Tuesday, November 27, 2012

Deficiency Wages

So there is no mystery for the source of my title, next week in my Economics of Organizations class we're covering Efficiency Wages a la Shapiro and Stiglitz.  My old word play self can't leave well enough alone.  But it's other things I've been reading that prompted this post.  I'll get to those in reverse chronological order - according to when I read them.

First is Nate Silver's latest column on tax bubbles.  I did not like that column for the following reasons.  First, he doesn't try to distinguish marginal tax rates from average tax rates in much of what he discusses.  He disses a proposal for tax reform that perhaps should be dissed, but he doesn't entertain the possibility that the proposal is sensible given the constraints, namely that working class and middle class tax payers should continue to receive the Bush tax cuts, but starting at income of $250,000, those tax payers should pay the same average rate as they paid under Clinton.  The only way to achieve both of those, I fear, is to have the tax bubble that Silver so detests.  The problem of the bubble would disappear if we simply reverted to the Clinton rates across the board.  I understand that for economic stimulus, keeping the Bush cuts for lower and middle income people makes sense as a near term measure.  But it seems to me that Obama Administration position is to keep those rates at the Bush level permanently.  Moreover, this position seems to be moving toward a Liberal consensus.  Why?  Is it a good idea or not?  That's what this essay is about. 

Next consider Matt Miller of the Washington Post.  His column today is about the virtues of government spending in terms of rebuilding America.  If we're talking about infrastructure investment, support for research and education, cleaning the environment and other public works then I'm completely on board.  But his last item was this:

And while we’re making a non-elderly wish list, I’d also add bigger wage subsidies — via, say, some kind of mega-earned income tax credit — so that full-time work (and especially in-person service-sector work that can’t be offshored) offers a reliable path to the middle class.

Where did this come from?  Unemployment insurance, yes.  Payments to keep people living in poverty from going hungry and having decent housing, yes.  But subsidizing a middle class lifestyle for the non-poor who work?  I don't get it.  There's an issue here but in my humble opinion this is going about finding a solution in the wrong way.

The last piece is a Tom Friedman Op-Ed from the Sunday before last.  It was about welding job, but those that also require enough science and math knowledge to understand what is going on with welding, along with the certification to prove the point.  There are plenty of people who can weld but apparently there is a shortage of welders with the appropriate math and science background.   Friedman interviewed a CEO of a small company, Wyoming Machine,  named Traci Tapani.  She was grappling with this shortage problem.  I was struck by these lines:

Welding “is a $20-an-hour job with health care, paid vacations and full benefits,” said Tapani, but “you have to have science and math. I can’t think of any job in my sheet metal fabrication company where math is not important. If you work in a manufacturing facility, you use math every day; you need to compute angles and understand what happens to a piece of metal when it’s bent to a certain angle.” 

My question is this.   Is $20 per hour a good wage for for a high skilled manual labor job?   On a forty hour week that works out to $800 per week so that for 52 weeks (since vacations are paid for) that amounts to $41,600 per year.  Is that a good job?  In my way of thinking about this, it is okay for a starting wage or for a single person who is a little further along.  It is low for a head of household with a family of four.

If that is right, my next question is why is it for skilled labor that is scarce wages are nonetheless so low?  Put another way, why doesn't the market bid up the price of these folks, say to $30 per hour?  If that wage really were higher, wouldn't more people who can weld try to get the necessary math and science background?  The market seems to be failing here.  Employers appear to prefer the low wage approach even with scarcity of skilled labor.  Is that myopia on their part?  Is it stinginess? 

The story in the late 90s and early 2000s is that the savings rate went to pot for working class and middle class America because there was no other way to maintain the middle class lifestyle.  Very few people seemed to be asking about why wages were so low then; they simply took it as a necessary consequence of globalization.

If skilled manual labor earned a decent wage (like plumbers do) then for lightly skilled service jobs where the wages are more modest you don't want to do what Matt Miller is suggesting and subsidize them.  You want those jobs to have the reserve army of the unemployed low wages, precisely so people have a reason to rise above it.  But when they do so rise if they are still paid rather little then the system doesn't seem to be working.

