Sunday, October 30, 2016

Update on Review of Papers

I had some health issues yesterday and only started to look at the papers today. It has been going slowly.  I hope to have them all done by end of day on Tuesday.

Here is a little general reaction on everything I've read so far.  Jargon from the paper under review gets introduced without giving a definition of it in plain English.  I've already encourage one team to produce a glossary as a prior exercise to writing the paper.  Perhaps each team should do that.  Whether you include your glossary as an appendix or just do it for you as a first step in the writing, I leave to your judgment.

The other big deal issue is giving reasons why as you say what the author argues.  The reasons why are the heart of the paper.  Then you illustrate those with examples.

Some people are doing this a bit better than others.  Nobody I've read yet is doing it really well.  Part of the reason why my reviews are taking a while is that I have to determine what sort of feedback will get you to do this reasonably well in the second draft.

Thursday, October 27, 2016

Wednesday, October 26, 2016

Why Health Insurance Is Different From Car Insurance

Here's a little bit on the history of health insurance in the U.S.  Note that getting insurance through your employer means every employee is paying the same in premiums even if everyone is not equally likely to access the care that the insurance is meant to cover.  So the accident in history encouraged an approach that we'll call a pooling equilibrium.

Excel Homework Due 11/2 at 11 PM

The homework is on bargaining.  Note that M&R have a discussion of bargaining in Chapter 5.  You should read that.  The model they go through has both the buyer and seller having two types.  In the Excel homework, the model has a continuum of types on each side of the bargain.  In that sense it is harder but also more elegant.  And, I believe, it should give you a better understanding about the relationship between the private information and the inefficiency  created.

There is a fiction in the model that helps to understand what is going on.  The fiction is that there is a third party - an arbitrator - who provides rules for how the bargaining will happen, when trade will occur, and at what price.  The fiction is necessary because the model is static.  Real world negotiations happen over time and to model that correctly one needs a dynamic model.  There are such models, but they are well beyond the scope of our class.  So we will keep the modeling relatively simple and wave our hands about what happens in real world bargaining.

There is a rather extensive discussion in this homework before you log in.  I encourage you to read that carefully and not gloss over it.  It is about how to bargain well and what happens in real-world procurement, which entails a good deal of such bargaining.  There are practical lessons here that you can carry over to your work life, even if you don't engage in procurement.

Tuesday, October 25, 2016

Not Course Related - My Prediction for Game 1 of the World Series

I will be asleep before the end of the fifth inning.  I wouldn't bet against that one.  As to who will win the game, it's an exciting matchup so let fate decide.

Monday, October 24, 2016

What make for successful teams?

I thought this piece was an interesting read for the class on several grounds.  The notion of social capital is quite interesting as is teaching empathy.  And, just to make the world seem quite small, Carol Vallone who ran WebCT is one of my contacts in LinkedIn and our campus was a WebCT client when I had my campus job of Assistant CIO for Educational Technologies.  On campus, that was called Illinois Compass.

Friday, October 21, 2016

Modeling Insurance Supply

While I covered the demand side pretty well in class yesterday, demonstrating the fundamental result that if insurance is priced in an actuarially fair manner then then insured demands full coverage for loss, I glossed over the supply side.  So here is a bit on that.

We would like to consider both the case of perfect competition in the long run and the case of pure monopoly.  Perfect competition in the long run means firms make zero economic profits.   The mental picture of this is that there are many firms, each one small relative to the size of the market.

If there are many small insurance companies one needs to ask are they nonetheless large enough to get the full benefits from diversification so they can be taken to be risk neutral.  In other words, there is some tension between having insurance companies get the full diversification benefit but assuming no individual firm has market power.  The waving hands I did in class was meant to assume away this particular difficulty.  In reality, there are several insurance companies that are name brands (you know their TV a good neighbor) and they do have some market power but they also do compete with one another.  The oligopoly case then is more realistic, but it is harder to model, so we won't do that in our class.

