Risk Aversion II: Professors

We were discussing Kevin D. Williamson’s article in the currentNational Review.  He has a wonderful article about dynamic American businesses and the comparisons with other developed countries around the world.  Of course you should read it and subscribe to National Review.

We previously discussed the exceptions of the business of American sports and public safety in America not being as risk loving compared to the rest of the developed world.  Now we want to get on to professors and risk aversion.  Remember that risk aversion means that an individual prefers a smaller variance of outcomes rather than a larger variance.  In dismissing professors, Kevin says:

 If you want to have a nice life as a college professor, you’d probably be happier in Denmark, where there is a very comfortable welfare state, or in Switzerland, where universities pay the highest academic salaries in the world.

Two things: First, tenured professors have a very low risk life in America.  Second, there are substantial risks to becoming a tenured professor in America and elsewhere.

A tenured professor is not just risk averse but  about as risk free as any position can be.  A tenured professor can only be fired for cause.  Poor, really poor, performance is not cause.  We know this from our experience with System lawyers.  You won’t get really rich as a professor but you have amazing freedom, benefits, and post-employment benefits so there is no need to go to Denmark.  An example we have used before is that our health care is paid for until we are 115.  A tenured position in America is like being in your own private nordic country but you don’t have to put up with all the tall people.

Reaching the goal of being a tenured professor, on the other hand, is a very risky proposition.  There are other hurdles but the three major ones are getting a PhD, getting a tenure-track position, and, obviously, getting tenure.  All of them are risky because the alternatives are not good.  For example, many disciplines have a combined masters and PhD program.  In effect, a masters degree is a parting gift for the folks that didn’t make it as PhD candidates.  During our minor in economics we saw lots of folks get culled from that program.  Getting a PhD is a judgment by the senior professors.  If you rock the boat or are, gasp, a conservative you are less likely to get your degree.

Getting a tenure track position can be difficult.  Part-time faculty positions are numerous but rarely advantageous.  See this AAUP study.  Part-time faculty members have high risk and low rewards.  For some open full-time tenure-track faculty positions we would get well over 100 applicants.  For an accounting position we might hit double digits in a recession.  You need to love what you study to earn a PhD but you should consider the alternatives.  Lots of PhDs never get a tenure track position.

Getting tenure is not easy.  If you look at the story that Kevin probably used as a reference for Switzerland having the highest paid professors you will see that they expect great things for the money and it appears clear that promotion to full professor is far from a given.  It looks like the Swiss universities are what we would call doctoral universities.  If you check the Carnegie categories at the link you should know that there is a clear relation of risk and reward by classification.  There are more classifications but three will do for our discussion: Doctoral, Masters, and Baccalaureate.  Doctoral schools are paid like the Swiss and the probability of becoming a tenured full professor is low.  We have tried to find data on the percentage of folks that leave but most leave before they are denied tenure.  It is a bit like working a big accounting firm.  Many are hired but very few become partners. The difference is that folks that leave a big accounting firms are in high demand.  Folks that leave Doctoral campuses for other classifications have some baggage.  At the other end of the spectrum, Baccalaureate tenure-track positions are easier to get and easier to keep but the financial rewards are usually much less.

Our point is that you have to be risk lover to become a tenured faculty member but once you reach that goal risk goes away.

 

 

Risk Aversion I

We model investment behavior based on risk and return.  Return is the expected mean or average return and risk is the variance of possible returns.  Most models assume that people like higher returns (duh!) and lower risk.  We use the term risk aversion to describe the latter.

Kevin D. Williamson, writing in the current version of The National Review, describes how Americans tend to be less risk averse than other countries.  He nails it right from the start:

In the United States, the road to economic success is open because the road to economic failure is open.

That’s the basic American proposition: We have an unregimented business culture, easy credit, a forgiving bankruptcy regime, and a “hold my beer” model of entrepreneurship.

He recognizes that success and failure are both risks.  It is true that individuals often have different reactions to downside risk and upside risks.  We see them buy insurance and lottery tickets.

