Friday, November 8

Herding Cats

Truly managing academic departments is like herding cats. I am involved in several universities in a management and/or teaching capacity and over the past few years, have seriously come to believe that there is definitely a dedicated God in charge of tertiary education. Because only through divine intervention can the results happen like teaching students. The level of confusion, incompetence, ego’s, administrative log jams, misaligned incentives, lack of strategic direction, planning, coordination, budgeting, risk management etc. etc. is simply gobsmacking and the fact that they keep on running and also end up educating our younglings is a miracle which can only be attributed to divine intervention.

So it was with interest that I read this paper. I quote the 2 quotes:

“There is a lot of difference in managing a group of employees in a plant and (managing) faculty
members,… Trying to manage faculty members is like herding cats”
“The reason why disputes in academia are so bitter is because the stakes are so low”

Truly herding cats indeed.

Here’s the abstract:

Using a tried and tested measure of management practices which has been shown to
predict firm performance, we survey nearly 250 departments across 100+ UK
universities. We find large differences in management scores across universities and that
departments in older, research-intensive universities score higher than departments in
newer, more teaching-oriented universities. We also find that management matters in
universities. The scores, particularly with respect to provision of incentives for staff
recruitment, retention and promotion, are correlated with both teaching and research
performance conditional on resources and past performance. Moreover, this relationship
holds for all universities, not just research-intensive ones.

When I see university management, I sometimes wonder. Just because you are a good teacher and/or a researcher does not mean that you are a good administrator. Specially here in the UK. Take a peek over the pond, there they have professional administrators and that’s what we need more of. Universities are complex beasts and they need professional trainers to train and perform. Specially the staff.

Thursday, November 7

Bankers and their Bonuses*

A very interesting article.

We analyse the role of financial sector workers in the huge rise of the share of earnings going
to those at the very top of the pay distribution in the UK. Rising bankers’ bonuses accounted
for two-thirds of the increase in the share of the top 1% after 1999. Surprisingly, bankers’
share of earnings showed no decline between the peak of the financial boom in 2007 and
2011, three years after the global crisis began. Nor did bankers’ relative employment position
deteriorate over this period. We discuss proposed policy responses such as transparency,
bonus “clawbacks”, numerical bonus targets and tax.

Bankers seem to be doing very well out of the crisis. And this was a well argued paper. For example: I quote:

In terms of policy, we begin by considering whether there is really any “problem” to be
addressed. If bankers are paid in a competitive labour market and simply rewarded for their
talent, there seems little reason for government intervention, at least on efficiency grounds.
However there seems to be substantial evidence of rents within the sector – a result of
imperfect competition or arising from the implicit and explicit guarantees and subsidies that
the sector receives from the government due to the “too big to fail” problem. We discuss
various policy options that seek to either remove the basis for these rents or to tax them ex
post. Finally, we note that on equity grounds, policy may seek to reduce the post-tax income
taken by those in the upper echelons of the income distribution – which implicitly targets
bankers given their prominence among high-earning workers. This has primarily taken the
form of higher marginal tax rates.

The authors argue that regulators are unable to remove the rental issue. Which is a curious argument to make but then in the absence of a truly global government with one currency, this issue will keep on happening as national regulators will keep on making suboptimal decisions based upon large banks presence in multi country jurisdictions. We have been here before, remember the Dutch and East India companies? They were also too big to fail. So I suspect and concur with the authors that the result will be to increase the marginal tax rates on the top earners. This can have unforeseen implications.

See for example what happened in France. Here’s one example:

Over 8,000 French households paid taxes topping 100% of their incomes, according to French Finance Ministry data. See Taxes on Some Wealthy French Top 100% of Income. You may scratch your head in disbelief. How is that possible?

Stateside, you might guess it was the alternative minimum tax. In France, it was a one-time 2011 levy on incomes for households with assets over 1.3 million euros ($1.67 million). 8,000 families paying 100% may seem a small number, but nearly 12,000 households paid more than 75%. The percentages sure do grate.

Or this:

Hollande's 75% supertax on the mega-rich is at the centre of another row after French football clubs said they would cancel all matches scheduled for the final weekend in November to protest at the levy.

The symbolic tax – a 75% tax on income exceeding €1m (£850,000)a year – has caused a headache for the Socialist government since it wasthrown out as unconstitutional by France's top court. To avoid the embarrassment of a major policy U-turn, ministers redrafted the tax earlier this year to shift the burden from individuals to employers – a legislative shimmy that has spooked football clubs, which famously pay vast salaries even to bit-part players.

Clubs say they are already under financial pressures and that the tax would spark an exodus of top players to rival leagues abroad, killing the domestic game. In spite of a poll showing that 85% of French people are in favour of the tax being applied to football clubs, the clubs decided to step up their protests.

this promises to be fun. Much more ink and excited electrons will flow below the bridge before this is settled.

