Wednesday, October 12, 2011

A code of ethics for professional economists


As a reaction to the documentary Inside Job - which won an Academy Award last February - the AEA (American Economic Association is rafting a set of professional standards for economists). Apparently, the main concern is the existence and appearance of conflicts of interests. Hope it is not too late... The article in the WSJ here.

Tuesday, August 16, 2011

Thursday, April 28, 2011

Sokol: Guilty


This is the answer to the assignment you wrote on David Sokol's behavior according to Berkshire Hathaway. The statement said Berkshire Hathaway's investigation of stock purchases by David Sokol showed the former executive violated company policies and concluded he misled senior management. Link here.

Sunday, April 17, 2011

Why business majors need ethics classes


Great piece in the NYT today (here). Summary here:

* Business majors spend less time preparing for class than do students in any other broad field, according to the most recent National Survey of Student Engagement: nearly half of seniors majoring in business say they spend fewer than 11 hours a week studying outside class. In their new book “Academically Adrift: Limited Learning on College Campuses,” the sociologists Richard Arum and Josipa Roksa report that business majors had the weakest gains during the first two years of college on a national test of writing and reasoning skills. And when business students take the GMAT, the entry examination for M.B.A. programs, they score lower than students in every other major (...) What accounts for those gaps? Dr. Arum and Dr. Roksa point to sheer time on task. Gains on the C.L.A. closely parallel the amount of time students reported spending on homework. Another explanation is the heavy prevalence of group assignments in business courses: the more time students spent studying in groups, the weaker their gains in the kinds of skills the C.L.A. measures.

* Scholars in the field point to three sources of trouble. First, as long ago as 1959, a Ford Foundation report warned that too many undergraduate business students chose their majors “by default.” Business programs also attract more than their share of students who approach college in purely instrumental terms, as a plausible path to a job, not out of curiosity about, say, Ronald Coase’s theory of the firm. “Business education has come to be defined in the minds of students as a place for developing elite social networks and getting access to corporate recruiters,” says Rakesh Khurana, a professor at Harvard Business School. It’s an attitude that Dr. Khurana first saw in M.B.A. programs but has migrated, he says, to the undergraduate level.

* Donald R. Bacon, a business professor at the University of Denver, studied group projects at his institution and found a perverse dynamic: the groups that functioned most smoothly were often the ones where the least learning occurred. That’s because students divided up the tasks in ways they felt comfortable with. The math whiz would do the statistical work, the English minor drafted the analysis. And then there’s the most common complaint about groups: some shoulder all the work, the rest do nothing.

* “We’ve got students who don’t read, and grow up not reading,” he says. “There are too many other things competing for their time. The frequency and quantity of drinking keeps getting higher. We have issues with depression. Getting students alert and motivated — even getting them to class, to be honest with you — it’s a challenge.” One senior accounting major at Radford, who asked not to be named so as not to damage his job prospects, says he goes to class only to take tests or give presentations. “A lot of classes I’ve been exposed to, you just go to class and they do the PowerPoint from the book,” he says. “It just seems kind of pointless to go when (a) you’re probably not going to be paying much attention anyway and (b) it would probably be worth more of your time just to sit with your book and read it.” How much time does he spend reading textbooks? “Well, this week I don’t have any tests, so probably zero,” he says. “Next week I’ll have a test, so maybe 10 hours then.” He adds: “It seems like now, every take-home test you get, you can just go and Google. If the question is from a test bank, you can just type the text in, and somebody out there will have it and you can just use that.”

* IN a dimly lighted classroom at Ohio University, 20 students are spending a long evening preparing for final exams. (...) Tomorrow’s final is in finance, and the students, mostly sophomores, are sweating over practice questions. (“If you invested some money in a fund seven years ago that offered a fixed 5.99 percent nominal interest rate with quarterly compounding . . .”) “I know this is going to be tricky, but I think I’ve learned from the mistakes I made on the last finance test,” says Adrianna Berry, a junior who started out in marketing but added a second, more challenging major — management information systems — after an injury forced her from the swim team. In contrast to finance, she says, the marketing final she took earlier in the week consisted mostly of multiple-choice questions that had already appeared on previous tests this quarter. For the management final, students could bring a cheat sheet. Ms. Berry’s sheet, in tiny multicolored script, is a thing of beauty: the five-factor model of personality. Bounded rationality. Anchoring bias. Distributive versus procedural theories of fairness.

