Jeffrey Goldberg writes:

But coming back to the issue of the pressure cops feel, let me ask another question: Are cops aware of the immense power they have? The power to arrest someone is awesome; any cop, at any moment, can take temporarily take your freedom. Yes, there are courts to protect the rights of the innocent, but in the meantime, a police officer can still put handcuffs on you, shove you in the back of his vehicle, fingerprint you and lock you up for at least a couple of hours; and lock you up with some pretty mangy people if he so desires. That is real power, traumatizing power. Society grants police officers that power, but in exchange, we must expect certain things — that the police officer granted this responsibility show more patience, more kindness, and better judgment than the average citizen. Which brings us back to the issue of Sgt. Crowley. Once he ascertained that Henry Louis Gates was the legal occupant of the house, it was Sgt. Crowley’s responsibility to apologize, turn around and walk out. It does not matter at all whether Gates yelled at him, mocked him, got loud at him. It was Crowley’s responsibility to understand why Gates could have been upset, and it was his responsibility to turn around and leave. Good police officers know how to control their tempers, and know enough to understand why someone might be upset with them. Crowley should have left the house.

Tyler Cowen makes another point:

On the substance of the altercation I do not know the details but some time ago we decided, for better or worse, to give policemen a lot of discretion in intimidating individuals, including innocent individuals and especially African-Americans.  I don’t think we chose an optimum but it is disingenuous to be suddenly shocked by what happened.

Categories: Governance, Law
No Comments »

Ed Glaeser lists five great reasons for getting rid of the Mortgage Interest Tax Deduction.

As a renter, I openly resent the homeowners who I continue to subsidize and now have to bail out.

Categories: America, Business and Economics, Governance, Incentive Centered Design, Politics
No Comments »

Arranging to deliver the ransom for the Ukranian ship captured by Somali pirates, and to receive the ship and hostage crew in return is a delicate matter without a legal framework to reduce the counterparty risk (sort of like a drug buy):

More from market-design guru Al Roth’s new blog.

Categories: Business and Economics, Governance, Matching Mechanisms
No Comments »

The Co-Op Casino in Ann Arbor, MI (my home during graduate school) has been robbed, reports The Onion:

Thus far, no firings have been made or even suggested, but the casino’s members have agreed to beef up oversight measures by replacing the position of casino pit boss with a 15-person pit coordinating committee.

Categories: Community, Funny, Governance, Graduate School, Managing
No Comments »

I came home from the airport today to discover my car had been broken into again, only this time they decided to enter by shattering my front window, which will now cost me $200 to replace.  I feel bad for the person who is in a situation where he has to break my window to steal what amounted to about $4 and some pens, but I can’t imagine that it was worth the effort.  It also nets a $204 loss to me, while only a $4 gain to him.  The Coase Theorem teaches us that we would both be better off if I just gave $5 to him. He’d have an extra dollar, and I wouldn’t have to replace my window.

Of course, some people call paying someone not to break your stuff extortion.  If only I could pay a group of people to protect me from potential car-robbers.  I could even pool my money with other car-owners and they could protect all cars, not just mine.  And maybe, while they’re at it, they could protect people from murders, or guard public events.  And as long as they’re protecting everyone, maybe we could fund them through some sort of tax scheme - after all, their protection would be a public good.

But what would we call such a group, and who would stop them from beating the crap out of everybody?

Categories: Community, Governance, Incentive Centered Design, Law, Politics
2 Comments »

My roommates and I do a decent job of keeping our apartment clean, but there’s definitely room for improvement in our systems.  The problem is that cleaning our apartment is a public good, and like any public good, there’s tons of room for free-riding.  Anyone who has ever had roommates has most likely dealt with dirty dishes in the sink, or papers on the table, or piles of unread mail.  Unfortunately,  my brilliant idea, described below, is something only an economist could love, and I live with lawyers.

The solution to our problem, of course, is to attach a price to the various household chores we want done and compensate the person who accomplishes the task by having the other two roommates pay him.  I struggled with how to set the optimum level of payment for each task.  We could have each person decide how much they’d pay for the task, but what if nobody wanted to work at that level?  An alternative is to say how much each person wants to charge, but what if nobody pays it?

Co-op housing attempts to solve this problem through a system of fines and penalties, but if the fines are too low, then it will be seen as a charge for the service and not a penalty (thanks behavioral economics!).  You can force compliance by making the charges too high, but then there’s an opportunity for trade – between people who want to clean or need money and those who don’t – that’s being missed.

The optimal solution goes back to game theory – which teaches us how to incent both action and truth-telling.  There’s a classic problem in game theory where two business partners are trying to split a pie, or their company, or something.  Anyways, two people are trying to split something – and the best way to find an equitable split is to have the first player propose how much the pie/company is worth to them, and the second player decides whether to buy them out at that price, or sell to them at that price.  Because Player One doesn’t know which option Player Two will choose, they want to be as honest as possible about their true value of the pie/company/something, and will be indifferent between the two options.

