  Learning to get yourself unstuck is one of the more important life lessons a college student can have.  It would be a terrible thing if students give up too frequently when they are stuck because they haven't allocated enough time to the situation.  In addition to the lack of confidence that would create, it means students haven't mastered a critical problem solving skill.  But to manage the time it might take to get unstuck, students need time buffers that they can run down on an as needed basis.  From some of the discussion in class about how many credit hours students are taking, or how many hours students are working at a paying job, it seems the need for time buffers is either not well understood or it is not prioritized as very important.  It is.

The assignment problem that we all address is manifest in many forms.  Which emails do we ignore and which do we respond to?  For the latter, what sort of lag between the time of receipt and the time of response do we conclude is acceptable.  How much time do we spend monitoring the InBox versus being engaged in the current task. Likewise, ahead of time do we think we can respond with little or no thought?  Or are we likely to spend substantial time in composing a response?  Here I don't want to be prescriptive.  All I want to make clear now is that some decision making has to be done so these situations can be dealt with.  They are rather frequent.  Now you shouldn't give a detailed investigation of how you've addressed the issue.  Yet you should acknowledge that how you solve your own time allocation problem is a kind of budgeting.  The issue is whether you've come up with something sensible or not.  Tests of this are whether you manage to get your obligations done on time and that you don't feel overwhelmed from doing so.  When either of those tests fail, not just once but with some frequency, it suggests a different approach is needed.

There may be time inconsistency between your planned allocation and your actual performance.  One of those demons that is inside all of us is an in-the-moment felt need to procrastinate.  I am certainly not immune to it.  As I am composing this post on Saturday morning, I want to note that I have yet to do the weekly upload of grades into Moodle, which I normally do on Friday.  My "excuse" is that yesterday I chose to update my NetID password as I wanted to make sure I did that before the deadline.  I was able to then update the stored passwords in my browser on my desktop computer where I access campus apps, such as Banner and Moodle.  That was no problem.  But I couldn't get email on my phone to work. So I went through a troubleshooting process, which was kind of frustrating. uninstalling the email account and then reinstalling it.  I ended up doing that twice and testing each time to see if mail would go through, by sending myself email from other accounts I use. Eventually it did work, though I'm still not sure why.  Afterwards, I simply didn't feel like doing the grade uploads.  This morning, I'm writing this post first.  I enjoy the writing more than doing the administrative task.  And it's still early in the day.  So I rationalize that students won't see it yet, though I really don't know that.

Student procrastination does leave something of a trail in our class, because in addition to knowing when you turn in work, I get information about when people download the Excel homework. There are a lot of downloads Wednesday evening, after I've gone to sleep.  Since you can't initiate the homework before you download the file, evidently those who do download Wednesday evening think they can work it through then and there with little fanfare, or are willing to suffer the consequences of being unable to complete it on time. Yet some students have gotten stuck on the Excel and have asked for help as a consequence.  If you want to allow for a time buffer in case you need help, then initiating earlier makes sense. 

I don't see how you make these sort of decisions in your other classes.  But I have a general sense that there are some students who get all their work done well before the deadlines, other students who are always scrambling right up till the deadlines, and then a group in the middle who do some of each of these. The overall pattern hardens as habit.   If you do some self-reflection about how you "solve" the assignment problem, you might ask whether you are happy with your own habits.  If you are, congratulations.  If you are not because with regularity you don't live up to your own good intentions, you might try some behavioral economics cures.  For example, ask what you usually do when you procrastinate.  Is there a way for you to raise the cost of doing that or to make it impossible to do?  Alternatively, can you find some productive work that you actually enjoy, so can readily spend time on it.  (For me, it is writing a post like this.)  You might still procrastinate on tasks where your sense of avoidance is strong, but at least you can make some headway with other activities that are more rewarding in the doing.

* * * * *

I now want to talk about the assignment problem in the workplace.  Many of your blog posts, written about internship experiences, described a situation where permanent staff were incredibly busy, and often seemed to be overworked.  Let's peel the onion on this some to see what lies below the surface of this observation.

First, hourly work and salaried work are different, regarding the time put into the job.  With hourly work, the time is part of the contract and/or the pay varies directly with the hours put in.  With salaried work, in contrast, performance is measured by some work-related output.  The time put in to achieve that output is typically not monitored well, if at all.  Both the inquiry part of  knowledge work and the communications part - being on the phone, writing or reading email messages - can be done away from the workplace.  So the expectations are that work related output gets done at a certain pace, and the time needed to produce that pace is treated as something the employee manages.

Next, to the extent that there are fixed costs per employee, in class we mentioned the costs of training, here let me note that an experienced employee who has reliably produced good work in the past may be scarce at that organization, and then there are costs like health insurance premiums that don't depend on worker output, all suggest that it is rational for the employer to try to get more work out of current employees rather than to expand the workforce and hire additional people. It is important to keep that in the back of your mind.

This suggests that the the pace of work related output which each employee produces is determined by the local ethos at the place of work and that might vary from one employer to the next.

Then there is the question whether the work itself is interesting and absorbing for the employee, a source of learning new skills and being exposed to new ideas, or if it becomes drudge work and is somewhat alienating.  For the former, employees might willingly sacrifice their own leisure time to do this sort of work.  For the latter, such employee effort is much harder for the employer to elicit.

