Large Assignment Needed
Edward1111
MHR538_EquityandEquality_Fall2020Lesson4.pptxEquity and Equality
(and Efficiency)
MHR 538
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Light Brain Stretching…
What hit the market along side spinach as the first frozen vegetables?
What continent are you on if you are lost in the easternmost portion of Egypt?
What celebrity was seen on an anti-drinking poster reading, “Before I ride with a drunk, I’ll drive myself”?
Cogitate the following…
What do you call a funny mountain?
What did the astronaut say when he crashed into the moon?
Why didn’t the orange win the race?
Peas
Asia
Stevie Wonder
Hill-arious
I Apollo-gize
He ran out of juice
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- Should we have handicap ramps, or should we just say, “sorry”.
- Should we spend more on urban schools than on suburban and rural schools?
- Should we give students that are from a crack addicted mother more money for education? Is equality enough? What will be the outcome will happen if we give an equal amount? What will happen if we give an equity amount?
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Maybe we should give handicaps to those that are better? Maybe Usain Bolt should have to start 5 yards back. It certainly isn’t fair right now.
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They paid the same, maybe, but that is an equality argument, but what about equity. Maybe they should size everyone and place people in seats based on size needs.
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How do we decide if the distribution of wealth in a society is fair (equitable)?
In terms of property, what is “freedom”?
How difficult is it to assign a value to the contributions of each person?
What is the relationship between financial need and productivity?
How these questions are answered heavily correlates with whether the respondent is liberal or conservative
The Four Major Divides in the Equity Debate (Deborah Stone, 1988)
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1. How do we decide if the distribution of wealth in a society is fair (equitable)?
Fair Process (C) versus Fair Shares (L)
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Who decides on initial assumptions?—(e.g., fairness of laws or attributes or items that should be used to determine outcomes)
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2. In terms of property, what is “freedom”?
C: Freedom to dispose (no constraints), or
L: Freedom from dire necessity
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If you can’t do what you want with your property, what is the meaning of “property rights”? Maybe compromise is needed: everyone is guaranteed a “minimum”, after which property right apply.
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3. How difficult is it assign a value to the contributions of each person?
C: All production is the result of individual creation,
or
L: Production is a social creation
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Relay race or orchestra performance; even in combat, is it obvious how much value is added by each person? E.g., on a flying mission is it clear how much of the created value belongs to the wingman?
How would Rawls answer the question at the top of this slide?
Quick Test - Rawls contrasts:
Social Primary Goods - things that are created,
shaped and affected by social structure (e.g., wealth, income, civil rights, and liberties)
With
Natural Primary Goods - less affected by society (e.g., strength, talent, good health)
- Rawls is very liberal
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4. What is the relationship between financial need and productivity?
C: Need creates motivation to work, or
L: Security from need protects the motivation to work
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Does deprivation create or inhibit work motivation? Maybe security allows people to commit more fully to work.
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Conservatives believe:
Liberty = Freedom to dispose of property with minimum government intervention
Work is motivated by financial need
Property is an individual creation
Equity arises from fair process
Liberals believe:
Liberty = Freedom from necessity
Work is motivated by security
Property is a social creation
Equity arises from fair outcomes
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a) Liberty=freedom to dispose of one’s property with minimum government intervention
b) Liberty=freedom from necessity
c) Equity arises from fair process
d) Equity arises from fair outcomes
e) Work is motivated by financial need
f) Work is motivated by security
g) Property is a social creation
h) Property is an individual creation
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Conceptual test:
Of the last 7 presidents (Carter, Reagan, Bush, Clinton, Bush, Obama, Trump) using Stone’s arguments, which was the most conservative?
Hint: government should probably get smaller, especially those parts that “redistribute” wealth
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Helpful charts
Clinton is extremely conservative
He kicked a lot of people off of welfare
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Which candidate ran as the most conservative (using Stone’s definitions)?
We don’t profess that one is better than the other, our position is that you should be thoughtful; know why you’re voting for someone
One candidate said, “Lots of people took out housing loans that were completely unreasonable and they lied about what they were making and banks protected their lies and gave them loans that now they cannot pay off…we need to bail all of these people out.”
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Hint: Which of the candidates proposed the following:
Top News October 8, 2008, 1:44PM EST
Mortgage Bailout Plan: Candidate wants to spend $300 billion to buy out "underwater" homeowners at the original value of their mortgages
“This proposal, if enacted, would be a massive government subsidy from taxpayers to the most irresponsible banks, including the ones who committed fraud,“ (A top advisor to the other candidate)
From a top advisor to the candidate:”the government must step up and take the hit”
McCain's Mortgage Bailout Plan
The GOP candidate wants to spend $300 billion to buy out "underwater" homeowners at the original value of their mortgages, a plan sharply criticized by a top Obama adviser
Anyone sitting down to watch the second Presidential debate on Tuesday night, Oct. 13, had to wonder what answers the two candidates would have for the nation's unfolding financial calamity. Earlier that day the Dow Jones industrial average had crashed another 508 points (BusinessWeek.com, 10/7/08), and stocks were on track for their worst year since 1937.
There was really only one new proposal offered in the debate, though, and it came in Senator John McCain's answer to the first question. Asked how he would deal with the housing and economic crisis, McCain said he would order the Treasury Secretary to "buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes, at the diminished value of those homes."
