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Economics & Personal Finance

23 Posts


Posted by cmares28 Aug 6, 2012

What motives a student to achieve in school?


Short answer - I don't know. The difference between the student who receives straight A's and the student who would rather look out the window than listen to a word the teacher is saying is a multifactorial problem. I don't know what motivates a young student and what may work with one may not work with another. There may be some sort of common rules or techniques that may be useful but there are unknown to me.


During the past few months the question of what motivates us has weighed heavily on my mind. I have done some research into this area and I wanted to share a few of the things that I have learned that I think are important.


The first is one that I have learned from a man named John Allison. Mr. Allison was the former CEO of BB&T Bank. In a lecture that he gave to students at the Darden Business School at the University of Virginia, Mr. Allison spoke on the topic of Leadership and Values. Video here. (Poor Quality, but worth an hour of your time). The key portion that I took away in this context is Mr. Allison's advice to managers, especially younger ones. I think that the message is applicable to teachers, especially young ones.


You are not responsible for the choices that your students make. You are responsible for teaching them to take responsibility for themselves.


Getting a student to recognize what's in their own self-interest is not any easy task. There is always uncertainty associated with any one path versus another. Doors open through education, work experience and extra cirriculars when you are young. There is less uncertainty when a student does not take ownership over their choices. Doors close through making bad decisions. These are sometimes referred to as temptations. Mr. Allison put it another way - "Temptations are reasons to fail."


More to come on this topic in future posts.


For more resources on John Allison a google search should provide enough to get started.


Also, feel free to check out this Econtalk episode featuring John Allison on Strategy, Profits, and Self-Interest.

I read a lot of articels and blog posts on the web. Web pages are messy. There are ads, links and other clutter all over them. Income for websites is generated from advertisments. Advertisers pay for ad space based on web traffic. Therefore the creator/s of the website want to keep you on their site as long as possible, hence the clutter. I am fine with the clutter in between reading. I would like to know what other content is on the site. But when I am reading its distracting and I don't like it. What to do?


A free online web service from readability.com provides the solution. They offer a free downloadable icon that appears in the toolbar on your webpage. Click on it and change your webpage from this:


Screen shot 2012-07-17 at 6.51.26 AM.png


to this:


Screen shot 2012-07-17 at 6.51.59 AM.png

OR this:


Screen shot 2012-07-17 at 7.09.28 AM.png

to this:


Screen shot 2012-07-17 at 7.09.57 AM.png


Feel free to check it out - readability.com

Remember this commerical. It's a Xerox ad from 2003. The student understands that technology is going to change the way that the publishing industry works. Their model was outdated. The commercial is nine years old and the student's view of what was coming in the world of publishing is now outdated. Printing off one book at a time? Why even print the book when you can read it on your tablet or your cell phone? The student did not see the kindle or iPad coming. The opportunity to get published is now even easier than could have been imagined not even a decade ago. The decrease in the barriers of entry into the world of publishing could have substantial implications in education.


The textbook in its current form will be the first thing to go. I don't just mean the large bulky thing that makes backpacks heavy. I am also referring to the way in which a textbook is written, distributed and implemented in the classroom. Soon teachers will have the ability to create and implement their own textbooks. The teacher can write and add content to the book themselves, update the material each year and implement their own work in the classroom. Here is a preview of what is coming.

Lesson in creative destruction and entrepreneurship:


A new invention spells disaster for the little paper or plastic cup that we keep in our bathrooms. The new Rinser toothbrush with Power Fountain from Amron-Oral provides a ready stream of water for rinsing after brushing your teeth. Long gone will be the days of using a paper cups to rinse out your mouth. There will be no more agonizing about bending over to drink the water directly from the faucet if you should run out of cups.

A Free-Market is based upon an institutional framework, voluntary exchange, property rights, the rule of law, etc. If you change the way that the institutions operate, you will change the outcome of events. The problem we face with our analysis of economic phenomena is that it is hard to observe counter-factual outcome. An example: policymakers often argued in 2008 that if the government had not intervened that the economic outcome that would have transpired would have been much worse. Critics of the intervention imagine a different counter-factual, one where the intervention actualy made things worse than they otherwise would have been. Because neither side can provide an undisputable empirical analysis, neither side can win the argument. All the economist can do is make an estimate based on certain assumptions.


However, proponents of the free-market do have some very large natural experiments and empirical data that they can point to on institutional analysis in other areas. The 20th century was defined, in economic circles, by the debate between the free-market (an 18th century idea) and the socialist state (a 19th century idea). From around 1920-1990, a very large natural experiment took place between the two competing institutions. Half the world adopted an approach that more closely resembled a free-market and the other half adopted the socialist state. The results were overwhelmingly favorable for the countries who adopted the free-market over the coercive power of the state in guiding economic life.


