Attending to your cultural education - in addition to learning economics.

This being Halloween, if you've never heard the Monster Mash before, you should watch this video.  It is from 1962.

And, since you haven't been laughing at my joke in class in spite of the impeccable delivery, here is some modest creativity from the professor, inspired by Aaron Judge winning the Home Run Derby at that All-Star game this year.  It is called The Derby Smash.  

Lanny on Learning: The Derby Smash - Lyrics via kwout

A totally optional discussion group for the spring semester.

I normally make this announcement at the start of December, but this year we seem to have a large number of students who will graduate after this semester.  I wanted those students to be aware of this possibility, in case you do stick around town for the spring.  You would be more than welcome to be part of the group, although you would no longer be enrolled at the U of I. 

The last few years I have invited students to join me in the spring for a weekly discussion group on the topic of how they might get more out of their learning.  Four years ago, I didn't get enough nibbles.  Three years ago I had three takers.  We met each Friday afternoon throughout the spring semester.  It was an interesting experience, unusual for both the students and for me.  Two years ago I had two takers initially, but one soon dropped.  The other person was extremely shy and it was kind of odd to have conversations with him.  We went for a while but didn't meet quite as regularly. Likewise, last year I had one student in the spring and it was more mentoring than discussion group.  I have another student this fall, where again it is more mentoring.  The mentoring thing is okay, but for students with an eye on the job market, I'm probably not the right person to mentor that.  I think the discussion group approach would be more interesting, but it does take a few students to make a group.

This year I'd like to do something similar but on a different topic.  I maintain a reading list on leadership and learning.  We might start with a few pieces from there to help us find a rhythm.  After that, I'd hope that students would offer up their own pieces for us to discuss.

When the group seemed to work well we went for somewhere between 90 minutes and two hours and met in BIF.  That much of what we did I'd like to keep.  Based on that experience the ideal number of students is at least 3 and probably no more than 5.  If we can get that this time around we'll be a go.

If you are interested you can indicate that either by commenting on this post (and maybe that will attract some others to do likewise) or you can send me an email.

Let me say one more thing about scheduling.  I am not teaching next semester so I am pretty happy to meet whenever is convenient for the group (if such a time exists).  But I would prefer daytime to evening.  You should probably treat that as a firm constraint in assessing your own availability for this.

A few things

1.  I plan to spend the first part of class today explaining what student teams need to do next with their class project.  If your team is not represented in class today, it will be at a disadvantage moving forward. 

2.  In a little while I will do an update to the grade book in Moodle.  This will include one Excel homework on the math of risk, one blog post on managing income risk, and an update on the bonus points for completing surveys about the class session.

3.  There will not be any more bonus points allocated of the sort described above.  I have now made a different form that you can use for commenting about a class session.  This is not for credit, but I do appreciate getting the feedback.  There is a new tab on the homepage called Feedback On Class where you can find the form. 

First Drafts In - A Little Droll Humor

I am just back from a nice tailgate at a friends house (so we avoided the bad weather).  The first quarter of the game had ended and the Illini are down only one touchdown - a moral victory. 

Every team has now submitted a draft.  I relabeled many of the submissions so the team name comes first.

At the tailgate, my reputation is to crack jokes in context (not canned ones as I have told in class) and I did that and then some.  That coupled with the very good food has tired me out.  So it is nap time for me.  After that, I will start in on reviewing the papers.

I did want to point out that some of you said funny lines, I think inadvertently.  There were a couple of teams that labeled their submissions as Rough Draft, which might be accurate but isn't very good marketing.  What am I to think of it, given that label.  Some others, wishing to be polite in their messages, said - enjoy your weekend.  If you were reviewing student papers, would you enjoy the weekend?

Remember that your professor is a princess, as in the story.  Your writing is the pea.

Reaction to Class Yesterday/Attendance and Course Performance/Teamwork and Project Teams

First, we are down to 25 students enrolled in the class.  Yesterday, 16 were in attendance.  For an upper level course in the major, that is not a great batting average.  I understand that some of you are interviewing for jobs.  When that happens the adult thing to do is to let me know about it ahead of time.  A few of you do that.  Most of the absences remain unexplained, from my view.

Yesterday I mainly lectured but then tried to verbally quiz students about the concepts as we proceeded.  While my measurement is admittedly subjective, it seemed to me that most students weren't getting it, even while this is the part that is straightforward.  Next week there is real subtlety in the homework.  How can you make that step up if you are not standing on terra firma now?  

My sense is that many students are mechanically doing the Excel homework without really thinking through the questions and the text that is there to explain things.  The approach allows you to submit the key, but there is little take away from the exercise that you can use elsewhere.  (In other words, it is not building human capital.)  For students who were present yesterday, you experienced the quizzing that I was doing.  Can you do that yourself while you do the homework and/or after you submit it but then want to make sure you understand it?  Something like that is needed.

* * * * *

I took the class attendance data that is not perfect (meaning some dates are not included) but is more extensive than I've previously collected and plotted it against current course points as reported in Moodle.  I completely threw out the first two weeks of attendance, because some students added the course then and I didn't know how to control for that in a simple way.  (The entire exercise took me about 15 minutes.)  

You can see the scatter that was produced and there is a regression line as well.  There is no doubt that attendance and class performance correlate.  You may recall that one day I mentioned John Nash, popularized in A Beautiful Mind, who never went to class but did pathbreaking work.  We don't seem to have another John Nash in our class, the instructor included.  For the rest of us mere mortals, putting in more effort in the learning matters regarding measured performance.  Coming to class, which I would have hoped is something to be enjoyed for the most part, appears to be its own form of effort. That's my interpretation of what the data show. 