The notion of having the government buy up mortgages directly and play a more active role in reworking troubled homeowner loans has been discussed since the early days of the financial meltdown and has generally been backed by Democrats. Senator Barack Obama has backed similar efforts in Congress and recently argued such moves should play a key role in the Treasury's $700 billion rescue efforts as well. But for McCain, the idea is new—and it's a big shift. He clearly meant to use it to position himself as different from both President George W. Bush and Obama on dealing with the average American's woes. It's also a huge ideological shift for a man who is running as a fiscal conservative and who was far slower than his Democratic rival earlier in the year to argue that the federal government should step up to aid homeowners facing foreclosure.
Breaking Down the Proposal
Given the way the sentence was phrased, it wasn't immediately clear what McCain meant—or what the financial implications of his idea might be. Was he saying the government should buy up every bad mortgage at its original value and then refinance the homeowner into a lower-priced, affordable mortgage? That would stick the government with the difference between the original loan values and current, much lower values. Or did McCain mean that the Treasury should negotiate first with the lenders or investors holding the mortgages to reduce the values of the original mortgages to realistic current values before buying them out and refinancing the loans? In that case, banks and investors currently holding the loans (or the mortgage-backed securities they've been packaged into) would have to agree to take that immediate loss in hopes of avoiding the greater loss that could come from foreclosure.
In a conference call Wednesday morning with reporters and in a follow-up call, McCain's top economic adviser, Douglas Holtz-Eakin, made clear that the Arizona Senator is proposing the first option. Under his plan, the government would buy the mortgages from banks and investors at the original value of the loan, no matter how overinflated that now appears to be. "We're [proposing] buying back the original mortgage at the original value and then giving [the homeowner] the new mortgages" at current values and more affordable interest rates, Holtz-Eakin told BusinessWeek. "Obviously the taxpayer is on the hook for the difference."
That could be a huge sum: Enormous numbers of homes are now "underwater"—no longer worth the value of their mortgage —and are no longer worth anywhere near the value of their current mortgages. Indeed, The Wall Street Journal reported that 1 in 6 homes is now underwater. Moreover, buying out mortgages at their current values would essentially mean bailing out the lenders who made those loans, or the investors who now hold them, at what have proven to be highly inflated values. (These are values that were often inflated with the complicity of the lenders and appraisers who made the loans.) They would essentially be made whole on those loans.
Taxpayers to Take the Hit
A statement that's up on the McCain-Palin Web site says the plan would cost $300 billion. Holtz-Eakin says an earlier proposal by McCain would have required lenders and investors to take a loss by selling the mortgages for more reasonable current prices. That's the idea behind legislation that was passed this summer that went into effect on Oct. 1, known as the Frank-Dodd measure, after its sponsors in each house, Representative Barney Frank (D-Mass.) and Senator Chris Dodd (D-Conn.). But given the severity of the problem—and the limited response such a proposal is likely to get from mortgage holders, since it's voluntary on the part of those banks or loan servicers—Holtz-Eakin says the government must step up and take the hit in order to put an end to the foreclosure crisis.
"Our original proposal had that feature in it—it required the voluntary participation" on the part of the lender, he says. "But that gets you smaller scale of activity, it slows everything down, and…I think the balance has shifted [to the need] for a broader more aggressive approach."
Austan Goolsbee, one of Obama's top economic advisers, called the proposal "truly stunning." While Obama was one of the early backers of the Dodd-Frank bill and has long backed the principle of having the government do more to facilitate loan workouts for struggling homeowners, Goolsbee was highly critical of the notion that the government should pay full value for the troubled loans. "This proposal, if enacted, would be a massive government subsidy from taxpayers to the most irresponsible banks, including the ones who committed fraud," Goolsbee says. He points out that if a lender engaged in appraisal fraud or other questionable behavior to bump up the original value of the mortgage, that lender would get bought out for a larger amount than one that had not done so. "This proposal would give the taxpayer all the risk, with no gain," adds Goolsbee.
The statement on the McCain Web site fills in some other details: It says the plan would buy mortgages directly from homeowners and mortgage servicers and replace them with "manageable, fixed-rate mortgages." That help would be available to mortgage holders who live in the home as a primary residence, who can prove they didn't fake their qualifications for the loan, and who provided a down payment. The statement also indicates McCain believes the purchases can be made quickly as a result of the authority given the Treasury Secretary in various pieces of legislation.
Clearly, addressing the underlying foreclosure crisis will be critical to resolving the broader financial crisis in the coming months. And simply buying bad mortgage-backed securities and loans from the banks and others who hold them won't be enough if average Joes keep losing their homes. But still more explanation will be needed if McCain's proposal is going to be taken seriously and not simply as fodder for a debate.
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SACRED MONEY': ‘Mr. Wizard' commutes from Denver by bus to beg for cash in Monument
June 30, 2008 10:37 AM
THE GAZETTE: MONUMENT
MONUMENT - Briefcase in hand, Leerie Tagney boards the morning FREX bus in Denver with commuters heading to jobs along the Front Range. He naps on the ride south on Interstate 25, gets off at the Monument exit and walks to the nearby Woodmoor onramp to start his day's toil. Block letters on a rumpled cardboard sign tell motorists he is “OLD-TIRED-SICK-HUNGRY CREATIVE BROKE”. He has until the red light turns green to take offerings from car windows. Two bucks is the typical handout, with fives, tens and candy bars not uncommon. "I make a good $25 an hour," said Tagney, 71, known as "Mr. Wizard" and looking the part with turquoise eyes and a frizzy blond-streaked gray beard.