There is the further point that 40 or 50 years ago workers tended to stay with the same employer for a very long time.  They had job security and lifetime income security as a result.  Nowadays if there are good jobs but where those are and what skills those require change over time, then employees will have to change employer and/or the work they do multiple times during their careers.  If they mainly self-insure for those times when change comes, they need to make enough so they can create a stash for the self-insurance purpose.  If that happens the labor market might work reasonably well.  As we have things now, those welders who have the math and science they need are banking on their profession being in short supply well into the future.  If not, even if they are good employees now, they'll join the ranks of the unemployed.

That would be a shame.

Sunday, November 25, 2012

My Favorite Blogger Sidebar Gadget Is Broken

One of the reasons to use Blogger rather than WordPress in a teaching blog has just been eliminated.  The Google Calendar gadget, which allows the listing of the 5 most immediate future calendar entries, including the long descriptions, is broken.  I really liked the functionality this gadget delivered.  I, for one, would not fill out the entire course calendar in advance, but would rather put in entries based on how the class was progressing.  This semester in particular, where I had to change when we were doing things because of my health issues, this modification of the calendar more or less on the fly was absolutely necessary.  The sidebar was the best way for the students to keep track of the changes.

At present I know of no alternative that extracts Calendar entries in this fashion.  I suppose the calendar itself can be displayed in weekly view.  If the start of the week were always today, that would work ok.  But if the start is always Sunday (or Monday) then near the end of the week the Calendar doesn't show much new information.  That's what this gadget resolved quite nicely.  For that reason, I hope that some alternative emerges. 

What makes for an effective learning object?

Does an experienced writer know whether he's nailed a piece immediately after he's finished composing it?  Or is it that in writing the thing he gets too close to his creation to understood how others will react to it and thus the actual reaction by others adds to the author's understanding of what the piece has accomplished?  In this case, might it be that the reader's take away from the piece remains distinct from the author's aim for it?  If so, is there a necessity that the reader and the author ultimately reconcile the two views?  Suppose here we abstract entirely from works of fiction and consider only non-fiction pieces.  Does that change how you would answer these questions?  Just to make these questions concrete, consider that in yesterday's NY Times Op-Ed  there was a piece by a Palestinian author representing views of Palestinians in Gaza, particularly in regard to American foreign policy toward them, with that foreign policy characterized by this author as failed.  It might be reasonable to suspect that most readers of that piece are pro-Israel.  Wouldn't that in itself suggest that many readers will ignore the arguments the author makes, rather than embrace those arguments?  Yet surely the author wrote that piece to move minds and the Times published it if not for that reason then as a commitment to the notion that multiple points of view need to be heard and their readership should respect that notion.

Let's now repeat the questions from the paragraph above but this time substituting teacher for writer (or if you prefer you can use designer of learning objects instead of teacher, though that is a mouthful) and substituting student for reader.  And think of these questions posed in a course from a discipline that has a distinctive methodology, such as microeconomics, where the methodology itself can be considered objectively and where the learning object in question is on some aspect of the methodology.  In this case it seems reasonable for the fourth question - must the teacher and the student ultimately reconcile their views about the take away from the learning object?  - the answer is yes, they must.  In this case we're apt to attribute earlier differences in perspective between teacher and student not to differences in point of view but rather because the teacher is expert and the student is a novice, where the novice fails to see many of the implications implicit in the learning object that the expert takes as immediate.   The effective learning object, then, would move the novice in the direction of the expert and that effectiveness would be assessed, for example, by the student's performance on an exam that the teacher has written to test the students' understanding.  Of course, student understanding depends not only on the quality of the learning object but also on the student's prior understand on this and related topics.  Exam performance typically can't parse one cause from the other, so this way it is hard to ascertain the learning object's value add, though if used with a variety of student audiences then maybe that information can be found in the aggregate results. 

