.

Note: this post includes a heavy dose of sarcasm. If you do not react well to sarcasm, please stop reading now.

In the U.S., women now make up 58% of all undergraduate students. At Florida Atlantic University, one of the largest public schools in the country, women made up 64% of the class of 2006, and were responsible for 75% of honors degrees and 79% of highest honors degrees. Other research has shown that women have higher GPAs than men.

There is only one logical conclusion to be drawn from these facts: men are being treated unfairly.

See, there’s a difference in outcomes between men and women, and one thing I’ve learned from being at a university long enough is that whenever there is a difference in outcomes between two groups of people, it must be because one group is being treated unfairly. The strange part of this is that another thing I’ve learned being at a university is that a faceless, omnipresent, oppressive white male power structure in this country is the cause of all unequal outcomes. That’s why I can’t understand this phenomenon. I’m not sure how or why they’ve done it, but those evil white males are behind their own inferior educational performance. I know it doesn’t seem to make sense, but it must be part of their diabolical master plan somehow. I have been an official member of the faceless, omnipresent, oppressive white male power structure since 1974, but I have missed the last few meetings, so I’m not caught up on the plans. I’ll have to read the minutes when I get a chance.

OK, let’s look at those numbers and see what we can infer from them. Perhaps women enroll in less challenging majors. That’s one possible explanation men like to imagine. Sorry, guys: research that controls for major choice finds that when you compare men and women in the same major, women tend to have better grades. Maybe women are smarter than men. The women in my classes seem to think that’s the answer. Or maybe women get special treatment from their professors, who are overwhelmingly male. Or maybe, just maybe, women work harder in school and take their education more seriously, while men tend to drink and party more. When I was co-coordinator of the Student Learning Center’s Economics Tutoring program at U.C. Berkeley, more than 2/3 of the students that came in for tutoring were women. Men tended to be more obstinant, perhaps more proud, and did not seek help nearly as often.

Any or all of the possible explanations offered above could factor into the GPA disparity. So to conclude that simply because the male GPA is lower than the female GPA, men are being treated unfairly, is a preposterous conclusion to make without further analysis. Yet that is exactly what is being done today by some women’s groups in the context of wage and income differences between men and women.

Today is National Pay Equity Day (NPED), and it is being celebrated by the Women’s Center here at SCSU. NPED is based on analysis that looks at the average annual earnings of full-time salaried employees, comparing men to women, and finds that the number for women is 78% of the number for men (Source: Bureau of Labor Statistics, 2007). NPED is supposed to be the day at which a woman would start working in the year so that by the end of the year they have their 78% while men get their whole 100% because they have been working since January 1. Never mind the simple fact that 22% of the year would imply that NPED should start on March 21st, yet for some reason women have pushed it back to the end of April. I’m not sure if it’s because women never seem to be ready on time, or if it’s because they just have to be overly dramatic about everything.

This is from an e-mail sent out to the University community today from Emeritus Professor Dr. Lora Robinson:

On June 10, 1963, President John F. Kennedy signed the Equal Pay Act, making it illegal for employers to pay men and women different wages for the same work. At that time, women earned only 59 cents for every dollar earned by men. Despite the passage of the EPA more than 45 years ago, the average woman now earns 78 cents for every dollar earned by her male counterpart. With Equal Pay Day on Tuesday, April 28, now is the perfect time to urge your senators to support the Paycheck Fairness Act (S. 182).

Notice the convenient switch here. The first sentence talks about making it illegal for employers to “pay men and women different wages for the same work.” Then in the third sentence, it says the average woman now earns 78 cents for every dollar earned by her male counterpart. That’s not comparing men and women doing “the same work” — that’s an average across all men and women, across all jobs. Those aren’t even remotely the same thing.

I’m not arguing with the 78% figure. That’s a fact. But it’s simply a statistic, with no explanation behind it whatsoever. Quoting that 78% and saying there’s a problem of unfairness is just as intellectually dishonest as it would be for me to quote the GPA difference and saying men are being treated unfairly in college. There are plenty of perfectly reasonable explanations for why some people earn higher income than others. One of them is “compensating differentials,” payments received for jobs that are dangerous or otherwise unsavory (think “Dirty Jobs”).

Men make up 94% of all workplace fatalities. Why isn’t there a National Fatality Equity Day? It would occur on December 9 each year. That would be the day that women started dying on jobs, while men have been dying all year long since January 1. There’s no NFED because men are willing to take riskier jobs than women, in industries like logging, mining and fishing, and they understand the gamble they are taking with their lives. Men trade that risk for higher pay and don’t seem to complain about unfairness when they are overrepresented in fatalities. That’s why there’s no National Fatality Equity Day. So why is it that when women make the opposite choice, trading lower pay for less risk, they complain about the unfairness of lower pay and have their own day to commemorate it?

Note: when I mentioned the disparity in workplace fatalities, the director of the Women’s Center at SCSU informed me that women really actually do want these risky jobs, but men shut them out. She suggested I rent the movie North Country to see more about this. Despite my huge, well-documented crush on Charlize Theron (I won’t see Monster because I don’t want that image in my head), this is not a convincing argument. I mean, if I’ve seen The Devil Wears Prada, that’s all the proof I need that women are all rich Manhattan fashion moguls, right? Newsflash: one movie is not the equivalent of national economic data from the Bureau of Labor Statistics.

If women choose different occupations and earn different wages, is that discrimination? If women choose to become English professors while men choose to become Accounting professors, and Accounting professors make more money than English professors because they have better opportunities in the private sector, is that unfair treatment of women? It seems to me the Women’s Center at SCSU would think so. The truth is we need to know why women are in different sectors before we judge either the process or the outcome as unfair. If women choose to be English professors instead of Accounting professors because they like books more than ledgers, then that is their choice and the wage difference is the cause of their own actions, so cries of ”unfair” ring hollow. If there is an evil male Accounting cabal keeping women out, because they’re going to make us use pink numbers for negative values instead of red numbers, then we can talk about discrimination and unfairness. But you can’t just observe differences in wages and conclude there is unfairness. If women choose to be in services instead of manufacturing because they like dealing with people more than machines, then that is their choice. But one should not expect equality of outcomes when the market values manufacturing and services differently. And even if outcomes are  not equal, inequality of outcomes does not necessitate that there is inequality of opportunity or an unfairness of process.

