Questions for Discussion in Class

1. Questions for Discussion in Class Economic Organizations and Markets & Economic Institutions and Markets Note: These slides, based on previous courses, are provided only as an indication. They will be modified both before and after class

2. Block I. Individual behavior

3. Topic 1. New cognitive perspectives

4. Sweet tooth(love for sweet food) • Why do we like sugar and fat? • Is such preference optimal? • How do we deal with it? • Look for examples of culture, institutions, education, self-control, rationality, emotions • Does it determine our weight? • What can you do as… • … a manager? At Danone? McDonald’s? Searle Inc.? • … an economist? At the Ministry of… Health? … Education? • … student?

5. Generalizing sweet tooth • Instincts present • Poorly adapted b/c environmental change • Cultural complements regain adaptation • Often relying on instincts • Influence does not mean determinism • Similar traits? All questions applicable? 

6. Same questions about… • … jealousy? • ... xenophobia? • ... happiness? • ... education? • Which education is most important—academic or “informal?”

7. Why do we humans need families? • What does our species specialize in? And where does its success lie? • For this specialization, how should our minds work? As a generalist processor? • How is our mind designed? • When and where was it designed? With what consequences?

8. Who participates most in class – the men or the women? • Why? • Nurture • Nature • How could we verify the various explanations? • E.g., segregated classes • What are the consequences for career development? • Now: what can be done to improve the sex deficit • In future: foresee contingencies, prevent men from deciding for women (someone has to decide, who?)

9. Do we like to try out new teaching methods? • Why are we especially and irrationally adverse to loss? • Are we able to instinctively watch over social interactions? • What is the function of culture and institutions? • Does explaining conduct (such as a genetic inclination towards violence) mean we condone it?

10. Topic 2. Business implications of evolutionary psychology

11. Optimizing topics 1 & 2 • Getting recipes for management (e.g., “Homo Administrans”, Nicholson)? • Opening your mind, to complement you “toolkit” for self-control and social interaction

12. What are the “building blocks” of your beliefs on human nature? • Experience • Family? • Friends? • Formal education • School? • University? Homo economicus? Is it a SSSM? • Others? • Religion? • What about “nature”, e.g., mind’s hardwiring???

13. Biological “effects” on behavior and, in particular, management • Do they replace, add or interact with the environment? • Interaction  complexity applications? • Management? (“Homo Administrans” examples)

14. email • “I am ... from your class of Economic Organizations and Markets (group 2), I write you in order to comment some aspects of The Economist's article "Homo administrans". In the article, despite the fact that the author states that nurture and nature explain the differences between individuals and that both are important in order to determine our character, he just focus on showing experiments that seems to defend that biology is the only determinant of our character, almost without influence of our environment. For me this is contradictory not just with his initial affirmation but also with other studies that suggest the importance of nurture to define our personality traits. For example, a couple of days ago I read an article which says, briefly, that environment helps to determine our character and that the role of genes seems to be help to determine the paths that people take in their environment (if you want to read it carefully here is the link: http://voices.yahoo.com/the-role-nature-nurture-shaping-human-behavior-2255780.html)”.

15. “Pruned” email • “I am ... from EOM class. I write to comment on the ‘Homo administrans’ article. Despite it states that both nurture and nature are important in explaining human behavior, it just focus on experiments that seem to defend that biology is the only determinant, almost without any environmental influence. You may see http://ow.ly/sUlkE”.

16. Analysis “Homo Administrans” • Contents: • Research grounded on biology (nature) effects • Emphasizes interaction nature-nurture. E.g.,: • “Genes do not operate in isolation. Environment is important,…, they interact in subtle ways” • Describes research on such interaction: Arvey: “Business-women, it seems, are born. But businessmen are made”. • Cautions on the limited explanatory power (2 last paras.) • Puzzle: It is perceived as contradictory or biased • When reading new info • Confirmatory (100% nurture)  “of course”, no complaint • I.e., do you subject nurture argument to the same standard? • Conflicting (interaction nature & nurture)  complaint!!!

17. Outline of “Business Implications of Evolutionary Psychology” • Organizing exchange • Opportunism and ‘Farsighted contracting’ in TCE • Moral hazard in principal-agent theory, etc. • Management • General management • Managing people • Marketing • Finance

18. How to deal with homo sapiens? (endowed with cheating detectors, emotional commitments, etc.)

19. Questions on functional management Leadership Is self-deception effective? In what areas? Why do leaders usually feel alone? What do we ask them? Finance Why do people continue to fall for pyramidal frauds? (e.g., Madoff, Foro Filatélico, preferentes, etc.) Why do speculative bubbles keep happening? Marketing Why do customers not like it when brands change their logos? Is advertising that addresses men sexist? And advertising that addresses women? Any examples?

22. Managing your career Which emotions threaten your career? How can you train yourself (“nurture”) for... Postponing gratification? Interacting better with others? Speaking in public? Keeping control over your career? How would you deal now with your partner? Making a deal, establishing “safeguards”?

23. How is to achieve work/life balance? What regrets are expressed by many managers, both men and women? Are they the same? Why? How can they be remedied?

24. Example: Who deals best with self-esteem? V. See this Subject in Sintetia

25. How should our studies change? Groups: Size? Continuity? Identity? Competition? Exams: Necessary? How often? Homework: Necessary? Effects? Provision of information on: Type of exam? Ranking in the class? Change: Teaching method? Others? Can you help UPF make students more rational? Meaning by rational? Improve self-control?

26. Application for topics 5, 6, 7 • What is the role of “emotions” in understanding and regulating markets, politics, institutions, and business firms?