The same goes for cleaning the apartment.  Give one roommate the option of saying what they value the chore at.  The other roommate has the option of either completing the chore at that price, or they can pay to have it done.  Running through the register of household cleaning tasks should create an equitable outcome, or give one roommate some supplemental income as a maid.  Either way, everyone wins – we all get to live in a clean apartment.

How’s this for a long post, Mom?

Categories: Behavioral Economics, Crazy Theories, Governance, Incentive Centered Design, Information Economics, Strategy
3 Comments »

Gruntled Employees has a two word corporate blogging policy:

“Be professional.”

If your employee-bloggers are posting the secret-sauce recipe, bad-mouthing customers, or distributing NSFW (not safe for work) art, fire them. And if you’re concerned that your employees won’t understand what you mean by “be professional,” then you have a management problem or an employee problem. Or both

Categories: Business and Economics, Governance, Managing, Social Software
No Comments »

Via ConfessionsofaCommunityCollegeDean, a Chronicle article on the importance of shared governance in universities:

Shared governance, especially in the context of a search for a top administrator, means that professors, staff members, and sometimes students get to participate in the process — unlike the bad old days when a university official could hire whomever he (and it was invariably a male) wanted without any input. “Shared” means that everyone has a role…
…
“Shared” doesn’t mean that every constituency gets to participate at every stage.
…
Clearly, the main reason why a search — especially for an administrator — cannot be a simple matter of a popular vote is that someone must remain accountable for the final decision, and committees cannot be held accountable.

Many governance institutions break down because they are a committee structure that is charged with decision making, rather than oversight, and no single individual is responsible for outcomes. At the same time, individual committee members will invariably cry foul when their own brilliance is dismissed by the group or the decision maker.

Categories: Careers, Governance, The Academy
No Comments »

The one thing each donor had in common? Recognition of KIPP’s past performance. Like it or not, this is what donors are after: an assurance that their donation will produce results. And school choice critics can bash KIPP until they’re blue in the face, but KIPP has produced results that are not merely outstanding and quantifiable, but predictable. These donors clearly believe that KIPP can expand and retain its same high standards. Could they be wrong? Sure. But it’s a calculated risk they’re willing to take.

Donors are funding the Knowledge is Power Program because they measure and deliver results.

via Joanne Jacobs

Categories: Education, Governance, Metrics, Philanthropy
No Comments »

After an experience at a restaurant, the Evil HR Lady says:

We don’t train our managers correctly. We don’t teach them what they, as the manager, should fix and what their employees should fix. Managers are scared to let employees have any power–for fear they’ll make the wrong decision. If your employees are poor decision makers, you should not have hired them in the first place. Hire good employees and let them do their work.

Customers want the person they’re dealing with to be able to fix their problems, not have to pawn it off on someone else. If your employees need to get management approval to improve customer experience, they’re wasting everyone’s time. Better to hire talented people, focus them on the customer, and trust them to make the right choices. Let managers manage, and trust the employees who handle your most precious asset, your customers, to make the right decisions, because if you don’t, your customers will leave for a company that does.

Categories: Business and Economics, Careers, Customer Engagement, Employee Engagement, Governance, Managing, Marketing
No Comments »

Also, if faculty governance actually means something, then faculty unionization makes no sense. You’re either management or labor; not both. If you really run the place, then you’re management. If you claim to run the place and you unionize to negotiate against it, I’d call that ’self-dealing.’ It’s a flagrant ethical violation, and of dubious legality. You can’t have it both ways.

From this blog that I just discovered, featuring the musings of an Anonymous Community College Dean

Categories: Careers, Education, Governance, Law, The Academy
No Comments »

From the dumbest column I’ve ever read in Slate (which I normally read before anything else):

Suppose the national defense of the United States were relegated to the private sector. Instead of the publicly funded Army, Navy, Air Force, and Marines, the country would be defended by private militias funded mainly by insurance companies. In the event of foreign attack on U.S. soil, the militias would defend those citizens in the affected areas who’d paid defense insurance premiums through their places of work (or, if self-employed, as individuals).

The best-armed troops would defend the wealthiest and most hawkish segments of the population, who would have paid the highest premiums.

The premise of the article is that we should nationalize health care because it’s like the military, and look how good a nationalized military is. Wow, lets go through all the ways this is flawed.