Our analysis of these results can be fogged by the issue of time and place. Americans became rich and prosperous in 20th century but they had advantages in natural resources, military power, a dominate currency, etc. In order to develop a deeper understanding of how institutions affect outcomes we need to look at the same people over a relatively short time frame.


The transformation of West Germany after World War II and the economic boom that followed the destruction that had occurred there was remarkable. East Germany had roughly the same demographics but were under the control of a very different institutional framework. The East Germans did not fare as well as the West Germans. In 1990, the two separate German states reunified. Our natural experiment gains a new dimension. We know how the East Germans fared under communism. How did they fare under the free market? Here is a photo gallery of the results since 1990.


Change the institutions, change the outcomes.

"This is the single biggest change in education since the printing press." -Anant Agarwal, President of a new joint venture of MIT & Harvard, edX.


I have spoken before about the potential untapped market for credentialing online education for free worldwide. MIT has already begun their own project in this regard having launched MITx whose first course, Circuits & Electronics, has over 120,000 students worldwide. Univerisities are missing out on a fundamental marketing principle to lure in new customers that they otherwise would not attract, offer a free service and then offer a more comphrensive version of that service at a price. Personally, I think that univeristies should just put the first two years of general education requirements online for free and focus on higher-level coursework. No one is paying attention in that class 500 students learning about the introduction to business. Half of those students will dropout anyways because they think, perhaps rightly so, that they are wasting their time.


Food for thought.

From college@home: We spend an average of 38 minutes a day in a car driving to and from work. The opportunity cost of the time spent driving is the what other wants you may have fulfilled without having to drive. It is likely the case that all of these other wants could not be accomplished without driving to your job in the first place, therefore cutting out the drivetime is not feasible. So what to do then?


My advice is to make the time spent in your car as productive as possible. If you drive to and from work alone this is accomplished more easily. First step, turn off the radio. Second step, turn on your iPod. If you have a tape deck buy a car kit that will allow you to run the sound from your iPod through the car stereo. If not by an AV in/out stereo cable and plug your iPod into the CD player. You must have an AV out plug on your deck to do this. If you have neither of the first two options use headphones. I am not suggesting that you simply turn off the music on the radio and substitute your own tunes. You will be more productive if you just turn off the music altogether. You already know all the words to the song.


Take advantage of the time you spend in your car to learn new and interesting ideas from others. You can do this by listening to podcasts and then researching the content presented afterword.


Where should you start: I endorse the podcast host by Russ Roberts of George Mason University, Econtalk. Russ is a gracious host, a knoweledgable debator and has had a vast array of different economists and other notables on his program since 2006. New podcasts appear every Monday and archives date back to the beginning (2006). Some of the previous guests: Nobel Laureate Milton Friedman, Thomas Sowell, Walter Williams, Greg Mankiw, Tyler Cowen, Don Boudreaux, Michael Munger, Nobel Laureate Bob Lucas, Nobel Laureate Vernon Smith, Nassim Taleb, and Nobel Laureate Gary Becker.


Happy Listening!  

Via The Washington Post:


"There are no professors in Virginia Tech’s largest classroom, only a sea of computers and red plastic cups. In the Math Emporium, the computer is king, and instructors are reduced to roving guides. Lessons are self-paced, and help is delivered “on demand” in a vast, windowless lab that is open 24 hours a day because computers never tire. A student in need of human aid plants a red cup atop a monitor."


"Virginia Tech students pass introductory math courses at a higher rate now than 15 years ago, when the Emporium was built. And research has found the teaching model trims per-student expense by more than one-third, vital savings for public institutions with dwindling state support.


“When I first came here, I was like, ‘This is the dumbest thing ever,’” said Mike Bilynsky, a freshman from Epping, N.H., who is taking calculus. “But it works.”


No academic initiative has delivered more handsomely on the oft-stated promise of efficiency via technology in higher education, said Carol Twigg, president of the National Center for Academic Transformation, a nonprofit that studies technological innovations to improve learning and reduce cost. She calls the Emporium “a solution to the math problem” in colleges."


Think about all the inefficiences that are associated with classroom learning. There are distractions everywhere: the distance between you and the teacher, the other students, the other objects in the room, the windows, etc. If you space off for a minute or two it is likely that you will miss out on some piece of valuable information. A solution to this problem is to take courses that require repitition to attain mastery out of the classroom and put them on the computer. Most introductory coursework is used to lay the foundation for more rigorious work. Our educational model pushes those who have not achieved an understanding of the basic concepts to move on to the next topic anyway. As they continue on in their academic life, their understanding decreases at an increasing rate because they do not understand the fundamentals. The students frustration grows, they give up easier, and some quit going to school altogether.