A different way to get at the value add question, especially for subject matter that the student finds difficult and hard to master, is to consider a variety of different materials on the topic - readings perhaps from several different textbooks on the matter, and multiple learning objects also dealing with the same topic, and let the student self-report whether an Aha! moment was experienced while going through all of these.  The Aha then serves as an indicator and the learning object that was in focus immediately before the Aha occurred will likely be attributed as the one with the biggest value add.  But for this approach to work, the student must willingly go through many different materials till a solid understanding emerges.  If mainly students aren't so willing, then this sort of test has limited applicability.  Further, and this is the crux of the matter to me, even if certain learning objects do get identified in this manner as capable of generating the Aha, this doesn't mean that another student exposed to that particular learning object first off would likely reach the Aha without spending substantial time before that in a muddle on the subject.  Indeed, an important positive aspect of a learning object is that it encourages students to spend time playing with it, enough so for the students to get familiar with the subject they are studying.  But, of course, some of this stick-to-it-ness is part of the character that makes for a good student and would be better attributed to the person than to the object.

Let's switch gears now and move from the philosophical to the concrete.  I want to discuss my own recent experience with learning objects designed for intermediate microeconomics.  I made these either prior to or during the spring 2011 semester, the last time I taught the course.  I will talk about Excelets* that I made - these are numerically animated graphs done in Excel - and YouTube videos of screen capture movies of the Excelets with my voice over and then captioned, to give a narrative about what is going on in the graphs, done as a micro-lecture.  For the sake of this discussion, the interesting thing is that this content has had two distinct audiences.  The first are the students in that spring 2011 class.  The second are students taking intermediate micro elsewhere who are searching, primarily within YouTube, for helpful content because they are stymied on some topic in the course they are taking.  I want to contrast what I've learned from the two different groups.  I should note here that I also produced essay content, such as this one on Price Differentials along with aloud readings of these, but these did not generate an external audience, so I won't comment about them below.

In the 2011 class I didn't require a textbook, thinking my learning modules were sufficient and/or that many students don't access the textbook sufficiently on their own to make it worth their while to purchase the textbook.  Further, I've never liked to follow a textbook closely so at best it offers a different path to the content than what I do in lecture.  In the course evaluations at the end of the semester many students said they'd have liked a textbook.  Let's peel that onion a bit.  The intermediate microeconomics course plays a role in the curriculum akin to the role organic chemistry plays for pre-med students.  It is a requirement for students in the College of Business, also for some majors in the College of ACES (Agriculture) and fits the social science general education requirement for some students in the College of Engineering.  This apart from it being the key prerequisite for all upper level economics courses  and a requirement for the economics major.  From what I know of the course, students typically don't like it, especially those in Business.  It is too theoretical for their tastes and in that way is unlike the rest of their Business education.  Also, the course is hard.  The Engineering students are more likely to enjoy the course because it is softer than the typical engineering class and for them the modeling is not that hard at all.  Further, they can indulge a social science interest that they have but that doesn't get much attention in the rest of their studies.

Given this prior, there is the dilemma of how to motivate the students to access the learning objects and spend time with them.  My imperfect solution to this quandary was to embed these learning objects inside quizzes in Moodle which were required as homework.  Here is an example you can access if you have Respondus.  There was one question per YouTube video and the entire quiz was devoted to the various spreadsheets in a particular Excel workbook.  So the hope was that the students would watch the videos and play with the Excelets in the process of doing the homework.  But the students might very well try to do the quizzes without accessing the learning object content.  And if they could succeed in getting a good score on the homework in that way, then my mechanism would have failed in providing the right sort of encouragement.  I should also note here that all of this online content was made in anticipation of a subsequent offering of the course done in blended format.  This version of the course had that online content but had the normal amount of face to face class meeting time.  It was not advertized in advance to be a technology intensive class.