For the most part, we will then make another highly simplifying assumption - the only costs the insurance companies have is the payout of coverage in the event of loss.  In the perfectly competitive case this means the premiums just cover the expect payout of coverage.   That is how we will model perfectly competitive supply.  It can be interpreted as saying there are no fixed loads and the variable load equals the probability of loss.  This makes the math of supply very simple.

One can extent this a little bit if there are administrative costs per policy that the insurance companies need to cover.  Then in perfect competition there would be a fixed load, to cover those administrative costs, but the variable load would still equal the probability of loss.  In either case, we will then assume that supply is perfectly elastic at that price, which is what a long run supply curve looks like in a constant cost industry.  That keeps things quite simple, which is good, because the interesting issues are on the demand side.

Thursday, October 20, 2016

For Class Session Today

PowerPoint that reviews the blackboard presentation from last class.

Brief PowerPoint that has the basics of the demand for insurance.

Akerlof's The Market for Lemons

                Brief video to illustrate the adverse selection problem in insurance markets (this video assumes the policies will have full coverage so is simpler than next week's Excel Homework.)

Spence's Job Market Signaling

               Rounders - an interesting take on high stakes poker, one example of signaling outside the labor market.

Wednesday, October 19, 2016

Excel Homework Due October 26 at 11 PM

This one you should find interesting.  It is on insurance under private information.  A person could be a low risk (low probability of loss) or a high risk (high probability of loss) but there are no distinguishing features that lets the insurance company know which type an individual is.  The individuals know which type they are, but if low risk types get better rates then both types have incentive to claim they are low risk.  The market must somehow address this incentive problem.

Note:  In years past students have had a hard time understanding when a pooling equilibrium will occur and when a separating equilibrium will prevail instead.  I plan to cover that in class after the homework is due. 

Tuesday, October 18, 2016

The Basic Insurance Model

Because the blackboard was in such bad shape and I wasn't sure whether students could read what I was writing on the board, I made a little PowerPoint to review what I did in class today.  When I continue with this stuff on Thursday, I will do it in PowerPoint.  I won't do very much of that, but I will do some.

For class session today

The question nobody asked in their posts but should have:
What was the reason for this prompt?

Let us recall a distinction we've made in class previously between
(a) information that is verifiable (by a third party),
(b) information that is observable (by the parties in contract) but not verifiable, and
(c) information that is not observable (meaning one party has the information but the other does not).
Which of these is most relevant to what we will be studying in the next few weeks?

The life-cycle model of consumption.  This graph is useful to keep in mind when considering income risk.

What causes income to rise during one's working life?
Economics answer - It is a return to human capital.
Normal person's answer - it's what happens when you get promoted.  So the rising portion of the curve is associated with climbing a job ladder.

What might block moving up to the next rung on the ladder?

The Peter Principle - People rise in an organization till they reach their own level of incompetence.

Are there things you can do now or things you've already done that can shape how you'll performa after being promoted a couple of time?  

Non-proximate causes - The Fifth Discipline

Life lessons - School of Hard Knocks (Experience)

Are there prior experiences you have had that will shape your performance as you climb the job ladder but are not anywhere on your resume or on your transcript?

Can you identify any such experiences?

A big deal issue with your generation as perceived by mine:

A blog post written by me called Slapball, written before The Overprotected Kid came out, which is partly nostalgia for childhood and is partly a description of how kids played when they didn't have adult supervision during the time I was growing up.

Monday, October 17, 2016

Friday, October 14, 2016

Does the behavior in marriage translate into like behavior at work?

The piece linked below is about how well people do in marriage and the factors that make for success or failure.  So, on the one hand it would seem to be entirely out of scope for our class.  Yet on the other hand, I find the parallels with the gift exchange model we have talked about quite striking.  I wonder if you'd agree.