* Concrete business skills tend to expire in five years or so as technology and organizations change. History and philosophy, on the other hand, provide the kind of contextual knowledge and reasoning skills that are indispensable for business students. “If we didn’t provide that kind of timeless knowledge to our students, we would be providing a seriously inadequate education,” Dr. Schlesinger says.

Wednesday, April 13, 2011



Bernie Madoff accepted to receive a reporter from the Financial Times in prison. Besides his accusations (e.g. he says that JPMorgan, the primary bank for Bernard L. Madoff Investment Securities, should have known of his illegal activity before his arrest), it is interesting to see what he has to say about his Ponzi scheme. The interview is available here.

Some fragments here:

So in 1992, he says, his slide into the Ponzi scheme began, using money from new deposits to pay some returns. “I thought I could do it. I did! I took the money – let’s say I had $1bn, by then – and I was convinced that when the market straightened out I would be able to cover things.” But it never happened. “The turning point was really about 1992 onwards. From then on, it started getting worse and worse. I spend a lot of time thinking about it – it is almost like a blank to me now. I try to piece it together; why didn’t I say, ‘I cannot do it?’ Why didn’t I return the money to those four or five clients – and the others – and say, ‘I can’t do it.’ Why?”

We ask why he didn’t just hand the money back to investors. After all, he says that in 1992 he was already a fairly wealthy man, since the market-making operation was performing well. “Ego,” he explains. “Put yourself in my place. Your whole career you are outside the ‘club’ but then suddenly you have all the big banks – Deutsche Bank, Credit Suisse – all their chairmen, knocking on your door and asking, ‘Can you do this for me?’

“[I was] under a lot of pressure – a lot,” he mutters. “And I was embarrassed. It was the first time in my life that something hadn’t worked. I was just dumb. Dumb! Starting in the early 1990s there were no trades. It was just paper. But let me tell you,” he adds forcefully. “It looked real.”

Once the Ponzi scheme was under way, it required a constant influx of new cash. Madoff began taking on clients referred to him by existing ones, who were inclined to keep their money parked with him because of the steady returns. At some point – Madoff never makes it clear exactly when – the real trading ceased altogether, and he began forging trade records for clients. And he says Picower, Chais, Levy and Shapiro – his big four clients – knew something was amiss. “They were complicit, all of them,” he says.

Madoff’s accusations cannot be corroborated. None of the four families has been charged with criminal wrongdoing. Picower is dead, and his estate settled for $7.2bn; his lawyers maintain he was not aware of the fraud. Levy is dead and his family settled for $220m. Chais is dead; his family denies any wrongdoing and has not settled. And Shapiro, the only one still alive, settled for $625m but denies any wrongdoing and has not been accused by authorities of being complicit. In the words of his lawyer, “Mr Madoff is a liar. These latest statements are no more believable than all the other lies that Madoff told his investors and the authorities for decades.”

But the regulators did not crack down. “The regulators get calls all the time,” Madoff says. They didn’t investigate “because I had the reputation at the time for being the gold standard. I had all the credibility. Nobody could believe at that time that I would do something like that. Why would I? Stupidity – that is why. But remember that when people asked me about the strategy, it made sense. I was big, credible.”

But how does he feel about ruining all those ordinary people’s lives; all those innocent “Mrs Greens”? Did he feel pleasure – or revenge – in this? He shakes his head. “I was scared to death,” he says. “I took no satisfaction in this. There was no malicious action on my part.” (...) I have spent a lot of time with a psychologist [in prison], which I had never done before in my life, in order to try to figure out how I could have done it,” he says. “There are these mafia people who can kill people all day long, do terrible things, and then go home to their families. I used to wonder how it was that people in wars could shoot people. But the thing is that you can compartmentalise things in your life.”