Of course you should read everything that Kevin writes.  Have you signed up for his Tuesday newsletter?

We would like to discuss professors, because they come up in Kevin’s article, and two exceptions to Kevin’s thesis.  Professors will take awhile so we will use a second post to complete that discussion.

We agree with Kevin that America helps make Americans less risk averse than other developed countries.  We see two exceptions: sports and public safety.  In almost every other country sports use a relegation and promotion system.  America has sports monopolies.  Even if you are as poor a leader as Bob Quinn, the Red Sox still stayed in the American League and he probably made money on the deal.  In England, France, or Spain a team like that would have fallen to the third tier and have little value.

Before COVID-19 we traveled a fair amount.  Comparing the Ciffs of Moher, the Castles of Scotland and other international destination to American destination like our National Parks it is clear to us that America is more risk averse in terms of public safety.  Perhaps you milage will vary but we see America has more restraints and more warning signs than any other developed country.

Perhaps, the American litigation system explains our attitude towards public safety while the nature of American capitalism, as Kevin explains, accounts for the dynamic of American capitalism.

 

 

A Matter Of Perspective

David French, at The Dispatch, thinks this is the week that liberalism fought back.  He is looking at pundits while we are looking at universities.  We end up with very different answers.  Here is David:

Now back to this week. On Tuesday, a broad range of (mainly) left-leaning academics, pundits, authors, and other public figures published “A Letter on Justice and Open Debate” in Harper’s Magazine. This was not your standard coalition of civil libertarians for free speech. It not only included arguably the most famous living novelist (J.K. Rowling), it included a range of leftist luminaries, such as Gloria Steinem and Noam Chomsky.

We agree with David that this is good news.  You should read it all.  You should read it all now because we have bad news.  Lots of it.  Here are five recent items from various universities.  They may not have been this week but that was when we saw them.

Mike Adams is retiring from the University of North Carolina-Wilmington.  We are happy for Mike.  He was an even worse high school student than MWG but he too became a college professor.  We hope Mike enjoys retirement but the email from Chancellor Jose Sartarelli is shows his, and we think UNC-Wilmington’s attitude towards free speech.  Here is Jose’s first point:

Have [Mike] continue as a faculty member and accept the ongoing disruption to our educational mission, the hurt and anger in the UNCW community, and the damage to the institution.

You should read the whole letter.  You will find that they gave Mike over a half a million dollars to retire early.  That is what stopping free speech is worth to them.  We found the letter vindictive.  We hope Mike gets something extra from them.

Paul Mirengoff at PowerLine has a story on members of the Princeton faculty recommending  creating a new committee.  Paul says they demand an end to academic freedom.  He is not wrong.  The faculty members want to create a committee with absolute power to punish racist behavior.  No appeals.  No due process.  It is a group of faculty rather than an official faculty action so it is only on the horizon.

John Hinderaker, also at PowerLine, has a series of posts including this one that deal with Samantha Pfefferle, a supporter of The Donald, and if she would have her admission to Marquette University revoked for her support.  It appears she didn’t but we wonder what might have happened without PowerLine.

Heather MacDonald in the WSJ has the headline, “I Cited Their Study So They Disavowed It.”  Heather says:

The authors [of the study] don’t say how I misused their work. Instead, they attribute to me a position I have never taken: that the “probability of being shot by police did not differ between Black and White Americans.” To the contrary, I have, like them, stressed that racial disparities in policing reflect differences in violent crime rates. The only thing wrong with their article, and my citation of it, is that its conclusion is unacceptable in our current political climate.

We are not sure if the authors are running scared or if they just can’t believe that conservative writers understood them.

Then there was the tweet welcoming conservative students to Penn State that was quickly withdrawn.  You need good eyesight to pick it up but it won’t take long to read.

We hope David is right and the left is coming to accept free speech again.  We hope that universities are a lagging indicator.  We don’t think so.