Generally, what should we make of this? Perhaps he provides a valuable service—people give him $2 and feel good the rest of the day—win, win.
MONUMENT - Briefcase in hand, Leerie Tagney boards the morning FREX bus in downtown Denver with commuters heading to jobs along the Front Range. He naps on the hourlong ride south on Interstate 25, gets off at the Monument exit and walks to the nearby Woodmoor on ramp to start his day's toil. Block letters on a rumpled cardboard sign tell motorists he is OLD-TIRED-SICK-HUNGRY CREATIVE BROKE. He has until the red light turns green to take offerings from hands jutting from car windows. Two bucks is the typical handout, with fives, tens and candy bars not uncommon. "I make a good $25 an hour," said Tagney, 71, known as "Mr. Wizard" and looking the part with turquoise eyes and a frizzy blond-streaked gray beard. "I did fantastically well last Friday, which according to my biorhythm chart was my lucky day. I did $340." Without the $6 ride on the Front Range Express bus, Tagney would be just another beggar on Denver's streets. Tagney limits his treks to Monument to two times a week. "These are beautiful, generous people," he said. "I don't want to wear it out." He totes a water jug, jacket, snacks and several hats. He likes to look presentable. He prides himself on being a gentleman. He knows the demographics of his client base. "This area leads to upper-middleclass housing and a generally Christian community. I have teenagers give me $20 bills." He regards it as an investment in a maladjusted misfit who thinks big. "I consider what they give me sacred money. It's in a trust for my betterment, it's not mad money," he said. "I gave up booze 23 years ago. I don't use drugs, I'm not about to start at 71. I like to have a cup of tea and have something at McDonald's and socialize a little bit. I bought a $500 crystal ball on layaway." His name is on the business cards for tarot card and horoscope readings he does for $10 at the Mercury Cafe in Denver. But it isn't until he starts talking about the octagonal 5-foot clock he's spent four years building with wood and 1,308 upholstery nails that his Mr. Wizard side rears. "There will be a Buddha in the middle, surrounded by the 12 animals of the Chinese calendar," he said. "I have all the radially codes of the planets, starting with Pluto, in simple and complex form." The clock, which he thinks should fetch $10,000 at auction, will be functional. "It will tell time," he said. Tagney was married for a short time as a young man in California, and he has a son and a grandson. A cosmic revelation led him to Colorado Springs in 1999. He read tarot cards in Manitou Springs before moving to a subsidized senior housing studio apartment in Denver in 2006 in hopes of expanding his business. That didn't happen, but he noticed people panhandling downtown without getting arrested. He decided to give it a try. He objects when panhandlers put untruths on signs. He doesn't like it when they drink, either. Smoking is OK, though. He does it. He set up shop at the Monument exit earlier this year, drawn to the spot because he felt a good karma about it when he passed a man and a woman panhandling there a few years ago. Monument does not have any laws against panhandling. The city police don't hassle him because he isn't in the town's jurisdiction. Tagney is OK if he doesn't cross the painted line. "Pedestrians are prohibited on roadways and cannot impede traffic," Sgt. Tony Rasnake, Colorado State Patrol spokesman, said. "It's a Class B traffic infraction." Mostly, people pretend Tagney doesn't exist. He's not part of the laptop crowd on the Front Range Express bus. "They just smile and think, what kind of screwball is this?" he said. "They live happy lives. They have a standard life. I admire them in many ways, I just don't want to be one of them."
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The best known business philosopher; extremely conservative. Your kids should probably have this on their reading list (50 or 100 books they must read before they can get a license) before getting a driver’s license. But if you to want indoctrinate earlier, you can use the red hen, which makes many of the same points. What happens in this book? What is the conclusion? (deprivation leads to an enhanced work ethic) Definitely a red hen.
Who will help me clean the house? Who will help me plant the grains of wheat? Who will help me make the dough? Who will help me make the bread? Now the liberals come running and say, “I want my share.” The Hen says, “I will not share, I’ll eat it all myself.” Next time, the liberals are all in.
Rand Quotes
Promise of a “right” to economic security abrogates the concept of rights. It is a promise to enslave people who produce, for the benefit of those who don’t. If some people are entitled by right to the products of the work of others, those others are deprived of rights and condemned to slave labor.
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What Percentage of Your Income Should You be Required to Pay in Taxes?
Is it immoral to use your income to buy a Lexus when people around you are addicted to meth? Shouldn’t you pay for their treatment instead?
Isn’t it better to give than receive?
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What is the right amount? It is about 70% in France right now.
How would Rand answer? She might say, “If you produce, then you can consume. If you do not produce, you should not gain the benefits and get to consumer.”