“My complaint about regulators and the SEC, which dates back as long as I’ve been involved, is I feel they spend too much time going after minor infractions and no time going after the major firms and investment banks,” he says. “Very little, if anything, has been done with this new regulatory reform that is going to correct this.”

By early December 2008 Madoff faced $7bn in redemptions – and he did not have the money. On December 10, the night of the BLMIS office Christmas party, his sons could tell something was wrong. “I was comatose,” he says. “They had never seen me like that.” So Madoff, his sons, his brother and Ruth retired to their plush Upper East Side home, where he told them the family fortune was built on a fraud. “I was crying,” he says. “They were crying.” His sons, on the advice of their lawyer, turned their father in to the police. He was arrested the next morning. Madoff says he never considered fleeing. “In the end I was almost relieved,” he says. “The pressure I was under in the last 16 years was almost unbearable. I wish they caught me sooner.” However, his moment of relief unleashed hell on his family. They were hounded by lawyers and journalists. On the second anniversary of Madoff’s arrest, Mark, his eldest son, committed suicide by hanging himself while his own two-year-old son slept in the next room. His other son, Andrew, has broken off contact. “They don’t speak to me,” he says in a flat voice. “It’s horrible. They feel like I betrayed them. And I did. But I had no choice. By the time I realised, I couldn’t get out.

The distribution of funds to Madoff victims is a complex ordeal that is taking years, and many of the settlements, including the $7.2bn from the Picower estate, are tied up in appeals. Madoff is of the opinion that individuals should not be pursued by the trustee. “I do not think that Picard will be successful in clawing back money from individuals, including the Mets family,” he tells us. “He shouldn’t. If they can claw money back from the average person who was involved, then who will ever invest in a hedge fund ever again? But the banks are different.

Several business schools have approached him, he adds, and asked him to work on ethics courses. He likes that idea; Harvard and Northwestern are in his sights. But from 10am to 7pm, four days a week, he mans the commissary, or prison store. Fittingly, Madoff tells us, it is called the “money management department”.


The last paragraph is eloquent: "As we leave the prison, we are still not sure where the truth ends and his lies begin. What we know is that this is a man who mercilessly ran a Ponzi scheme for at least 16 years, corrupted the financial system, destroyed lives and bankrupted families and charities. Yet, in the flesh, Madoff spins a credible tale of how a renegade entrepreneur conquered Wall Street and was drawn into crime by personalities and forces he could not control. It sounds almost convincing; or at least no more absurd than many of the other stories we hear every day in western finance."

Saturday, April 9, 2011

Groupon and the ethics of price discrimination


Gabriella sent me the link to a very interesting piece on price discrimination. You can listen the story here. And following this link you can have access to the article. Should producers treat their customers equally? What is wrong with price discrimination?

Monday, April 4, 2011

Buffett, Sokol and Insider Trading


I am sad about the case of David Sokol, the right hand of Berkshire Hathaway Chairman Warren Buffett, who had bought nearly $10 million worth of stock in Lubrizol just over a week before he suggested to Mr. Buffett that Berkshire should acquire the company. For those of you who are not familiar with the case, you can watch this clip from BloombergTV. Two days ago, the WSJ published an op-ed piece entitled: "Insider Trading: Why We Can't Help Ourselves" (here). At least two important questions arise: is there anything morally wrong with Mr. Sokol's trading given that - as Stephen Bainbridge, an expert on securities at the UCLA School of Law says - it falls "in an enormously gray area of the law"? Second, is this an indication that character does not matter, that even Buffett is weak-willed?

Wednesday, March 30, 2011

Corporate Responsibilities to Consumers

I truly enjoyed our class discussion yesterday. And I am sorry that some of you were not able to express your views given that we were running out of time. As a continuity of the first issue - whether business firms have a responsibility to educate their customers - Brendan Green contributes this clip. Enjoy it and feel free to continue the conversation.

