Tuesday, November 17, 2015

It could have been done better: Alvin Roth's "Who Gets What - and Why"

Alvin Roth has a Nobel Prize. If you want to get snotty about it, I can google it and remember that it is not a true Noble but instead the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” which is close. It’s as much a science as those other squishy awards they give in things like literature or “Medicine”.

Roth’s Noble is important because I think it was the driving force behind the creation of this book. Someone must have noticed that Roth didn’t have a book for pop econ reading that summarized his work. That person must have gone to Roth and encouraged him to write this.

It’s not that this is a bad book, but that is also not the parenthetical you want someone writing about to start a sentence with when getting to the meat of things. Roth’s work on market design is interesting and important, but the key thing is that when he explains it it sounds like one of those intuitive leaps that is so simple that it feels silly that no one else made them before. That is why the guy has a Nobel.

What the book really lacks is structure. We learn much about the markets for kidney transplants and the reciprocal chains that he developed; we learn much about about placing students at the schools of their choice; we learn much about the dangers of exploding offers and how they create suboptimal outcomes. It’s just that what we learn is scattered and feels systemic. It is as if the book was over-written to add a page count so that it legitimately feels like a book. It makes it repetitive and hard to engage with.

I know I had my issues. When a book makes me think and expands what I know or challenges my beliefs, I fill the front cover and title pages up with my own notes. I read this book front to back and I didn't even lazily dog-ear a page. So in the end where I want to say that this book is  a good introduction to the works of Nobel-Prize Winner Alvin Roth, I’d have to offer a caveat - It could have been done better.

Monday, November 16, 2015

"Inequality: What Can Be Done": Anthony B. Atkinson's Starts the Conversation

Inequality is bad.

Wait, not the book, but the fact that some have much more than others and that it is truly impossible to justify that in terms of hard work - whatever that means.

Inequality has been the elephant in the room that was ignored for so long until Piketty blew up for some reason last year. It's weird how that happens in the culture. I bought Piketty’s book Capital on pre-order and only got about 100 pages in,. By the time I actually got the book, I had read so many blogs going back and forth over it that I had felt like I had already read it.

Anthony B. Atkinson’s book, “Inequality: What can be done?” didn’t get the same attention when it came out in 2015, and I’m not sure why not. Maybe the bloggers on both sides had decided that it was time to look at something else - secular stagnation, when will the Fed achieve liftoff from the zero lower bound, is the Phillips curve still a thing.  Or maybe because Atkinson’s book felt a little less universal than Piketty with his laws so that people could argue if r was less than, greater than, or equal to g. Either way, the fact that people didn’t let this book blow up in the same way is shameful, because it is more straightforward and systematic and economical with the prose. If anything, it fails because it is less grandiose than Piketty, looking at changes that can be made at the national level instead of some global wealth tax. Instead he has a constellation of proposals and an examination of their feasibility and potential cost. If anything for popular American readers, it might be seen as a bit dry and a bit too focused on somewhere that is not America, but the proposals are transferrable. Importantly though, Atkinson doesn’t leave his proposals as the definitive answer, accepting that the economy exists in flux with many variables - making his work not just some answers but a jumping off point for further discussion, We just have to be brave enough to join that discussion.

We need a true mass movement: Critiquing Aronowitz's "The Death and Life of American Labor"

I was reading this short book quickly, as Aronowitz is a good writer, and I mostly agreed with his descriptions of the weakness the the labor movement in America. I wanted to give it to my Democratic friend who works for SEIU to show him that he’s leading himself down a dead end, with a glee that was not comporting with my friendship and respect for the man.

But it was in the second part that I was lost. He lays out a manifesto for the labor union (168-170), which several are already planks of a party, but one that grows internal to the labor movement that he just spent the rest of book decrying. If there is to be mass change for the workers and citizens of the world, I don’t think that his manifesto would work because it seems to accept the irrelevance of the power of the movement (Item one emphasizes that contracts aren’t necessary) but also want to use the movement. Unions need work as the percentage of the labor force in them make them almost irrelevant now what with the neoliberal ideology pervasive but they are held up as what is bad since the main concentration is in government. Perhaps it is time to let labor die and grow a new mass movement where the key identifier is not as worker (since who knows how much longer any of us will actually continue to be full time employees) and instead look at making larger changes where our identifier is as citizen.