WHO PAYS TAXES AND WHO RECEIVES GOVERNMENT SPENDING? AN
ANALYSIS OF FEDERAL, STATE AND LOCAL TAX AND SPENDING
DISTRIBUTIONS, 1991-2004
By Andrew Chamberlain and Gerald Prante* Tax Foundation Working Paper No. 1, Tax Foundation 2001 L Street N.W., Suite 1050 Washington, D.C. 20036
In general, federal government spending is more sharply tilted toward lower-income
households, due to the large amount of federal transfer payments to lower-income
households through Social Security, Medicare and Medicaid. State and local spending is
generally more flatly distributed across income groups with the largest dollar amounts
targeted at the highest income quintile. This is largely due to high state and local
government spending on programs that are disproportionately used by middle- and upperincome
households. These include public education that is heavily utilized by upperincome
groups with the largest total numbers of children enrolled in public elementary
and secondary schools, highways that are disproportionately used by upper-income
households with the most vehicles, and interest payments on government debt that
disproportionately fall on upper-income households who hold government bonds
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Source: Rush Limbaugh
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The area under the curve represents how much tax is collected from each quintile
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Well this doesn’t seem quite right?
Source: Citizens for Tax Justice (2010a).
Misleading stats to support the liberal view—as the prior two slides indicate, the bottom 45% don’t pay form 1040 taxes; their federal taxes are SocSec taxes (and Medicare)—and we know they get back more than they pay. Without both input and output it seems like secretaries and CEOs have similar average rates. (Average household, middle 20%= about $50,000 per year). After subtracting what they get back from SS, the % of income for the lowest fifth is probably less than 9%; the highest is in the range of 27%. Again, this might be the “RIGHT” system to use—we take no position here—but we should know what we are looking at.
Citizens for Tax Justice, a research group that's been studying tax issues from its offices in Washington since 1979, provides the information we need. When all taxes (not just income taxes) are taken into account, the lowest 20% of earners (who average about $12,400 per year), paid 16.0% of their income to taxes in 2009; and the next 20% (about $25,000/year), paid 20.5% in taxes. So if we only examine these first two steps, the tax system looks like it is going to be progressive.
And it keeps looking progressive as we move further up the ladder: the middle 20% (about $33,400/year) give 25.3% of their income to various forms of taxation, and the next 20% (about $66,000/year) pay 28.5%. So taxes are progressive for the bottom 80%. But if we break the top 20% down into smaller chunks, we find that progressivity starts to slow down, then it stops, and then it slips backwards for the top 1%.
Specifically, the next 10% (about $100,000/year) pay 30.2% of their income as taxes; the next 5% ($141,000/year) dole out 31.2% of their earnings for taxes; and the next 4% ($245,000/year) pay 31.6% to taxes. You'll note that the progressivity is slowing down. As for the top 1% -- those who take in $1.3 million per year on average -- they pay 30.8% of their income to taxes, which is less than what the 9% just below them pay, and only a tiny bit more than what the segment between the 80th and 90th percentile pays.
What I've just explained with words can be seen more clearly in Figure 6.
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
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Income tax rates: by quintile
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But then again…40% pay nothing, yet they get money. They didn’t pay any, but they get some. How does this make any sense? How is this fair, equitable?
Is Social Security a Welfare System? (2013)
| Based on 2013 "Bend Points" | ||
| Yearly Income | Total SS Tax | Total SS Benefit |
| $ 10,000 | $ 49,600 | $ 113,170 |
| $ 50,000 | $ 248,000 | $ 279,570 |
| $ 110,000 | $ 545,600 | $ 412,517 |
| Assumptions: work for 40 years, collect SS from age 67 to age 80 |
If you are wealthy, you put a lot of money in, you don’t get much back. If you are poor and you put only a little in, you get a lot back. Incredible rate of return.
Includes both employee and employer 6.2% paid into social security
Estate Taxes
Should you be allowed to leave money to your children?
Should you be allowed any choices at all in terms of what happens to your money when you die?
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SOCIALISM
State or collective ownership and administration of the means of production and distribution of goods--Wikipedia
Where the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy; the stage in Marxist-Leninist theory between capitalism and communism—Free Online Dictionary
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Are we moving toward Socialism?
What evidence do you have?
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What do we have now?
How do taxes work? Progressive? Flat? Consumption? How should they work, especially if we want to avoid socialism?
Can you “own” property in the United States?
Can you ever own something if you have to pay on it indefinitely?
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Socialism systems would be expected to have highly progressive tax systems
Even if you pay cash for, say, a house in San Diego ($880,000) in a sense you are still renting it from the government (see next slide)
Bridgeport, Connecticut; 1,800 SQ FT; $450, 000
Taxes = $8,193 (2020)
Providence, RI; built 1902, 2879 SQ FT (.17 acres); $889,000 (Zillow)
2020 Property Tax $23,572
San Diego, 3,318 SQ FT, $1,150,000 (Zillow); 2020 Property Tax: $19,007
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If you have to pay property tax forever, when do you ever really own your home??
BUSH MORTGAGE PLAN: (Is it “socialist” to bail out those who made mistakes?)
Eligibility: Homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home's current value, live in the home and have not filed for bankruptcy.
Objective: Adjust mortgage payments through lower interest rates or longer repayment schedules with the goal of bringing payments below 38% of monthly household income.
Bush’s plan was quite liberal
Does the government own the “means of production”?
Bush wanted to bail these companies out and essentially nationalize these firms.
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If you asked these very successful people how they came to be wealthy, would say?
Hard work 8-12 hours a day
Education
In America, all that’s needed is hard work! If only the poor understand that they just need to work!
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Transition: Wait a second…it sure seems like these poor people are working.
If they would only work harder and/or faster they could have time to study and learn and move up in the world…really???