Sunday, March 27, 2011

Greenwashing and deceptive advertising


Let us assume that the study by TerraChoice is correct. Is greenwashing deceptive advertising? It is certainly immoral - whatever the law says - to advertise products without warning about their dangerous side-effects? But what about "environmental" side-effects? Should concrete legislation prohibit vagueness and exaggeration that cannot be proven false? The Federal Trade Commission and the Food and Drugs Administration prohibit exaggerated claims for health products boasting of unfounded disease prevention. Can they legislate against such environmental claims? What level of
transparency can consumers realistically hold corporations accountable for when it comes to complex ecological
relationships that are very difficult to establish? Green messages are audited for how they go wrong. Should they be judged for where they do not go right? Moreover, do business firms have any responsibility - besides what is stated in the law - to educate customers? Should they go green even if consumers are not willing to pay more for environmentally friendly products?

Wednesday, March 23, 2011

Problems with roles


The question, the underlying question of your group project, is whether it is possible to be a good role player and a good person.

Thursday, March 17, 2011

Fukushima 50: Duty and Honor


An elite squad of 70 or so technicians and engineers are struggling to avert disaster at the Fukushima Daiichi power plant in the worst nuclear industry crisis in Japan's history. They are known as the Fukushima 50. They work under threats of radiation sickness, fires and explosions since they became the sole occupants of that risky area. TEPCO (Tokyo Electric Power) has not released much information about its elite team. Five have already died and two are missing.
We only know that they are trying to cool overheating reactors and storage pools to avoid disaster. We also know the conditions they are working in:
"They are working in hot, cramped conditions, clad in white, full-body jumpsuits and working in shifts to prevent contamination and exhaustion. They are equipped with respirators and torches, and when radiation doses rise tohazardous levels, as they did on Wednesday morning, they must be ready to take refuge in safer areas of the complex. The operation has already taken its toll. Eleven people, including members of the Japan Self-Defence Forces, were injured in a hydrogen explosion at its No 3 reactor."
David Brenner, the director of radiological research at Columbia Service, is reported to say that "In many ways they are already heroes... They are going to be suffering very high radiation exposures." And Michiko Otsuki, an employee at the nearby Fukushima Daini plant said: "The people working at these plants are fighting without running away. Please don't forget that there are people who are working to protect everyone's lives in exchange for their own."
@nekkonekonyaa twetted yesterday: "My dad went to the Nuclear Plant. I never heard my mother cry so hard. People at the plant are struggling, sacrificing themselves to protect you. Please dad come back alive".
And the daughter of a Fukushima 50 volunteered wrote an email saying, "My father is still working at the plant -- they are running out of food…we think conditions are really tough. He says he's accepted his fate…much like a death sentence…"
Meanwhile, 500 bone marrow transplant centres across 27 European countries have been put on alert to treat nuclear power station workers whose lives may be threatened in the battle to avoid a meltdown. The European Group for Blood and Marrow Transplantation offered to treat 200 to 300 patients if necessary.
"After a person has been radiated, you have three to four days before they're on the cusp of severe complications," said Ray Powles, chair of its nuclear accident committee. "At that point, they could be put on a flight to Europe if Japanese facilities are overwhelmed."
More on this here, here, and here.

Are these men heroes - we do not know if they are women in the team - or are they simply doing their jobs? Are they morally required to do what they are doing? Is it part of their professional responsibilities like soldiers do?

Sunday, March 6, 2011

Distributive Justice Again: New Kidney Transplant Policies


Last week, the New York Times published a piece about organ transplants, a topic we discuss early in the semester. A proposal is being considered by the nation's organ transplant network, which would change the current first-come-first-served system to a new one that provides better matches between the life expectancies of recipients and the functional life of donated kidneys (click here)
Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania, supported the proposed policy: "If it’s a choice between saving grandpa or granddaughter, I think you save granddaughter first (...) It doesn’t make sense to give people equal access to something if some people fail to benefit.”
In response, Luana K. Lewis, from Bronxville, N.Y., wrote the following letter to the editor:
"I read with shock and revulsion about the proposed plan to allocate donated kidneys to younger patients rather than older ones. Why should some human lives be valued more highly than others? The notion that kidneys should go to recipients where the organs might enjoy “the longest functional lives” is morally repugnant. This is a very slippery medical slope. Please, let’s not set foot on it."