1. National Defense is a public good, health care is not. You may think that health care is a right, or something everyone is entitled to, and those are philosophical positions, but health care doesn’t fit the definition of a public good in the economic sense. First of all, it isn’t non-rival, which means that if I consume some health care, you can’t consume that same amount. If I take a pill, or use a X-Ray machine, you can’t take that same pill or use the machine at the same time. In contrast, an army that protects the United States offers the same amount of protection, whether or not you add more people to it. Second, health care is excludable. I can stop you from taking a pill or getting that X-Ray if you don’t pay for it. But with national defense, if you don’t pay your taxes, the army still protects you. There are fundamental characteristics between them that make them different.
2. In general, everyone in the country shares the same risk if the country is attacked. Granted, people in high-risk areas may suffer a greater risk due to terrorism, and that is actually reflected most of the time in higher local tax rates to support police counter-terrorism, or insurance premiums for potential targets. In general, though, if there is a large scale attack against the United States or its allies, the risk to all of us is the same. When it comes to health care, we all have different amounts of risk, and only minimal information about that risk. Well planned insurance lets us pool this risk to reduce the cost to individuals and overcome some of this information problem. Nationalized health care has nothing to do with risk pooling, and it effectively involves the health and low-risk subsidizing the unhealthy and high-risk.
3. National defense is a pretty bad example. There’s definitely consensus on the left, and I think among some people on the right that we spend way too much on national defense. It costs the Defense Department orders of magnitude more to procure technology that is available cheaply in the private sector. Defense technology research involves massive outlays relative to the returns. The military is a sprawling and inefficient bureaucracy with a sprawling and inefficient supplier network supporting it. Do we really want to take our relatively dynamic biomedical research sector and make it part of a government supplier complex? Is this really a way to reduce costs?

I later found that Arnold Kling took a briefer, though probably more economically informed shot at the column as well.

Categories: America, Business and Economics, Distribution, Governance, Incentive Centered Design, Information Economics, Politics
No Comments »

Chris Anderson has noticed that risk aversion and a lack of imagination are making CIOs irrelevant:

The consequence of this is that many CIOs are now just one step above Building Maintenance. They have the unpleasant job of mopping up data spills when they happen, along with enforcing draconian data retention policies sent down from the legal department. They respond to trouble tickets and disable user permissions. They practice saying “No”, not “What if…” And they block the ports used by the most popular services, from Skype to Second Life, which always reminds me of the old joke about the English shopkeeper who, when asked what happened to a certain product, answered “We don’t stock it anymore. It kept selling out.”

Later on he notes that this is the biggest problem at universities:

The life of a university CIO is like the life of a telco CEO, fast forwarded by about five years. The users want a dumb pipe, preferably at gigabit speed. They neither need or want the university to administer their email, wikis, blogs, video storage or discussion groups. They want it to simply get out of their way.

From what I know, universities didn’t create CIOs until recently, and they don’t really have much function. Most departments manage there own IT. In the liberal arts, this just means faculty and administrator desktops, but in the hard sciences it usually involves research equipment that goes over the central service’s head. Yes, there are certain shared services that the university needs – most importantly single sign-on, but I’d argue mail and file storage as well – but then get out of the way. With the price of storage as low as it is, I can’t imagine why universities have such low quotas, which is one of the things that drives engineering and art colleges to run their own parallel systems. If your job is keeping the lights on, that’s where you need to innovate – give people the tools they need to do what they want to do better, don’t blow money on tools that other people do better, cheaper.

And, as in all cases, if you’re having discussions about whether or not you’re relevant anymore, it means you’re already irrelevant. It’s time to either reinvent what you do, or stop wasting resources.

Categories: Business and Economics, Governance, Information Economics, Libraries, The Academy
No Comments »

Googling around I found this Jewish Week article on why Jewish mega-philanthropists aren’t donating to Jewish causes:

Our annual research of mega-gifts — gifts above $1 million — turns up at least 50 people who could match or exceed Stanton’s generosity. Typically, these are wealthy Jewish business leaders who give only relatively modest gifts to Jewish causes.

It’s tempting to write these people off as uncommitted Jews, but it would be wrong.

If Jewish causes want to receive mega-gifts, they have to prove themselves worthy. They have to compete on equal ground with the secular hospitals, symphonies, museums and universities, all of which court and inspire Jewish donors.

The money-paragraph at the end:

Look at it this way: Today’s philanthropists think like investors, because that’s how they got wealthy. They want their money to achieve a return; they want results.

That means Jewish causes need to change the way they run their businesses.  Want to attract investment?  You need a clear definition of what you hope to accomplish, a strategy for accomplishing it, and clear metrics that demonstrate your progress.  Even more importantly, those metrics have to reflect your goals, not your activities.  Non-profits, especially in the Jewish community, need to treat their donors like corporations treat their shareholders, and start to demonstrate real, measurable results.

Categories: America, Community, Governance, Jewishness, Metrics, Philanthropy, Strategy
No Comments »

Turner Broadcasting and their ad agency are paying the city of Boston $2 million after law enforcement there confused a glowing Mooninite advertising the new AquaTeen Hunger Force movie with a terrorist threat.  Half will be “goodwill” funds given to the agencies for training and equipment.  Does this mean they just got a million dollars for their screw up?  Will they use this to prevent a similar embarrassment?  Doesn’t this provide an incentive for police departments to overreact, forcing a settlement with corporations who will then pay up to prevent a PR disaster?  After all, none of the departments in 9 other cities, who figured out that a glowing Moon Man isn’t a bomb, got any free money.
The companies can’t say what I’m going to: Boston law enforcement overreacted and behaved in a bumbling and incompetent manner.  The more we are willing to kowtow to our fears of terrorism, the more effective it becomes as a tactic.

Categories: America, Entertainment Media, Governance, Incentive Centered Design, Law, Marketing, Television
1 Comment »