A related issue is dealing with the stress from being expected to produce a tolerably good deliverable in a short time frame.  Younger employees may initially appreciate taking on added responsibility that a manager assigns to them.  That the manager would do this seems to indicate that the manager is confident in their performance.  But continued piling on of the work can become unbearable, especially if that seems a permanent thing, not a temporary escalation of work because there is some emergency that must be dealt with.

Managing this issue, one must be aware that staff can burn out, which lowers individual productivity and lessens group morale.  This means managers need to find a way to keep workloads within bounds.  The issue was particularly acute on campus during the last couple of years of the previous decade, after the Great Recession began.  In information technology, on campus a moratorium was put on new hires. So if some employee quit or retired, there was no replacement brought in.  Yet, the set of IT services remained constant and indeed the demand for these services rose, as travel budgets on campus had also shrunk and many were trying to use video conferencing as a substitute for making trips.  Around then I was writing a quarterly column for Educause, the national IT organization for higher education.  This column on Sunsetting IT Services was written with these concerns in mind.  You might find it interesting.

Put a different way, getting increased output by having salaried employees work more hours does not constitute an increase in productivity.  Rather, it is an internal tax placed on the employees by the company.   Doing this near term may seem like it is efficiency enhancing.  But it will almost surely backfire long term.

All of us need some balance in our lives.  This includes regular physical activity and leisure pursuits that both engage and are unrelated to work. Where to strike that balance may be more art than science, but we should all agree that such balance is necessary.  If you are ever to become managers at your place of work, keep that in mind for your employees.  It will make the environment much healthier and the work more enjoyable.

Additional Documents for Today's Class Session - Sept. 26, 2019

Notes on Repeated Games

Working Through Matching Examples

Management and The Assignment Problem

Some follow up to today's class session.

I did a count of the class today among those present.  I believe I got 18 students.  There are 38 students still on the roster.  There are 36 student blogs linked in the left sidebar of the class site.  At my last count there were 27 posts done on the opportunism prompt (and/or on an equivalent topic). 

If you miss submitting assigned course work, while you may feel awkward about doing so, it is best to email me about what's going on that explains it.  I like the expression - bad hair day - because it is otherwise non-specific about the issue but does communicate that things will be back to normal soon.  That is different from planning to drop the course, a more permanent change.  I'd like to know about that too and and about what option you think you are maintaining by not doing it yet if you've already fallen behind in the course.

We are now into the segment of the class on management.  For us management is how organizations handle transaction costs so they are kept within bounds and don't derail organization.  One part of management is coordination and, in particular, addressing the assignment problem - who does what.  I didn't say this in class today, but to inject some humor into the discussion, one way the assignment problem is addressed is that if an employee has done a good job on a previous assignment, then the "reward" is to get assigned more work in the future and/or to have to deal with tougher issues or tougher clients in the future.  If you're an overachiever, be forewarned about that. 

I also didn't try to distinguish management from leadership.  In some contexts the terms are used interchangeably.  But leadership can be practiced by anyone in the organization, not just by those at the top.  To me, leadership means things that raiser the productivity of co-workers or of the group as a whole. Setting a good example in one's own performance can be an act of leadership.  Working with a co-worker who is struggling so the co-worker can improve is another example.   The blog post on effective teams, which is due Friday, might be thought of as asking how can the team get everyone to be a leader?

Follow Up To Class Session Thursday September 19

Based on comments after submitting the Excel homework, some of you seemed to have difficulties with it because you didn't learn the lesson from the Tutorial, last week's homework, to use cell references.  Anyone can make a mistake, but not all mistakes are equally valid. In our class (and I assume in much else that you learn) the lessons are meant to be cumulative.  You really should try to use what you previously have been exposed to in the current situation. But doing that requires practice. 

Which leads me to the next point.  Given the little demo I did of how you would come up with the meaning of opportunism, in a operational way to use in framing your blog post this week, I wonder if you felt you could do that on your own or if instead you felt it was beyond your capabilities.  I will say, some things for me are quicker than they will be for you.  I have more experience and am closer to the expert end of the spectrum.  You are closer to the novice end of the spectrum.  But novices can still practice to teach themselves things and make operational meaning in a situation where they are initially unsure.

Before we did that example, we talked about giving employees autonomy as a way to provide them with motivation.  But a manager needs to have confidence in the employee for making good judgments before autonomy is granted.  So it seems to me that practicing this skill of making mean for yourself - without getting outside help - is necessary as a way for you to move up the ladder at your place of work, wherever that turns out to be - and to encourage your manager to give you more autonomy.   If you look at he post in the left sidebar by the former student, Susan Athey Econ 490 fall 2017, she says as much in her post, and that the habits practiced in college carry over to the workplace. 

Then I wondered if in last week's blog posts where some students reported not getting direction from their supervisor during their internship, whether instead of this entirely being neglect on the supervisor's part if some of it was delegation and the granting of autonomy to the intern.  How would you determine if it is one or the other as an outsider to the situation?  I'm not sure in any individual case, but with a large enough sample of interns if many floundered yet a few flourished that would be just the sort of evidence the company would want as to which interns to hire.

For Class Session on Thursday 9/19

The previous post on student responsibility

An explanation of some of the Excel homework

Q: Are the Concept Quizzes busy work only, or are they good prompts to become acquainted with the subject matter?

Q: Should we keep the in class mechanism as is?  Or should we move to online lectures and in class treat it as a TA session/office hours?