Saturday, March 5, 2011

S.E.C. New Corporate Pay Rules


Last January the SEC took aim at lavish corporate pay enacting new rules that give shareholders a voice on salaries, bonuses and so-called golden parachutes. These “say on pay” rules let investors vote on executive compensation at publicly traded companies. However, boards do not necessarily have to listen since the votes are considered nonbinding. The measures are the latest rules born from the Dodd-Frank Act, the financial regulatory overhaul enacted last July.
Lawmakers are hoping to discourage companies from awarding lucrative packages that encourage risky behavior.
The rules require shareholder votes to take place at least once every three years, although investors can opt to increase the frequency. The agency also mandated separate nonbinding votes on golden parachutes. The companies must disclose in public filings whether they followed shareholders’ wishes. So, shareholders’ votes are non-binding. Why bother?
Link to the WSJ coverage here.

Tuesday, March 1, 2011

Prioritizing


In this link you will read the debate between Whole Foods CEO Mackey, the founder and CEO of Cypress Semiconductor T.J. Rodgers, and economist Milton Friedman about the social responsibility of business. You can appraise their arguments and judge who is right (and why!!!).

Monday, February 21, 2011

Doctors, Teachers, and Professional Ethics


So, after the midterm exam, we will be discussing your final project soon. As a way of introduction, take a look at this clip. As you may know, there is a massive teacher union protest in Madison, Wisconsin. Teachers called in sick, closing all public schools in Madison for three consecutive days, to protest at the state capital about the Governor's effort to eliminate public sector unions. If teachers who do not provide a medical certificate they lose a day's pay for protesting instead of going to work.
The University of Wisconsin medical school reports that it is investigating reports that doctors from the school handed out medical excuse notes to protesters at the state Capitol this weekend.
As you can watch in the clip, doctors from numerous hospitals set up a station near the Capitol on Saturday to provide notes to explain public employees' absences from work.
The University of Wisconsin Health said Sunday that any doctors who distributed notes did so on their own behalf. Now, the questions are whether it is morally permissible for a doctor to pass out sick notes to protesting teachers who were not sick so that they would not lose a day's pay for protesting and whether a teacher is justified in submitting such a note to the school. Assuming that the Governor's initiative is unfair and that workers have a right to protest, should schools accept these notes from the teachers? And should the hospitals discipline the doctors who hand out fake excuses to protesters?

Friday, February 18, 2011

Talk on "Giving What We Can"


Larry Temkin was my professor a few years ago. He is a brilliant philosopher and a good friend. Toby Ord is an Oxford philosopher and the founder of the "Giving What We Can" movement. Given the good reception of the "Giving What We Can" initiative, I thought that you may be interested in attending the talk (or even bring these guys to Rose Hill).

Saturday, February 12, 2011

Give What We Can

Visit msnbc.com for breaking news, world news, and news about the economy


Nick Beckstead, Mark Lee, and Tim Campbell, students at Rutgers University, are launching a chapter of Giving What We Can, an initiative that began at Oxford University in the U.K to encourage people in the developed world to pledge a fixed percentage of their incomes to charity. These guys get by on stipends and earn no more than $20,000 a year. But in most other parts of the world they would be considered both wealthy. Indeed, the rate at which each donates his income to charity puts him in an elite bracket with leading philanthropists.
Lee and Beckstead have pledged to give away all of their income over their stipends until graduation, and half their post-tax income from then until they retire.
Campbell has pledged to give away 5 percent of his income for now, and more after he receives his Ph.D. and starts his career. His wife, he says, supports the general idea.
The story recently appeared in the Wall Street Journal (here).
You can check their website here and this is the list of members who have each made a pledge to give at least 10% of their income to where they think it will do the most to eliminate poverty in the developing world. They have 64 members, from 9 countries, who together have pledged more than 22 million dollars. Most of them, as you can see, are students. None of them are majoring in business, management, finance, accounting or marketing...
They think - along the lines of utilitarianism - that they have a moral duty to do it. But according to virtue ethics, it is not a matter of duties but rather the development of good habits which will eventually lead to acquire the virtue of generosity.
Would you join Nick, Lee, Tim, and Giving What We Can? Should you? Why? These are moral questions...