Most of these people don’t want to work here, why are they working here? And yet some call them “lazy.” Maybe they should try it out some day!!
| Note: In the "Actual" line the bottom two quintiles are not visible because the lowest quintile owns just 0.1% of all wealth, and the second-lowest quintile owns 0.2%. |
| Source: Norton & Ariely, 2010. |
Actual
Estimated (Surveys again)
Ideal (Survey Identified)
Percent of Total Wealth
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Distribution of wealth
| Note: In the "Actual" line the bottom two quintiles are not visible because the lowest quintile owns just 0.1% of all wealth, and the second-lowest quintile owns 0.2%. |
| Source: Norton & Ariely, 2010. |
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CEO to Minimum Wage Ratio
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Lots of CEOs say they are paid “market determined” wages; they say they won’t work for less than the value they produce; but the next slide asks the question: Where would you go? Who loves their 1% more than America?
And why did CEO pay stay at about 30x average worker pay for decades before its recent ascent?
Businessweek, from 2000 article
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Why do US CEOs make so much more than CEOs in Germany and Japan? In general have the CEOs of GM and Chrysler been 30 times better than the CEOs of Mercedes, Audi, Toyota, and Honda?
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Source: Emmanuel Saez, UC Berkeley
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The link takes you to a “rich-o-meter”; right below the picture of the blogger on the right hand side you can type in dollar numbers for your wealth or income and it will tell you where you stand relative to the rest of the US
Top .1% Share of Income: by country
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Source:visualizing economics
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Source:Roine and Waldenström inspired by saez
Southwest vs Sun Country Pay Rates (2011) (per flying hour)
| Year | Southwest B-737 Captain | Sun Country B-737 | ||
| 12 | $212 | $127 | ||
| 11 | $208 | $123 | ||
| 10 | $207 | $119 | ||
| 9 | $205 | $115 | ||
| 8 | $203 | $111 | ||
| 7 | $201 | $107 | ||
| 6 | $198 | $101 | ||
| 5 | $196 | $ 95 | ||
| 4 | $194 | $ 88 | ||
| 3 | $191 | $ 82 | ||
| 2 | $189 | $ 77 | ||
| 1 | $186 | $ 31 |
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If wages are able to be determined by value created, why do pilots flying the same aircraft receive such different wages? And success is not a satisfactory answer—for example Delta and United led the way on pay (until somewhat recent bankruptcies) and American is a constant money loser, yet their total pay package is one of the highest in the industry. It seems that a number of social factors, including size of the organization and power of the union work together to determine wages.
2008 US Doctor Salaries
Milton Friedman paraphrased:
The AMA acts as a government-sanctioned guild, increasing physicians' wages and fees by limiting the supply of physicians and non-physician competition
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Why do we pay doctors so much? Education? Is this market driven? If so why are they paid so much less in other countries? (next slide)
2007 data (img residency)
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This slide demonstrates that doctor pay is socially determined—Americans pay substantially more than Germans, Swedes and Norwegians; yet American health outcomes are not better than those found in these countries
http://frommedskool.com/2007/12/16/the-ama-is-to-blame-for-the-primary-care-specialist-income-discrepancy/
Pictures: Dr Rey and from the movie “Brazil”
http://www.washingtonpost.com/wp-srv/special/business/high-cost-of-medical-procedures-in-the-us/
Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services Compared To Other Countries
Miriam J. Laugesen 1,* and
+Author Affiliations
1Miriam J. Laugesen ([email protected]) is an assistant professor of health policy and management at the Mailman School of Public Health, Columbia University, in New York City.
2Sherry A. Glied is a professor of health policy and management at the Mailman School of Public Health. She is currently on leave at the Department of Health and Human Services (HHS), where she is assistant secretary for planning and evaluation. This paper was written prior to her appointment at HHS and does not reflect the official views of HHS.
↵*Corresponding author
Abstract
Higher health care prices in the United States are a key reason that the nation’s health spending is so much higher than that of other countries. Our study compared physicians’ fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States. We also compared physicians’ incomes net of practice expenses, differences in financing the cost of medical education, and the relative contribution of payments per physician and of physician supply in the countries’ national spending on physician services. Public and private payers paid somewhat higher fees to US primary care physicians for office visits (27 percent more for public, 70 percent more for private) and much higher fees to orthopedic physicians for hip replacements (70 percent more for public, 120 percent more for private) than public and private payers paid these physicians’ counterparts in other countries. US primary care and orthopedic physicians also earned higher incomes ($186,582 and $442,450, respectively) than their foreign counterparts. We conclude that the higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main drivers of higher US spending, particularly in orthopedics.
Source: Paul Krugman, NY Times
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Krugman quotes==Tim Smeeding’s “Poor people in rich countries“
Party, AIG-Style: The St. Regis Monarch Beach Resort in Dana Point, Calif.
U.S. Air Force 2007 Budget:
$130.2 billion
AIG Bailout
(so far):
$182 billion
Even as they are being bailed out, they use taxpayer money for an expensive party. Here's the tab: $139,375.30 for rooms. $147, 301.71 for "banquets." $1,488 for the Vogue Salon, which features manicures, pedicures and hairstyling. $6,939.09 on golf. $2,949 for tips. $5,016.32 at the Stonehill Tavern. $3,064.71 for in-room dining and the lobby lounge. That's part of the $440,000 bill from a recent weekend bash that an American International Group Inc. subsidiary threw for its top performers at the posh St. Regis resort, on a bluff overlooking the Pacific Ocean. Sounds like they had fun.