Thursday, October 13, 2016

Some things I forgot to say in class today

You will note that I teach without notes.  This is an old habit that encourages me to be mindful in what I am saying during the live session.  When I used to teach with notes I would go way too fast for the students.  This helps to regulate the pace.  But my memory isn't what it once was.  So I miss saying things I had planned to say.  Also, sometimes things occur to me only after the session that didn't come to mind during the preparation.

On determinants of risk aversion -

Some diversification happens over time.  You try one venture now.  A few years later you try something else and then again a few years after that.  When you are younger, there are more possible episodes, so a greater chance to diversify these things.  This gives one simple explanation for why younger people maybe tolerate risk more than older people, something we mentioned in class.

Risk attitudes almost surely correlate with personal wealth.  People of modest means typically can't diversify their wealth, which may be tied up entirely in just a few assets (home, car, perhaps one bank account).  Wealthier people can have a more balanced portfolio and thereby make themselves immune from idiosyncratic financial risk.

On economic forecasting - 

Don't say I didn't warn you.

On the class project - 

There are currently two posts on the class site that give instructions about how to proceed.
This one gives information on structure and formatting.
And this one gives information about timing and process.

Also let me say that co-authors argue and that arguing is a good thing.  That doesn't mean being rude or intolerant.  It means offering up your view based on your current understanding of what is going on.  Disagreement in this setting can happen and when it does it is a good thing.  It means there is a tension that needs to be resolved.  Coming to a resolution in a reasoned way is a way to learn.

However, sometimes the learning gets cut short because there are deadlines to be met.  That's how it goes.  Dealing with deadlines is an important life skill.

Finally on Econ in the News - 

I normally would not link to a piece like this because it has a bit of a political angle and I am trying to keep national politics outside our course.  However, in the section that discusses the work of Jason Furman, there is mention of monopsony in the labor market.  As we mentioned that in class while reviewing the Excel homework with transfer pricing, I thought it worth noting here.

Are you rational (in an economics modeling sense)?

We will use this Excel workbook for an in class demo today.  But I won't go over the third worksheet in class.  You should do that yourself.  (It will take perhaps 10 minutes).  It has some small experiment for you to try and then gives an explanation afterward.  Don't read the explanation till after you try the experiment or you will ruin it.

Wednesday, October 12, 2016

Grades Updated - Including Blog Posts First Half

I am sorry this took so long to do, but it is now done.  Let me explain where we are:

1.  The Excel Homework scores are now all correct.  There were a maximum of 40 possible points here for the tutorial, efficiency and equity concepts, strategic approach to efficiency, and coordination mechanisms.  Each submitted homework gives 10 points.

2.  For the quiz that was just to try out Moodle quizzes, for everyone who did them I gave the full 10 points, even if you got something wrong.   The content was not relevant to the course, so I rewarded doing it.

3.  The actual quiz was auto graded in Moodle.  That had a 50 points max.

4.  The last thing I did, which took quite a while, was to assign points for the blog posts and to give comments on how to improve your blogging in the second half.   There were 150 points max.  Nobody got all the points but I believe I was pretty generous overall.  The average was not quite 125 points.  In coming up with this I relied more on getting the work in regularly (or not) than on the quality of what you posted.  Truthfully, it is too early to grade your on quality.  You are still getting your feet wet with the blogging.  Post quality will matter more in the second half allocation of points.

Do note that this.  In the second half I will not accept any posts that I do not see by Sunday evening at 6 PM, unless the student has contacted me ahead of time to explain some issue of why the post is late.  As I said in class yesterday, it is just too hard for me to track the late posts and keep up with the class.  I hope with this to encourage everyone to get their posts in on time.


The upshot is that 240 real points have been allocated and then 10 points more for that one little quiz in Moodle to test out the functionality.  So that is almost one quarter of the points in the course.  Based on that you should be able to track how you are doing.  I know you care about grades, a lot.  Though I am definitely not as wise as King Solomon, my hope with this approach is to encourage all students to put in their best effort in the second half.