Some linked content from today's class session.

A simple diagram of vertical integration that we will use repeatedly in the cclass.

If you are interested in learning more about the Economics of Education, here is the syllabus for a class in the College of Education on the subject.

Some Peter Drucker quotes about communication.

Follow up to the session today on the University as an Organization

I wonder how the videos worked for you today.  Truthfully, for explicating data, they are probably as good as a live presentation where I would otherwise have to futz with the computer screen in class.  It did work from my end.  My throat was in much better shape today after class than on Tuesday.   I do hope they have a microphone for me soon, but now at least there is plan B in case not.

Here are some subject matter ideas on the various videos and related issues.

About tuition - We didn't mention college specific surcharges.   While they didn't exist at all when I started back in 1980, they are now important.  The one for College of Business started during the time I was an Associate Dean there (2006 - 2010).  I know the surcharge for the College of Engineering was already in place by then, but I don't know when that started.  Something to understand about these surcharges - the bulk of the money flows back to the specific college.  In contrast, for the base tuition, much of that goes to campus administration.  This is an example of transfer pricing, which we'll be talking about in a few weeks.

The other very important issue with tuition is that the table I showed might be referred to as "list prices."  If a student gets a full or partial scholarship, then the "transaction prices" will be lower than the list prices.  It would be great to get data on the transaction prices - what fraction of the students are paying the full list price and what sorts of discounts are the other students getting?  I believe such information is harder to come by, though I'm not really sure why other than for this reason.  If student A pays full tuition and student B gets a discount, is part of what A pays used to cover that discount for B?  Were it framed that way, A might be miffed.  On the flip side of this, I think the campus needs to be open about how such discounts are allocated.  And if we looked at income distribution of the families who have students attending the U of I, I would guess that the upper middle class and well to do families are over represented.  (Right now I'm saying that without the data to back me up, but I don't think it is a fabrication.)   To attract more students from working class families, those tuition discounts will be needed.

Another variable to consider that we didn't discuss is class (or section) size.  I showed that IUs have risen about 10%.  We didn't present any information on the growth of instructional staff.  If they have grown, but by less than 10%, then class size must be going up, on average.  There is also a composition effect to consider.  Fewer students are majoring in the humanities now.  Humanities course are frequently taught in smaller sections.  If those students who used to major in the humanities are now majoring in other disciplines,  economics for example, and econ classes are larger on average than classes in English or comparative literature,  this shift in what students major in will also cause an increase in average class size.

Marketing of the U of I - What message is getting out?  From when I started in 1980 to the mid 2000s, I was a pretty serious fan of U of I men's basketball.  I would go to home games and watch the away games on TV.  Of interest here are the commercials that aired during halftime that promoted the university.  (I'm guessing that the same commercials would also air at halftime of football games.) My recollection, imperfect as it may be, is that many of these commercials featured a dedicated researcher who somehow brought undergraduates into the research, either within a class setting, or as part of the research team in the researcher's lab.  The message being sent was that research and undergraduate education are strong complements and that undergraduate students get involved in research when at the U of I.  I don't doubt the sincerity of the faculty member depicted in the commercial, but I always question how representative those commercials were of the overall situation on campus. I haven't seen such commercials recently.  (I stopped watching basketball here a while ago.)  Has the marketing changed in accord with some of the data we looked at in class today?  Or is it still pretty much the same as it was?  It may be the normal expectation is for a large organization to somewhat hype its product, whatever the organization and whatever the setting.  But too much hype starts to be a violation of trust and thus tarnishes the brand of the organization.  We should discuss this a bit more on Tuesday.   We should also discuss how much the marketing matters for forming an impression of the university.

Teaching a course as if the subject is a settled matter versus taking an inquiry approach -  Intermediate microeconomics, as a methodology, is pretty much a settled matter.  Applications of intermediate micro, in upper level courses such as ours, the topics are far less settled and interesting questions keep popping up that deserve to be addressed.   Are researchers more likely to embrace an inquiry approach than teaching faculty?  I don't know the answer to this question.  For those of you who have already taken other 400 level courses in economics, it would be good to learn how those courses were taught, as settled or as inquiry.  And for those of you who have another major in math or science, it would be good to know if the answer is different there.

By the Numbers

If we had the data readily available, we would look at a variety of quantitative information about an organization to help us understand what the organization actually does, how the organization allocates its resources, and what performance indicators the organization uses to measure how it is doing. Further, if we have historical data of this sort we can then look at how the variables have changed over time and use that to investigate changes in organization behavior.

Alas for private corporations, much of their information is tightly held and we won't be able to look at it.  But for the U of I, there is much institutional data that is released publicly, and it behooves us to take a look to see what we can garner from it.  And the Daily Illini maintains a faculty and staff salary database that can be useful for this purpose. Further, 23 years ago I was able to get some institutional data that is not generally released, because I was doing a study under a grant from the Sloan Foundation, and the university wanted to encourage Sloan (perhaps with a renewal grant) so they supported that work.  We'll take a look at a bit of both.

The first Excel Workbook gives some of the publicly available data.  There are three spreadsheets, each with different sorts of information.  The first is about students in class, which the university measures in instructional units (IUs).  An IU is a credit hour.  So our course, being 3 credit hours, means each of you enrolled in the course generates 3 IUs and then the total number of IUs for the course are the number of students enrolled times 3.  Instructors are divided into three categories - Tenure Track (and Visitors), Grad Assistants (TAs), and Specialized Faculty (these are instructors not on the tenure track whose full-time job is teaching).