True and Truer: Braverman's "Labor and Monopoly Capital"

I bought this several years ago, but I had left it on my shelf for too long, one of those books I know I should have read, but other books just kept getting in the way. I don’t remember the impetus, but I was looking at all my unread and half read books that I had relegated to the shelves - their newness lost and becoming dusty fixtures - and I grabbed Braverman’s study of the nature of work.

What struck me most about this work was that it was researched and written in the late 60s and early seventies, right before the breakdown of the Bretton Woods system and contemporary with the flashes of revolt amongst the various people who had been forgotten in the capitalistic system (students, women, african-americans). In a way, a naive look at the time is that it was the last time that Capitalism may have been said to work in the way its cheerleaders say it will work with shared growth like Kennedy’s rising tide lifting all boats.

Knowledge of the historical record will show that there was always that undercurrent of malaise in the working world as capitalism may have worked on the surface, but underneath that work was born on the back of unpaid women at home and underpaid workers in the factories and mines and white collar workers. Braverman examines how labor was atomized and demarcated and prescribed even for those who were highly educated. What is also striking is how current and relevant the examination is, even with 40 years passing between the initial publication and today. The machines feared have become the robots in our discourse, but the theme underneath it all is the fear of the lack of autonomy and self-direction that takes craftsmen to laborers, no matter if the skill is working with your hands or your mind.

Braverman did work within the tradition of the folks at the Monthly Review, and this speaks to Sweezy and Baran’s “Monopoly Capital,” which I have not read. Despite my own failings, I think this was a worthwhile read.

Saturday, November 14, 2015

When is a Variance Analysis Needed?



If we know that a variance is the result of an uncontrollable price increase for a supply item that we must have, do we need to investigate and make a report regarding the variance? Why or why not?

I’m not sure if this question is fully packed. What matters in looking at the variance is not just that a variance occurred, but also the size of the variance. We can look at a variance as just an absolute dollar amount or as a percentage of budget. If he variance of the line item surpasses either of those thresholds in terms of the company’s policy , then I would say of course a variance report should be prepared. This variance report would be able to unpack the other issue with the question. It says we know that a variance is the result in the price increase – but do we know that this is the sole driver of the variance, or do we know that the price went up so we spent more? A variance analysis can find other underlying trends that just knowing that there is a correlation between the variance and the price of the supplies. This can let us look at perhaps other vendors of the needed item or perhaps a renegotiation of the terms with our current supplier.

The Importance of Credit Policies



Having a credit policy ensures that your organization has the cash flow to operate. If you give everyone service and are relaxed on how soon (if ever) to actually cash in on those receivables, you may have some assets on your books in A/R that will never be realized as cash.  If you never get the cash, you are going to go under soon.
One thing to note is that in public service you might have to essentially give away services at some point. The book talks about hospitals doing charity care, but it can operate in the same manner in different organizations. You should have a development department to make up for the shortfall in funds from services. Having a firm, defined credit policy about who gets credit and who does not will help the planners in your organization make plans on budgets and cash flow.
In my experience, there is an interesting other side to this. Our biggest funder is the state of Illinois, with almost 70% of our operating budget coming in from them. If a funder is a big enough part of the budget, you lose leverage over your policies. Even in good times, we have to plan cash flow on not being paid for service we do right away. Service today might be paid in January.  That makes our planners have to be reactive to the state’s whims.

Sunday, November 8, 2015

Kinds of Long-Term Financing



Long-term debt is characterized by being debt that will last in duration for more than a year. There are several sources of long-term debt for an organization to use.
The first of these is a long-term note. With a long-term note, the organization just borrows money from a lender with a promise to pay at a certain interest rate and payments at certain times. This form is considered an unsecured debt. The organization can lock in a better interest rate by pledging collateral against the loan. This is an asset the organization promises to forfeit if they default on payments of the note.
A second kind of long-term debt is a mortgage. A mortgage is like a collateralized long term note, but the mortgage is secured by a specific asset, usually real estate. Usually a mortgage exists to purchase the building or land. There are multiple structures to how the repayment schedule of a mortgage is set up, but it is usually a set payment every month.
A third kind of long-term debt is bonds. With bonds, the organization is borrowing a lot of money, but the borrowing is not coming from one institution as it might be when borrowed as a long-term note or mortgage. A bond is usually set up as promise to pay the holder of the bond a set amount of interest payment (normally twice a year) for the length of the bond, and then payment of the par value of the bond when the time period comes due.
The final kind of long-term debt is a capital lease. With a capital lease, the organization is not taking ownership of the capital item, instead is paying a third party that maintains ownership, and to which the capital item will revert to when the term of the lease expires.