44% of four year college students never graduate, 71% of two-year students never graduate, given the expenses associated with getting a university education these two statistics are a huge deadweight loss of time and money. Maybe we need to rethink some of our pedagogical techinques to work on improving  not just the number of kids who go to college but the number of students who complete their education and actually learn something. Self-paced, computer based learning, where the student can narrow their focus to just a computer screen seems to gaining some momentum. Virginia Tech's model for implementing a large-scale effort in this direction should be applauded.

The title of a recent blog post by Gary Becker and Richard Posner on their site http://www.becker-posner-blog.com/.


Here are some excerpts:


Becker: "The first and most prominent is that this gives professors freedom to express unpopular views in their writings and lectures. The second is that professors in the same field are the best ones to judge the qualifications and promise of potential new hires and existing colleagues...neither of these arguments made for having tenure in higher education has close applicability to teachers at the K-12 level."


"K-12 tenure is justified with the argument that the quality of teachers is not known or objectively measured...it is hard to judge when hiring a new teacher how good she will be, it is not difficult to know teaching quality after someone has been teaching for a few years."


"Having the power to get rid of the bad teachers would improve everyone’s teaching, partly by raising the incentives and morale of other teachers."


"I do not believe that elimination of unions and tenure would vastly improve the performance of students from [disadvantaged] backgrounds... Nevertheless, it is very worthwhile to improve what schools can do by eliminating tenure, reducing the power of unions, and introducing more competition into the public school system."


Posner: "There is general recognition that education provides significant external benefits—significant enough to warrant public subsidy. But public subsidy needn’t imply public provision of the subsidized service. Government subsidizes health care but does not provide the health care itself...Is this a mistake? Should education be privatized? Conversely, should private schools be discouraged?"


"Should public school teachers be tenured (and should teachers’ unions be allowed, or at least allowed to negotiate tenure contracts for the teachers they represent)?—the answer may be that it doesn’t much matter from the standpoint of educational quality. On the one hand, tenure makes it difficult (though not impossible) to get rid of dead wood; on the other hand, like the long summer vacation of teachers, tenure provides a valuable nonpecuniary benefit to teachers, and this enables public schools to hire them at lower salaries than would otherwise be possible."


"It's when teachers belong to unions that it's hard to fire them, because the union will often act in effect as the teacher’s lawyer, making it costly for the school to fire the teacher. But this is a more an argument against teachers’ union than against tenure. If tenure is a big factor in public school quality, one would expect stronger evidence fo the superiority of charter schools."


Share your thoughts, Should K-12 teachers have tenure?

For any one who uses Greg Mankiw's Principles of Economics text, here is a video to help you translate to students the Ten Principles of Economics.




A dereliction of duty?

Posted by cmares28 Jan 27, 2012

     Last fall Stanford Professor Sebastian Thurn along with Peter Norvig the Director of Research at Google Inc taught an Artificial Intelligence course at Stanford. In conjunction with this course, Thurn and Norvig hosted an online version complete with homework assignments, quizzes, exames and a certificate indicating proficiency signed by the instructors. While Stanford itself did not lend its own accredition creditionals to the project it helped in a small way to legitimize the enterprise. The results: "over 160,000 people worldwide signed up for the course...more from Lithuania alone than in attendence at Stanford University as a whole. The list of countries participating included students from Afghanistan as well." 248 online students received perfect scorces, and 170 members of Thurn's physical students ended up participating online instead. Thurn decided he could no longer teach at Stanford and gave up his tenure to launch Udacity (an online university) the goal of which is to enroll 500,000 students for his first course on designing a search engine. The course begins Feburary 20th, I'm intrigued enough by the idea that I signed up.


     So where is the dereliciton of duty?


     Felix Salmon of Reuters explains:

I was expecting was an announcement from Thrun that he was helping to reinvent university education: that he was moving all his Stanford courses online, that the physical class would be a space for students to get more personalized help. No more lecturing: instead, the classes would be taken on the students’ own time, and the job of the real-world professor would be to answer questions from kids paying $30,000 for their education.


I have to say I’m a little sad that it’s happening away from, rather than being part of, Stanford. If any world-class university would embrace this idea, one would hope it would be the one at the heart of Silicon Valley. And surely Udacity would only benefit if it was part of Stanford and carried the Stanford brand name.


Stanford was willing to spend hundreds of millions of dollars building a new physical campus in New York City — but it isn’t willing, it seems, to     help Thrun build a free virtual campus which could reach the whole world. That’s a dereliction of its educational duty. But where Stanford has failed, surely some other elite university will step in. Thrun is taking a bold step here. Let’s hope he soon gets the support, if not of Stanford, then of some other college. Like Harvard, or Yale, or Oxford, or Cambridge. They’re exclusive places now. But they don’t have to be, in the future.


