I thought this piece was interesting in light of our discussion on cashing in on a reputation.

In class yesterday I said that cashing in on a reputation was more likely to happen either if the person or organization is "end-gamed," in which case rather than go down with the ship people start to behave opportunistically to salvage what they can, quite possibly at the expense of others who get hurt by this behavior, or even if the end is not in sight then in an industry that is declining, which cuts into the rents that address the moral hazard problems.  When the rents start to shrink cashing in becomes more likely.

Newspapers are one such industry in decline.  (And if you've never read this essay by Clay Shirky called Newspapers and Thinking the Unthinkable, I encourage you to do so when you have some free time.)  The piece below I read after class yesterday.  The first paragraph in the snippet seemed to tie into our discussion quite nicely.  I thought you'd be interested in that connection, as well as what the author argues in the next paragraph.  

At present, I am not sure that profit maximzing news organizations are compatible with journalism that is arms length, avoids senationalism, and acts as a check on power.   When I was college (think Watergate) that compatibility existed.  But things have change, rather dramatically.  So I, for one, am quite uncertain as to how this will play out.

Facebook Shouldn’t Fact-Check - The New York Times via kwout

What Does It Mean To Be A Good Student

Since several of your posts on personal reputations were about your being good student, I did a search on that and eventually found the essay linked below, which I thought wasn't bad.  It is from 1997, ancient history for you, just yesterday for me.  One wonders how much of it has changed since.
The piece does say that you can grow ability.  (The psychologist Carol Dweck in here book Mindset says you can grow intelligence.)  In either case, translating that into the jargon of our course, that would be increasing general human capital.  Here, the labelling matters not.  What does matter is that practice of the right sort can improve things.

The one issue I have with this is on the matter of hard work.  We may have talked about this in class earlier in the semester.  If you are absorbed in something and it has your full attention, you may learn a lot from the experience, but it might be quite enjoyable so I wouldn't describe that as hard work.  I am told that people have different innate ability to concentrate.  If that is true, for those with that ability the learning isn't hard work.  For those who find concentrating difficult, it is more of a struggle.

If you do read this I wonder if it coincides with your view of what being a good student means.

On Being a Student via kwout

The Last Blog Post - Due Friday December 2 at 11 PM

Because of Thanksgiving, I am posting this here rather than in the class calendar.  Students do tend to monitor the class site, so I hope this will get read by everyone enrolled.

You have two options to write to.  The first is the prompt I used last year (and in prior years as well).  The second is to do a Williamson-like critique on our class based on two governance decisions that were made.

1.  Last year's prompt:

This is the last post to be done for the course.  I'd like it to be both a review and a critique.  Can you offer up some lessons learned from the course about Organizations that you didn't have already going in?  What about the pedagogic approach we took with the way the live class was structured and the online blogging.  Are there any take aways from that?  Please spend a bit of time talking about your process for doing the blogging and the Excel homework -including the preparation you do and how long it all takes.  Finally, talk about things you would have liked to see in the course but didn't or ways the approach might be improved.

2.  Williamson-like critique:

Two governance decisions were made in the class that impacted behavior thereafter.  The first is in the syllabus.  Attendance was not required for the live class session (though it was encouraged).  The second students voted on after two weeks of the semester.  This was whether students could have portable electronic devices out during the live class session.  The majority was for allowing students to access electronic devices during class.

Please describe how these rules impacted your own behavior.  Then please consider the matter from the perspective of the class as a whole.

Paper Drafts

I've now read through all the papers that were submitted.  Here are some observations/feedback/and a brief description of what is next.

1.  Only one team actually submitted a memo (which I asked for) regarding how the second draft addressed my comments.  I was disappointed that other teams didn't do this.

2.  Except for that one team I used track changes in reviewing these papers.  I expected you to still send a cleaned up version back to me and to do that before you start doing the virtual elevator speech.

3.  Every paper needed further editing and proof reading.  In some cases, the papers had a substantial number of squiggles in Word that should have been consulted.  Many times I found myself accepting the suggestions that Word offered.  This sort of thing really should be done by students, not by me.