* * * * *

During the past week several high attendance students have told me about teammates who have missed team meetings and haven't yet done their share of the work on the first draft.  I gather that the free riders are low attendance students.  There is, then, the matter of what should be done about it, if anything? 

Let me first describe the ideal from the instructor's view.  The holy grail in teaching is to elevate each and every student.  For the already high attendance students, that is to get them to consider the ideas of the course in a deeper way and to encourage that they learn in this deeper way in their other studies.  For the currently low attendance students, the next step would be to encourage greater diligence from them.  Attending class more frequently would be one indicator of that.

There is research that supports the hypothesis that students learn from other students, perhaps more than what they learn from their professors.  So there was some hope that the project teams might provide that type of learning.  And maybe on teams that are functioning well, that is happening.  But on other teams where there is some free riding, it is evident that the experience is not sufficiently intensive to overcome the larger patterns in the class that are evidenced in the scatter on attendance and performance. 

Now, as to what to do about it, here are a few thoughts.  First, teams must self-insure so that what is turned in represents a good effort.  This should happen even when one of the members is free riding.  Second, I hold out hope that things can be made better, so I ask team members to encourage a teammate who has been slacking so far, to participate in full for the remainder of the project, if the person is willing to do so.  Third, note that the bulk of the points in the course have still not be allocated.  That is a feature, not a bug.  (Some economics explanation for that will come in a few weeks.)  While I will continue to give all team members the same number of points on their projects, that was in the rules I set up and I need to go by the rules, note, for example, that I was pretty generous on the points for the blog posts first half among students who missed posts.  I will be sterner in my evaluation in the second half.  Seeing evidence of student effort in the course (or not) will impact that evaluation. 

If You Happen To Have A Spare $40 M Lying Around

I am sitting in BIF typing this message.  Somebody just gave me an orange and blue button with the I-mark that says Gies Business.  There are two big banners that say Gies College of Business on each side of the commons area.

Before the massmail was sent out with this announcement, I heard about it from the former dean, who is a good friend of mine.  I asked him if that meant BIF will also go through a name change.  Apparently it won't, but the naming rights are still available.  I told him I would take it into consideration as I do my estate planning.

Evaluation of Eighteenth Class Session

Here is the form.   The economics itself is getting more subtle now and with that comes added difficulty in understanding the concepts.  It would be good to comment on your sense of understanding of the issues.

Some Bonehead Plays I Made as an Administrator along with some Reasons for Making them

I don't think I said clearly in class today that the purpose of the last blog post was to connect it with what we are doing in Excel in our study of decision making under risk and uncertainty.  But unlike how we will model this in Excel, in reality there is much more complexity, the decisions and the random environment both unfold over time, and sometimes very seemingly small choices end up mattering a lot while things that you once assumed were very important might prove to be only incidental. 

Since all of you wrote about your choices coming to the U of I and while you were enrolled, here is a brief illustration about my years in college.  If you have never been to Boston - it is a town with many different colleges.  MIT actually is across the Charles River in Cambridge, but you can walk over a bridge and be in Boston.  Boston University is quite close.  When considering attending there, I was aware that MIT was a haven for nerds, which might be okay academically, but I wanted contact with other people, just as I had in high school.  I assumed (incorrectly) that I'd have such contact because of all the colleges in Boston, especially since some of my high school classmates were enrolled there.  I ended up hanging out almost exclusively with folks in my dorm - we all had a lot inertia and that was the easy way out. At the beginning that was okay, but too narrow for me.  Eventually the narrowness started to get to me.  Rationally, I could have moved elsewhere on campus and starting over again with a new cohort on campus and then make a deliberate effort to engage with people from other campuses.  But I didn't know people at MIT other than those in my dorm.  I did know many people at Cornell, so it wasn't such a jolt going there, and then I found the variety of people I had wanted. 

* * * * *

In a few weeks, when we do the Excel homework on bargaining, we will discuss procurement.  The model of bargaining will be very simple.  The discussion of procurement, in contrast, will try to illustrate the complexity and the goals in the process of choosing a vendor and then negotiating with the vendor.  The discussion below is not meant so much to foreshadow what we will do in a few weeks as it is meant to tie into the issue about making mistakes in decision making when operating under uncertainty.  The issue of mistakes might sometimes be ascribed to novice decision making.  But the time period I am talking about I was in my late 40s and had made many important life decisions by then.  There was, however, novelty to the situation.  In the presence of novelty you tend to make assumptions to aid in the decision making.  (This is exactly what Herbert Simon argues in his Nobel lecture.)  When some of the assumptions prove unsound, which happened in this case, you can get egg on your face; that also happened and things became quite unpleasant for a while. 

So with that here is an incomplete description of the choices made - why they were made at the time - and what should have been done in retrospect. 

When my little center of educational technologies started in summer 1999, we had 5 products.  Two were discussion boards - FirstClass and WebBoard - one was a homegrown quiz tool - Mallard - and we had two fledgling learning management systems - Blackboard and WebCT.  It was my decision then to have two LMS.  Most other campuses at the time went to one of those or the other.  (Iowa also went to both.)   I understood things reasonably well from the user/instructor perspective.  So I favored offering different alternatives for different users to better match their preferences.  I didn't then understand, nor did I gain much better understanding later, the issue of supporting all the services, both at the back end (server) level and at the front end (my staff interfacing with instructors) level.  What I did understand is that there are diseconomies of scope here, meaning it it more efficient to provide one comprehensive service and do that reasonably well then to provide a variety of niched services, even when on a function by function basis the niched services beat the comprehensive service.  I should also add the the budget of my center was quite limited, so that reality needed to be confronted.  But, at the time, I thought our general enthusiasm would overcome these other difficulties.  That proved wishful thinking and living in the present without thinking forward.  (I am otherwise usually good at thinking forward.  The prior three years where I cut my teeth as an administrator were full of that, but all on a much smaller scale.)