In the ideal we'd have some additional data, that we don't have here.  The first is dollars spent per IU.  In our class, this is pretty simply to calculate, since I'm paid just to teach the class.  If we had 50 students, which makes 150 IUs, and if I were paid $15,000 to teach the class, which I'm not but I'm using the figure to make the calculation easier, then the expenditure on instruction per IU would be $100.   When I was a full time faculty member, it was pretty standard to allocate faculty time as 40% teaching, 50% research, and 10% service.  Plus, at that time there was a 4-course teaching load.  Thus you could allocate 10% of my salary then to teaching the class and compute expenditure on instruction per IU that way.  As you can see, those numbers would depend on faculty salary, teaching load, and fraction of overall obligation that is teaching.   It would be good to know how expenditure on instruction per IU varies with - 100-level courses, 200-level courses, etc., how it varies with the department that offers the instruction, and how it varies from courses that satisfy general education requirements to those that are for the major.  I can provide some anecdotal information on this, but it would be good to see the numbers.  I've never seen such information presented.

It would also be good to have some metric of quality of output, but that is much harder.  Does it matter for students learning who does the teaching?  We'll discuss this some in class.  But not with any hard data.

The second spreadsheet is on Economics faculty salaries - only Assistant Professors and Specialized Faculty.  The salary numbers coupled with the teaching loads of Assistant Professors, which I will provide in class, offer up an explanation for why there are Specialized Faculty now (there weren't when I started by in 1980).  I've also included my salary from when I started as a benchmark to see what's been going on since then.

The third spreadsheet gives a historical look at Tuition and Fees plus other expenses.  I will ask students in the class, focusing on those from Illinois, what their next best alternative was if they didn't attend the U of I.  While this wouldn't be a perfect answer for that, it would be good to see Northwestern tuition and fees and Illinois State tuition and fees over the same time interval.  That would help in understanding what happened historically.  Do note that tuition at the U of I is a political animal, set by the Board of Trustees with advice from the University President. 

The next workbook is old data from spring 1996.  You can't find this information publicly available, but it is interest.  Take a look at Table 2, which shows the size distribution of undergraduate classes by enrollments.  (Credit hours may not be uniform across these courses.  If credit hours were uniform, then enrollments and IUs would be isomorphic.) . The distribution is highly skewed, half the enrollments in classes with at least 160 students, and a quarter of the students in classes with at least 500 students, while there are many much smaller classes. Further, the large classes tend to be introductory courses, while the smaller classes then to be advanced courses.

In class we will discuss some of the implications of this and how the situation has changed over time.  We will also contrast this with some other information.

Geographic Distribution of U.S. Students in Econ 490 fall 2017

Data about family income at the U of I (from the NY Times)

Where we are

This morning we had 39 students registered and that still is the number as I write this post.  Maybe the adds and drops have settled down.  I hope so.

Of the 39, 28 have completed the first concept quiz.  I would like every students who is registered to complete that.  There is also another concept quiz due next Tuesday on the next PowerPoint presentation.

We are roughly a half lecture behind from what I had scheduled for the first week, meaning I had jammed in too much stuff to cover.  I'm guessing that by the end of next Tuesday we will be a full lecture behind and then we'll push things back a day.  I said in the first class session that the pace will be determined by us.  We are under no obligation to cover topics in a specific time frame.

For those of you who started in Engineering and then transferred to Economics, I encourage you to read the blog post by my former student who is writing under the alias Susan Athey Econ 490 fall 2017.  She wrote quite a poignant piece that might speak to you. 

More generally, we might talk some about depression and school and about depression and work. It's not the most pleasant topic, but it is a reality that you should be aware of.  We all will hit a wall sometime in our careers.  We should consider what might be learned from the experience, how you likely can bounce back, and some ways to keep it from repeating over and over again.

So I'd like to discuss that at some depth.  I am expecting us to get to the University as an organization,  on Tuesday, but how far we go on that we'll have to play by ear.

Gift Exchange and Collegiality as the Basis for a High Productivity Work Environment

There is a rather large literature on "efficiency wages," where workers earn job rents (they are paid more than their opportunity cost) and this is done for productivity reasons.  There are a variety of explanations for this.   The gift exchange story gives one of those and is attractive, in part, because it is more sociology than economics.  (We clearly care about the welfare of others, but that conern is usually absent in the economics approach.)    The efficiency wage approach, in turn, followed a similar approach called "implicit contracts" where, in effect,  the employer and the workers have a mutual agreement of the sort, I'll scratch your back if you scratch mine.  When it's time for your own back to scratched, you earn a (quasi) rent.  The hero of the implicit contracts story is Arthur Okun.  He referred to the back scratching arrangement as "the invisible handshake."  Incidentally, implicit contracts can exist elsewhere than the labor market.  For example, a shop owner might very well have an implicit contract with her loyal customers.

The gift exchange model is the brainchild of  George Akerlof.  Given that Janet Yellen was the Chair of the Federal Reserve, Akerlof may have come to be widely known as her significant other.  But he is a first-rate economist in his own right.  Indeed, he is a Nobel Prize winner.