4.  Making the deadline for the second draft right before the Thanksgiving break was a mistake.  I should have pushed the deadline to the week before.

So, to sum up, teams need to still send me a clean version of there paper.  They then need to work on the virtual elevator speech.  This is a departure from the syllabus, but I am insisting on it because most teams didn't send me a memo.

Happy Thanksgiving

With the Men's basketball game against West Virginia pretty much out of hand and my inability to watch the Dallas Cowboys play football now, yet with about 45 minutes before we sit down for our meal here, I found myself looking for other diversions.  This piece was interesting and I thought, given that you all write blog posts, that it might resonate with you.  I hope you are enjoying life wherever you find yourself now.

The Running Conversation in Your Head - The Atlantic via kwout

Second Quiz Grades Hidden

Some students alerted me that they couldn't see their grades on the second quiz in the Moodle Gradebook.  So I checked and sure enough, those grades are hidden.  I then spent about a half hour trying to figure out how to unhide those grades, but I couldn't do it.  So I sent a message to tech support (see below).  I apologize for the inconvenience.  I hope the issue is rectified soon.

Some Ideas for the Virtual Elevator Speech

I made a template Presentation for you to download and review.  It can be played in slideshow mode and then plays automatically, with background music.  The slides are meant as instructions on how to make your presentation.   So that covers the layout part.

Content-wise, the big deal is image selection.  Some thinking should go into what sort of image best represents the idea you want to communicate.  I expect that to be the bulk of the work, with there also some effort put into your slide titles to tie into the images and establish connections with your paper.  The images should be taken from the Internet, but don't use one which has a copyright notice on it.  Otherwise, everything is fair game, though do note we are a G-Rated class and your content should fit that requirement.

As to the music, it is best for it to be purely instrumental, no vocals.  This way the music complements the content on the slides and doesn't compete with it.  One possible source of such music is to find Karaoke versions of popular songs.  Here popular means for students, not for me.  Remember, other students in the class are your primary audience.  If you find such music on YouTube, there are many converters out there to make an mp3 (audio) file from the video.  I've used this one with good success.

You need to put in timings/transitions for the slides.  This requires a bit of arithmetic like this - if you have 20 slides and you want the presentation to run for 2 minutes then that is 10 slides per minute or 6 seconds per slide.  You don't need to have it completely uniform that way, but it is certainly easier.  Slides with a lot of text (you won't have many of these) should have some more time to allow the viewer to read what is on the slide.

Finally, the music should autoplay.  There are some tools for doing that.

If you need help with this I can certainly provide that, but my hope is that at least one team member will have these skills and this sort of things is something that each of you should learn, if you don't already know how to do it.

About Grades

Here are some facts about the course grades to date and also moving forward.  Recall that the course was designed to have 1000 points.  So far 415 points have been allocated and then there was an extra 10 points for that early quiz just to verify that the functionality worked.   I've looked at students performance to date and it is running okay now, so I will not make any adjustment to the grades at this time.  Also note that in spite of prior warnings, I declined to give students penalties for submitting work late.  Treat that as a gift.

There are still 585 points to allocate.  10 of those are on the last Excel homework.  The rest are for the Class Project, worth 150 points, Blog Posts and Comments for the second half,  worth 150 points and 75 points respectively, and the last quiz (the final) which is worth 200 points.

You will note that the points are "rear loaded" which means that while most of the semester is behind us most of the points are still forthcoming.  That is by design.  In class today we'll talk about seniority pay.   The concept is essentially the same here.  In the next paragraph I will  critique the approach as it pertains to grades.

I have tried in the class to separate out giving you feedback, which I think is important for learning, from giving you numerical awarding of scores on your performance, which doesn't help much and can block things especially since you learn by failing and I wanted to encourage that.  But some of you are so wound up to be aware of grades that by being less forthcoming about them I may have hindered your motivation in the class.  The rear loading of points assumes you have the rationality to figure out the rewards possible at the end of the course.  Maybe there needs to be some shifting of points to earlier in the semester just to keep students in a good frame of mind.