-Chicago tribune
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Government for the Privileged?
Richard Fuld, Lehman Brothers; makes $500 million over 13+ years, drives company into bankruptcy
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Is she laughing at us?
Even though we could demonstrate that all of Fuld’s bonuses were based on fictional profits Americans did not ask him to give back the $500 million; instead that hole and more was fixed by taxpayers.
Is it moral to allow inheritances in the $ billions?
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Athina Onassis: inherited perhaps $1 billion; what position have Gates and Buffett taken? They are encouraging all of the rich to dedicate their money to charity while they are still alive
From Fortune: The $600 billion challenge
June 16, 2010: 7:00 AM ET
Bill Gates, Melinda Gates, and Warren Buffett are asking the nation's billionaires to pledge to give at least half their net worth to charity, in their lifetimes or at death. If their campaign succeeds, it could change the face of philanthropy.
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Why are we in the middle? Richest country, but still hold minimum wage low?
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Extra slides
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What is “efficiency”?; what should we look for to decide if a system is “efficient”?
Let’s start with a small system:
A city’s Public Library System
Potential Goals/Objectives?
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Potential goals:
“as good a collection as possible under the circumstances” (focuses on what libraries have)
Produces other questions:
Should we minimize salary to save money for books?
If we cannot buy all books what are the tradeoffs? More “new” books? More “classics”? Book types (scifi, textbooks, mystery, biography, kids books)? Books on tape?
For that matter, is the focus of libraries “books” or “information”? Should we have more periodicals/newspapers/CDs or DVDs?
What if we emphasize an “economic or “value to the community” set of objectives?
Discussion groups? Storytelling for children (babysitting)? Jobs? (and notice that for potential goals like babysitting or jobs, the costs and benefits might come from the same financial stream, making it difficult to gauge “efficiency”)
Should we divert money from books to these activities?
From a community point of view, these items may point to efficiency.
Efficiency from the customer(s) point of view
What is “efficiency” for a college student who needs books immediately and help in getting the kinds of materials required for papers? Multiple copies of books, which reduces waiting for availability? More checkout librarians, reducing time in library? More librarian to help get around the library?
What is efficiency for the older, less mobile people (80+), who want to read the newspaper and who have limited mobility? Multiple branches; internet connections to newspapers (buy computers and fewer books) or hard copy versions, bookmobiles or taxi services. Spend money for ramps, elevators, access—which comes out of the money that could have been used for books. Since they want to minimize travel, we probably need multiple branches, which results in the purchasing of lots of duplicate books. Probably less need for librarians—hire cheap paraprofessionals and forgo the journals.
Efficiency depends on the perspective of the different types of patrons.
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Efficiency is always a comparative and contestable concept!
“Efficiency” depends on desired outcomes and how you weight them; one person’s efficiency is another person’s waste
“Efficiency” claims are always politically dependent, arising from a particular worldview (triad)
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Efficiency and Effectiveness require choosing “winners” and “losers”
For these decisions we need Systems Architects who are “Leaders of Character”
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No matter what you do some will win and some will lose. That’s why we need leaders of character to make these decisions. We’d prefer a non-zero sum gain, so there are not winners and losers and we can often get there, but it takes a lot of work and most managers don’t put in the time to find that type of outcome matrix.
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Income equality in selected countries
| Country/Overall Rank | Gini Coefficient |
| 1. Sweden | 23.0 |
| 2. Norway | 25.0 |
| 8. Austria | 26.0 |
| 10. Germany | 27.0 |
| 17. Denmark | 29.0 |
| 25. Australia | 30.5 |
| 34. Italy | 32.0 |
| 35. Canada | 32.1 |
| 37. France | 32.7 |
| 42. Switzerland | 33.7 |
| 43. United Kingdom | 34.0 |
| 45. Egypt | 34.4 |
| 56. India | 36.8 |
| 61. Japan | 38.1 |
| 68. Israel | 39.2 |
| 81. China | 41.5 |
| 82. Russia | 42.3 |
| 90. Iran | 44.5 |
| 93. United States | 45.0 |
| 107. Mexico | 48.2 |
| 125. Brazil | 56.7 |
| 133. South Africa | 65.0 |
| Note: These figures reflect family/household income, not individual income. |
| Source: Central Intelligence Agency (2010). |
Diagram from wikipedia, also: “Jeenie” Cooefficient according to howjsay
The Gini index is defined as a ratio of the areas on the Lorenz curve diagram. If the area between the line of perfect equality and the Lorenz curve is A, and the area under the Lorenz curve is B, then the Gini index is A/(A+B). Since A+B = 0.5, the Gini index, G = A/(0.5) = 2A = 1-2B
Income inequality in other countries
The degree of income inequality in the United States can be compared to that in other countries on the basis of the Gini coefficient, a mathematical ratio that allows economists to put all countries on a scale with values that range (hypothetically) from zero (everyone in the country has the same income) to 100 (one person in the country has all the income). On this widely used measure, the United States ends up 95th out of the 134 countries that have been studied -- that is, only 39 of the 134 countries have worse income inequality. The U.S. has a Gini index of 45.0; Sweden is the lowest with 23.0, and South Africa is near the top with 65.0.