 

Post-Peak COVID-19 Universities

Universities will have big changes in the post-peak COVID-19 (PPC-19) era.  We are not sure they are convinced of it yet as our former school is emphasizing increasing its diversity police.  Universities are not fully a free market but the market will have a big impact on them at the margin because tuition is a large portion of university revenue.  There are some great ideas.  Charles Lipton at Real Clear Politicsis worth reading several times.  Will anyone listen to him?

Steven Hayward has a terrific statement that a fellow conservative is going to use as a preface to his introductory history course.  We an interested and excited to see the outcome of such a statement.  The big question is what will the administration (department chair, dean, and CEO) do when the students protest?

Mark Hemingway at Real Clear Investigations tells us of an alternative that is not market based.  Mark says:

Currently, the conservative National Association of Scholars is working with four states – Missouri, Iowa, Kansas, and Arizona – to go further: pass laws to increase “intellectual diversity” at public universities.

It is clear that the right can succumb to the siren call of fascism.  We are not in favor of people with guns enforcing intellectual diversity.  It shows that groups respond ro the problem that the university has created.

TaxProf Blog reprints an op-ed from Arlene S. Kanter that asks if professors can be forced back on campus in PPC-19.  She convinces us that the answer is no.  At the very least there will be professors that litigate such coercion.  Faculty and student demands related to protecting them from COVID-19 adds another element to the chaos that PPC-19 will produce.

Our background is in a public university so we will consider them only.  Here is the situation as the 2020-21 school year approaches.  They are largely controlled by folks accepting of the far left mob although there are pockets of conservatism as in Steven’s report.  State universities have severe budget problems because of tuition shortfalls and state budget shortfalls.  On average, state representatives are closer to the center than the university.  So are the parents of students. Thus, we see potential solutions like forced intellectual diversity that Mark discusses.  We will also see reduced attendance in the fall.  Nobody knows how much.

Charles has a much better idea but it is much more difficult.  Of course, the main problem is getting the university to reject the demands of the mob.  Do read all of what Charles says.  We would suggest that you give a copy to any administrator you work with or know.  He says:

Universities must publicly reassert the first principle of academic inquiry: free and open debate is essential to research and learning. Bad arguments should be rebutted with better ones, bad data and methods with better ones. How do we know which arguments, data, and methods are bad? Only through vigorous debate.

The statement that Steven reports says that and more. He goes on to say there must be a safe harbor for faculty members.  Again, this would require administration to stand up to the mob.  He suggests that state legislators can help by insisting that universities adhere to the First Amendment.  Charles doesn’t mention it but FIRE can help too. We like his ideas but we don’t know if the administrators are up to them.

We think that the budget problems will be exacerbated by the mob because most administrators will not, at least initially, stand up to them.  Students will stay away so they don’t run afoul of the mob.  As universities approach the brink of failure what will happen?  Will the state close several campuses to save the rest?  Will some administrators with backbones lead the way?  Will the state insist on leadership?

We expect there will be different outcomes in different places.  We are sure that there will be big changes.

Failure Of Politics

We see politics as the way to get to an accepted and sometimes legal solution.  Early in our career when the College of Business Administration needed a curriculum we got together and had intense discussions.  Eventually we passed a curriculum by the narrowest of votes that held together for decades.  A political solution rarely makes anyone happy but often is long lasting.

We first wrote about the failure of politics over forty years ago with regard to the end of slavery.  We know from Fogel and Engermanthat the market for slaves was robust.  How come there couldn’t be a market solution to end slavery over time?  That is, the expected cost of the Civil War, which both side grossly underestimated, would be enough to free the slaves over time.  Birth and death would be one reasonable alternative.  It wasn’t published so you will have to trust us on the computations.

We don’t expect another Civil War but we do see another failure of politics with regard to the George Floyd situation.  Here is what the Chancellor of our former school said in an email we received recently:

In recent weeks, we’ve seen many responses to the deaths of Breonna Taylor, Ahmaud Arbery, George Floyd and Tony McDade among countless others. More broadly, we’ve been reminded of the ever-present issues of systemic racism, injustice, police violence, bias and racial profiling throughout our country.  [Emphasis added]

Seriously, we have seen countless deaths in recent weeks? There have been many deaths from COVID-19 but we work very hard at counting each one.   Later on, without a trace of irony, the email says:

As an institution, we are at our best when we support, uplift and — perhaps most of all — take the time to listen to one another.