28. Block II. Economic Organization

29. Topic 3. Incentives

30. Does voluntary cooperation exist? • Examples? http://bit.ly/wt61P6 • Do all individuals cooperate voluntarily? • When voluntary cooperation does exist, how do explicit incentives affect it? • Can “strong” reciprocity... • ... help us negotiate? • ... create new types of incentive? • ... alleviate the problem of collective action (public property)? • How do you interpret social “indignation” with the analytical tool of “strong reciprocity”?

31. How do the social context and, especially, social approval affect the efficiency of incentives? What would happen if we were to fine you for arriving late? And what would happen if we lifted the fines two weeks later? How will you motivate your children to make their beds? If NYC could fine foreign UN diplomats for parking incorrectly, would they park better? Would they all react the same way?

32. What would happen if an army paid its officers for the number of casualties caused? • How should we provide better incentives for university teachers? • How should we provide better incentives for university students? • And for teachers’ evaluations by students? • What have you learnt from the Bocconi study?

34. Is corruption present among UPF students?

35. What do we think of someone who… … often misses classes? … copies in exams? … copies in problem sets? ... copies from you without permission? … does not return a wallet containing money? … uses Bicing without paying it? … steals a bike in the street? … your bike? … slips a friend in for hospital tests? … gets medicine with a pensioner’s voucher not being a pensioner? … works while collecting unemployment benefits? … dodges paying for a ticket on the Metro? … steals someone else’s Metro season ticket? … avoids paying taxes? … keeps some of the money collected for a graduation trip? … keeps a commission for organizing a graduation party?

36. Market and ethics • How does the “market” affect ethical standards? • Market = • Market economy • Competition in the market • … • Ethical standards • Content of standards • Compliance • Impersonality (relative treatment of people who are both known and unknown) • … • …

37. Topic 4. Delegation and divisionalization

38. Social choice on public services • Market failure • Externalities, public goods, natural monopolies • How did they vary from XIX to XXI centuries? • courts, police, prisons, army, foreign relations • education, health, pensions, housing, etc., etc. •  political intervention • Financing and producing public services • How to organize production? Bureaucracy • Only financing public services • How to contract them? Subcontracting, internal markets

39. Delegation and divisionalization (1)Revision How to organize.... ... a company with a single product and a single market? ... a company with several products and several markets? ... a university? What do we mean by “organize”? Economic divisionalization: Allocation of decision-making rights Evaluation of performance Compensation

40. Delegation and divisionalization (2)Revision • How to organize ... • ... a manufacturing department? • ... a sales department • ... Zara’s China division? • ... Bankinter’s insurance business? • ... IBM’s strategy department? • ... the UPF library?

41. How to organize the Royal House? • News for Spain: recently set salaries • Issues, more generally? • Functions? I.e., “outputs” • What about inputs? • Accountability? • Bought where? • Budget? • How to set it? What to include?

42. Delegation and divisionalization (3): Implicit prices & budget gaming Discuss: According to “the head of the heart surgery department at the Hospital de Sant Pau, seven patients died while waiting for operations there” (El País, 7 June, 2000) What are the explicit and implicit prices? Were they playing an strategic game?

43. Delegation and divisionalization (4) How are UPF, TV3, SCS paid and by whom? What incentives do users & suppliers have? What incentives do those responsible for budgeting have? Are they really “responsible” for the budget? Who finances the budget? What incentives do they have? What information do they have? What incentives do they have to find information?

44. Delegation and divisionalization (5) Who knows most about value and cost? Budget cutbacks Which is easiest, to cut back the wages of university teachers, school teachers or metro train drivers? … cuts in preventive medicine or cardiology? Cost allocation How do owners’ associations finance collective heating, and what are the effects? What are the consequences of taxes on employment? And on consumption?

45. Delegation and divisionalization (6):“Internal markets” How to reform... ... public healthcare? NHS? Shadow invoicing? (How are health services for civil servants organized?) ... primary and secondary education? School subsidies? ... the university system? Is there any point in creating an “internal market” of public services if it will only be “disobeyed”? What changes and decisions has the current system of school subsidies led to? Example: restricting the offer of subsidized schooling when demand for it increases

46. Delegation and divisionalization (7):“Automatic management” How are the following organized in Spain? ... Notaries? ... Property and mercantile registers? How were the following organized up to the 1980s... ... courts? ... Primary health centers? What are the characteristics of these solutions? Powerful incentives? Civil servants or employees? Degree of regulation?

47. Privatization of public services: e.g., Spanish Civil Registry Why do unions generally oppose it? Read, e.g., “UGT suspects Gallardón has retaken plans to privatize the Civil Register” Another example: water in Alcázar de San Juan (20-2-14) Suggest two general explanatory hypotheses: X Y What about users? Do they have incentives to inform themselves? To fight? What about taxpayers? Do they have incentives to inform themselves? …

48. Delegation and divisionalization (8) What are the consequences of insisting that a department must... ... reduce costs? ... its average cost? ... maximize revenue? ... maximize its profit? ... maximize the return on its investment (ROI)? What should we think about a positive deviation from standard performance?

49. Delegation and divisionalization (9) What is the optimal transfer price? What problems arise in a context of decreasing costs? How can this be considered in accounts? Should it include fixed costs?

50. Case: Airport fees • “Lack of passengers advises closing down 15 airports” • How should we set the fees to use these 15 airports? On the basis of • Marginal cost • Total average cost • AENA recently rose fees in underutilized airports such as El Prat or Barajas • Is it sensible? Consequences? • Whose interest is such pricing serving? AENA’s owners? • How would you apply the transfer pricing analysis? • Did Fomento the same for the AVE?