     If the goal of education is to educate individuals we would certainly benefit greatly by expanding the availiability of learning opportunities at a significantly reduced cost. Some university is eventually going to figure this out. The costs of a university degree, especially if you combine into the mix in the "hidden costs" paid by taxpayers is quite high and growing. In my opinion (and the opinion of others) you are buying the accredition not the knowledge. My own university has spent hundreds of millions (outside of athletic facilities improvements) on new buildings and renovations during the past decade. Enrollment is up, so is tuition. Student fees per semester are at least as much as taking an additional course. The majority of the money rolling into our univerisites is fronted by the federal government in the form of  low interest deferred loans. The assumption, the value of a degree is worth it in the long run because its value never goes down. The latter sounds eriely familiar to me. Wasn't there some other asset class which never loses its value being backed by the federal loan gurantees a few years ago?


     Something to think about. In the meantime, bravo to Mr. Thurn for his great work. A marginal step in the right direction.

     The cost of going to college in the United States is rising. There is also an increasing amount of students who are not finding the kind of employment they thought that there education would bring them. Solution? Tie financial success to the cost of your education.


     The common line cited by supporters of higher education is a statistic that says that over a lifetime an individual with a college degree will earn on average around $1 million more than an individual without one. Certainly for some individuals the value of a degree is more than the value of a similar degree or a degree of equal cost. Tuition and fees are usually set at a university wide rate, x dollars per credit hour. A student who receives a degree in social work may end up paying the same amount as a student who majored in computer science and engineering, even though it is more likely that the latter student will earn a much higher income. A way of redressing this imbalance according to students at the University of California at Riverside would be to tie future earnings to the cost of your education.


     The specifics of the proposal are quite simple. Each student is able to go to school tuition free for the duration they choose. At the end of their schooling they are contractually obligated (assumption of omitted detail) to pay the school 5% of their wages for the next twenty years. The math is such that a student who makes on average $50,000 for 20 years will end up paying the school that amount for tuition. So basically your average salary for twenty years is how much your schooling will cost you.


    First there will be winners/losers as with any policy change. The winners are those who are currently paying large tuitions for low-paying jobs i.e. teachers. The losers are those who are paying the same amount as someone who will not earn as much as them, they will now have to pay more, albeit the same percentage of their income. This system also creates an incentive for graduates to try to artificially hold down their earnings for the first 20 years to lower their tuition costs. At the same time it creates an incentive for colleges to get their graduates into higher salaried positions. Another question, if you drop out are you forced to pay the tuition as you would under the old system? How would that price be established if it has been abandoned?


     Final thoughts: GO FOR IT! We learn best through trial and error, even though the time horizon on this experiment is long, (20 years) give it a shot. In fact, you could have a control group, allow the students to choose which method the would prefer, or randomally select them.


     Comments welcomed.


Do Teachers Kill Creativity?

Posted by cmares28 Dec 27, 2011

From Marginal Revolution: "the characteristics that teachers use to describe their favorite student correlate negatively with the characteristics associated with creativity. In addition, although teachers say that they like creative students, teachers also say creative students are “sincere, responsible, good-natured and reliable.” In other words, the teachers don’t know what creative students are actually like.

As a result, schooling has a negative effect on creativity."

Personally I am sympathetic to the argument. Any form of standardized instruction and thought is going to kill creative instincts. This is especially true at the university level where far too often the students who receive the best marks (especially when writing) are those who are best able to regurgitate what the instructor has said.

Here is the paper: Creativity:
An Asset or Burden in the Classroom?

Here are some other links affirming the hypotheses:


Robin Hanson: Schools Aren't Creative and The Myth of Creativity


A Harvard Business School Working Paper from Francesca Gino and Dan Ariel- "The Dark Side of Creativity."


From TED talks, Sir Ken Robinson on "Do Schools Kill Creativity?"


Some stuff on Creativity:


From John Cleese.


Want Increase Creativity? Get On a Plane.

As always comments and criticisms are welcomed. Happy Reading!

David Henderson is Associate Professor of Economics at the Graduate School of Business and Public Policy, Naval Postgraduate School in Monterey, California. He is also a Research Fellow with the Hoover Institution. He blogs at econlog.econlib.org. On December 10th, Dr. Henderson addressed a small gathering at Occupy Monterey in California. His talk was entitled, "Crony Capitalism versus the Free Market." In his speech Dr. Henderson introduced a number of examples which I suspect most of the audience members had never thought of before. Some of the highlights include the real story of the so-called Robber Barons Cornelius Vanderbilt and John D. Rockfeller, a discussion on Social Security, how trade promotes peace and a defense of corporations such as Nike employing children in the third world as the "best of a bunch of bad options." The links provided are a paraphrased transcript.


Part I, Part II, Part III, and Part IV.


For more information on some of these topics introduced by Dr. Henderson, the Library of Economics and Liberty at Econlib.org is a good source.


Happy Reading!