It is clear that the Chancellor is only interested in lecturing.  Universities are not the only ones that are not listening to folks or paying attention to data.  Jim Geraghty in the Morning Jolt reports that the Saint Paul Mayor said every person arrested in the recent riots was from out of state and:

Minnesota governor Tim Walz and Minneapolis mayor Jacob Frey made similar comments Saturday morning. But data from arrest reports released later that day indicated that was not the case. “In Hennepin County, which includes Minneapolis, 47 of the 57 people arrested in protest incidents through Saturday morning had provided a Minnesota address to authorities, according to Jeremy Zoss, a spokesman for the Hennepin County Sheriff’s Office.”

Conservatives and the GOP have similar problems getting facts right but for our discussion the biggest problem is the there hasn’t been a Republican mayor of Minneapolis since just before we were writing about the Civil War.  As the WSJ puts it the government has failed:

The violence that broke out in American cities this weekend goes far beyond justified anger at the killing of George Floyd on Monday. The rioters are looting shops and attacking police with impunity, and they threaten a larger breakdown of public order. Protecting the innocent and restoring order is the first duty of government.

The government is made of Democrats and it has failed to protect citizens from the police and citizens from other citizens.  Yet what is the chance that GOP sweep into mayoral positions in major cities like Minneapolis?  Zero?  Less?

The Democrats and the left have failed in cities all over America.  It is a failure of politics because the Democrats have no reason to improve because the GOP and conservatives can’t find a reasonable offering that would even compete with failure.

 

 

 

Two COVID-19 Problems; One Solution

COVID-19 causes many problems.  Two have popped up this week.  Two very different sets of officials in two very different places are confronting two very different sets of problems.  The Italian government has a specific COVID-19 problem: the price of face masks.  The University of Wisconsin has a more general COVID-19 problem including the likelihood that both sources of revenue, student tuition and the state government, will not meet expectations.

The Italian government has created a problem for itself by replacing market signals with central planning.  Alberto Mingardi at the WSJ tells it all in the headline: Italy’s COVID Price-Control Fiasco.  As folks often say, to be fair, we should only report when government price controls are not a fiasco.  Still you should read the whole thing just to remind yourself of the problems of central planning.  Here is a tidbit:

Companies were allowed to import only masks that were already allocated to health-care institutions. No one was allowed to import masks and sell them to the highest bidder. Those who were buying up masks to hoard risked government confiscation. These moves clamped down on price gouging but created a shortage. Through a later adjustment, importers were able to keep 20% of their masks to sell on the market. Yet the signal was clear: importing face masks is better not left to “animal spirits.”

Central planning always leads to the need for more central planning.  Later, Alberto lets us know that the market worked for hand sanitizer.

On this side of the Atlantic, the University of Wisconsin System (UWS) has created The Blueprint For The UWS Beyond COVID-19.  UWS has two different meanings.  Sometimes UWS means all 26 campuses.  The Blueprint applies to all 26 campuses.  UWS also means UWS central administration.  They created the Blueprint.  It is no surprise when they conclude:

To address the significant costs of the COVID-19 pandemic, the University of Wisconsin System must play a more direct role in operations at the campus level to more rapidly achieve systemwide efficiencies.

We are convinced that UWS works because each campus has a fair degree of autonomy.  Perhaps you should read it all.  It is only seven pages and it sounds plausible but it will meet with all the problems of central planning.

So we have two different sets of officials on two sides of the Atlantic dealing with COVID-19 and they both decide that they need more power to solve the problem.  We know in Italy that the people being planned took “unexpected” actions.  Expected the “unexpected” in Wisconsin too.  Another action we can expect is for more officials to conclude that more central planning is the solution to COVID-19 problems.  We really should expect the “unexpected” from both the planners and the planned.