JSTOR: The Quarterly Journal of Economics, Vol. 97, No. 4 (Nov., 1982), pp. 543-569

Akerlof's theory is rather simple to articulate, as is the debate over the right way to provide incentives in the workplace.  The quintessential issue is whether pay should be performance based and hence vary from individual to individual who hold the same job or if instead pay should be position based and not feature such idiosyncratic variation, except perhaps on a seniority basis    Of course, even with fixed pay per job, performance matters.  But it is rewarded differently than when there is pay for performance.  The argument is that promotion should be the primary reward for exceptional performance.  Within a job classification, the workers need to be managed fairly, which provides the basis for equal treatment.  Fairness is more of a sociology concept than an economics one.  

The vision for why gift exchange produces superior performance was supplied by Dumas père in The Three Musketeers.  It is embedded in the relationship between Athos, Porthos, and Aramis (the workers doing the same job) and D'Artagnan (their manager) and is captured in the phrase, "All for one and one for all."  Akerlof crafts that vision and related ideas from sociology to make an economic model of it.  For the non-economist, it might be framed as collegiality-driven productivity.  Here are the model's basic elements.

There is a minimal performance standard below which the employee will get fired.  There is a performance norm, substantially above the minimal standard, that typifies what workers produce.  The difference between the minimal standard and the higher norm constitutes a gift that workers give to the firm.  Likewise, there is a minimal wage below which workers would quit and find work elsewhere and there is an actual wage above that minimum that the firm pays to workers.  The difference is a gift that the firm gives to its employees.  Gift giving demands reciprocation for it to be sustained.  When that happens all involved feel good about the place of work and productivity is high as a consequence.

There is one more piece to the puzzle.  This regards how productivity is observed and what explains variation in productivity from one worker to the next and for one worker over time.  From the worker's own perspective, this is mainly due to random factors - circumstances beyond the employee's control.  Or, in the case where there is clearly a drop off in a particular employee's performance, it can be attributed to outside of work stresses (e.g., a sick child at home) that are apt to be temporary in nature.  The correct response in this case is not to punish the employee but rather for co-workers to chip in and pick up the slack.  Sometime in the future, the employee who received such help will lend a hand when another co-worker has a similar problem.

Someone who favors pay for performance but comes to the issue of appropriate compensation with an open mind might grant that collegiality-driven productivity can be a good thing, as long as the fire burns within all the workers, but will argue that eventually a worker burns out and turns into dead wood.  That is not temporary.  It is a permanent change.  Then he will argue that the gift exchange approach sustains the dead wood, who act as a drag on the entire system.  One needs, instead, a time-consistent way to purge the system of the dead wood.  Performance based pay does that.  (This issue has been discussed quite a bit with regard to teacher pay and teacher tenure.)

Akerlof's model does not address that critique.  Before I provide my own answer, let me take a slight detour.  The Akerlof gift exchange model is essentially social in nature.  There is a different reason to depart from performance based pay that is intellectual in nature and is particular to knowledge work.  This other view is articulated by Daniel Pink in this RSA Animiate video and focuses on psychological explanations for productivity.  There can be performance anxiety or, if you prefer, writer's block. High performance is achieved when intrinsic motivation is strong and the individual becomes so involved in the work as to entirely lose a sense of self.  Making extrinsic rewards overt moves the individual's focus away from the intrinsic motivation and thereby lessons productivity.  Better to have the economic rewards provided up front so that one can put them out of mind when the real work commences.  While I have critiqued this video on how it represents the economics, I concur with its representation of the importance of intrinsic motivation.

Burnout then can be thought of as the disappearance of intrinsic motivation.  The response to the critique is to look at the causes for why intrinsic motivation should disappear.  One possible cause is a sense of plateauing in the work.  There is little left to learn, no inherently new challenges.  For the most part it is a rehash of what's come before - been there, done that.  When it happens, it would seem to make sense that the worker should move onto a new challenge; do something else.  There is, however, a different cause that is also possible.  It is that the individual confronts organizational barriers that seem arbitrary and anti-productive and those barriers repeatedly thwart the individual's creative efforts.  Eventually, the individual wears down from not seeming able to accomplish sensible change.  Gallows humor becomes part of the routine as the individual loses the desire to fight the system.  This second cause might reasonably dictate that more fundamental organizational change is necessary.  The burden shouldn't be placed on the individual to accommodate organizational inertia.

It is this second cause that forms the basis of the response to the critique.  The Akerlof gift exchange approach must happen within a dynamic organization that makes organizational learning paramount.  (See Senge's The Fifth Discipline.)  Employee burnout might still happen in such organizations, but it would be far rarer.  When it does happen the appropriate organizational response should be job reassignment rather than immediate severance, this in accord with the gift exchange view.  Collegiality, in tone and actual practice, then characterizes good jobs and is at the heart of how the organization remains productive.

In my years working in learning technology, everyone I've encountered knows this implicitly, though I expect that the vast majority of them were not acquainted with Akerlof's gift exchange model.   I wonder if people reading this post with a prior disposition toward pay for performance might consider collegiality based alternatives instead. 

Getting Deeper Into Some Items From the First Class Session

Is School Work or Play?

You've achieved success in your field when you don't know whether what you're doing is work or play.
Warren Beatty

Silliness and Learning - Can They Happen Simultaneously?

What do cows in Greece say?

A view of school as work.  (I believe this is the prevalent view, even today.)  The Little Rascals were on TV when I as a kid.