The table that follows displays the scores for 22 major countries, along with their ranking in the longer list of 134 countries that were studied (most of the other countries are very small and/or very poor). In examining this table, remember that it does not measure the same thing as Table 4 earlier in this document, which was about the wealth distribution. Here we are looking at the income distribution, so the two tables won't match up as far as rankings. That's because a country can have a highly concentrated wealth distribution and still have a more equal distribution of income due to high taxes on top income earners and/or high minimum wages -- both Switzerland and Sweden follow this pattern. So one thing that's distinctive about the U.S. compared to other industrialized democracies is that both its wealth and income distributions are highly concentrated.
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How do we decide if the distribution of wealth in a society is fair (equitable)?
Fair Process versus Fair Shares
In terms of property, what is “freedom”?
Freedom to dispose (no constraints), or Freedom from dire necessity
How difficult is it assign a value to the contributions of each person?
All production is the result of individual creation; production is a social creation
What is the relationship between financial need and productivity?
Need creates motivation to work or security from need protects the motivation to work
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| wealth owned by top 10% | |
| Switzerland | 71.3% |
| United States | 69.8% |
| Denmark | 65.0% |
| France | 61.0% |
| Sweden | 58.6% |
| UK | 56.0% |
| Canada | 53.0% |
| Norway | 50.5% |
| Germany | 44.4% |
| Finland | 42.3% |
Percentage of wealth held in 2000 by the Top 10% of the adult populationin various Western countries
Thanks to a 2006 study by the World Institute for Development Economics Research -- using statistics for the year 2000 -- we now have information on the wealth distribution for the world as a whole, which can be compared to the United States and other well-off countries. The authors of the report admit that the quality of the information available on many countries is very spotty and probably off by several percentage points, but they compensate for this problem with very sophisticated statistical methods and the use of different sets of data. With those caveats in mind, we can still safely say that the top 10% of the world's adults control about 85% of global household wealth -- defined very broadly as all assets (not just financial assets), minus debts. That compares with a figure of 69.8% for the top 10% for the United States. The only industrialized democracy with a higher concentration of wealth in the top 10% than the United States is Switzerland at 71.3%. For the figures for several other Northern European countries and Canada, all of which are based on high-quality data, see Table 4.
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
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“TQM ruined the Air Force” “Focus on processes instead of focus on the battlefield.”
“Business” Practices—as in “Best Business Practices” aren’t relevant--“We aren’t a business”
What is a business? A business is characterized by a focus on accomplishing a vision/purpose using people, budgets, goals, and metrics.
The essence of business or management study falls under four pillars: Planning, Organizing, Leading, and Controlling. When we suggest that “we aren’t a business”, which of these pillars is being rejected?
But Does Management Have Any Value for the Air Force?
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As described below, the choice of TQM demonstrated a lack of understanding of Mgt; TQM is a very bad choice for particularly hierarchical organizations. Hence, the wrong program was chosen, failed, and was then used to support the contention that Management techniques don’t work in the AF.
TQM:
People empowerment: the key to TQM success; Many “leaders” espouse a participative style, but do not practice this style. Many managers require a personal program of leadership development (e.g., Bennis, 1989) before they can employ TQM.”
TQM replaces top-down management with decentralized decision making.
Open Questions…
Without wealth redistribution is equality of opportunity possible?
If you were born in Mongolia, what would the limit be to your potential wealth? GDP - per capita (PPP): $3,600 (2010 est.)
Who decides how much of your earnings should be taken?
Who decides how the money will be used?
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Question 1: Tipping theory/critical mass models notes that the strongest segregation in America happens on the basis of wealth; should we expect our poorest citizens to create schools without redistribution of any kind?
If you are very successful in any society you might make 10 times the average per capita GDP; in Mongolia (3600 per capita GDP) you might make 36,000 (per capita per capita GDP for US is 47,000—somewhat equivalent success would be $470,000); how much of your success is derived from simply being an American citizen?
However, even if we decide that we should give back, the next two questions are difficult to answer
Nortel Case
In 1998 Nortel’s Code of Conduct was viewed as being leading edge. Notwithstanding the code of conduct, Nortel’s financial statements were still manipulated with the knowledge and assistance of many employees in finance departments throughout the organization globally.
How was this possible?
What characteristic of Nortel might have caused it to be identified as a high-risk audit?
Consider the incentives, rationale and opportunities for fraud.
What would be the role and responsibilities of the Chief Ethics and Compliance Officer?
What would be an appropriate reporting structure and why?
How should the position be compensated and why?
Nortel Case
Management control characteristics at Nortel permitted the manipulation to occur, including:
Tone at the top that earnings targets had to be met through whatever practices necessary, and that it was not acceptable to question the practices;
Lack of technical accounting expertise;
Weak or ineffective internal controls;
Complex corporate structure which contributed to a lack of clear responsibility and accountability; and
Lack of integration between business units, which resulted in a lack of transparency.
Giving Voice to Values (optional)
Educational approach: Coursework that focuses on how to analyze ethical situations
Corporate approach: focus on communicating the rules and enforcing the consequences for violating them
GVV approach: rather than focusing on ethical analysis or rules and enforcement, GVV focuses on ethical implementation and asks “what if I were going to act on my values? What would I say or do? How can I be most effective? So instead of asking “what is the right thing to do?, GVV asks, Once I know what is right, how do I get it done?”