To study gender discrimination in labor markets properly, you have to first control for other economic factors that explain wage differences: relevant industry, experience, college degree, etc. And when you control for everything, research shows that the 78% number goes up to 95%. The study cited in the e-mail faculty received from the Women’s Center actually says this on page 18. Unfortunately, this very important fact doesn’t even make the 3-page Executive Summary of the report, which most people will probably read instead. It seems some women don’t want people to know that when you account for everything, the world is not as oppressive as they have been led to believe. And that’s why they still use the 78% number. (Note: I am aware there’s still a difference of 5%. Is that discrimination? Maybe, maybe not. Maybe women just don’t bargain enough for higher wages — as this study and others seem to suggest.)

I find it interesting that in other academic departments, when there are differences between people based on race or gender, we are told that we can’t just look at percentages. For example, if you look at incarceration rates by race and find one race represented disproportionately, you will likely be told that you cannot just use the incarceration rates – you have to account for institutional factors and a variety of other variables to explain away the simple percentages; the world is more complex, we are told, than just the simple percentage. And that is absolutely correct.  The same argument applies if you look at rates of out-of-wedlock birth, abortion, or any number of other things. Yet when doing precisely that kind of analysis weakens the argument the Women’s Center has about unfair treatment, they throw away all that complicated (and correct) analysis and resort to just quoting the simple 78% number. It’s intellectually dishonest — it’s eating your cake and having it too.

Speaking of cake, maybe you’ve been thinking: Dave, how is the Women’s Center celebrating this historic day in the fight for equality between men and women? Well, I’m glad you asked. They’re having a bake sale. That’s right, a bake sale. Men, throw out your antiquated stereotypes about women — they’re in the kitchen baking cookies! I think a more fitting way to stick it to the male power structure would be to get a spot on Atwood Mall grilling hot dogs. They could even cut them in half first…

It is once again time for end-of-semester evaluations. Time for students to let their professors know what they liked and what they didn’t. And it’s the time when some of us get nervous and hope we’ve done a good job, all the while second-guessing a lot of the decisions we made this semester about what to teach and how to teach it.

Most of us in the economics department at SCSU have moved towards doing our evaluations electronically on D2L. For most questions, students give a 1-5 rating and then have the option to provide comments about that specific topic. I have found that the quality of the open-ended responses is so much better using electronic evaluations than it ever was with paper evaluations. Students can take the evaluation whenever they have five minutes at a computer, instead of right before or after a final exam when they really don’t want to spend the time. Most students can type faster than they can write, so instead of a half-sentence, they write several complete sentences. Students have provided much better information about the little things (exams, textbook, other things) than they used to. And when asked about the electronic evaluation process vs. paper evaluations, over 95% of students said they preferred the electronic evaluation, it took less time, and they were able to provide better feedback.

I write this post for students, to encourage them to take the evaluation process seriously. Most of your professors really do want to give you the best education possible. We’re supposed to try new things: new books, new websites, new ways of delivering content. Sometimes they work out well and sometimes they don’t. Some experiments fail, and we learn from that — so we need you to be honest and constructive about what works and what doesn’t. We need your feedback so that we give you a course that fits our requirements, but does it in a way that works well for students too. I recommend you visit the following site in preparation for your evaluations these last few weeks of the semester. Take the process seriously — other students will benefit from the feedback you provide, and your professor will appreciate the time you took in giving constructive feedback that helps them craft a better course. I know I’ve done several new things in courses as a result of comments and suggestions I received the semester before, and most of them worked out very well.

Last semester, after all my evaluations were in, I e-mailed a summary of them to my students so they could look at them. I specifically wanted them to see the comments. I wanted them to see how hard our job as professors can be when we have a class of 70 students. They needed to see that for every student that says “I like the fact that you write on the chalkboard” there’s a student that says “The chalkboard sucks — you should use PowerPoint.” For every student that says “The exams sucked — you should use multiple choice” there’s a student that says “I’m so glad you don’t use multiple choice.” We cannot make all of our students happy. You need to know that. If you have a professor that does something in a way you find annoying or not constructive, please understand that many other students feel the exact opposite. And if you love how a professor does something in particular, there’s probably another student that hates the same professor for that very same reason. That’s why you need to take the syllabus seriously — if your professor does something in class you don’t like (group projects, grading attendance, etc.), then don’t take that class. E-mail your professors ahead of time and ask for a syllabus so you don’t waste the first week of class. Most of us will appreciate the fact that you’re taking your education so seriously.

There are a variety of websites for students to examine when considering taking a potential class or professor. There are two pretty good websites you can go to if you want to learn more about your professors or provide feedback to other students who might benefit from your insight:RateMyProfessors and CampusBuddy.

Most people know about RMP, so I won’t go into too much detail here (but I will come back to it later in this post). CampusBuddy is relatively new. You can log in through your facebook account, so that makes it easy. The interesting thing about CampusBuddy is that while you can rate your professors (although there are very few ratings on the site), the most important feature of the site is that you can get information about grades. CampusBuddy uses actual data from the registration office, so you can see what grades have been given by department, by course, and by professor. When you have a variety of people to take a required course from, this kind of information can be useful. The only majors with GPAs lower than economics are physics, math, and engineering (if memory serves me correctly).