In spite of the prevalent view, might school actually be play some of the time?

The Fun Theory - How hard would it be to design school in this mode?

Your professor when he was in high school, a true math nerd.  Play and work were jumbled together.

Down and to the right, the coach of the Math Team and my favorite teacher, Mr. Conrad.  With bright kids, really good teachers make the learning a kind of play. 

Good Technique for Learning - Mindfulness

There was a slide about optimal technique for learning.  Here I want to drop the jargon word - optimal - and simply contrast good technique, which we will call taking a mindful approach, from poor technique, which we we will call taking a mindless approach.  A mindful approach does help to build human capital.  A mindless approach skims the surface of the subject matter only and produces little real learning.  

Ellen Langer's book - The Power of Mindful Learning

If it is your habit to be reading regularly non-course books during the semester, I encourage you to make this book one of your choices to read.  If not that, consider reading it over the winter break.  It's a fairly quick read and will help you reflect about your own approach to learning and what you might do to make your own learning more mindful.   In the meantime, you can read this short essay now.  It too is by Ellen Langer and gives the highlights of points made in more depth in the book. 

Examples:

I teach without lecture notes.  I've done that for most of my career.  When I did use notes I found I had my head in the paper I was holding so I didn't spend enough time looking at students.  It turns out that the the faces of students are pretty revealing about how engaged they are with the discussion and whether they are getting it or not.  I also would go way too quickly with the content.  To a large extent, students should set the pace of the discussion, and do so with their questions or comments.  This is especially true if the subject matter is difficult.  But what's difficult for the student might not be difficult for the professor.  So more often than most instructors would care to admit, the student gets left in the dust as the professor pushes onward - to no real benefit for anyone.  Without the notes I have to reproduce in my head the topic for that class session and there is an element of improvisation in doing so, even when I have a pretty good idea of what we'll be discussing.  The improvisation is being mindful, as it is like thinking through the matter anew.

As I've gotten older, I do occasionally forget things and will have a senior moment, now and then.  One reason for having the Tag on the class site, Extending the class session online, is to cover things I had forgotten to mention in class.  And if it does look like I'm having a senior moment, please be kind.  That can be disconcerting and the consequences can linger as a result, even after the senior moment has passed. 

Here's a different example, one that students who took an earlier offering of this course told me about, perhaps 7 or 8 years ago.  They reported that in many of their classes they didn't need to attend, if they could get the lecture notes from a friend.  (So, if I understand this correctly, the friends could divide up who would attend and then share the lecture notes after that.) They said their job was to memorize those notes and then at the exam spit back what was in the notes to answer the questions.  The way they described the practice it sounded pretty mindless.  Is it something common in courses now?

Is Creativity The Same As Mindful Learning?

Here is Maslow on The Creative Attitude.  (You have to be on the campus network for the link to work.) You should be aware that Lincoln, one of our examples in the first class session, was considered a consummate self-actualizer by Maslow.  As Maslow argues that self-actualization and creativity are pretty much the same thing, this is an indirect argument that how Lincoln taught himself, reading by the light of the fire, was both a path to self-actualization and to creativity.

And here is a more recent piece by Csikszentmihalyi on The Creative Personality.  You might read this to see if it fits you in some respects.  Also, you might ask whether you find these descriptions attractive or unattractive.  Many of them express the dualism of yin and yang.

We should also reckon with the question of whether creativity is about the process of doing things or if it is about product.  Some people are reluctant to consider themselves creative because on the product front they've yet to produce things that others would find creative.  There are some quotes from Thomas Edison that are helpful here:

Genius is one percent inspiration and ninety-nine percent perspiration.  

I have not failed.  I've just found 10,000 ways that will not work. 

If we think of creativity as the initial spark, typically there must be a lot of follow through to get to an interesting product.  The self-actualizer is one who maintains concentration through the entire process.  If you can generate the spark, but you have trouble on the persistence that's needed afterwards, note that there is now much discussion of Grit and that it is something that can be acquired, though doing so itself is effortful. 

Puzzles for the Economics of Organizations 

Your textbook, when we get to it, will articulate something called The Efficiency Principle.  Organizations tend to produce the efficient outcome and that is indeed part of their purpose.  When we see what evidently looks inefficient, we should wonder whether there is an economics explanation for the inefficiency.  In particular, if a big part of the University's job is to encourage deep learning in its students, then how can the practice described above with the lecture notes persist?  That is evidently a puzzle.  

It turns out that economists have a range of possible explanations for inefficiency.  Some we'll cover later in the course.  Here I will mention a particular explanation that relies on a notion called "lock-in."  The best known paper that discusses the phenomenon is by the Economic Historian Paul David.  It is called Clio and the Economics of QWERTY.   Although this paper was written for professional economists, it is readable by the lay person and it's actually quite fascinating, in its analysis and in its conclusion.  QWERTY was originally efficient.  It was designed to slow typists down so the keys wouldn't jam so often.  As long as we had manual typewriters, QWERTY probably remained efficient, even with improvements in the mechanisms.  Electric typewriters got introduced in the mid to late 1960s.  Word processors and personal computers came 10 to 15 years later.  There was then no reason to slow down typists.  Yet QWERTY persists to this day.  Here's a little bit to explain why that is.