Now let's fast forward about 3 years.  Three things changed to make the situation quite different.  First, usage in our services had grown substantially.  At the time, most students on campus would have had at least one course that used our services.  We needed to find a way to support all that growth; consolidation in our offerings made sense for just that reason.  Second, the university had done the deal to get Banner as its ERP application, which included the Student Information System (what you use to register now and what I use to see who is enrolled in the class).  The old SIS would be retired.  The systems we supported drew data from the SIS.  There was a need then to consider a new way to populate the systems with SIS information.  This too favored having one system where this pipeline was well constructed (and where if trouble shooting were necessary attention could be placed).   The third thing was that what we were experiencing was happening on most campuses.  So the market responded by delivering enterprise versions of the LMS that promised to address these issues.

Now let's add a layer of complexity.  At the time my center was located in the Armory.  We had some tech staff there and four out of the five services were hosted right out of our office.  The fifth service, WebCT, was hosted in DCL by the then campus IT unit.  We contracted with them for this hosting.  It was clear that if we were to go to an enterprise LMS that they would host it.  While I had a relationship with the guy who ran the division that hosted the service which dated back to 1996, and we were on reasonably good terms, I thought that from our end we needed a tech guy who would talk their language and better communicate our needs.  Plus, we needed somebody on our side of the tracks who would really understand an enterprise LMS under the hood.  At the time there were two other instances of WebCT, one in Chemistry, the other in ACE.  One of the ACE staff had previously interviewed with us for a different job (supporting our other servers).  I hired him to be the needed tech guy.  This got several of my other staff upset, but I think it was the right call.  The skill set was limited and he was the right guy for the job.

The other part of this that made life complex was that my boss, the CIO, wanted us to merge with the campus IT unit (which was much bigger than we were) and with his CIO office.  On the one hand, this made some sense, for the back end communication issues discussed in the previous paragraph.  On the other hand, my little center had a reasonably good reputation while the big IT organization was regarded in a much more mixed way.  I thought our way of doing things would get lost in the merger.  So I pushed back a little on this with the CIO, but not a lot.  In retrospect, that was a mistake.  I should have pushed a lot harder because the "getting along" approach contributed to what came next. 

We originally conceived of the choice of enterprise LMS as a "bakeoff" between Blackboard and WebCT.  When Campus Purchasing got wind of this, they said we couldn't do that and had to go through a formal RFP process, which entailed going out for bid and awarding the contract to the best bidder.  At first, this annoyed me.  Later I came around to their view, although the RFP process definitely is clunky.  A first step in that is the writing of a detailed requirements document.  As an enterprise LMS was a comparatively new piece of software at the time, there was the question of just how one determines the requirements for it.  In this case, we obtained a couple of RFP documents that had been written previously at other universities.  One was from Berkeley, the other from the U Wisconsin system.  These are the sort of documents where plagiarism isn't just permissible, but is actually desirable.  There is no need to reinvent the wheel.  But there were some local circumstances that should have been accounted for.  I made another significant error here.  I completely trusted our tech guy to come up with the right requirements, without challenging whether they should be requirements at all.  I will illustrate this in the next paragraph. 

One of the big requirements is that the software had to be supported by Unix-Oracle.  (It would run on servers from Sun Microsystems and rely on an Oracle database.)  There were actually four enterprise LMS vendors on the market then, but two of them operated in a Windows only environment.  (Blackboard and WebCT ran in both environments.)  In the bakeoff we originally conceived, some of our users would be upset by the decision, as the other platform would be chosen and they'd be forced to switch.  If we had actually chosen one of those Windows only vendors, then everybody would have had to switch, but then it would have been because a majority thought it was the best environment.  That might have been better for us politically.  (Several other Big Ten Campuses went to one of those Windows only vendors.)  By writing the requirements as we had we precluded this possibility.  The other big issue issue with this requirement is that while the campus IT organization had quite a lot of experience with Unix servers, it had no prior experience with Oracle.  It wanted to develop such a capability, not just for the LMS but for other services as well.  (The University IT, which runs the SIS, did have Oracle expertise but at the time they were entirely separate from the campus.)  I should have been skeptical about the ability to develop sufficient Oracle expertise (which mainly meant having redundancy at the DBA position) in the same timeframe that we were rolling out the enterprise LMS.  But I was not.

A significant reason for being so accepting is that I let my ego get the better of me and I got caught up with "empire building."  The enterprise LMS was going to be my baby and it would expand my visibility on campus as well as increase my presence within the newly merged IT organization.  My personality, in general, is not very imperial, so you'd might think I'd be immune from these sort of ego rewards as temptation.  Here are two reasons why I didn't have such immunity.  When my little center was still a concept, nothing more, I was being mentored by the then head of of the campus IT organization.  He was very good to me and I thought he was a pretty sharp cookie.  He told me how big the center would be (number of staff) at the outset and what it was likely to grow into over time.  The number of reports overseen by an administrator was a measure of importance, in his view.  If I had more people under me, I'd have more clout and more esteem by my peers, or so it seemed.  When everyone else plays by that metric, it is impossible to not to get caught up in it, even if makes little or no sense for you personally.