A further feature of the course was that I had the students blog and that I divided the content of the course into a narrative piece based on the readings and the blogging (in the second half of the course we read Heilbroner's The Worldly Philosophers) and an analytic piece based on the Exceletes and the Moodle quizzes.  The exams tested only the latter.  At least for this audience, that proved to be a blunder on my part.  Many of the students perceived the course from the lens of the exams.  What's on the exams is important; everything else is extraneous.  It matters not in this view that I as the instructor select what students will do because I deem all of those activities as important.  Many students reported in the course evaluations that the blogging was worthless because it didn't prepare the students for the exams.  Also, the first midterm especially was hard, as measured by the the student performance on it, and because I had not taught the course for ten years I hadn't bothered to produce a practice exam for the students before that first midterm.  These students want teaching to the test and I confounded that expectation rather than conforming to it.  The upshot was that most students didn't like the class at all.  And while the learning objects were not the focus of their disdain, the learning objects clearly weren't sufficient to overcome the negative disposition to the course overall.  I was quite disappointed reading those evaluations, having put in a lot of energy constructing the learning objects.  But I wasn't really surprised by the evaluations, because by then the students had made clear through their performance their instrumental approach to the subject and I knew I hadn't met them halfway in indulging that instrumentalism.

With the external audience things are entirely different.  They don't see the Moodle quizzes.  They supply their own motivation in accessing the Excel workbooks and the YouTube videos.  And because they are so motivated, the learning objects can be considered from another perspective - effectiveness at communicating the economic concepts.  The particular YouTube video that gets the most hits is on Income and Substitution Effects.  It is a topic students find hard, so this buttresses a previous remark that the external audience is searching to find clarification on topics they find difficult.  But hits per se are not a particularly good indicator that the learning object is effective.  Only a handful of students make comments, yet it is the comments that are much more revealing about the effectiveness of the learning object.  On that score, my most effective video is this one on The Effect Of A Tax.  Let me try to explain why.

First, this video explains both a theoretical point and an empirical question.  I'm afraid that much else of what we do in intermediate microeconomics is pure theory - structure built on top of which empirical questions may be asked but often that posing of empirical questions is not done sufficiently. As the vast majority of students don't have a theoretical orientation, this theory for theory's sake approach means that students are learning subject matter that they don't perceive they will every apply.  No learning object, now matter how well it is done otherwise, can fully succeed in this case because there is no Aha to be found in such work.  In this particular case  the empirical question regards tax incidence.  Who bears the tax, the buyer or the seller, or if in some mixture how is that mixture determined?  One can answer that question via a calculus approach, but these students find the calculus less than illuminating.  The animated graphs, in contrast, provide a good visual representation to see what is going on.  The students can do little experiments to vary the demand elasticity or the supply elasticity at the original equilibrium and see how the result changes.  So the students can answer the tax incidence question for themselves with this spreadsheet.

The theoretical question is which curve shifts as a consequence of the tax, the demand curve or the supply curve?   The students get to see here both possible representations, one in terms of the buyer's price and the other in terms of the seller's price, and discover that both give the same results.  Again the animation helps the students in linking the two together.  Static representations can show the different representations but can't really explain to the students how those representations are connected.

Let me also point out that the price and quantity labels are given numerically rather than algebraically.  I've come full circle on this issue.  When I was a young assistant professor I thought everything should be done algebraically.  Only in that way would the students develop a deep understanding of the model.  This is still true to some extent but one must admit that if students aren't already fluid with algebraic representations, then presenting the material to the students in that way is like presenting it in a foreign language.  They will grasp less of what is going on because their discomfort with the algebra blocks them from getting to the economics.  Because the numeric representation is more immediate for them, they can better understand the economics.  I should also point out here that in my actual course I had the students view this video on Reverse Engineering The Spreadsheets, so they can discover how the various curves are plotted and see the formulas used to generate those.  If the students did diligently reverse engineer each spreadsheet they'd then get the algebraic approach that way.  I suspect most of the students in the spring 2011 course did not do this.  And clearly the external students have not seen reverse engineering video, as it has gotten very few hits.  So they are making their judgments about effectiveness based on the numerical approach only, though they may be getting the algebraic approach from other content provided in the course they are taking.

