Sunday, September 18, 2016

Opportunism and Economic Inefficiency In Econ 490

This Monday marks the start of the fifth week of the semester.  A student who is doing well in the class should begin to have a good picture of what the class is about.  I am afraid, however, that most of the students do not because so far they have been merely going through the motions.  These failures are a shared responsibility to correct.  For my part I need to alert you to the issues, encourage you to adjust your behavior for the rest of the semester so the course is more meaningful, and provide whatever motivation I can for you to up your game so you can get into taking a mindful approach to the coursework.  For your part I hope that you rise to this challenge and encourage your classmates to do likewise.

Let me review the recent past that prompted this post.  I will make reference to three things where the under performance was considerable:  (1) The blog posts on opportunism.   (I have now read through all that have been submitted so far.  If you haven't done so yet but get your post in today I will read that as well and comment on it.)  Below I will describe the issue with these.   (2) The in class experiment done last Thursday.   I've written a previous post about that so won't discuss it further here.  (3) Class attendance.  Last Thursday we fell below 50%, with 12 students out of 31 when the class started and one more student arriving about a half hour later.  I will offer up some conjectures about why attendance has never been very good and has fallen off as of late.

I do plan to discuss these issues in class on Tuesday.  If you would prefer to comment online about what I say in this post or do so as a way to move the in-class discussion along on Tuesday, that would be very good.  I am striving to keep this post at a high level with a positive tone, in spite of the recent subpar performance.  I hope you can do likewise.


Here is the definition of opportunism:

The definition includes an ethical dimension.  The opportunistic individual benefits at somebody else's expense.  If your blog post didn't include the ethical dimension in some way, shape, or form then you weren't writing to the prompt.  Many students wrote about opportunities foregone, perhaps an interesting reflection in itself, but otherwise not related to the course.

Just to give one concrete example of such opportunistic behavior, so there isn't any doubt as to what we're talking about, consider this piece from 5 years ago about a Law School Dean at the the U of I misreporting test scores of entering students to boost how the U of I did in the Law School ratings.  Other examples of opportunistic behavior, which are definitely not as egregious but are opportunistic nonetheless include: cutting in line in front of a person who is waiting but not paying attention, not reporting cash income on your income tax form because there is no record associated with the transaction,  and driving over the speed limit but then slowing down when a police car comes into view to avoid getting a ticket.   To a certain extent we are all opportunistic in some of these ways.  The real issue is how egregious is the ethical failure and what might be done when that failure is rather serious.

In the case where you don't write to the prompt but then produce a blog post that requires some effort, this is clearly inefficient as far as advancing course goals.  But if it was only the author who was harmed there wouldn't be an ethical dimension.  Our process, however, has others read your posts and comment on them.  Those others are me and your teammates.  It is causing these others to dissipate effort in an essentially unproductive activity where the ethical dimension lies.  So each student has responsibility to write to the prompt or, if they choose to write something else, which is their prerogative to do, then to establish a connection between what they write about and course themes.

There is then the matter why so many students made the error of confounding opportunities with opportunism and whose responsibility it is to prevent such an error from happening.  It may occur to some of you, for example, that I should have posted the definition of opportunism in the prompt.  This would get the students off the hook and put the ball squarely in my court.

In fact, this is what I did.  During the first few minutes on Thursday, before we ran the experiment, I finished up our overview of transaction costs by giving a pretty hokie demonstration of the holdup problem, followed by a brief discussion of the problem more generally.  I then described this week's blog post as getting at some of the issues with the holdup problem from the prior experiences students have actually had.  Whatever can be done to prevent holdup from occurring is a transaction cost, maybe the most important type of transaction cost.  I discussed this in the context of vertical integration, where a firm would be merged with its own input supplier.

So I gave a fairly rich explanation of opportunism as it applies in the context of our course, but did this in class.  Some of you seem to be operating as if this is a totally online course with optional face to face sessions.   That's not how I see it.   In any event, if you choose to miss class, for whatever reason, it is your responsibility to make that up.  So the responsibility of understanding the difference between opportunism and opportunities, an important distinction, is on those students who missed last Thursday.