Then there is the matter of taking knocks on the job, which in my case was getting criticized by our faculty users for making decisions that needed to be made but that were not to their liking and/or for me again being too accepting of the wishes in the IT organization and not pushing back harder at them in favor of delaying the decisions.  Some of the more overt of these decisions were about cancelling service offerings.  This will happen with IT.  Services reach end of life and/or become too costly to continue to maintain.   But we didn't have a good model for how to do that at the time (and we may still not have such a model now).  Such a model would include some interim period, where the service continued to run after the shutdown had been announced.  Users would then learn the model and grudgingly come to accept it.  Absent the model, I was left to be the messenger of doom and took flak for doing that.  (There was centrally supported ed tech services that were not in my unit.  One was called Campus Gradebook.  It was cancelled when we adopted the enterprise LMS.)  The ego rewards then serve as some sort of compensation for taking the flak.   It really is silly, in retrospect, because the ego rewards proved not to be reward at all.  But while it was going on it seemed appropriate.  This is and example of how you lose focus on the job about wha you are really trying to accomplish. 

Here is one last mistake I made, which was about budgeting for the back end of the LMS.  Given our earlier discussion about transfer pricing, it is an interesting question in the IT organization about which services get well funded and which other services get poorly funded.  As it turns out, the funding approach to services varied quite a bit by service.  The network, which was then recently supported by a solid transfer pricing formula, was well funded.  Services like email (at the time Gmail didn't exist and the campus hosted student email) were funded off the top.  Often, that funding was less than adequate to offer a high quality service.  The enterprise LMS seemed to fit in with this second category. 

But I should have insisted that we support it at the back end with every recommendation for support that the vendor gave us and that we make adequate investments in personnel, hardware, and complementary software.  What needed to be done really was outside my expertise, but ignorance is not an excuse and I should have insisted on understanding that we were doing things the right way, arguing with my boss that he need to supply the requisite revenue to achieve this outcome.   I didn't understand the urgent need to do that at the time.

Eventually that did happen, but only after the service failed.  We were embarrassed into making the right choice rather than be proactive about it in the first place.  I took quite a lot of heat for that, deservedly so.  (I will add here that some of this may have been the software itself and that the U of I was a larger instance than the software was really designed for.  So the vendor had to share some of the responsibility for the failure, at least in my eyes.) 

* * * * *

The above is what I'd call a post mortem on a rather extended set of experiences that I was wrapped up in.  We all make mistakes.  The purpose of a post mortem is to avoid making the same mistake a second time and to consider how things might be done better when moving forward. 

I will close with the following observation.  Making mistakes is not a matter of intelligence.  I hope this narrative will convince you that I was thoughtful throughout the process.  Mistakes that are conceptual in nature happen in situations that are novel so you can't just "play it by the book" and be assured that things will turn out reasonably well.  You have to make a call.  Hindsight is 20-20.  Foresight is not nearly as good.

Excel Homework Due 11/1 at 11 PM

This is the homework on insurance under asymmetric information.  Note that the economics here is harder (I tried to keep the math as simple as I could).  If you have questions on the mechanics for producing an answer in Excel, please post those as comments to this post.  If however, you have questions about the underlying economics, note that I plan to lecture on this in class the following day, to explain both the modeling and the consequences of the model. 

Cost of attending the U of I if a student in Econ

This is information from the Registrar's Web site.  I suppose you get only one bill for the whole thing, so you think of this as the combination of numbers.  I am used to looking at just the first panel, which has the base tuition rate.

Office of the Registrar via kwout

And this is the other costs.  Regarding the Campus Fees, apart from health care I believe there are fees for: (a) campus recreation, (b) Library and IT, (c) deferred maintenance, and (d) misc.  That there are such fees, as I understand it, is because the budgeting process fails without them.  In other words, each item is essential to fund, but without a separating line item in the budget, there would be less funding.  Deferred maintenance, in particular, was in disastrous shape, until they set up such a fee.  (DKH, was renovated within the last 10 years because of that fee.)  I think it fair to add the Campus Fees to the Base Tuition and say that is what your tuition is.  The other costs that are itemized, I would not include in tuition.

Office of the Registrar via kwout

Evaluation of Seventeenth Class Session

Here is the form.  The blog posts were more interesting last week.  I wonder if that will impact class discussion. 

The "Animal Spirits" Explanation of Risk Preference

This book was quite popular  when I was in junior high school and high school.  It articulates a theory of territoriality - intra-species aggression is triggered when one animal goes onto another's turf.  It also gives the example of the peacock who struts as a way to intimidate other males of the species and to attract females.

Amazon.com: On Aggression (Harvest Book, Hb 291) (9780156687416): Konrad Lorenz: Books via kwout

There is then the very general idea in Darwin's theory of evolution about fight or flight.  While if the circumstances are right each animal can be seen to engage in the behavior that is not typical, we tend to think that certain animals (hawks are emblematic) who will naturally fight while other animals (doves are emblematic) who will naturally flee.

You can think of these behaviors as expressions of emotion:
Fight ---- Anger (risk seeking)
Flight ---- Fear  (risk averse)

Within economics, Thorstein Veblen articulated a theory of "conspicuous consumption" that in conception is remarkably like the peacock who struts.

The Theory of the Leisure Class (Dover Thrift Editions): Thorstein Veblen: 0800759280629: Amazon.com: Books via kwout

More about risk preference as it pertains to real life

The expected utility theory that you will be exposed to over the next few weeks is one dimensional - it concerns wealth risk only.  You might want to consider risk attitudes in other dimensions as well.