Wednesday, November 6

The role of stock ownership by US members of Congress on the market for political favors

this was not surprising at all. I quote the abstract:

I examine whether stock ownership by politicians helps to enforce noncontractible quid pro quo relations with firms. The ownership by US Congress members in firms contributing to their election campaigns is higher than in noncontributors. This bias toward contributors depends on the financial incentives of politicians and the relation's value. Firms with a stronger ownership–contribution association receive more government contracts. The financial gains from these contracts are economically large. When politicians divest stocks, firms discontinue contributions to the politicians, lose future contracts, and perform poorly. Politicians divest the stocks in contributors, but not in noncontributors, in anticipation of retirement.

In a way, from a purely economics view, this makes perfect sense. Incentives are everything, no? So the fact that both the congress and the companies work to ensure each other get remunerated shouldnt be a surprise, eh? This allows both parties to skate around the bribery restrictions. Neato. bah!

The author gives two publicly available news stories.

The Case of Representative Jerry Lewis (R-CA)

Representative Jerry Lewis (R-CA) is a 16-term member of Congress and has been a member of the House Appropriations Committee since 1980. From 2005–2006, he served as chairman of the full committee, and he currently serves as a ranking member. Rep. Lewis’ ethical issues arise from misusing his position on the Appropriations Committee to steer hundreds of millions of dollars in earmarks to family, friends, former employees, and corporations in exchange for contributions to his campaign committee:

“In 2005, shortly after becoming chairman of the Appropriations Committee, Rep. Lewis was asked to buy into an initial public offering of a fledgling bank, Security Bank of California, headed by his close friend James Robinson. Rep. Lewis’ initial investment of $22,000 for 2,200 stocks in Security Bank was worth nearly $60,000 in 2006, an increase of almost 300%. The stock was recommended to Rep. Lewis by Mr. Robinson's wife, a former chair and board member of the Loma Linda University Children's Hospital Foundation, a branch of Loma Linda University Medical Center. Rep. Lewis has helped direct more than $200 million in federal dollars to the medical center, which has facilities named in his honor. In June 2006, Rep. Lewis acknowledged that the medical center benefitted from $40 million in earmarks. Many of Security Bank's board members have also contributed to Rep. Lewis’ campaign and are linked to businesses that received federal earmarks. They include Zareh Sarrafian, an executive with Loma Linda Medical Center and president of the Hospital Foundation's board, and Bruce Varner, a friend of Rep. Lewis’ who served on the board of the National Orange Show Events Center in San Bernardino. The center has received more than $800,000 in federal funds.” (CREW report 2009, pp. 37–38)

The Case of Representative Maxine Waters (D-CA)

Representative Maxine Waters (D-CA) is a 10-term member of Congress and a senior member of the House Financial Services Committee. She arranged a meeting between the Department of Treasury and OneUnited Bank, a company with close financial ties to Ms. Waters, involving both investments and contributions:

“In September 2008, Rep. Waters asked then-Secretary of the Treasury Henry Paulson to hold a meeting for minority-owned banks that had suffered from Fannie Mae and Freddie Mac losses. The Treasury Department complied and held a session with approximately a dozen senior banking regulators, representatives from minority-owned banks, and their trade association. Officials of OneUnited Bank, one of the largest black-owned banks in the country that has close ties to Rep. Waters, attended the meeting along with Rep. Waters’ chief of staff. Kevin Cohee, chief executive officer of OneUnited, used the meeting as an opportunity to ask for bailout funds.... Former Bush White House officials stated they were surprised when OneUnited Officials asked for bailout funds.... In December 2008, Rep. Waters intervened again, asking Treasury to host another meeting to ensure minority-owned banks received part of the $700 billion allocated under the Troubled Asset Relief Program… Within two weeks, on December 19, 2008, OneUnited secured $12.1 million in bailout funds… This was not the first time Rep. Waters used her position to advance the interests of the bank. Rep. Waters’ spouse, Sidney Williams, became a shareholder in OneUnited in 2001, when it was known as the Boston Bank of Commerce. In 2002, Boston Bank of Commerce tried to purchase Family Savings, a minority-owned bank in Los Angeles. Instead, Family Savings turned to a bank in Illinois. Rep. Waters tried to block the merger by contacting regulators at the FDIC. She publicly stated she did not want a major white bank to acquire a minority-owned bank. When her efforts with the FDIC proved fruitless, Rep. Waters began a public pressure campaign with other community leaders. Ultimately, when Family Savings changed direction and allowed Boston Bank of Commerce to submit a winning bid, Rep. Waters received credit for the merger. The combined banks were renamed OneUnited.... In March 2004, she acquired OneUnited stock worth between $250,001 and $500,000, and Mr. Williams purchased two sets of stock, each worth between $250,001 and $500,000. In September 2004, Rep. Waters sold her stock in OneUnited and her husband sold a portion of his. That same year, Mr. Williams joined the bank's board.... OneUnited Chief Executive Kevin Cohee and President Teri Williams Cohee have donated a total of $8,000 to Rep. Waters’ campaign committee…. On October 27, 2009, less than two months before OneUnited received a $12 million bailout, the bank received a cease-and-desist order from the FDIC and bank regulatory officials in Massachusetts for poor lending practices and excessive executive compensation... the bank provided excessive perks to its executives, including paying for Mr. Cohee's use of a $6.4 million mansion…” (CREW report 2009, pp. 123–125).