Now let me conclude with an ethical dilemma, which is about comments on the blogs and what it says about that in the syllabus.  Some of you have done that with some energy.  Others have not done it at all.  I am not sure why.  What I'd like to encourage is that people do comment with energy for the rest of the class.  So for the time being, I have not assigned these grades.  (It says 75 points in the grade book.)

If I graded by the book the people who haven't commented at all would get zero, meaning they'd really get slammed.  I see little good in that.  However, I don't want to ignore the effort of those students who have been commenting in earnest.

So I've been thinking about giving every student some base level of points, B, and then awarding the remaining 75 - B points on a performance basis.  Doing this is NOT IN THE SYLLABUS.  So it should be considered by the class.

I do want to point out that I don't grade on a curve.  Your own grade is not impacted up or down by the performance of your classmates.  I hope you understand that as you consider this alternative approach to grading the comments for the first half.

The Nobel Prize in Economics

This is the announcement of this year's winners, Oliver Hart and Bengt Holmstrom, who have done fundamental work on contractual incompleteness (the inability to specify all contingencies in the contract).

And here is an essay by last year's winner, Angus Deaton, on The Threat of Inequality.  It is an accessible piece meant for a general audience.  (The link should work if you are on the campus network or if you use VPN from off the campus network.)

Making comments more effective - how and when

Yesterday in class we spent some time talking about one of the pitfalls possible with vertical (power) relationships, namely the subordinate sucking up to the boss.  I brought this up because I thought some students tried to do that with their most recent blog posts.  It actually took some effort to construct a post that way, I am appreciative of that effort, but at the same time it would be much better for students to voice their own point of view and thereby develop that in a deeper and more confident way.

There is a different but similar issue with horizontal (peer) relationships, especially when the people don't know each other very well and the person sending the message wants to be polite and friendly.  Then one is apt to say something rather bland, more encouragement than substance, a pat on the back rather than an thoughtful provocation.  Our world is now filled with - have a nice day, LOL, various emoticons, and other similar messaging that may serve some useful social function but doesn't produce learning in the recipient of the message.

If taken to the extreme, there is the risk that this sort of thing can lead to a "hive mind" which is not capable of independent thought.  (On the entertainment front, an excellent depiction of the hive mind is in the Borg, part of the Star Trek Next Generation series.)  I leave it to you whether the hive mind remains an issue in real life.  I am using it here rhetorically to set up its opposite.

I learned about this after I had taken extensive leadership training, which at its conclusion offered up several things we might read.  One of those was the Contrarian's Guide to Leadership, a book that does provoke one's thinking.  If you click on the Look inside link, you can get to the first chapter of the book, which is called Thinking Gray.  I encourage you to read it.  It will challenge you, not because it is difficult intellectually, but because it is different from what you are used to.  Virtually every student in the class expects right answer and right ways of thinking about a situation.  So the issue is whether students can try on a different hat, one where there aren't right answers so much but rather multiple points of view, each with something to speak for it.  A thinking gray leader tries to maintain multiple points of view and, this is the part that will drive you nuts, doesn't commit to one of those being the better point of view, until it is absolutely necessary for making choices.

So you might consider your job when offering comments as getting the student who wrote the post to consider a potential different angle for looking at the topic.  I'm hopeful that with this orientation the commenting will become more valuable both to the student making the comment and the one receiving it as there will be a more evident value add.   I will note however, that coming up with such a comment might not be immediate, so let's consider timing issues below.

- - - - -

I also suggested in class yesterday that at the author's discretion part of the blog post can be more on the topic from the previous week.  (The other part would be on the current topic.)  Reflection is a way to continually make connections between posts, something I'm definitely trying to promote.  Given that, comments might encourage deeper reflection and clearly more interesting comments are more likely to do that.  So let's abandon the requirement that the comments on other students' posts need to be done before Tuesday's class, which was based on the idea that everything would be wrapped up in a bow via the class discussion on Tuesday.  That was naive of me and probably encouraged students to make trivial comments.  Teammates might discuss among themselves when they are likely to be writing their blog posts and when, as a consequence, they are apt to review the comments of their teammates in a way that might be incorporated in their next reflection.  I hope you can internalize the timing so that it works for each team member.