For example, as there seemingly are so many injuries in professional sports, pro athletes must tolerate more health risk than most of the rest of us would.  That they are seemingly willing to accept such health risk probably doesn't say much at all about their risk aversion over wealth.

As another example, it is my sense that outspoken students are more willing to take on risk in the classroom, but quiet students might be more willing to take on risks with the blogging.  And in neither case would I infer much from that about their risk aversion over wealth.  We said in class today that wealthy people have greater opportunity to diversify so should be less risk averse for that reason.  I doubt whether personal wealth correlates at all with being outspoken or being quiet.

Here's one more that might amuse the sports fans in the group.  It is a mathematical argument I made some years ago that when a favorite plays an underdog, the favorite is risk averse while the underdog is risk seeking.  (I made this more to demonstrate the possibility of using a Tablet PC for doing math writing than for the economics of this.)  In other words, the risk preference is determined entirely by the strategic situation.  This is an extension of well known proposition that a seriously wounded animal (think lion or tiger) is more dangerous after being injured.  When survival is at issue we all become ferocious and willing to take on risk.

Portfolio Experiment Done In Class

This is the file we used today.  The issue with systematic risk is a big deal.  Many investors might not realize how exposed they are and feel they have a safer investment than they actually do.  It is
difficult to measure systematic risk, though it is easy to talk about.

The bit at the end about risk preference and rationality (the third worksheet) is really the tip of the iceberg on these matters.  One further thought is that experts are rational while non-experts are not, so get expert advice when making financial decisions.  It turns out, however, that is not true.  Even the experts are not rational, though they may make fewer errors than the non-expert.

Finally, if you eventually get into managing your own portfolios (say in a 401K plan) one piece of advice I learned from reading a book called A Random Walk Down Wall Street by Burton Malkiel is that if you can't sleep because you are worrying about your portfolio, then it's too risky.  I don't subscribe to too much financial advise, but that one makes sense to me.

Class Attendance Among Those Students Still Registered

I didn't track every class session, but for most of them I did.  We seem to be witnessing a gradual shift downward in attendance.  Later today I will do some simple analysis of the correlation between individual attendance and course performance, as measured by how many points a student has earned to date.  I'm sure the correlation is positive, but I'm not sure how strong it is, so it would be good to see that. 

Scores for Comments Uploaded in Moodle

I made a comment matrix, which is also available in Moodle, on which to base the scores.  Note that for each post, you can get at most one entry in the matrix.  I know that some of you commented extensively on some posts - both length of comment and sometimes several comments.  Given the points allocated - not that many, tracking that was just too much and I doubt would have mattered much at all in terms of the point allocation.

In class tomorrow I will discuss whether this process is working for you or if it should be modified.

Your Professor Has Transformed Into A Major Storm

Typhoon Lan poised to be Northern Hemisphere’s next megastorm in the western Pacific - The Washington Post via kwout

Links for Class Session Today

A couple of critiques about modern American education

Excellent Sheep (book)

Bloggingheads.tv interview - Glenn Loury (Brown University) and William Deresiewicz (Excellent Sheep)
At around the 18:00 minute mark there is a discussion of the Econ Major (which at Ivy League schools that don't have a Business School is about the Business Major as well). 

The Overprotected Kid - Hanna Rosin

A couple of my posts (one is a guest post on another blog) about what I hope students will develop as mental habits

Encouraging The Mind to Putter

Making connections via mental puttering: Lessons from teaching with blogs  (The picture of me, which from about 10 years ago, shows I didn't always have as much gray in my beard.)

Some Business News Web sites that might be used to write a blog post on other than the prompt

NPR site - search on profit sharing

New York Times site - search on the invisible handshake  (this illustrates that not all searches will hit a home run for you).

PBS NewsHour - Economy page

Google Search - Transfer pricing

Grades for Blog Posts - First Half Uploaded in Moodle

There are also comments for you in the feedback section.  As students still seem to be getting their comments in on the Reflection post, I will wait to tally the comments till after class tomorrow, but then I will post scores for that as well.

Please look at this before you start the next Excel homework, which is due 10/25 at 11 PM

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

Notes on the Math and Philosophy of Probability  (This is a pdf file.)  There is a slight error in this - a line I attributed to Keynes actually comes from Mark Twain.  Otherwise, it is pretty basic stuff.

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

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

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

The last bit on expected utility is based on the book by John von Neumann and Oskar Morgenstern called Theory of Games.   Maximizing expected utility is what economists think of when they refer to economic rationality.

Reactions to the most recent blog posts

One of the challenges for me in reading your posts is to determine whether you are saying things in a genuine way or if instead you are writing about what you think I want to hear.  The former is what I hope for.  The latter is a kind of opportunism, one I'm afraid too many students learn as their default behavior from all the classes they take.  Instructors have power over students that results from the ability to assign grades.  I really wish I didn't have that power, yet that we were nonetheless engaged in this blogging activity.  This is impossible to pull off, given the realities of the system.  So here I will content myself with describing the ideal.

Earlier in the semester I mentioned an important work skill that you all need to acquire - the ability to write a cogent memo to some higher ups in the company where you work.  Here I want to mention a different life skill that you need to to master as well, one that I have yet to talk about in class.  You need to self-direct your own learning based on following your interests, your opportunities, and your current skill set.  You might think of this as coming up with your own prompts and then writing to them.  Sometimes you can do this in your head without typing anything out.  Other times you have to process the ideas in a variety of ways to internalize them.  In doing this you need to please yourself, which is what all self-directed learners do.  What that means might be vague now, but over time you develop a sense of taste of what is pleasing.  Developing that sense of taste is an important part of the the learning.