People learned touch typing, a skill needed so they could look at their document while they typed, rather than look at the keyboard.  The ability to touch type is a kind of specific human capital.  It has value in the keyboard layout it was learned and no value whatsoever with a different keyboard layout.  So those already knowledgeable about QWERTY wanted their PCs to use it.  Likewise, the schools that taught touch typing wanted QWERTY to persist as their training approach was built around the assumption that QWERTY would be the keyboard design. 

In other words, lock-in is about interdependencies that end up supporting the status quo, whether it remains efficient or not.  The status quo was not always that and when it was new it was designed to solve a then current issue.  So it was efficient at gestation and in the aftermath.  But if it is persists for a while, because of lock-in, it likely will no longer be efficient.  Yet what is better can't be implemented because the lock-in prevents that from happening.

Note that lock-in is quite important in current information technology and all the big IT companies, Facebook and Google are two notable examples, have as their goal to lock users into their online environments.  Also note that this is tied to the revenue models that these companies use.  Consider two alternatives - (1) users get access to content via subscription to the service or (2) users get access to the content which is ad supported.  Alas, the subscription model lost in this competition.  The ad-supported model won, giving the providers incentive to cull personal use information, so the ads could be customized.  This has led to all sorts of abuse of the information.  I'm sure you know of many such examples of this that I won't get into here.  The point is that even with all of the bad practices, where the users personal information is at risk, use persists, because the users are locked in.

We might next consider the lecture itself is illustrating a kind of lock-in.  Lecture emerged as an adjunct of Gutenberg's printing press (which meant that books need not be hand written).  Books, however, were still scarce.  So the lecture arose as a way to disseminate information that was in a book to those who didn't have the book.  Then those who were taught by lecture and who themselves became teachers would also lecture, because that's the approach they knew.  This persists to this day, even though now information is clearly abundant.  Indeed, everyone is on information overload.  Yet in many disciplines, lecture is the main form of instruction.  I do want to note that a lecture format can seem quite similar to a seminar format, if Q&A is allowed throughout and the audience aggressively asks questions.  That's the way it is when the audience is itself full of professors and the person presenting is giving a talk on current research.  With undergraduates in the audience in a course setting, however, the audience tends to be more passive unless the instructor actively does things to get the students to talk up.

Getting back to our example about the lecture notes as the be all and end all in some courses, others have written about the lock-in in ways that make it seem like a pervasive phenomenon.  The paragraphs below are from a paper called What We're Learning About Student Engagement From NSSE: Benchmarks for Effective Educational Practices by George Kuh. (You can access this paper if you are on the campus network.)

The more pages students write, the more pages faculty members have to read and give feedback about. And the more of that we do, the more likely it is that students will make appointments during office hours to talk with us about that feedback. In terms of student engagement, all this is generally positive. But it becomes problematic in terms of allocating time across multiple faculty priorities.

And this brings us to the unseemly bargain, what I call the “disengagement compact”: “I’ll leave you alone if you leave me alone.” That is, I won’t make you work too hard (read a lot, write a lot) so that I won’t have to grade as many papers or explain why you are not performing well. The existence of this bargain is suggested by the fact that at a relatively low level of effort, many students get decent grades-B’s and sometimes better. There seems to be a breakdown of shared responsibility for learning-on the part of faculty members who allow students to get by with far less than maximal effort, and on the part of students who are not taking full advantage of the resources institutions provide.

To this, I'd add two additional effects that support the lock-in.  In the early 2000s, when you were very young, the then President George W. Bush pushed through No Child Left Behind, and "the accountability movement" had its moment in the sun.  Standardized testing took on greater importance, as a way to measure whether improvement in the schools was happening, the intended consequence, and students became far more grade conscious as a result, the unintended consequence.  The other effect, on the instructor side, is that more and more undergraduate education has the teaching done by non-tenure-track faculty.  (We'll talk about why this is in the next class session.) These faculty don't have the job security that those with tenure have and they need the students they teach to give them decent teaching evaluations, so they can keep their jobs. Each of these factors reinforces the disengagement compact.

Before getting to the next item, here are a couple of other ways that lock-in manifests at the university.  The first is with regard to the academic calendar.  Summer is treated differently than fall or spring.  This is because 100+ years ago, when the economy as a whole was largely agrarian, students had to go home to help their families with the planting and with the harvest.  Very few, if any, students do that today.  Yet we treat the summer session differently and practices have grown around it, such as the internship during the summer, that keeps the summer session as it is, even though it would be more efficient to have three equal terms a year - fall, winter, and summer, and to get students to graduate earlier as a result.    The other example is given by a rhyme I wrote some years ago called, The first ten days blues.  It's about the add-drop period at the start of the semester, which made sense when we did registration on paper, but doesn't make sense anymore with registration online, yet it persists.  I'm also including it to show your professor is a bit over the deep end, but does have a sense of humor.  So if you find this one is silly but liked it anyway, then I've hit my mark.


Signaling and GPA

Old TV commercial about Abe Lincoln needing a college degree to get a job.

Michael Spence's article called Job Market Signaling, August 1973, which was a foundational piece in the then new information economics. Spence eventually became a Nobel Prize winner.  This paper is one reason why.  My guess is that the model itself is too difficult for most students in the class, but reading the introduction of the paper is probably do-able and you might find it interesting.