Tuesday, November 5

the strong do what they can and the weak suffer what they must.

I popped into the British Museum the other day and I swung by the Parthenon Sculptures to wonder at them.



Here’s one of my most favoured sculptures, came out behind from the East Pediment. These are the Lapith Women. And boyo, do they get me all tingly and excited. Absolutely beautiful and exquisite. I have also seen the Parthenon and whilst I was unable to see the marbles there (the museum in Athens wasn't constructed when I was there late last century), I can see them here.

The argument whether or not the Marbles should be sent back is a difficult one and has been argued for many many moons. Here’s one recent argument which I read. I quote

Lord Elgin’s theft was the most ignoble act of the neo-classical era. Today, his actions seem as redundant and repulsive as slavery and colonialism, and I am being quite serious when I say we should see the Marbles continued presence in London as vestiges of both, for had the Greeks not been enslaved to the Ottomans, they would surely never have allowed this vandalism and theft to take place. I won’t go on - it will be bad for all our blood pressure. But I will just say that there is a moral imperative to try to right the wrongs past, just as Her Majesty’s Government has done by apologising for illegal acts committed in Northern Ireland and Kenya.

As it so happens, I did a small course on Ancient Greece around this time. And I learnt how Athens demanded protection monies from other Greek Cities and then Pericles used the money to beautify Athens with temples and statues including the Parthenon. I quote from Plutarch

But that which brought most delightful adornment to Athens, and the greatest amazement to the rest of mankind; that which alone now testifies for Hellas that her ancient power and splendour, of which so much is told, was no idle fiction, — I mean his construction of sacred edifices, — this, more than all public measures of Pericles, his enemies maligned and slandered. They cried out in the assemblies: "The people has lost its fair fame and is in ill repute because it has removed the public moneys of the Hellenes from Delos into its own keeping,2 and that seemliest of all excuses which it had to urge against its accusers, to wit, that out of fear of the Barbarians it took the public funds p37from that sacred isle and was now guarding them in a stronghold, of this Pericles has robbed it. And surely Hellas is insulted with a dire insult and manifestly subjected to tyranny when she sees that, with her own enforced contributions the war, we are gilding and bedizening our city, which, for all the world like a wanton woman, adds to her wardrobe precious stones and costly statues and temples worth their millions."

3 For his part, Pericles would instruct the people that it owed no account of their moneys to the allies provided it carried on the war for them and kept off the Barbarians; "not a horse do they furnish," said he, "not a ship, not a hoplite, but money simply; 159and this belongs, not to those who give it, but to those who take it, if only they furnish that for which they take it in pay. 4 And it is but meet that the city, when once she is sufficiently equipped with all that is necessary for prosecuting the war, should apply her abundance to such works as, by their completion, will bring her everlasting glory, and while in process of completion will bring that abundance into actual service, in that all sorts of activity and diversified demands arise, which rouse every art and stir every hand, and bring, as it were, the whole city under pay, so that she not only adorns, but supports herself as well from her own resources."

So before people get too excited, this is what the Athenians did.

But then comes the question of if its right for the Brits to gob on to the Marbles. Question is whether its right or wrong in terms of justice. And I was reminded of this when I read the Melian Dialogue. Written by Thucydides in his History of the Peloponnesian War, it talks about the confrontation between Athens and Melos. Melos wanted to be independent but Athens said that questions of justice does not arise between unequal powers, and ended up besieging Melos, killed the men and sold the women and children into slavery. I know Melos wasn't strictly independent as they had relations with the Lacedaemonians or Spartans if you will. Let me quote the operative paragraphs of this discussion.

89. Athenians. For ourselves, we shall not trouble you with specious pretences--either of how we have a right to our empire because we overthrew the Mede, or are now attacking you because of wrong that you have done us--and make a long speech which would not be believed; and in return we hope that you, instead of thinking to influence us by saying that you did not join the Lacedaemonians, although their colonists, or that you have done us no wrong, will aim at what is feasible, holding in view the real sentiments of us both; since you know as well as we do that right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must.

In your face! one of the most famous sentences in the history of human relations and international politics. The British took the marbles and keep it because they can. Greece has to suffer what they must. I am sure the Greeks can appreciate this, eh?

So its going to be interesting to see how this turns out. The Turks and Egyptians have successfully managed to get their antiquities back, no?

Monday, November 4

Why do we still read Homer

A fascinating article by Professor Andrew Szegedy-Maszak. who lead the Ancient Greeks course which I read recently. If you ever wanted to know WHY one should read Homer then this is a great article to read. Great professor and his video lectures were really nice and interesting :)

thank you Professor, really appreciate you taking the time to educate the world!