Let me close about the poster responding to my comment.  I would still like that to happen before the Tuesday class.  I hope that is sensible and do-able.

Tuesday, October 11, 2016

I made a small error in the grade upload to Moodle

This is why I hate clerical work.

In uploading the scores for the Excel Homework on Coordination, I mistakenly called the homework by a name for a previous assignment.  So the Excel grades need to to be changed to have the right entries in the proper columns.  Once that is sorted out, I will get to work on assigning scores for the first half blog posts.  That will almost surely be tomorrow rather than later this evening.

I apologize for the delay.

If you can have a look at this

And if you'd like to offer some reaction, please do so as a comment to this post.

Monday, October 10, 2016

For class session on 10/17

Connecting the dots

From my grade book on tracking the last several blog posts.

The prompt and student responses as a game of charades.

Cultural Literacy - For making connections and communicating about them.

Blogging with threads

Excel Homework Due Wednesday October 19 at 11 PM

Note - so you can start making some progress on your projects and so you can do the background content for this Excel homework, I am having no Excel homework next week.  This one is pretty easy.  The next one after that is harder (but much more interesting).  I will make these homeworks available early so if you want to progress faster you can.

This is the homework on the Math of Risk and Risk Preference.   While you might be able to grind through it without viewing the content in the previous post, my expectation is that you will have done so.  It will greatly increase your understanding of what is going on.

Also, if you are an eager beaver in the crowd and do the homework before class this Thursday (I applaud the eager beavers in the class) note that when you get to line 86 of the spreadsheet it says we have covered these ideas in class already.  We should get to those ideas on Thursday, if only briefly.

Please look at this before you start the next Excel homework

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 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.

Friday, October 7, 2016

Salary programs, inflation, and the rest of a unit's budget

In reconsidering our in class discussion yesterday, particularly when a student asked, "what about inflation?"- I was probably too flippant with my response, "forget about inflation."  So here I want to consider this a little more and explain how the process is more complex than I indicated yesterday.

First, on the salary program itself, which let's say is 3% just for the sake of discussion, some fraction of this, let's say 2% out of the 3% is meant to be applied across the board to hold faculty and staff harmless from the effects of inflation, while the other 1% of the 3% is meant to pay for a merit increase.  There is no guarantee that every employee will get at least a 2% increase.  So an employee who got no raise at all or just a 1% raise would take a real decline in salary, when adjusting for inflation.  That is possible.  (I don't believe a negative percentage raise is permitted.)   Likewise, how merit increases are allocated have no hard and fast rules.  Whether those are near uniformly distributed or are restricted to only one or two start performers depends on the unit and the inclinations of the supervisor who makes the salary recommendations.  I should add here that if an employee gets an outside offer the unit normally has a chance to respond, matching it or even bettering it some, as a way to retain the employee.  Since offers don't always come near the time of the salary program, the revenues for that have to come from somewhere, meaning from a higher level in the hierarchy, outside of the unit's budget.  Then when the salary program is applied, that person is taken out of the equation.

Next, on expenditures other than salary that might be subject to inflation, there are two points to consider.  First, the campus as a whole maintains a budget line for something called unavoidables.  This includes the health insurance premiums and the mandatory life insurance premiums that are part of each employee's benefits package.  It also includes things like the cost of utilities, which may vary from year to year based on the weather, and it includes other costs that are incurred because the campus self-insures on a variety of matters and sometimes must make payouts to settle losses.  The point is that in the budgeting many of the costs are covered at a higher level and are not in the unit's budget.  So, for example, the air conditioning in DKH is not paid by the Econ Department.  It is paid by the campus.