For a specific subject matter, of course, there is benefit to acquire insight from someone with expertise, who can get you deeper into the subject than you might with your own explorations and/or who can get you up to speed in a much shorter period of time than you would otherwise be able to do on your own.  But this is a two-way street.  There is the matter of why the expert will talk with you.  What do you bring to the table?  How will you use the information after the conversation occurs?  Being self-directed in your own learning will help answer those questions.

* * * * *

The two most common terms from our course that students brought into these posts were opportunism and transaction costs.  Nobody mentioned gift exchange and collegiality, what we talked about during the very first week of the class.  (If you added the class after that there is some reason why you may have not mentioned it, but do note there is presentation material you could have reviewed on this.)  Likewise, nobody mentioned complexity, the use of buffers to manage uncertainty, and that in general we come up with rules of thumb for making decisions (we satisfice) rather than optimize.  In other words, you connected what you said in the blog posts, but you didn't connect with other things we talked about in class. 

The reality is I can't write a prompt on everything we consider.  So even if you are writing on my prompt rather than on your own, the more connections you can make with class themes - including from the Excel homework or from class discussion - the richer will be your take away from the course. 

Finally, I want to mention a paper I stumbled upon a few years ago while I was researching something else.  It is by Kenneth Bruffee and is called Learning and the "Conversation of Mankind" and which might be a bit much for you to read through.  It definitely isn't about economics, so I will give you a very condensed version here.  Thinking, writing the blog posts, and class discussion are all conversation in some form.  That class discussion is conversation shouldn't be surprising.  That thinking is conversation might be a new thought for you.  Bruffee calls it internalized conversation.  Then, writing is also an imagined conversation, with the hypothetical reader (who is in your head).  You always have the reader in mind when you write.

I try to teach this way, even though we are an Econ class, not an English class.  I wonder if you had this sort of course as a first-year student (perhaps it would take several classes like this) whether the lessons I mentioned about learning self-direction would have taken hold with you earlier.  I'd be interested in hearing your thoughts about that.

Some follow up on today's class session

First - I don't know enough about how Moodle works from the student's perspective.  Did anyone start a quiz, then log out, and later logged into Moodle and finished the quiz?  If so, could you either email me or comment on this post about how that worked?  Did it save your work and let you continue from where you left off?  I would like to advise students on this for the next quiz, but I don't know this so I am hoping that one of you does.

* * * * *

Next, on creativity and whether some people don't like it, after class it occurred to me that some of you may have watched SpongeBob as a kid and enjoyed it then.  (I know about SpongeBob via my kids.)  There is a particular episode on "imagination"  that illustrates some of the points I was trying to make in class today and it is done in an entertaining way.  You can watch this clip and amuse yourself with it. 

* * * * *

On objective performance measures, like multiple choice exams, it turns out it is not as cut and dried as I made it sound in class.  In some cases there is ambiguity over whether student A did better on the test than student B.  There is no ambiguity if A got all the questions right that B got right and then got some additional questions right that B got wrong.  In this case A definitely performed better than B.  But when A got some questions right than B didn't get and B got some questions right that A didn't get, then there can be ambiguity as to who did better.  In particular you can construct examples where A gets the higher score when each question is worth the same number of points, because A got more questions right in total, but where B gets the higher score if hard questions get more points than easy questions, because B answered more hard questions correctly.  Further, even experts might disagree as to which questions are easy and which are hard.  Now, it seems, what we referred to as an objective test has elements of subjectivity to it, based on how the questions are labelled.

Evaluation of Fourteenth Class Session

The form is here.  There will be a few more of these where you can get credit.  Then we'll just do comments which will be optional and not for credit. 

Links for Today's Class

The Fun Theory

Tiffany's Post

Creativity Is Rejected

Creativity and Opportunism - this link requires being on the campus network.

Some follow up to today's class session

First, if you want to be a good teammate and one of your team members wasn't in class today, please let that person know that the quiz is live now and they must do it be 11 PM tomorrow night.

* * * * *

I left out a few finer points on the class scheduling - expanding capacity issue.  Efficient use of the space requires scheduling on a grid, where each slot in the grid does allow for class changeover but otherwise doesn't leave empty space between classes where the classroom goes idle.  Scheduling on a grid is easier if classes meet for an hour (50 minutes and ten minutes for the changeover) or two hours (which is what graduate classes in Econ do, at least they did when I was teaching them 25 years ago) and then always start on the hour.  Those classes that meet for 80 minutes, like hours, sometimes start on the hour and sometimes on the half hour, and there often isn't a grid, so there is idle time between classes that use the room that is less than enough time to schedule a class.  That idle time is wasted capacity

I did mention in a previous post that there is lower classroom utilization on Fridays, particularly Friday afternoon.  Some of this "waste" can be attributed to something I said earlier in the semester - faculty (those on the tenure track) view themselves as bosses.  They teach when they want to teach.  Accommodating that preference, sometimes the schedulers produce inefficiency in space utilization. 

There is a further issue of whether revenue flows back to providers if they expand capacity, which would give them some incentive for doing do, and, if so, how that works out. On campus, there are normally two different enrollments that one considers as course performance numbers.  The first is the day-ten number, the enrollment when no more students can add the class.  The second is the final enrollment, the number of students who get a grade for the class. 