Personally, I'd prefer the class just to be pass-fail.  If wishing would make it so.

As to the final, since it is worth a big chunk of points and some of you might otherwise freak out about that, my plan is that between 50% and 75% of the points to come from questions you have already seen on the two quizzes (with the points in the graphs relabelled so you can't simply copy your answers from previously).  There will be some new stuff.   Exactly how much is to be determined.  Also,  the final won't be that much longer than the previous quizzes.  I will just amplify the points per question.

Update to Moodle Gradebook

I have finished the exercise of tracking your performance with the Excel Homework and the Blogging.  I have transferred those results to Moodle.  You will find 4 new grade entries for the Excel homework.  They are:
Insurance under Asymmetric Information
Bargaining
Principal-Agent Model
Bonus - 10 points.

There is still one more Excel homework on the Shapiro-Stiglitz model.  I expect that you will do that when you return from holiday.

I also made entries for 4 blog posts, those the most recent ones, with the last on the Triangle Principal-Agent model.  There is one more blog post on personal reputations, due at the end of the holiday, and then a wrap up post to review the course.

As the quiz is ongoing now and when it closes I will have been asleep for a couple of hours, in the morning I will look at those and see how the class is performing point-wise.  So there may be a message about that tomorrow.  I will also discuss this in class.

For class session tomorrow to begin our discussion about reputations and deferred compensation.

The graph below was taken from the paper Why Is Their Mandatory Retirement?  This paper is from 1979 and the labor market was quite different then.  In particular the model assumes that the employee works for the same employer for the entire working life of the employee.

In the graph, W* is the wage that is actually paid, W tilde is the reservation wage (what the employee could earn elsewhere), and V* is the marginal value product.   That the lines are straight is simply to make the graph more readable.  It is more reasonable to imagine time variation of these curves that coincides with human capital accumulation over the working life and then later some deterioration in skill due to aging  But even with the straight lines that Lazear uses, we should note the slope.  That W* is steeper than W tilde connotes a seniority premium to the actual wage.  That W tilde is upward sloping suggests that with experience some of the human capital accumulation is general human capital that has value when working elsewhere.  Recall in class we talke about a simple model where a  person's output depends on human capital, ability, and effort.  After some age (perhaps 55 or so) the person slows down (ability declines) and that trumps the human capital accumulation part.  Where the peak is surely depends on the individual and the nature of the work the person does.  Also note that at some age, the reservation wage reflects more the value of leisure than the productivity in some other job.

Likewise, the marginal value product curve is probably humped, with a peak somewhere in mid career.  I think that is more realistic, though there is no doubt that the graph below is cleaner to look at.  Economics modeling says to look at the simplest possible model that illustrates the points the author wants to make.  So Lazear's graph wins over  a more realistic alternative.

Finally, as the picture is drawn, the employee does not want to retire at T because W*(T) > W tilde (T).  So in Lazear's model mandatory retirement (which is no longer legal) gets the separation of the worker from the firm to happen when it should.  Absent mandatory retirement there needs to be some other mechanism to encourage separation (perhaps certain types of pensions will do this) or one can't rely on seniority premiums as much as one could when mandatory retirement was legal.

lazear_mandatory_retirement.pdf via kwout

Excel Homework Due 11/30 at 11 PM

This is the last Excel Homework.

This homework is on extensions of the basic Shapiro and Stiglitz model, with a particular focus on making the monitoring intensity a choice variable.

You should watch the video presentation of the basic model first.   This is a full lecture on the math of the model.  It takes about a half hour.  (If you want the PowerPoint file, a link to it is in the description of the video.)

The actual Shapiro and Stiglitz paper.
The video that derives the equations from the paper.

What I forgot to mention in class today

Multiple choice exams where individual questions have one right answer are often called "objective" tests.  The score you get on such an exam can be readily determined.  There are ways where use of the word objective may be a bit of a misnomer.  For example, since we already talked about exam difficulty, you can envision individual question difficulty.  An exam might have many easy questions and a few hard ones.  One student might get all the easy questions right but not get any of the hard ones right.  Another student might have gotten some of the hard questions right but missed several of the easy ones.  Which student did better on the test?  The typical way this is considered is by having points per question and by adding up the points for right answers.  But a different point scheme can change who is the better performer and there is nothing which tells you what point scheme to use.