Here’s where things get personal. If you look at all the professors in the economics department here at SCSU, you’ll find I give out the third-highest GPA (it’s listed as fourth, but one of the people above me, Hari Luitel, has moved on to warmer temperatures). There’s a stigma involved in that, as some professors might think you’re just handing out A’s like candy. Recall the scene from an episode of Friends where Ross posts his grades. Another professor looks at them and says, “Looks like someone was generous this semester,” after which Ross starts putting minuses on all the grades.

I honestly don’t know what to make of my GPA. On one hand, perhaps my courses are really easy and it’s easy to get a good grade in my classes. Or perhaps I’m a good professor and my students learn so well from me that they just learn the material well enough to get good grades. I’d like to think it’s the latter, but how can one be sure? As my tenure clock ticks away, it makes me wonder how others at the school will determine whether I am a good professor.

One way is to look at the RMP data. RMP has three ratings: helpfulness, clarity and ease. Each is given a 1-5 score. The overall quality rating is the combined average of helpfulness and clarity (assuming that more = better here). The ease rating is kept separate. I think an easiness rating too close to 1 or too close to 5 is equally bad. There’s also a correllation between the two measures. I might actually download the data on every SCSU professor just to examine this further, but it’s low on my list of priorities. It seems that professors that get low easiness scores tend to not get good quality scores, and professors that get high quality scores also get high easiness scores. So how exactly should one combine this information to make sense of this? One way I propose is to take the quality rating and subtract the easiness rating. That way, if someone scores really well on quality just because their class is a cakewalk, they’ll get an ease-adjusted quality rating (EAQR) of 5-5=0. I did that for everyone in my department here, and for everyone in my former department at NMU. The average EAQR for the both economics departments is 0.5, with a standard deviation of about 0.6. My EAQR is 1.7 at SCSU and 1.4 at NMU — so either I’ve gotten better or my classes have become harder since I switched schools. I think my EAQR says that I’m an effective professor who is both helpful and clear, but who doesn’t just water down material to make a class so easy that everybody gets a good grade. Those EAQR ratings put me right in line with my former colleague Dave Prychitko, and his is good company to be in.

Another way is to look at end-of-semester evaluations. Obviously your professors care about the overall quality rating, but studies have shown that non-educational things can influence those ratings. So I look at a few additional questions that ask students to compare this class to similar classes (i.e. 200-level classes with other 200-level classes). The first one I look at is “How much do you think you have learned in this course, as compared to similar courses?” Possible responses are: much less than usual, less than usual, about usual, more than usual, much more than usual. The second question is ”The work load for this course, as compared to similar courses, is:” Possible responses are: much too light, a little too light, about right, a little too heavy, much too heavy.

If students learn a lot because the work is demanding, some professors would say that’s just fine, and I definitely understand that argument. But if students feel they have learned a lot and not had to work excessively hard to do so, I would argue that is a better outcome. On the first question, I usually get above 80% answering either “much more than usual” or “more than usual,” and only one or two percent giving me anything less than “about usual.” On the second question, I usually get about 80% answering “about right” and most of the rest being “a little too heavy.” Most students of mine seem to feel that the workload was about average but the knowledge gained was above average. So on that score, I feel I’m doing a good job. Ultimately, the highest compliment a student can pay me is to say they learned a lot, and it seems like the data bear that out.

I don’t think most of my former students will tell you that my classes are a cakewalk (maybe the Economics of Film class, but that was a given). And I would feel comfortable with any of my A students in principles taking the principles exams of any other economics professor anywhere. So yeah, I give out more A’s and B’s than a lot of my colleagues, but I think my students learn in my courses and I think they have earned those grades.

I’m interested in hearing what students think about the easiness of a course vs. what you learn in it, and what you think makes a professor good.

America cannot be the best in everything. That might sound very un-American, but hear me out.

While it is undoubtedly a lofty goal, it is not practical. It is especially impractical when being the best in something is equivalent to spending a lot more money on it, and that seems to be the Obama administration’s philosophy these days. The administration has so many goals it is hard to list them all, but here are a few:

- providing free health care to every man, woman and child in the U.S., including illegal immigrants.

- leading the world in the percentage of citizens with a college degree

- being energy independent

- leading the world in technology and innovation

- providing free education from birth to college for everyone in the U.S.

Each of these goals requires more government spending, according to the Obama budget. As crazy as he was at times, at least Howard Dean was sane enough to realize that we can’t have everything we want. When he was running for president, he made it clear that some sacrifices would have to be made, and while I disagreed with his politics I at least respected him for being honest about the trade-offs we faced. He made it clear that we can’t spend more on Medicare, spend more on education, spend more on defense, cut taxes, and reduce the deficit all at the same time. Those goals are in conflict with each other and something has to give. And even though I hear President Obama talk about his budget and the “hard decisions” and sacrifices that he is making, I don’t see where he’s making any sacrifices at all. He’s spending more on everything. He’s telling everyone they won’t pay more in taxes unless they make more than $250,000 (despite increasing cigarette taxes and other taxes on business, like carbon taxes or cap-and-trade, that will increase prices of many goods the poor purchase), and apparently the only people who are going to pay more are evil rich people. That’s the sacrifice? Studies have shown that even if we took ALL of the income of the people making more than $250,000, we would not be able to balance the federal budget. So we have to cut spending at some point, do we not? Talking about sacrifice is great, but at some point, to quote our president, ”words must mean something.”

In economics, we have a concept called opportunity cost (discussed here in the context of television viewing). Bush didn’t understand it and apparently neither does Obama. And sadly, a sizeable chunk of our population either doesn’t know it or doesn’t take it seriously, so politicians get elected promising to make government work more efficiently, spend less, and tax less — then they get elected and, if we’re lucky, they do one of those three things.