I will describe the model briefly, but before doing that, what is signaling about?  It is helpful to begin with a notion of private information.  In a transaction between a buyer and a seller, the seller might have information that that the buyer cares about regarding the quality of what is being sold.  If higher quality fetches a higher price, then the seller has incentive to represent the quality as high, regardless of the true quality. But talk is cheap and both the buyer and seller should understand that.  So such representations should rightfully be ignored, as with them it is impossible to separate the chaff from the wheat.

Signaling is about taking a costly action that is meant to communicate the private information.   The uninformed party (in this case the buyer) makes an inference about the quality based on observing the signal.  This works when high quality sellers are willing to incur the cost of the signal, but low quality sellers are not.  The signal then serves to separate the types and enable the buyer's inference.

In Spence's model, the students ability is the private information and the signal is getting a college degree (not the GPA, just the degree).   At the time the paper was written, the big cost in attending college was the opportunity cost of time for students, who might otherwise work.  Nowadays, tuition is probably larger than that opportunity cost, but tuition doesn't differentiate between high ability and low ability students.  Getting back to Spence, in his model the high ability students were willing to accept the cost of college if employers would then infer they were high ability, so hire them at a good wage.  The low ability students would not.  So the college degree worked as a credible way to communicate about the student's ability.

For us, we need to come up with some interpretation of what ability means in this context.  And we need to ask whether high ability in school translates to high performance on the job.  Ability can mean either something truly innate, for example, some people can separate their middle and fourth fingers in the Vulcan salute (from Star Trek) while others cannot (I'm one of those), and if there are such innate attributes that matter for productivity those are candidates.  But ability here could also mean human capital that is acquired prior to attending college.  As I write this I'm trying to resist using the word intelligence, though it might be the first thing that pops into your mind reading this.  Most measures of intelligence confound innate ability with previously acquired human capital.  There is also a school of thought, see Mindset by Carol Dweck, that intelligence can grow as long as the person pursues their own learning to foster such growth. What I want to avoid is any discussion of eugenics, which is out of bounds for our class.  Sometimes the mere mention of the word intelligence will do that. So I'm trying to exercise caution here.

Let's turn to the issue of whether high ability in school translates to high ability on the job.  If the job is being a professor, then the answer is yes and ditto for being a research scientist at a major corporation.  What about other jobs, does the translation work then?  The answer is less so, if at all.  Here's only one dimension of this to consider.  People who are introverts may thrive in a school setting but then not fare well at all in a work setting and vice versa for people who are extroverts.  Note that being an introvert and being shy are not the same things, but there is a positive correlation between the two.  If oral communication skills are important in the workplace, then shy people will perform less well in that context, at least until they overcome their shyness.  Depending on one's major, oral communication skills may not matter much in school.

Now we want to go from the college degree as a signal, meaning the signal is binary, yes or no, to a continuous variable as signal, GPA.  Waving our hands, we might now imagine the ability parameter in Spence is continuous, so a higher GPA means high ability.  Does that make sense?  Let me give a few different examples where it does not.  One is the idea of a late bloomer.  For a while the student's performance is mediocre.  Then the students experiences some life changing event and thereafter performs at a very high level.  The GPA, however, reflects an average of both.  The flip of this can also happen.  A student can have a very high GPA but be going through burnout, at or around the time of graduation.  The burnout may be important for how the student will do in the workplace, but it is not captured well in the GPA.  Then there is the issue of students experimenting with subjects they have not been exposed to earlier.  Curiosity should be rewarded, in general, but taking a course outside of one's field, and lacking the background that others who take the course already have, the grades are apt to be poor in this setting.  So high GPA students tend not to experiment in this way.  Is that caution something that should be valued in the workplace?

Given these caveats, what is it that GPA signals and why is it that students these days care about it so much?  Members of the class might be interested in this Website published by journalism students at the UofI Education On The Line.  Because I haven't seen the data they've amassed and am not quite sure of the methodology they've employed in analyzing the data, I don't want to totally embrace their results.  Yet what they argue is plausible to me.  Grade inflation, measured by the fraction of A grades awarded has been rising and the GPA has become less important for getting a job, though it remains a factor.

When I was a freshman at MIT back in 1972, they had pass-fail grading only, no letter grades for the first year.  In one class I took, I had earned enough points that they told me not to take the final.  How many of you would prefer that sort of system?   MIT went to pass-fail grading for first-year students, I believe, to take some of the stress off.  Depression at MIT at that time was a serious issue.  They had a high suicide rate.  I mention this alternative so you have something else to consider.  A quite current piece argues that sort of system will actually encourage more learning. 


Wrap Up

Here I want to ask whether the lock-in to a memorizing the lecture notes approach and the GPA as a signal on the job market are two different things or essentially one and the same.  Let's pose this question by considering the student's time allocation problem.  If time were spent in mindful learning for a class, would that help with getting a good grade in the class or not?  Does it matter how much time is put into the mindful learning activity?   Might it be that the lock-in is a consequence of students over programming themselves, so in addition to their courses they have a part-time job and xyz extracurricular activities?  And, if so, is this itself a consequence of students wanting to pad their resumes?  (The economics jargon for this is tyranny of the extensive margin over the intensive margin.  If quality of the experience is harder for an outsiders to measure, then make the list of experiences longer, because that can be measured.)

My intent in posing these questions is raise the awareness about the issues with students in the class.  Ultimately, students should be in control of their own learning - whether in their courses or in other activities.  How does one exercise such control?  Trying to answer that question is worth the inquiry.