If payment is based on final enrollment only, then were the a significant number of students who didn't drop till the last day (which this semester is October 20) such students presumably to consume instructional resources even if they are not counted as doing so.  That weakens the incentive to expand capacity. 

Alternatively, if the payment is based on day-ten number, then an opportunistic instructor could give a very hard midterm soon after day 10, generate a lot of F's on that, which in turn induces a lot of drops thereafter, and then teach a smaller class.

The point is that there is some distortion either way.  Of course instructors aren't paid this way.  Indeed, I don't think departments are paid this way either, at least not under the old RCM formulas.  It is the college that gets revenues based on the number of students taught.  It is then left up to the colleges how to share that revenue with the departments. 

Quiz/Evaluation of Class Session

The first quiz is live in Moodle now.  You can take it any time between now and 11 PM Wednesday.  The results will be available to you once the quiz has closed.

The evaluation form for the class session today is available. 

Nobel Prize in Economics

Richard Thaler of the University of Chicago won the prize.  Let's all be irrational today in celebration.

Nobel in Economics Is Awarded to Richard Thaler - The New York Times via kwout

Student Enrollment on Campus

This is meant to complement your posts on Illinibucks.  What things can grow with student enrollment (so they are no more crowded than they were 20 years ago) and what things get more crowded as the number of students increase?  The graph below is taken from the DMI Web Site. 

Grade Book Updated in Moodle

I've done a grade book update.  The last two Excel Homeworks were uploaded.  One blog post was tracked - the one on teams.  And the bonus points were updated.  This includes through the 11th class session. The evaluation of the 12th class session is still pending.

Link to Paper by Richard Freeman

When Workers Share in Profits

I still don't understand why the link didn't work for some of you.  But it is here.

For those who missed classed today/Some factoids that might help with this weeks' prompt.

If you have not yet done the Excel Homework on Coordination Mechanisms, I will accept submissions done later today and do an update of the grade book in Moodle tomorrow.

* * * * *

If there is excess demand for a particular course, that is potentially observable during the first ten days of the semester by students who want to get into the course logging into banner frequently to see if there is an opening.  After day ten, there is really no indicator of that.

However, a different sort of scarcity to consider is the classroom themselves.  One can look at the hours per week that a large lecture hall, like Lincoln Hall Theater, is scheduled for teaching.  One can also do the same thing for smaller classrooms.  I don't know current usage data, but a decade ago when I know the facts about this large lecture halls were in very high demand.  Foellinger accommodates 750 students, the maximum allowed by campus policy.  Lincoln Hall Theater after the renovation is somewhere in the 600s.  The next largest auditorium on campus accommodates in the low 300s.  Expanding capacity in a large class then, depends on which auditorium can be accessed.  If you can get a big auditorium, one lecture section might do the trick.  If you need to use smaller lecture halls, it might take several additional lecture sections to satisfy the demand.

There is also a time of day issue.  Students are notorious for not liking 8 AM classes.  Discussion sections at 8 AM are almost never full.  A decade ago, the busiest teaching time of the day was at 10 AM.  I am guessing that students also don't like late afternoon classes, but that I'm less sure.  When I was doing Economics full time, late afternoon was when there were workshops in the department, in which faculty and graduate students would present there research and sometimes invited guests would do likewise.  So you didn't want to teach then.  The time of day preferences of faculty and students probably don't coincide perfectly.

And there is a day of week issue.  Many people prefer to not have classes on Fridays.  Part of this is if you are going up to Chicago for work or pleasure having the long weekend is a benefit.  Classrooms are still pretty heavily scheduled Friday mornings, as lots of discussion sections meet then.  Friday afternoon is a different matter.

Add to this mix that there are blended courses, which have reduced in class time and instead have online interactions, as well as totally online courses.  To the extent that those are not synchronous (synchronous meaning a live session where everyone must be logged in at the same time) they would seem to offer the maximum in flexibility scheduling-wise.  So if there is chronic excess demand for courses in the presence of a shortage of classrooms, that might be a way to meet it.

None of this says what adjustments, if any might be made if the shortage is in instructional personnel rather than in physical space.

Evaluation of Twelfth Class Session

The form is here.  I had planned to give out a maximum of 50 bonus points for these evaluations, with 5 points per form you complete.  Please comment on whether you would continue to complete the forms even after you've accumulated the 50 points, or if you'd stop  because there was no incentive to do so.

The Algebra of Quality Choice under Transfer Pricing

The video below makes reference to this PowerPoint file.  The video is a micro lecture that grinds through the algebra.  I encourage you to watch it before class next Tuesday. 

Students not keeping up with assigned work

As of now, 18 students have done the Excel Homework that was due last night.  There are 30 students in the class.  On Tuesday, we had 17 in attendance in the live class setting.  That was the lowest number yet during the semester.  The, many students were late with their blog postings, some quite late. 

I have been scratching my head about this regarding what, if anything, I should do.  My tentative answer is to accept Excel Homework that is submitted today, but to tighten what I will accept on the blog posts.  If it is after Saturday, you won't get credit for the posts.  I can't keep up with posts that come in later than that.

I also want to tie the Excel Homework to our notion of leadership that we've been discussing.  So far there has been no student who has completed the homework, either easily or after some struggle, who has made a comment to help fellow students about getting it done.   I am not giving credit for such comments.  But I wonder if they might emerge as a commonplace hereafter.

More on Leadership

I thought it was interesting today when I asked the class about what leadership means and several students offered up certain practices that, to them, exemplified what leadership is about.  I want to critique that idea somewhat in this post, but first here is the working definition I offered up of leadership.

Leadership - the act of raising the performance of other members of your team.  