The Tax Day Tea Parties were not about taxes as much as they were about government size and scope increasing at a frightening pace in the last six months, and that includes the Bush administration. A trillion dollars here, a trillion dollars there, and suddenly we’ve spent an entire year’s worth of GDP trying to keep GDP from decreasing a few percentage points. When a CNN ”reporter” at one of the Tea Party protests asked a man why he was there, he started talking about Lincoln and liberty. She interrupted him to ask him if he was aware he would actually qualify for a $400 tax cut. What she and so many fail to realize is that for a lot of people, this is not about their individual tax situation. Some people are not willing to sell out their principles or their vision of America and what made us great for a mere $400 in tax cuts or some stimulus money for their state. Even if you may be willing to tax my neighbor and give me his money, I don’t want it. I find it funny that people like this reporter can’t seem to fathom why these people were protesting even though their own taxes aren’t increasing, yet they would have no problem understanding why people in the U.S. would protest poverty in Africa that does not affect them directly, or people in the U.S. would protest children dying of malaria in some third-world country, or people in the U.S. would protest women being treated as second-class citizens in a middle eastern country that most of us will never even visit. I don’t remember reporters going up to people protesting China’s actions in Tibet and saying, “Why should you care about this? Don’t you know that you don’t live in Tibet?” My neighbor may have more money than me, but that does not mean I have a right to his income. When half of this country pays no federal income taxes, which is what will happen under Obama’s budget, that just strikes me as wrong. Apparently, in this reporter’s eyes, that makes me an idiot. By her logic, I should want to be poor so I won’t pay any taxes. That’s the mindset at work here.

I’m a little off topic now. The point of this post was to say that we cannot be the best at everything if we have limited resources. While every NFL team may want to have the best defense, the best offense, and the best special teams, that rarely happens. NFL teams operate under a salary cap. If good players are more expensive (they usually are, but not always), NFL teams cannot have the most expensive offense, the most expensive defense, and the most expensive special teams players. Teams face trade-offs and have to make decisions that require sacrifices. They work harder to find talent that is not expensive and that wants to win, not just take home a paycheck. They try to get the most out of the players they have. They set up systems that reward effort and improvement, so that a third-string receiver has an incentive to work hard and become a great player so that, when they have the opportunity, they can help the team win the Super Bowl (David Tyree, anyone?). I’m fine with trying to have the best education system in the world, but we should have learned by now that the most expensive education (Washington D.C. public schools, for example) is seldom the best education. I applaud Obama’s stated plans to increase accountability in public schools, but I’ll believe it when I see it. I applauded his promises to put bills online for five days before signing them, to eliminate earmarks, and to not hire lobbyists — those promises lasted less than a month.

The fundamental difference between the people protesting on Wednesday and the people who make teabagging jokes about them is that the protestors honestly believe the government is not the answer to all of our problems. That many in government do not understand this and actually criticize these protests should not come as much of a surprise.  When people have to undergo public scrutiny and ridicule in running for government office, the only people who are going to go through that are people who feel they can make a difference by being in power. In recent decades, these tend to be people who think that a) government is the solution, and b) spending more money will result in better government. These tend to be people that think they can make a difference by changing laws and increasing the power of government to correct what they perceive as wrongs or injustices, so naturally government becomes more powerful. It is happening now under Obama and the Democrats, and it has happened under Republican administrations as well. At some point in the last 10 to 20 years, “Republican” and “conservative” stopped being synonyms. One of my favorite quotes is from the book Fair Play by Steven Landsburg, and he describes this beautifully. He writes the following (emphasis is his):

When Bob Dole resigned from the U.S. Senate, he combined a clarion call for smaller government with a list of his proudest legislative accomplishment, EVERY ONE OF WHICH has increased both the size and the scope of government. Either he was lying about his political philosophy, or he was lying about what made him proud, or the part of his brain that’s supposed to screen out illogic had simply ceased to function.

In much the same way, President Obama says that he is being responsible and making tough choices and sacrifices, but the stimulus bill and his proposed budget prove otherwise. When we fail to make any sacrifices today, allowing our national debt to soar and our currency to be devalued by inflation, it is our children’s future that will be sacrificed. That is what many people at the protests were trying to say, if “reporters” would have allowed them to finish their sentences…

In Fall 2009 I will be teaching Managerial Economics, a course I have taught here at SCSU twice already. The book I used both times is Baye’s Managerial Economics and Business Strategy, 5e. Most managerial economics books are pretty similar, but what I like most about Baye is the variety of homework questions. Some are based on theory, some are mathematical applications of the theory, and others require students to use Excel, which I think is extremely important. Students will use Excel their entire lives, so spending some time early on becoming familiar with it is going to pay dividends for decades. Students download data off the accompanying CD (or from the course website for those that bought a used book) and they run regressions and use the results to answer questions.

I placed my textbook order for the class last week and I requested the fifth edition thinking that was the latest one. Usually publishers know when you use their book and, when they have a new version, they send you a desk copy for free. I never got a new version of Baye, so I figured there was no sixth edition. As it turns out, there is in fact a sixth edition. I asked the textbook representative for McGraw-Hill to please send me a new copy so I could see if it is worth having students buy the latest version.

I got it in the mail yesterday and I cannot fully express how furious I am at McGraw-Hill. On the back of the sixth edition, it says the following:

Some exciting features in the Sixth Edition include:

- New learning objectives: Each chapter begins with clearly identified learning objectives, designed to enhance the learning experience and help implement AACSB assurance of learning standards.

- Enhanced Time Warner Case Study: Includes nine additional end-of-case problems (called Memos).

- New end-of-chapter material: Over 30 new problems and applications were added to enrich the learning experience.

The “new learning objectives” are things like: “Illustrate how changes in prices and income impact an individual’s opportunities” and “Explain how accounting costs differ from economic costs.” These are basic. If you read the chapter, you’ll figure out what you’re learning. Maybe there is a little value-added in this, but it’s not much.

The Time Warner case study is actually pretty cool. It goes through the merger of AOL and Time Warner from a managerial economics perspective and has you analyze different aspects of it. It was already very thorough; now it’s a little better. But to do that case well, I would need to spend three weeks in class on it and I don’t have that much time anyway. And these updates could easily be put on the textbook’s website for professors to download and give to their class. A whole new book doesn’t need to be printed to add these 3 pages.