Saturday, February 5, 2011

Is inequality good? Is equality bad?


There is an interesting article in the last edition of The Economist on inequality and the Gini coefficient (the most famous measure of inequality).
The data: The Gini coefficient has gone up a lot - which means that inequality is rising - in some rich countries since the 1980s. For American households it climbed from 0.34 in the mid-1980s to 0.38 in the 2000s (in the 1990s the income of the richest fifth rose 27% while that of the poorest fifth went up only 10%). In China the Gini coefficient went up even more, from under 0.3 to over 0.4. But Brazil’s Gini coefficient has fallen more than five points since 2000. And inequality in the world as a whole is falling. Follow this link to read the piece, it is very interesting!
As we will be discussing this coming week, some people believe that (social/economic) equality is morally good. Some other people believe that there is nothing intrinsically good or bad with inequality from a moral standpoint.
Same discussion among economists. The new managing Director of the IMF, French Economist Dominique Strauss-Kahn, bemoaned “a large and growing chasm between rich and poor—especially within countries” and argued that inequitable distribution of wealth could “wear down the social fabric”. According to Strauss-Kahn, the data indicates that "more unequal countries have worse social indicators, a poorer human-development record, and higher degrees of economic insecurity and anxiety.”
Other economists such as Gary Becker disagree. Becker argues that there is good and bad inequality. Some types of inequality, he argues, have great social value. And other types of inequality reduce efficiency, productivity, and utility. He illustrates his point with examples of economic development and inequality in China. Follow this link to read his arguments for why there is good and bad inequality.
The discussion is excellent; I hope you have time to read the posts.
If so, the question is pretty straightforward: is inequality good or bad?

Monday, January 31, 2011

Cost-Benefit Analysis, Global Poverty, and Greenhouse Gas Emissions


A hot debate in the pages of the Wall Street Journal between Princeton professor Peter Singer and Copenhagen Business School professor Bjørn Lomborg over whether we can afford to both reduce poverty and clean up the environment.

Singer asks:
"What should we do? Sometimes we should choose to protect the environment and the nonhuman animals that depend on it, even if that denies economic opportunities to some people living in extreme poverty. Areas rich in unique biodiversity are part of the world's heritage and ought to be protected. We should, of course, try to find alternative environmentally sustainable opportunities for those living in or near these areas. But there is no single currency by which we can measure the benefit of saving human lives against the cost of destroying forests that provide the last remaining refuges for free-living chimpanzees, orangutans or Sumatran tigers.
Cost-benefit analysis certainly can't handle this task. Even when economists ignore environmental concerns, their usual method of assigning a value to human lives leads to the ethically embarrassing conclusion that the poor count for less because they earn less and cannot pay as much to reduce life-threatening risks. (...) Giving equal weight to the interests of future generations provides us with strong reasons to be concerned about environmental preservation, as well as about the more immediate concern of reducing global poverty. We should help today's global poor, but not at the expense of tomorrow's global poor.
"

Lomborg replies:
"Mr. Singer criticizes the use of cost-benefit analysis because it doesn't value human lives at the same rate in developed and developing countries. As uncomfortable as it may be, the reality is that we don't actually think of all people as equal. If we did, we would be building all of our new hospitals in developing countries. Mr. Singer may regard this fact as shameful, but ignoring the ethical judgment of nearly everyone makes his analysis less helpful. Similarly, Mr. Singer criticizes the way that discounting is used by economists to make future costs comparable to values in the present. He argues that we should give "equal weight to the interests of future generations." Once again, this may sound admirable. But think about the consequences of heeding Mr. Singer's advice. By choosing a discount rate close to zero, we effectively say that the desires of infinite numbers of future generations are vastly more important than our own, meaning that we should save the great bulk of our resources for the future and consume just enough to survive. Essentially, our generation should eat porridge, while we leave virtually all benefits to the future."