Then, the last part to note is that some of the unit's budget comes from sources other than off the top funding.  Gifts may be given directly to a unit.  Or consider grants.  Typically a faculty member will write a grant proposal but then run the grant through the home unit.  The grant includes an item for ICR (indirect cost recovery) to cover the costs of administering the grant.  The ICR is split between the unit and the campus.  And the unit may come up with new programs that generate additional revenues.  In some cases (particularly with gifts and ICR) the monies don't have to be spent in the fiscal year in which they are generated.  The monies can be carried forward.  So a unit likely has some cash reserve that can be used as a buffer to cover cost increases on non-personnel parts of the budget.

The above is the story as I understood things when I worked in the campus IT organization, which was more than 10 years ago.  The main difference now is that the campus has experienced a massive downsizing in its appropriation from the state of Illinois.  So everyone is scrambling to figure out what the new normal looks like.  We are still in the midst of the adjustment process.

Thursday, October 6, 2016

Since we talked about determining whether a person is trustworthy

I thought students might find the piece linked below interesting, as well as the snip I captured from it.  While this piece is for new assistant professors, much of the tone of the piece should apply equally well to new junior executives who have just become managers.

There is one caveat I want to add.  If you have a technical competency and you were hired, in part, for that, it may be your skills are not replicated in your colleagues.  So they may not be able to understand your work at a deep level because they don't have the necessary background.  That issue is ignored in the linked piece.  It does matter, sometimes quite a lot.

To do list

This is meant to assist you in organizing your own efforts for the course.  These are ordered by importance/immediacy. Also note that there is no Excel homework for next week, in part to help you accomplish the third and fourth items.

1.  Take the Quiz in Moodle. It is available now.

2.  Write the blog post due tomorrow evening.

3.  Read the paper your project team was assigned.  This may be a challenge.  These papers are for the most part not intended for an undergraduate audience.  So if you have questions on what you are reading write those down.  (In other words, take notes.)  This will be a readying activity for you to meet with your team members and discuss the paper.

4.  There is some online presentation/lecture material on our next topic.  It will be available on Monday.  I expect it to take you under an hour to review.  Some of it is on content in Econ 202.  Some of it is on risk preference, which you may have not seen before.  Please do go through it in advance of the Excel homework due a week from Wednesday.

Tuesday, October 4, 2016

Some further observations about revenues and costs with undergrad education at the U of I.

I'm not sure whether I connected all the dots in class today, so here are some things to consider and some puzzles that still need to be resolved.

The old model 

Back when I started at the U of I in 1980 and as recently as 10 years ago, there were comparatively few transfer students.  So there'd be fewer sophomores than there were freshman the previous year, because of some attrition, and there would be still fewer juniors than sophomores, etc.  On the other hand, expenditure per student (the cost of the instructor, the TAs, and any other personnel involved in teaching the course) was much lower for freshman, who took a lot of large lecture classes, than it was for seniors, who were in smaller classes.  So, in this sense the first year and possibly the first two years provided a subsidy (profit) to pay for junior and senior classes that were more expensive, since they had much smaller class size.

Why the old model stopped

Tuition, not just at the U of I but nationally, has grown in a hyperinflationary way since I started as an assistant professor.  (This means that the rate of increase in tuition has surpassed the normal inflation rate, so in real terms tuition has risen.)  Indeed, the in-state tuition now at the U of I is definitely higher in real terms than the tuition my parents paid for me to attend Cornell (a ritzy private university) back in the 1970s.   Tuition was not a big deal when I went to college.  It is a big deal now.

The politics of that, especially in the last decade when the U of I changed its approach and became quite aggressive about tuition, suggested there needed to be ways for people of modest means to be able to afford getting a degree from the University.  So an idea was developed, I believe originally in California which has several really great public universities, that affordability could be found if students first attend  community college, which has much lower tuition, and only after that transfer to the University.  This was the so called 2 + 2 model.  It was quite popular politically.  After embracing it, the U of I started to accept many more transfer students.