Let me wrap this piece up by asking whether one can abstract to good learning object design independent of the subject being studied.  I'm quite skeptical that this is possible in a meaningful way.  I'd agree that on ancillary matters - how busy the diagrams are, the size of font used to label things, the amount of background white space so that things look clean, etc. then one can make a case for what a good learning object must do.  I started making Excelets back in 2001 and with practice my technique has improved in making them.  (It is also true that with the Mac having a comeback in the last decade I became more sensitive to making these in a way that would work on a Mac.)  For example, now I use only the XY scatter with straight lines graph and I've learned  to use solid lines for functions and dashed or dotted lines for labels of particular points.  I've also learned how to create a fill in a region (the trick is to plot one line as many distinct vertical line segments that are separated by blank cells and have those vertical segments integrate out as the full area) and to use light pastel colors in this case so it doesn't drown out the rest of the graph.  So I'd agree that on the appearance front there are general design principles that are good to learn.  But those principles are far from sufficient in determining whether the learning object is effective.  For that there is no substitute than to try it out with students studying the subject and see how they react to it. 

*With the move from Google Docs to Google Drive you have to log in with a Google account to access this content.   It used to be that you could access these without logging in. Then you have to download the files.  They have not been converted to Google Spreadsheet.  They remain in the original Excel.

Sunday, November 18, 2012

The Economics of Health Care - A Personal Perspective

While I'm receiving substantial health care the last few months I'm concurrently teaching a course on the economics of organizations. That has made me more reflective about the business practices entwined in health care provision.  There are many oddities in my view, looking at it with a lens from economic theory.  Let me give an example of a few of these, and then try to peel the onion a bit further.

Having been in the hospital and now receiving follow up treatment, I make no co-pay when I visit the doctor to have the wound cleaned and the dressing changed, every 3 or 4 days.  I am not sure why this is.  Looking at the HMO program plan document from Health Alliance, my provider, it seems that co-pays are part of the deal pretty much across the board.   Does the doctor's office play some game with the HMO to avoid patient charges in some cases?  My prior experience with more typical care is that there is a co-pay for office visits, even when the visit is a follow up that is specifically recommended by the doctor.  I'd be hard pressed to explain why a co-pay is required in this case from an economics perspective.

The normal argument for co-pays follows from patient moral hazard - a tendency to over consume health care when there is full insurance coverage.  The co-pay for the initial visit to the doctor falls in this category and make sense to me as an economist, though the amount my HMO charges, $15, is such a trifling that it would hardly seem to have consequence.  The subsequent co-pays that come with follow up visits are hard to explain from a moral hazard perspective.  One might explain them better as some attempt at cost sharing for care - keep the premiums lower by having the patient bear some of the cost ex post.  The cost sharing explanation makes better sense to me, for example, with that the hospital visit (which was initially supposed to be an outpatient procedure) itself has a co-pay.  If memory serves, that was $175.  A doctor must order a hospital visit.  A patient can't request this on his own.  So, again, there is no moral hazard, at least in the way I'm thinking about it.  Why have a co-pay present in the absence of moral hazard?

A non-economist patient who has been with the HMO for years probably gets used to the system and comes to understand that a trip to the doctor involves a co-pay, irrespective of why that is.   But a designer of the system would include co-pays or not by trying do aggregate social welfare across members and the aim for an approach that is best for the group in total.  If premiums are set in a sensible way to align with the expected payout of coverage, then there should be an inverse relationship between premiums and co-pays.  In the signup period that happens annually, my HMO competes with other plans.  It may be that co-pays emerge in the design as a consequence of that competition and the HMO wanting to attract younger and healthier members.