This is the introduction to a topic we won't really discuss, but I should have mentioned, called performance review.  Often that is done via subjective impression of the work of the employee done in the period under review and it is much about simply reviewing whether goals were met and setting new goals as it is about measuring performance for promotion.   The U of I instituted a formal requirement for performance review around 15 years ago.  It is done separately from decisions about salary increases and decisions about promotion.  But obviously the two are related.

The last wrinkle to consider here is to combine the performance review notion with Argyris and Schon models I and II.  In particular a Model I manager probably will not value an employee who shows the manager up.  So if it is evident that the manager is Model I, there is some incentive to "suck up" to the manager as a way to advance.  Sometimes you hear expressions like "not a team player" for someone who performs well but doesn't behave this way.  (Of course, it can also apply to a truly selfish person.)  The point here is that to implement well a system of promotion based on performance where there is some subjective measurement of performance, it would be preferred to have Model II managers.

Second Quiz

I just uploaded the second quiz into Moodle.  It will be available starting immediately after class tomorrow (12:20 PM) and will go till 11 PM on Wednesday night.

The format is slightly different than the first quiz.  There are two matching questions like before.  Each of those is worth 20 points.  And there are two multiple choice questions.  Each of those are worth 5 points.  This gives a total of 50 points.

Homonyms

In the blog posts for this week a significant fraction of the class confounded principle (note the ple spelling at the end) for principal (with the pal spelling at the end).  These are different words with different meanings.

Principle - is an idea or rule.  A basic principle of economics is that the market price adjusts according to supply and demand.

Principal - the way we are using it is a person.  You probably first encountered the word in school.  The top administrator of a school is the principal.  In our setting the principal is the person who hires the agent and who pays the agent for services rendered according to a predetermined agreement.

Considering President Killeen's Massmail in Light of Our Discussion in Class

The snip below is from the IPAC Web site that is referenced in the massmail.  Note that all the metrics of performance - enrollments, retention rates, etc. are on what is referred to as the extensive margin.

There are no metrics on the intensive (quality margin).  Frankly, those are harder to come by.  In our language in class, the intensive margin includes variables that are either observable but not verifiable or variables that are not observable (at low cost).  They include things like how much students learn, how engaged students are, and satisfied students are with the education they are getting.  These things might be measured at the individual course level.  But aggregating up to the university is difficult if not impossible.

If we do emphasize the extensive margin measures, what might happen on the intensive margin?  That is a question to keep in mind with this proposal.

IPAC - University of Illinois System via kwout

Some Linked Content for the Party in Class

The Fun Theory

Wrong Answers Jeopardy

Some music Professor Arvan listened to when he was in college 

From Bob Dylan:

Lily, Rosemary, and The Jack of Hearts

This song was on the flip slide of the album.  It's really wonderful but not that well known.  The big hit at the time was called Tangled Up in Blue and was the first song on side one.   

About Bob Dylan:

Diamonds and Rust

This song is from an album by the same name.  Joan Baez has a truly wonderful singing voice and it really shows here.  She and Dylan were once a thing, maybe a decade earlier. 

From Cat Stevens:

Wild Word

This song is from the album Tea for the Tillerman.  The entire album is worth a listen.  I had forgotten about this music entirely until quite recently a friend posted something to rekindle the memory.  Then I realized that Jeep seems to be using one of Cat Stevens' songs in its current commercial.

Excel HW Due 11/9 at 11 PM

This homework is on the simplest possible version of the principal-agent model.  It is this model that produces pay for performance as a feature.  It is important to understand this base model before we delve into various realistic ways of complicating the model.  (Mostly we will talk about that but I might do some additional modeling in class after going over the basic model.)  There is a video I'd like you to watch first.  It should give you the background you need to do the homework.

Video