The new end-of-chapter material consists of about 2 new homework problems per chapter, increasing it from 19 to 21. The other 19 are exactly the same as they were before.

Aside from those three things, nothing in the book has changed. All the examples are the same. All of the graphs are the same. I flipped to a random page in the new version of the book, page 520 (out of just under 600 total in the book). That page is exactly like page 518 in the previous version. In 520 pages, they only added enough material to increase the book length by 2 pages — and that was just the 2 extra questions per chapter.

I sympathize with my students when it comes to buying textbooks. I am offended for them that a company can make a few tiny changes, call it a “new version” and get people to pay $125 (and that’s on Amazon; it’s more in the bookstore) when they can get the previous version on half.com for $20-$40. I told the bookstore that there is a new version but I am not requiring it and I will tell my students to buy a used fifth edition, so the bookstore can go ahead and order the sixth edition but I doubt anybody will buy one anyway. Then I e-mailed my textbook rep and told him that I find it despicable that they published a new version when so little content was changed. I’ve already made the order so I’ll use the book this time, but in the future, I might switch to a different book just to make a point to the publisher.

When does this kind of thing stop? When enough professors stop requiring the new version, and the message finally gets through to publishers who pull this kind of thing. There is a new textbook company called Flat World Knowledge. They offer free e-texts for students, and if there’s too much eye strain reading off the computer screen, they can get a printed copy for as little as $30. There’s very little variety in their offerings right now, but they’re expanding their titles and the authors seem pretty reputable. That’s the wave of the future, and I plan to be a part of it; I e-mailed them and told them I am willing to help write a book or supplemental materials. As professors, we don’t always think about how a textbook affects students. If I save students $40 each on a textbook, that might not seem like a big deal. But when you have 30 students, that’s $1,200 the class is saving as a whole. And if every professor does that, it saves students a few hundred dollars a year.

My message to professors: find ways to save your students money. Don’t require the latest edition of a textbook. And if you like those new homework questions, type them out and put them on your course website so students can buy a previous version and still have access to the new questions.

My message to students: explore your options on used book websites, and make sure your professor provides a copy of the textbook on reserve at the library. Professors can request an extra free copy for this purpose, and publishers almost always oblige, but sometimes we forget. And even if we have an extra copy, we don’t want to bother with taking the book to the library and filling out the forms if nobody is actually going to check the book out. But if you remind us about it, we’ll think you’re going to use it and then we’ll feel like we’re actually saving our students money, and we’ll do it.

In my Industrial Organization class we have been talking about price discrimination, and I thought I would share some examples to help put things in perspective for people who haven’t taken a micro class with me.

Price discrimination is selling the same good to different customers at different prices. What I find compelling about it as an economic concept is that, while there may be perfectly reasonable economic justifications for it, the practice can (and perhaps should) be illegal. There is a tension between what may at times hurt no one at all and may actually simply benefit a group of people, and the legal responsibility to treat all individuals equally. For instance, it is perfectly legal for a movie theater to charge a lower price to senior citizens; but if I were an employer and tried to pay a worker less because he was a senior citizen, I would be sued for age discrimination and probably lose. If the latter is age discrimination, how is the former not? That is a rhetorical question, as my ultimate point on price discrimination is that while it might not seem fair, in many cases it increases the benefit to consumers of a product by allowing more people to get the product at prices they can afford.

I can see how someone would look at a situation and say “person X is paying more for the good than person Y is, and that is unfair.” But what might seem like the right solutions — forcing firms to charge the same price to both — might just make person Y worse off. Allow me to provide two examples.

Prescription Drugs: U.S. vs. Canada

Studies have shown that on average, prescription drugs are about 35% cheaper in Canada than they are in the United States. That’s why a lot of seniors take trips to Canada to buy their medication. The problem is the U.S. has a drug reimportation restriction. It is technically illegal to bring prescription drugs into this country, but the FDA has a “personal use policy” that basically means they won’t prosecute people for it as long as they’re not trying to bring in more than enough supply for a month or two. It was originally implemented as a way of allowing people to bring in drugs from other countries that have not yet been approved by the FDA, and can be changed any time the FDA desires. And in fact, the FDA has said in the last few years that it would start to crack down on third parties that facilitate this — like the bus tours that take seniors from New York to Canada to load up on prescription drugs. Despite that, famed Illinois Governor Rod Blagojevich decided he would thumb his nose at the law and allow his state’s citizens to buy as much as they want from Illinois, and even wanted the state to buy its Medicaid prescriptions from Canada. Politicians in the Illinois legislature fought him — a point which Blago now uses to explain why he was impeached (the whole selling Obama’s seat thing is just a distraction according to Blago; his rivals wanted him out because he wanted to save the state money, or so he would have us think.)

Why is this such a big issue? Apparently people seem to think that the country could save billions of dollars in medical costs if we all just bought our drugs from Canada. But lost in that is any analysis of why drugs in Canada are cheaper. The Canadian government runs its health system, and it has bargained with the drug companies to get lower prices — something proponents of nationalized health care in the U.S. use as an argument in favor of nationalizing the system. But the fact that Canadians get drugs cheaper than Americans has nothing to do with nationalized health care. Just look at two demographic characteristics of the two countries: income and population. The numbers are approximations.

2008 population: US – 305M, Canada – 34M

2008 income per capita: US – $46K, Canada – $40K

Population and income are two crucial elements that determine the demand for a product, and when a firm has market power, that will affect the market price. So here you have the U.S., where income per person is 15% greater than Canada and there are 9 times as many people. OF COURSE we are going to have higher prices in this country. But let’s see what would happen if we removed the law against bringing drugs from Canada. What do you think will happen? Will the drug companies give the 305M American consumers a 35% price cut, or will they just give the 34M Canadians a price increase? That answer should be obvious. In fact, it’s obvious to the Canadian government. Canada stands ready to impose their own law preventing Americans from buying drugs in Canada if there ever comes a time when the U.S. Congress were to change its laws and allow Americans to do it. They don’t want us buying drugs over there, since they know it will just cause higher prices in Canada and make Canadians worse off. Having one market for drugs, and one price for drugs, just means that the price in all of North America will be pretty close to what it is now in the United States. And Canada will have one more reason to despise their neighbor to the south.