Singer concludes:
"All of us living comfortably in industrialized nations should use more energy from sources other than fossil fuels, use less air-conditioning and less heat, fly and drive less, and eat less meat. And we ought to start doing these things now, for our own sake, for the sake of the global poor and for the sake of future generations everywhere."

And Lomborg counter-replies:
"This is a poor prescription, not only for those of us in developed nations but for developing countries and for future generations as well. It is an incredibly expensive way to achieve very little—and it won't happen (...) We are perfectly capable today of tackling the problems of both poverty and environmental pollution. But to do so, we must think clearly and rationally, and we must carefully weigh the costs and benefits of the approaches available to us."

Link to Singer's op-ed piece here and to Mr. Lomborg's article here.

Wednesday, January 26, 2011

Experiments in Ethics - Honesty, Deception, and Bystander Effects


It is not "What Would You Do?" but what do people do. And why. Is it just the situation?

Saturday, January 22, 2011

A replication of Milgram's experiments

video
Jerry Burger, a psychology professor at Santa Clara University, conducted a partial replication of the Milgram’s experiment we discussed in class yesterday. Seventy adults participated in the study up to the point where they first heard the learner’s verbal complaints (150 volts). The obedience rates were only slightly lower than those obtained by Milgram 40 years earlier. This research was featured in ABC News’ Primetime.

For those of you who missed class yesterday, you can watch the original experiment below:


Saturday, January 15, 2011

Money for Nothing


Canada's broadcast standards council has ruled that Dire Straits' 1985 hit "Money for Nothing" should be censored because of a homosexual slur in its lyrics. The council said the British band's use of the word "faggot" referring to gay people three times in the song breaches the national broadcasters' code of ethics. Yet, an edited version of the song can be played.
Helen Kennedy, executive director of Egale Canada, said last week the decision is the right move given a number of teenage suicides that took place in the U.S. in 2010 after they were subjected to homophobic bullying. The council said it realized Dire Straits used the word sarcastically but said it was inappropriate.
"Money for Nothing" was a massive hit upon its release in 1985. It won a Grammy, reached No. 1 on the charts in Canada and the U.S. and spawned a famous music video that featured crude computer animation and became interwoven with the popularity of music network MTV.
For a critical examination of this decision, watch the clip below:

FIAT & Chrysler: New labor contract, new right violations


Fiat workers approved last week a revamp of the carmaker’s oldest factory in Italy, clearing the way to implement a venture with Chrysler. 54 percent of employees voted for the investment in the Mirafiori plant in Turin in exchange for measures to limit strikes and curtail absenteeism (94% of the workers took part in the ballot).
FIAT CEO Marchionne needs a majority of the 5,500 employees at the factory to sign off an accord approved by most unions as he seeks to turn around Fiat’s unprofitable Italian operations and revitalize an alliance with Chrysler by sharing production for Jeep sports and Alfa Romeo cars. More importantly, the vote marks a milestone in Italian labor relations.
The CEO had said he may shift production abroad if the plan wasn’t approved. His tough talk has made Mirafiori the most important topic in the country the past two weeks, with daily front-page coverage by major newspapers and prompting commentary from political leaders including Berlusconi.
Fiom Cgil, Fiat’s biggest union which represents 10,000 of the carmaker’s 83,000 workers in Italy, was the only group that didn’t sign the Dec. 23 accord, saying the proposal curtails workers rights and worsens their conditions. Fiom has called a strike for Jan. 28 and said it may take legal action.
According to the Financial Times, productivity at Mirafiori averaged 30 cars per employee a year, compared with almost 100 at Tychy. Fiat’s European carmaking operations could generate a profit of 390 million euros in 2011 if Fiat shifted all production to Serbia and Poland, according to Kristina Church, a London-based analyst at Barclays Capital, who predicts a loss for the business of 855 million euros for this year after a 684 million-euro loss in 2010.
In addition to extra hours, workers would face shorter breaks and postpone lunchtime until the end of a shift. Absentees would risk having their pay withheld and unauthorized strikes face disciplinary action.
In a similar referendum last June, about 60 percent of workers at Pomigliano near Naples, Fiat’s least productive factory, supported a reorganization plan. Is it OK to trade off rights for the promise of higher productivity (or the threat of divestment or relocation)?