Zeke Update

A few days ago we reported thatDiane Kleinwas touting Zeke Emanuel as agreat (vice) provost in this time of COVID-19.  Here is an excerpt from Jim Geraghty’s Morning Jolt (yes, you should subscribe to it):

Back on January 30, former Obama White House health advisor Dr. Ezekiel Emanuel told CNBC: “Everyone in America should take a very big breath, slow down, and stop panicking and being hysterical. We are having a little too much histrionics on this.” (Now Emanuel believes that Americans will not return to large events until “fall 2021 at the earliest.”) And Emanuel was far from alone in his assessment that the coronavirus was not much of a threat. [Emphasis added]

Perhaps Diane missed Zeke on CNBC.  Would you bet that Diane is glad that The Donald limited travel from China the next (1/31) day?  It is fun to read the Washington Post try to find the imperfections in The Donald’s action.  We are not saying when it comes to COVID-19 that Zeke is always wrong and The Donald is always right.  We are certainly not saying that expertise is irrelevant.  It is a reminder that The Donald got one important thing very right when many experts like Zeke were not yet convinced that COVID-19 was a serious matter.

It does remind us of the usefulness of the analogy of COVID-19 pandemic and war.  There is a similar fog in both.  You can see some things but not others. There is an immense amount of data that is hard to evaluate.  There are many decisions to be made and knowledge is always imperfect.  Nobody, not Zeke, not The Donald, is going to bat a thousand.  It is going to take time and people are going to die.  It will help our outcomes if folks and listen and discuss the decisions and options rather than just attack any minor mistakes.

COVID-19: University Of Alaska

We have written recently about the problems of universities during the era of COVID-19. Today we spoke to a student at our former campus.  She was registered for the fall but uncertain how classes would be held.  We are concerned that the combination of uncertainty, a weak economy, and travel restrictions will lead to enrollment declines for in-state and especially out-of-state students that will be devastating in these days of state budget challenges.

Campus Reform gives us details about the University of Alaska (UA) that might be signaling the problems to come in other states.  UA was already in trouble before COVID-19.  Campus reform links to a Reuters report that UA invoked financial exigency in April of 2019.  Campus Reform makes a good analogy of financial exigency to academic bankruptcy.   Like bankruptcy, it is a legal procedure that allows a university to not fulfill its contracts.  Here is part of the Wisconsin System version of financial exigency:

[A] tenured faculty member, or a probationary faculty member prior to the end of his or her appointment, may be laid off in the event of a financial emergency. Layoff for reasons of financial emergency may occur only in accordance with this policy,

The previous problems at UA are not quite as severe as Campus Reform suggests.  The Governor agreed to reduce the $130 million cut that caused the declaration of financial exigency down to $25 million.  But the additional enrollment problems caused, at least in part by COVID-19, present a big challenge.  A state official described the ten percent enrollment decrease as seismic. As a result there are eight to ten day furloughs for 166 employees including the president and most of the top administrators.  We think it is a really good policy to start with cuts at the top.  We will be following UA and other state schools as they try to survive post-peak COVID-19.  It could well be seismic.

 

Post-peak COVID-19: University Edition

It has often been said that being a department chair at a university is like herding cats.  The department chair (we did it for over a decade) is nominally the supervisor of the faculty and staff but the chair has limited authority.  As we approach post-peak COVID-19 one faculty member has thrown down the gauntlet.

The problems of post-peak COVID-19 (PPP-19) are exacerbated at the university because of the nature of faculty and faculty governance.  To simplify,  PPP-19 is what we see and don’t see or isn’t reported.  If universities open up for in-person instruction then, somewhere, somebody is going to die from COVID-19 and that will get all the press.  Employment and learning won’t be noticed.  If universities operate online then there will be cutbacks if not some dead universities.  Lives saved will get less notice than losses.  All faculty are jailhouse lawyers and some have legal training.

Sidebar One: Our personal definition of jailhouse lawyer would not have required the person to be in jail.  See clubhouse lawyer.  Perhaps there should be a faulty lounge lawyer.  End Sidebar One.