Prescription Drugs: Human vs. Dog

When Al Gore was running for president, he was trying to talk about how screwed up our health care system is, and he told a story about his mother-in-law and her dog ,Shiloh. As the story was told by Gore, they both take the same arthritis medication (only Shiloh’s is probably chicken-flavored). The problem is that Gore’s mother-in-law pays three times as much for the same medication. Now, this claim was thoroughly digested by right-wing bloggers and a) nobody has every provided any proof of this “fact” and b) Shiloh presumably weighs less than her owner, so of course her pill should be cheaper. But the fat is that animal versions of human prescriptions are very commonly much cheaper than the human equivalent. And when pressed about the details, Gore’s spokesman Chris Lehane said, “The point, which most people get, is that its wrong to pay three times as much for the same drug.”

Is it? Suppose Al Gore had won the presidency and signed the “Species-Neutral Drug Pricing Act” of 2001, which states that the price paid per milligram of a medication should be the same for humans, dogs, cats, and any other animal. Do you think that one price would be the low price that Shiloh paid or the high price that Tipper’s mom paid? Considering there are about 60M dogs in this country and 300M people, and the demand for drugs by people who feel their own pain is a lot less price-sensitive than the demand by dogs who are very good at hiding their pain, I have a very strong feeling that the price dogs pay for arthritis medication would just increase to something very close to the human level. Then poor old ladies like Al Gore’s mother-in-law would have to choose between buying their dogs arthritis medication and buying their own medication, the end result likely being that tens of thousands of dogs every year would suffer in pain. Why does Al Gore hate dogs so much?

The problem I have with a lot of the arguments against price discrimination is that so few people actually think about what will happen to prices if firms cannot price discriminate. The Al Gore example is a classic example: he was trying to score political points about the current prescription drug situation being “wrong,” but paid no mind whatsoever to what would actually happen in the market if we removed the injustice he whined about. I started this post by talking about senior citizens, and how it is unfair that they pay less for a movie but I can’t pay them less on a job. While technically it’s age discrimination in either case, the differences is that with movie tickets senior citizens are made better off and nobody is made worse off. How do I know this? Based on a data set I have, senior citizen ticket sales account for approximately 4% of all movie ticket sales. Four percent. If it were declared illegal to charge different prices to different people, movie theaters would not reduce the regular ticket price to the senior citizen level. They would just raise the price of senior citizen tickets, and fewer of them would go to the movies. Allowing companies to give some groups discounts means that, in some cases, more people get the product that previously could not afford it. While some may not think it is “fair,” like the guy in New Jersey that sued a nightclub because women got in free for Ladies Night and he didn’t, you have to see if anybody is actually worse off. If on Tuesdays men pay the same cover charge they pay every other night of the week, but women just get in free, how are men worse off in that situation? They might be jealous that they don’t get in free, but they’re missing the main point: there are more women there, which is probably why you’re there in the first place, dummy! Now if the nightclub doubled the cover charge for men on Tuesday nights while they let women in free, then I can start to see this guy’s point because now he’s actually worse off financially because of price discrimination. (He actually won his case in court, but the New Jersey state legislature then amended their laws to allow some businesses, like nightclubs, to discriminate based on gender.)

The bottom line is you have to look at what the company would do if it could not price discriminate. And if the answer is “they would raise the price to people currently getting discounts,” like Canadians, dogs, senior citizens, and women at nightclubs, price discrimination is not a bad thing.

I am fascinated by a recent study showing that highway fatalities in 2008 were down 9.1% over the previous year, and how it puts death statistics in perspective.

Preliminary figures being released by the government Monday show that 37,313 people died in motor vehicle traffic crashes last year. That’s 9.1 percent lower than the year before, when 41,059 died, and the fewest since 1961, when there were 36,285 deaths.

That’s more lives saved than the number of people that died in the terrorist attacks “man-made disasters” on 9/11/01, which started our War on Terror “overseas contingency operations.” Think about that for a second. We have been in a recession for over a year, but it has saved 3,746 lives in the process. Suppose somebody were to come to you on 9/10/01 and say that you had a choice to make: save 3,000 lives or go into a recession where 5 million people will lose their jobs (that’s the change in employment since this recession began). What choice would you make? Is the employment of 1,666 people worth one person’s life? Is it worth devastating one family to make 1,666 other families not have to worry about losing their homes or feeding their children? If not, how much is a life worth? What about 1 million families? There has to be a number there somewhere, one which probably differs for each person. These are all difficult questions that economists have to deal with sometimes, as when after 9/11 the government decided to give money to the families of the victims. Families were compensated based on a complex algorithm that included the deceased’s age, employment and earning potential. Bond traders at Cantor Fitzgerald were paid more than dishwashers at Windows on the World. Is that fair? Perhaps, perhaps not. But it really makes you think about what’s “fair,” doesn’t it?

On a related note, there are over 50,000 people currently waiting for a kidney transplant in this country (statistics vary from 55,000 to 70,000), and over 3,000 of them die every year waiting for a transplant. That’s one 9/11 every year. It’s not as graphic or as visible, but the numbers are the same. It is illegal to sell a kidney in this country because, if it were legal, the poor would apparently be exploited and the myth of the person waking up in a bathtub full of ice with a kidney missing would come true; or so that’s what we are told. If selling a kidney were legal, the overwhelming majority of those lives would be saved. To everyone who has been saying lately that the government should legalize marijuana because it will help the economy and increase tax revenues, I say this: legalize kidney sales, as it will prevent the equivalent of one 9/11 every year. What’s more important: getting high or saving lives? Where are your priorities?