On the various prescriptions there is a yearly deductible that is paid on the first few prescriptions and then the patient bears some charge per prescription thereafter, with that charge varying by the drug, or perhaps by the category the drug is in.  We use the local Walgreens (a short walk from our house) as our pharmacy.  They seem to charge something other than what the published co-pay is, but the difference is small enough not to make a thing out of it.  By and large, the patient doesn't see the retail cost of the medicine.  For one rather expensive antibiotic, however, I did get to see the retail price as there was a snafu about getting approval for the drug.  Then  the Walgreen's billing system spits out the retail price for the patient, this as part of the explanation for why they aren't filling the prescription right away.  The number was an order of magnitude higher than I thought it'd be.  If my HMO is actually paying that number to the pharmacy and if the pharmacy as middleman is paying something close to that number to the drug company then (1) this year my HMO is losing a bundle on me and (2) how that number gets set should be an object of national discussion.  By the way, we did work through the issue and got approval for the drug for two weeks, which ends tomorrow, with our co-pay only $24.

Let me turn now to economics thinking on the care itself and what should count as fixed cost (overhead) and what should count as variable cost attributed to the specific care.  For the fixed cost there is the further issue of whether the resource congests and what should be done to mitigate that congestion.  And there is the question of how care is determined - what is the treatment, who will deliver the treatment, and where will that occur?

The operating room is a congestible resource.  For the procedure I had on Friday, I was told an approximate time in advance but that time was contingent on there being no trauma patient arriving in the interim.  I was in the OR, three different times during this visit and presumably that was the most expensive component of the hospital stay, given the various specialists who staff the OR and the specific facilities required for lighting, sterilization, etc.  They keep the temperature in the OR low, I'd guess around 60 or lower.  So one nice touch is that the have a blanket warmer so the patient can feel comfortable that way.

The last procedure was done Sunday morning.  Mine was the second of two procedures done.  Given that they did the other one, I'm glad mine was done then, but there needed to be a full crew there then.  So if one took the HMO's view on things would it have been cheaper to have waited till Monday to do this?  The call here was entirely made by my doctor.  The timing matched his schedule and I believe also reasonably matched his desire to see how my wound was progressing.

I had two different roommates during my stay, but the last two nights the bed next to me was empty.  I may have gotten more attention from the nurse and the tech as a consequence, the opposite of congestion effects.  Even when the place was full up, I got reasonably timely attention from the staff. 

I teach my students that moral hazard within organizations is best resolved when the members take ownership in the organization's well being.  Ownership here is a state of mind, not a contractual thing, so applies equally well to not-for-profits.  My doctor has certainly taken ownership in my care even after I left the hospital, for which I'm grateful.  But if he himself is a resource who can congest (since he is the doctor for the Illini Football team he does seem to be extremely busy) might it have been more efficient for him to delegate some of the care he is giving to me directly?  In particular, Carle has a Wound Healing Center.  Should my dressing changes have been delegated to them?

My doctor thought no.  He told an interesting story in this regard.  The upshot is whether the patient's pain during the dressing changes was an important consideration on how to proceed.  (The nurse informed me that I grimaced quite a lot during the first change, much less so during the most recent one,)  For my doctor it's at most a tertiary thing.  He'll say sorry, when I indicate it hurts, but he'll keep doing what he was doing to get the job done.  He said at the wound center they might very well stop.  So he didn't delegate in my case because he wanted to assure the right follow through.

At the last two visits, where I'm told there's been noticeable improvement, he has mentioned the alternative of sewing up the wound.  This is not his preferred alternative, but there is no doubt it would be more convenient for me.  So he does recognize tradeoffs in determining the course of action.  But these are tradeoffs the patient perceives in his welfare, not tradeoffs that impact the bottom line as considered by the HMO.

Let me close with one last observation.  The way my doctor acts vis-a-vis his health organization is very much as a boss, just the way faculty act at the university.  The decision to delegate my care or not was his to make. 

Thursday, November 15, 2012

Google Forms - Summary of Responses

My post on the Grid Question Type in Google Forms gets more hits than any other of my posts.  For some reason it occurred to me this morning, to see if visitors complete the form.  A handful have done so.  Below are the results summary, as Google provides them.

16 responses
Summary See complete responses
Teaching and learning out in the open Web - Theory About Approach
A lot
Not Much
None at all
Teaching and learning out in the open Web - Experience Using Approach
A lot
Not Much
None at all
Teaching and learning out in the open Web - Confidence In Approach
A lot
Not Much
None at all
Number of daily responses