Let me turn to the attendance issue itself and my diagnosis of what is at root here.  It speaks directly to course themes.   The core issue issue is that rather than view their job as making good meaning of course themes, many students take an accountability approach, not just to my class but to all their classes.  By this I mean that students pay attention to where course credit is earned (in our class that's Excel homework, blog posts, etc.) but ignore everything else that comes in between, especially where the connection between the course credit stuff and the other stuff is not self-evident.  And with the course credit stuff the students then satisfice in a way to get through the course.  I'm afraid this a learned behavior that has hardened into habit and is largely a consequence of the excessive testing that students in your generation have had to go through.  I truly regret that my generation opted for that approach instead of an alternative type of education that is more nurturing of learning.

The accountability approach can't work in our class and I believe it largely doesn't work in most college courses.  One clear reason why it can't work is that I can't assess you nearly enough for you to produce a meaningful understanding of course content.  I'm already maxed out with the way we are doing things now and there would need to be a lot more work that is assessed if it all came through that door.  The other reason, equally or even more important, is that you must keep a skeptical eye to what you are learning.  If what we cover doesn't jive with your experience, you should push back at it.  You need to become an independent learner on your own and not be my stooge just because I'm the professor and you are the student.  But to be an independent learner, you have to drive your own learning to a great extent.

There is then that following the accountability approach in this way tends to promote mindlessness, which is what we've been experiencing recently.  We want you to make a mindful approach to the subject matter and indeed to all your studies.  I strongly encourage you to read this essay by Ellen Langer on Mindful Learning.  Among other things, it will show that what I am encouraging you to do has a strong basis in psychology research.

And then there is that my absolute favorite model for our course is Akerlof's model of Labor Contracts as Partial Gift Exchange, which I covered on the second day of class and which I've mentioned multiple times since.   I believe you have to walk the walk if you are going to talk the talk.  So I really would like students to experience gift exchange in our course.  I've already discussed this above with regard to the blogging.  There is a section of the Syllabus about attendance.  You might look at that again from the point of view of gift exchange and commitment to work.  This is a different sense about walking the walk, one that might not have previously occurred to you.  In contrast, if you follow the accountability approach in all your classes, then your effort from class to class bounces up and down based on wherever the next deadline is coming from.  And as we near midterms you have to stop paying attention in those classes that don't have pending obligations.


Let me wrap up.  As I said at the outset, my intention with this post is to encourage students to up their game.  Nevertheless, I can imagine that many students reading this will want to know, what will be the consequences for me grade-wise if I don't do that and just continue as I've been doing?  Can I still pass the course by doing that?

Please understand that there is moral hazard for me in addressing this question, because this is an outcome I really don't want to see.  But I will try to give a straightforward answer here.  You definitely can't earn and A or B that way.  The syllabus says I don't like to give a grade of D, which is true.  So there is the issue of where to draw the line between a C- and and an F.  That's a judgment call.  I will make the judgment as I see the overall class performance.  However, I encourage you now not to flirt with that boundary and indeed to take the full message of this post to heart and then act accordingly.


  1. A student posted this elsewhere on the class site:

    Harold Demsetz Econ 490 fall 2016
    September 20, 2016 at 12:28 PM

    Professor Arvan,

    I have read through your recent post about class attendance and other issues regarding the progress of the class. I may be speaking for myself here, but many of the posts on here seem to be extremely long winded, and eventually tie into the point you are trying to make. I feel a little more clarity about issues, would be appreciated by the rest of the class. What I mean by this is, the recent post about class attendance, and other course issues, was close to 15 paragraphs long. While I am not saying I do not have the ability to read all 15 of those paragraphs, I do feel that the message could have been communicated in a more concise way that would eliminate some confusion. I appreciate you taking the time to read this comment and I hope you take my suggestion into consideration.

    Very Respectfully,

  2. I do have a reputation for being long winded. So let me give a much terser response here. I want students to:
    (a) act in a responsible way, and
    (b) be mindful in doing their course work.
    Beyond that, I'd like to leave much discretion to the students. If you want clarification on something procedural, ask. Don't, however, expect prior approval on your expressed point of view. If you think that leaves much ambiguity, good. Ambiguity is the essence of what our course is about.