P.S. Make sure you’re an organ donor and that your family members know this.

I received an e-mail from a student yesterday and, with his permission, I am reprinting it here, followed by my response. The only editing I did was to remove the course name, to protect the professor’s identity. It’s not economics, in case you are wondering.

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Hey Dr. Switzer,

Given your recent brush with students who cheat, I’d be curious to hear your thoughts on what happened to me this week. I want to tell you about professors who cheat.

My professor gave our class a take-home midterm on Tuesday, due next week.  The midterm is 3 pages long and contains only 2 questions. I read through both of the questions and it was clear that the writing style used was not a product of my foreign professor’s vocabulary. So, I was curious where he got the question from.  I pulled a phrase out of the first question and put it in quotations and did a simple Google Search.  What shows up was the exact question from my take-home midterm, with all of the answers I need. Talk about a moral hazard.

This is a take-home midterm that we have 7 days to complete, and not an in-class midterm, where the circumstances of student access to information would be constrained. The fact that I can do a Google search and find the answers to half of my midterm, which according to the syllabus will equate to 20% of my grade for the entire course, seems ridiculous and unacceptable. It really reflects the lack of effort the professor has shown our class so far. He is 5 minutes late to class every day, clearly does not prepare his lectures, and always seems to be disconnected from our small, 10 person class. He knows nobody’s name. 

What really bothers me is that all he would have had to do to prevent any student from finding what I found, or to reduce the value of what a student might find, would be to simply change the data given in the sample. I mean, it was only 15 numerical observations. Had he changed the data, the variance related jargon we have to calculate in the question would be completely different than those given on the webpage. Even at that point, the webpage would still explain the procedure to calculate everything using about as direct of an example as one can get. If the professor really liked this question, all he would have had to do to prevent anything like this from happening would be rewrite the question in his own words (even just paraphrase it) and change the dataset just in case a student finds it. That way nobody will find it.

I’m having a hard time seeing how this is different than a student cheating, because I really feel like I have been cheated this semester. Finding the midterm question and answers online really put cap on it. When you combine the poor instruction the professor has given so far and general lack of interest he shows for the class, as a student, I’m genuinely frustrated. Also, class attendance is also mandatory. When the professor consistently shows up 5 minutes late, mandatory attendance doesn’t seem fair. 

I’d be curious to hear your opinion on the matter. Is this a case of teacher cheating? As a professor, what arguments can you make for either side of my professor’s actions?

Matt Nicklay

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My response to Matt:

I think this is an interesting situation, and there are actually a few different elements to your complaint, so I’ll break this up into parts a little bit.

I understand a student feeling cheated at poor instruction in the course. You (and the taxpayers) are paying for quality instruction, and when you don’t get it, you are justified in being upset. I’d like to give the professor the benefit of the doubt and say there might be something going on in his personal or professional life that is distracting him. I know that as I approach tenure and start working more on research, some of my teaching is slipping a little bit. I don’t like it, but sometimes it’s inevitable. Now, if he just doesn’t care, that’s another problem altogether.

Grading attendance and then showing up late — that’s a bit hypocritical. I don’t grade attendance, since this is college and I think you can choose to show up or not, and your grade will reflect your decisions enough without me assigning points for attendance. I can see your frustration with that also.

But on your more central point, I think I have to disagree with you. I really do think it’s different when a professor takes a question from another source vs. when a student plagiarizes a paper (the fact that I’m not calling it plagiarism when a professor does it with test questions reflects my opinion here, and I admit that).

If I write a good question, and a colleague of mine wants to use it, I have no problem whatsoever. In fact, I would be flattered. Personally, I have e-mailed former professors and asked them for midterm questions so that I could use them, and they always oblige me. I don’t think they expect me to actually give them credit on the exam, and nobody has ever asked for it. And I would not expect a colleague to cite me on the exam if he used my question. I would like to know he is using it and at least have the option to say no, even though I can’t imagine I would ever do that. I would like my colleague to acknowledge to me personally that he is thankful for the questions. I think that’s more than just a courtesy — I think that’s the appropriate thing to do. But citing me on the midterm? I don’t feel that is necessary.

If I actually cite the source of the question on the midterm, I create a whole new problem. If I tell students that I got this question from a specific former professor or a specific website, I have given my students information that they can use against me. Then they can go online and try to find those questions, knowing where I’m getting them. They might be able to have final exam questions in advance because they looked at all the questions from that professor they found online. And I don’t think I have to tell you I would have a major problem with that. It would also limit my ability to give take-home exams, something I do occasionally, as students could easily do exactly what you have done in your situation.

Admittedly, I’ve taken questions from other professors’ midterm exams, some from professors I have had and others from professors I have never had (usually other professors at the same school as the professor I had). I invariably have to tweak them one way or another because I find them either too difficult or too easy, or covering the material in a slightly different way than I presented it that semester. I would like to think that these professors would consider this flattery, and would give me permission were I to ask them, as all the ones I do ask seem to do. Should I send them an e-mail ahead of time and say, “I found your Spring 2003 midterm online and would like to use question #2 in my Industrial Organization class this year. May I have your permission?” Perhaps that would be the courteous thing to do. And when it’s a professor I know, I do it every time and they always say yes. I guess I’m just assuming that the other professors, whom I do not know, would say yes too, so I don’t bother asking because a) they don’t know me, b) I don’t want to bother them, and c) I would personally be fine with it if the roles were reversed. In talking to some of my colleagues, they seem to agree with me, but as of now it’s been a small number of people I’ve talked to about this.

Some questions I put on exams are from other textbooks on the subject. Should I cite those too? If I do, then students can find those books and use those questions to study for their future exams, giving some of them an unfair advantage.