The reason why formulaic approaches are limited in this regard is because the world is complex and somehow we have to grapple with the complexity.  One of my favorite quotes on this come from George Orwell.

To see what is in front of one's nose needs a constant struggle.

The full essay from which this line has been taken is well worth the read.  We make mistakes in what we think is true because we want something to be true even if we should know better that it can't be true.  Further, the evidence is never as straightforward as you'd like it to be.

Chin Up

Something like this graphic was presented at leadership training I attended in 2003 at something called the Frye Leadership Institute.  This was during the very first session on Chin Up Leadership, which meant you have to be on the lookout for what is going on because things are complicated so it isn't easy to sort out the prevailing currents.  It was also supposed to be a double entendre - chin up also means to keep your spirits up in the presence of difficult situations at work. 

Now let me go back to the working definition of leadership given above.  One possible reason why leadership can matter is the the team members are currently underperforming.  I am going to close this post by asking - are there multiple possible reasons for this, each plausible in their own right, that might explain the low level of performance?  I encourage you to think through that question and try to come up with some possible causes.  

You don't recommend a cure till you do a diagnosis.  In class today students were recommending cures.  If you make a wrong diagnosis, the cure you propose might make matters worse.  So leadership of this sort requires some patience.  Keep Orwell's line in mind.  That will help. 

Team Assignments

For students not in class today, I allocated papers to teams based on the first preference of each team.  The results are below.  Note there are three teams doing Coase and another three teams doing Akerlof and Kranton.  Some of you may want to reconsider your preference, particular if other teams are doing the same paper as you.  If I hear from you about that before the week is out, you can change your mind.  Otherwise, we'll go with this allocation.

Evaluation of Eleventh Class Session

Here is the form.  I would be especially interested if you have ever seen matching markets in your other classes.  Also, whether the demo of intern matching program made sense to you.

Providing Context in Your Blog Posts - My Typos - A Specific Grammar Lesson - Generalist Reading

Now that you've had the experience of writing a few of these posts, I want to discuss an issue that many students seem to have with the blogging.  The problem is that the reader (in this case the reader is me) wasn't there along with you during the particular episode you are describing.  You are an eye witness to the events that you participated in.  Some of you are writing as if you are discussing the matter with another eye witness.  That simply won't work.  You need to consider whether the person who wasn't there can understand things armed only with what you have written.  And in doing that you need to be a bit skeptical about your own powers of explanation.  To convince yourself that you've told the story in a way another who wasn't there can still understand takes some effort and some patience.  If you are dashing off your posts quickly (as I gather some students do who are submitting these posts late) you will likely come up short on this goal. This is something that many of you need to work on in subsequent posts.

* * * * *

I make errors when I write.  I try to correct them by proofreading.  I have noticed the errors cropping up in the comments that I have written on your blog posts.  I apologize for those mistakes and I will try to improve my performance that way in the future.

Here is one particular reason for the errors.  The comment box doesn't enable a lot of text in it, unlike the box where you make your posts, which is ample in size.  In older versions of the software, there was a comment preview function and I got used to previewing my comment before posting it.  It seems that newer formats have gotten rid of the preview function.  That has altered my routine.  I need to proofread directly in the comment box.  I haven't been doing that, but I will in the future.

* * * * *

I have gotten on some of you about distractors in your writing.  Here I want to mention a particular distractor that so many in the class seem to be making.  It is so common in your posts that I thought I bring it to the attention of the full class.  This is about the misuse of the word "myself."

proper use of myself - tribunedigital-chicagotribune via kwout

Can I get your meaning from what you write even if there are distractors in the writing?  The answer to that question is, yes I can.  The follow up question, then, is to ask - why do I need to avoid distractors?  The answer is that you communicate many different things with your writing, some of which you may not be aware that you are communicating.  One of those is whether you care about the writing (and indirectly whether you care about making a good impression on the reader).  Having distractors in your piece may show you don't care, especially when English is your native language.  Alternatively, it shows you were poorly educated about proper English.  Neither of those things are desirable to communicate.  

* * * * * 

Here is one suggestion for how you can self-educate and improve your chances of rising in the ranks of management at wherever company you find gainful employment.  This will help, in particular, in making the leap from middle management to senior executive.  You need to spend a significant amount of time each week reading high quality generalist writing meant for an intelligent audience.  This will expose you to ideas that are well thought through and expressed in writing that is high quality.  I am talking about reading one of the major newspapers on a regular basis and/or reading well respected magazines.  You would do this in your leisure time.  Some of your leisure time needs to be devoted to self-education in this way.   If you find yourself commuting - taking a train into work - this sort of reading is a fine activity to do on the ride.

Of course, you won't do this unless you find such reading enjoyable.  After all, leisure is meant  to provide enjoyment.  Like many activities, we get enjoyment from things where we've developed the habit already.   If you are not doing this yet, the first several times you read such pieces it may not be enjoyable at all.  It may seem like work, rather than play.  That is to be expected.  You have to get past that phase.  You get better with practice and the enjoyment comes when it isn't such a struggle.  

Now I will make one other point.  I find our news quite depressing these days and even well written pieces on news topics are hard for me to digest.  So, perhaps, you don't want to bludgeon yourself with bad news.  You then need to pick and choose the pieces you read so you can get at interesting ideas that are more uplifting.  They are out there, though you might have to spend some time looking for them.  

Team Preferences Over Papers For The Course Project

If your team has figured out its preferences of which paper to do, could one member of the team please complete this brief form, which I will use to tabulate the preferences for all teams?

Thanks.