Those transfer students weren't taking nearly as many of those high enrollment courses that subsidized the rest of the operation.  So the question is whether their tuition is covering the marginal cost of their instruction or not.  (I don't know the answer to that.)  However,....

We went to the new model prior to the financial crisis.  

The new model might still make sense economically, even if the U of I loses on each transfer student, in the sense that expenditure on these students exceeds revenue generated from the tuition they pay, as long as the shortfall is made up elsewhere.  The obvious source of elsewhere is the State of Illinois, which gives tax revenue to the University.

But since the financial crisis, the state has been much stingier in what it contributes, not just to the U of I but to all public universities in the state.


An interesting outcome that I haven't seen discussed anywhere, and I do read about these issues a fair amount in the Chronicle of Higher Education, Insider Higher Ed, and more general news outlets is time to degree for transfer students.  Tuition, after all, is paid semester by semester.  It is not a fixed price per degree.  It is a burn rate per term.  A simple, though not particularly satisfying, solution to the issue of transfer students not providing enough of a subsidy to cover the cost of their education is that they take a longer time to degree and cover the cost that way.

This is the underlying issue behind whether advanced courses in a minor get staffed at a sufficient level to accommodate the demand.  The lack of staffing then might indirectly be the way to make the student spend another semester on campus.  In turn, that may be needed to cover the cost of the education.


Please note this is simply idle speculation by me and not anything I've learned from talking with administrators on campus.   But, for our course, the take away message is to ask - how does the organization at least break even?  If it can't do that it can't sustain operations indefinitely.  That the enrollments are rising suggest somebody thinks the answer might be found there.

I did mention Bernie Madoff in class today, so I'd wonder whether this is real or a Ponzi scheme.  I, for one, don't know the answer to that.

Monday, October 3, 2016

The Tipping Point and Connectors - A different look at matching

Last week we talked about matching markets and discussed the Medical Intern Matching Program. This is one way to consider matching.  Here is a quite different way, one that gives a role to management as an honest broker.

In 2000, a very popular book came out called The Tipping Point, which was about how innovations spread through society.  (The more formal word that describes this spreading is called diffusion.)  People who embrace the innovation at first are called innovators. (That's not very surprising, is it?)  After that comes early adopters.  Both of these types enjoy experimentation and trying out new things, a reward in itself.  After that comes the majority.  (And sometimes they don't come.  Diffusion stalls and the idea fades away.)  There are key people who are instrumental in getting the majority to adopt the innovation.  One of those is called a connector.  The connector matches the innovation with people the connector believes will benefit from adoption.  Majority types then adopt as much because they trust what the connector says as because of the innovation itself.

However, not all such connections involve a general idea that diffuses.  My experience is that quite often a specific and more idiosyncratic need emerges.  The person with the need doesn't know how to address it.  That person goes to the connector to see if the connector knows who might be able to help address the need.  Often the answer to that is yes, because the connector is quite plugged into the people network, so if there is a solution the connector will find it.

Below is a link to a piece about characteristics of connectors that you might enjoy.  I agree with most of these (though not #6).


1.  In Moodle - Experiment with Quiz Function.  This closes tomorrow before class.  It will take you all of one minute to do and will give you 10 points of course credit (the same as an Excel homework).   The purpose is so you are familiar with this functionality before doing the real quiz.  In particular, you should be able to see how you did, once the quiz closes.

2.  The Excel homework on Coordination, which had been due last Wednesday is now due this Wednesday.  Please get it done.   It has important stuff in it.  Use cell references for computing formulas.  That will save you a lot of trouble.  

3.  The actual quiz will be made available in Moodle immediately after class on Thursday and run through 6 PM on Friday.  I estimate it will take you about 20 minutes.  You might want to set aside more time than that so you don't feel rushed doing it.  It is worth 50 points.