Finally, I’m not sure the expectation of originality is the same for teachers as it is for students. As students, you are expected to learn the information and be able to explain it in your own words, as proof that you understand the material.  As professors, it is assumed that we already know the material. Should we really have to re-create the wheel and write all of our own questions to demonstrate that to your satisfaction? Should we be allowed to use the text banks provided with 99% of textbooks? (Is your problem that we don’t write our own questions or that we get them from a source that students can look up online? I guess I’m not 100% clear on that.) We still have to choose the questions that we feel are most appropriate to the way we have taught the class. When I create my weekly online assignments for my principles classes, I go through over 100 questions and pick the 10-15 I think are most appropriate to the way I teach the class. It’s time consuming, but I do it. If I picked them at random, would that mean I was cheating my students? Also, I have to admit that when I go question hunting on former professors’ web pages, the vast majority of the questions are not usable because I teach the material differently and emphasize different parts. Usually when I do that, it’s for a class that I am teaching for the first time, and I am just trying to get ideas for my own questions. It can take four or five hours, sometimes longer, so go through everything and craft what I think is a good exam. If I tried to write all my own questions from scratch for a course I’m teaching the first time, it would take many more hours, and that exam would probably not be good.

One more thing. In this day and age, if someone wants his students to have old exams but does not want the rest of the population to have it, he can use a course management system (WebCT, Blackboard, D2L) so only his students can access them. I guess I assume that if a professor makes them public, he’s okay with other people using them. In fact, I might put some of my material up on my profswitzer.com page for precisely this reason. I want other people to see what I do and get ideas, and if they use it, so much the better.

I hope you see that having to write your own exam questions is not always optimal and not always feasible. And I hope you see that citing the source on the exam itself introduces an additional problem whereby students can find the information. I understand your frustration with the class as a whole, and I think this might just be the straw that broke the camel’s back. But I’m not sure that what your professor has done on this exam is necessarily “cheating.”

I welcome your response and those of other students and professors.

Update 4:45pm: I didn’t even address the issue of this student looking at the question/answer online and whether using it is cheating, but it is discussed in the comments to this post.

Last year I presented a paper co-authored with my colleague David Lang at CSU-Sacramento entitled “Does Sex Sell?” It looks at the determinants of box office revenues, using a pretty large sample of movies released between 1993 and 2004. In it, we also look at foreign box office and discuss the importance of DVD sales, but at the time we did not have the data on the DVDs. Now we have it, thanks to the-numbers.com, and we are writing another paper to include this. In the process, I came across what I think is some interesting information, and I thought I’d share.

The table below shows the top 20 DVDs purchased for 2008 as well as the top 20 DVDs rented in 2008. Movies in bold on the rental list also appear on the purchases list. The value in the “Rent vs. Buy” column for those movies shows the difference in rank between the rental list and the purchase list.

I think it’s interesting to note that only 7 of the movies are on both lists. For every movie but Iron Man, the movie ranks higher on the rental list than on the sales list. Apparently most people who wanted to watch Iron Man bought the DVD, but the rental market was still strong. For the rest of those movies, they weren’t good enough to buy, but people still wanted to see them.

Here’s what I see when I look at these two lists. I see that there are two kinds of movies that people rent: Academy Award Nominees and crap. People wanted to watch Michael Clayton (good movie, btw) and No Country For Old Men (boring, IMO) so they could have some idea of which should win the Oscar. And people wanted to watch Good Luck Chuck (for some unknown reason) but knew based on its horrible box office performance and reviews that they would probably only want to watch it once — and even then probably only for $1 at Redbox. Baby Mama and Fool’s Gold are in this same league too.

I think it’s noteworthy that The Dark Knight was the best-selling movie of the year at the box office, as well as the best-selling DVD, but it is nowhere on the rental list. I guess when everybody has already seen the movie and everybody knows someone who owns the DVD, there’s no reason to rent it.

Of the top 20 movies sold, 9 of them can legitimately be called kid’s movies. (And yes, it can be a kid’s movie if it has The Rock in it. He’s the new Ice Cube — Ice Cube after he sold out, that is, and did Are We There Yet? and Are We Done Yet? Now The Rock does Race to Witch Mountain and Game Plan. I smell what the Rock is cookin’ and it doesn’t smell so good.) Only one of these 9 movies, Game Plan, is also on the rental list. Parents buy their kids the DVD, plain and simple.

Part of what we’re looking at in the DVD paper is how different aspects of movies affect DVD sales and how that differs from box office revenues. We have already found, for example, that a movie’s sexual content does not have a positive impact on box office revenues for R-rated movies. However, it does have a positive impact on DVD sales for R-rated movies. Conclusion: people want to watch those movies in the privacy of their own homes.

Some facts on the DVD/VHS market in case you’re interested: The DVD sales market is by far the most profitable distribution vehicle for movie studios. The revenues from DVD sales are more than the worldwide box office of movies, and the studios get a larger chunk of the revenues on DVDs (about half of box office revenue goes to your theater, the other half goes to the studios who made the movie; with DVDs, studios get more like 80% of the revenue). The DVD rental market shrunk last year, and only makes up about 1/5 of the revenue of the DVD sales market. That market shrunk last year too, as the economy took a turn for the worse. Blu-ray sales picked up, but not enough to offset the DVD sales decrease. VHS is practically dead: VHS rentals make up less than 4% of all rentals.

Netflix sent me an e-mail this week saying that if I wanted to stay on my same plan (3 discs at a time, including Blu-ray), I would have to pay an extra $3 per month. Until now, they were charging me an extra $1 for Blu-ray, and they are increasing that charge to $4. I promptly changed my plan to 2 discs at a time and am saving $4/month. One might think that people who can afford a Blu-ray player wouldn’t have a problem with an extra $3 a month, and I think that’s what Netflix is counting on. But I’m cheaper than most people, so my demand for everything is more elastic. And rumor has it that Redbox is carrying Blu-ray in other places around the country for the same price of $1/day, and as long as that hits St. Cloud soon, I should be just fine.