Moving to Local Questions:
How many cadets should be allowed to major in MGT or INB?
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Proposition from STEM perspective: “There are too business majors”
Data?
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Five Most Popular Majors at Rollins (Class of 2018)
Business Management/INB 31%
Communications 13%
Social Science 12%
Psychology 8%
Visual and Performing Arts 7%
These 5 majors account for 71% of the students.
Rollins has at least 30 majors.
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What should we do to make sense of these numbers?
Internally (a more interesting department? Higher critique scores?) Externally (What percentage of college students major in business/management? What do most people do after graduation? What skills sets would help? What is the most common activity described in AFSCs? Management?) The last question moves us to the next slide: is there value in a management education
“What value is there in management classes?”
Data?
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Organizations external to the Air Force seem to value additional management education highly, even for those who have been managing for years
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Organizations external to the Air Force also seem very willing to pay for some perceived value they believe new managers will bring
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How can Management be rejected despite strong evidence of its value? Think about this question using a critical thinking lens.
“I’LL BELIEVE IT WHEN I SEE IT.”
“I’LL SEE IT WHEN I BELIEVE IT.”
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Back to the Triad—people see what they believe; they recreate the world in their image. If they believe their organization doesn’t need mgt, no amount of evidence is likely to convince them otherwise
Suggestion #1
Don’t take strengths for granted
Is Management easy? What does “easy” mean?
Does easy mean fewer late nights? Isn’t that a choice?
What does it mean to “take the path of least resistance”?
Isn’t Physics easy for the 3.90 Physics student?
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Suggestion #2
Don’t let others set YOUR assumptions
(and constantly re-examine those you set)
“Why aren’t you an engineer?!”
“Well…I needed an “easy” major in order to be an athlete; to let me focus on Greek Life; to participate in….”
MU!
“I pursue management because I welcome the challenge of taking a leadership role in an organization. I look forward to building an outstanding team.”
“I want to create systems that can adapt to constant ambiguity; as a systems architect, I am about planning, leading, organizing and controlling my people, my resources, my organization.”
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But you don’t study as much as some majors!
In many cases, true; but that means I will need to pursue additional education later, when I have more time (not on a team, not Greek House President, not double majoring or minoring, not (or perhaps while) working full-time, etc.). For now, I am developing some requisite variety, sampling many of the toolkits I will someday creatively integrate to help my organization adapt to a changing environment. In addition, the other activities I am engaged in will ultimately better inform my management education.
So, while I may not currently have time to fully grasp all of the challenges of management, I know management is where my strengths and interests reside.
An important pledge you all need to make: “I do care about those who have chosen to sacrifice their social lives. In fact…
I promise to treat them kindly later, when they work for me.”
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Suggestion #3
Commit!! Use Critical Thinking models and techniques to become passionate about your education.
No Homework
Thursday
Try to avoid unproductive roles (logging cool points, being like “everyone else”); don’t accept your current talents as fixed!
Be honest with yourself; avoid excuses/defensiveness
(e.g., “I don’t want to be on Dean’s list”)
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Final Thought Experiment
What metric/measure could we look at 25 years from now to decide whether your major enhanced your probability of “success”?
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Final Exam Prep – Thursday, 4 Jun (tomorrow)
Optional attendance
Final Exam – Friday, 5 Jun, during our normal period time
Journals Due – Friday, 5 Jun, 11:59 pm
But feel free to turn it in early
Be sure to follow the assignment guidance
Complete the Course and Instructor Evaluation (CIE)
I think it closes sometime tomorrow (Thurs, 4 Jun)
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Consider the general officers from five USAFA classes (’74-’78)
Academic majors as cadets
Engineering/Basic Sciences: 37
Social Sciences/Humanities: 55
Applying reductionist caveats, is this data sufficient?
As a percentage of cadets graduating within a particular major (by division)…
Engineering/Basic Sciences: 1.70%
Social Sciences/Humanities: 2.16%
Management: 2.46%
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Rand Quotes
Where there's sacrifice, someone is collecting the sacrificial offerings. Where there's service, someone is being served. The person who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.
A sense of the very conservative viewpoint espoused by Rand
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MONEY IS THE ROOT OF ALL EVIL
WHAT IS THE ROOT OF MONEY?
An excerpt from the 1,000 page book—about 4 minutes. Money as the “barometer of virtue”; very conservative
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Honor and Deception
US Air Force Academy Cadet Informants
Were you surprised by anything in the article?
Did the informant program yield benefits?
Is this an acceptable practice?
Do the ends justify the means?
DEPARTMENT OF BUSINESS
DEPARTMENT OF BUSINESS
-100 to -150
-150 to -200
0102030405060
% of engineers for given rangeSAT Differential (Verbal SATcompared to Math SAT)
USAFA Declared Engineering Majors compared to Incoming SAT scores
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| >150 |
| +150 to +100 |
| +100 to +50 |
| +50 to 0 |
| 0 to -50 |
| -50 to -100 |
| -100 to -150 |
| -150 to -200 |
| <-200 |
Sheet1
| 0 | >150 | |
| 10 | +150 to +100 | |
| 11 | +100 to +50 | |
| 22 | +50 to 0 | |
| 30 | 0 to -50 | |
| 33 | -50 to -100 | |
| 38 | -100 to -150 | |
| 43 | -150 to -200 | |
| 55 | <-200 |