Diane Klein is one of those professors with legal credentials that is rallying the troops. Ah, here is why she lists herself as a gadfly.  She writes at Age of Awareness to advise faculty members not to risk their lives for their provost.  At most schools the provost is the chief academic officer.

She starts with a little character analysis.  Faculty members with Zeke Emanuel for a provost  have it good because he has a health care background, is an advisor to Democrat presidents, and a columnist for the New York Times.  As we know, the folks with health care backgrounds have been effective prognosticators on COVID-19 just the the economists on the economy and climate guys and the climate.

Sidebar Two: We need to listen to the guys with models.  It is just that creating models is difficult and subject to substantial error. We know as we worked on modeling enrollment by classes.  We need to ask questions of the models and the modelers.  End Sidebar Two

On the other hand, The Donald, Mitch Daniels (the president of Purdue and former GOP governor of IN), and others are denigrated.

The more serious question Diane asks is: Does your provost listen to faculty?  Here she is mostly talking about faculty governance.  She reports a Kinsley gaffe by one provost:

Unfortunately, economic and budgetary crises do not respect, nor respond to, shared governance. They happen, without our consent or input, and we must respond decisively to avoid even greater problems.

Obviously.  It happens in good times but mostly bad.  We were chair of the joint budget committee on several occasions when the budget for next year was cut late in the previous year.  There were attempts to involve faculty and student groups and individuals but there were many issues including time, faculty not being under contract, and speed of response.

We are big fans of regular process for the Congress and the university but there are some situations when it is not possible.  COVID-19 has caused problems in both places.

Classes at many universities start four months from today.  We have great uncertainty about the state budget and enrollment.   We have not seen any announcements but we know that state revenue is way down.  We have not seen any projections for the impact on UW System.  We are sure that administrators are working on it.  At our old school, fall classes are in the timetable and some classes are wait listed suggesting they are full.  We don’t know what full means but we do know that everyone is worried about more no-shows than usual.

We can see why political figures have supported the shutdown.  It is a definitive action.  It is likely to get more support than alternatives because the deaths and infections get lots of ink.  As we reach PPP-19 these political figures are starting to catch flak for the shutdowns as the negative impact of shutdowns build.  We are sure that university administrators will catch it from both sides in the fall.  Diane will be happy to help folks no matter what decision was made and how it was made.

Post-peak COVID-19: Decisions

Daniel Henninger at WSJexplains that, largely, the populous and not governments will decide when it will be after COVID-19.  He also adds a very important phrase to help us think about COVID-19: Post-peak.  We will not be in lockdown until COVID-19 is eradicated.  Lockdown will end long before that so we need to make decisions.

Daniel recognizes that there will be changes.  For example, hospitals might have special COVID-19 wards.  Individuals may choose to continue to isolate even after government lockdowns are officially ended.  For example we know a person that has damaged lungs from an accident.  This person plans to isolate until there is a vaccine.

Daniel concludes:

Post-peak coronavirus will be a battle, but it won’t be D-Day. The whole country just did coronavirus D-Day, and we survived. With or without official permission, with or without New York and California, the American people are going to self-release from their coronavirus isolation and get back to business.

These aren’t Trumpian mobs. It is not the rise of anti-science. It is humanity re-establishing social equilibrium. For that, we don’t need instruction.

One of the problems with determining post-peak COVID-19 is the data.  We could only find a data set on our phone from SmartNews so we don’t have a link.  It shows 304 new cases in Wisconsin yesterday which is the highest ever.  Then it breaks the data down by county and it didn’t look as large so we added it up.  It was only 136 cases.  That would be a downward trend.  Then there is our own county.  We haven’t had a new confirmed case in over a week.  Our state government’s plan, Badger Bounce Back, has a charming title but Daniel is right that government action will lag what actually happens like government almost always does.  Individuals will make choices based on the confusing data and their personal observations.  Everyone, including governments, needs to think about post-peak as we work towards eradication and plan for the next virus.