Thursday, January 13, 2011

A kidney for freedom


Mississippi Gov. Haley Barbour (R) announced late Wednesday that he will grant an early release from prison to two sisters serving unusually long sentences for armed robbery (see clip above). Sally Satel and Ira Brody wrote a piece in the WSJ with a proposal for kidney donation:
"A prisoner donates a kidney and receives compensation only when his or her sentence is complete—no shortened sentences, no parole, no special considerations. The organ goes to the next person on the national transplant waiting-list, the way all organs from anonymous donors do."
The advantages, they say, are threefold: a patient languishing on dialysis is rescued, the government realizes savings and a cushion of financial security offers the prisoner a better chance at successful re-entry into society.
Link to the WSJ piece here.

Tuesday, January 4, 2011

Chinese students ranked best in the world at maths, reading, and science


The Program for International Student Assessment, known as PISA, was released in December. PISA is a standardized test given to 15-year-old students by the Organization for Economic Cooperation and Development, a Paris-based group that includes the world’s major industrial powers.
Results on standardized tests are becoming a common way to evaluate student performance in different school systems. These tests are especially important in international comparisons of student performance since school systems differ so much across countries.
While international tests in mathematics, science, and reading have been given to high school students in different countries since 50 years ago, the PISA tests started in 2000, and the number of countries included has been expanded by 2009 to over 60.
Main finding: Chinese students in Shanghai outscored their counterparts in dozens of other countries, in reading as well as in math and science. The stellar academic performance of students in Shanghai was noteworthy, and another sign of China’s rapid modernization. For our purposes, let me emphasize this conclusion:
"The results also appeared to reflect the culture of education there, including greater emphasis on teacher training and more time spent on studying rather than extracurricular activities like sports."
A link to a NYT piece discussing the release in available here and the complete report can be accessed here.

Monday, January 3, 2011

Conflicts of Interests and an ethical code for economists


We recently discussed in class the MBA oath. Now, the NYT reports that the American Economic Association, the world’s largest professional society for economists, founded in 1885, is considering a step that most other professions took a long time ago, namely, adopting a code of ethical standards. Apparently, this is a reaction to a documentary film released in October - "Inside Job", watch the trailer above - that excoriates academic economists for their ties to Wall Street.
“You could call this the ‘Inside Job’ effect,” said David H. Autor, an M.I.T. professor who is a nonvoting member of the committee but had not heard of the proposal. “Certainly the implication of the movie was that people were selling their academic reputations to further the interests of moneyed individuals and institutions.”
The film is particularly critical of R. Glenn Hubbard, dean of Columbia Business School and a director of MetLife; Frederic S. Mishkin, a professor at the same school who advises investment firms; and Martin S. Feldstein, a Harvard professor who resigned from the board of the AIG after it was bailed out by the Fed and the Treasury. They have held top posts: Feldstein was chairman of the Council of Economic Advisers under President Reagan and Bush and Mishkin was a Fed governor.
The question is whether economists should be required to disclose (and how) who finances their research, which corporate clients they advise, consult for or give speeches to. And even whether they should be allowed to serve as corporate directors and officers, as many business and finance professors do.
Robert E. Lucas Jr., a Nobel laureate at the University of Chicago, said universities are better suited to handle the matter: “It’s good to get this stuff out in the open, but I don’t like the idea of the A.E.A. watching over this. What disciplines economics, like any science, is whether your work can be replicated. It either stands up or it doesn’t. Your motivations and whatnot are secondary.”
Of course, we disagree.