Category Archives: Business and Economy

Dissenting voices: “There is no college cost crisis”

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So says Stanley Fish in his NYTimes review of economists Robert B. Archibald and David H. Feldman’s new book, “Why Does College Cost So Much?”:

The causes of the increase in college costs (an increase that has not, [Archibald and Feldman] contend, put college “out of reach”) are external; colleges are responding, as they must, to changes they cannot ignore and still provide a quality product. Chief among these is the change in the sophistication and cost of the technology that has at once transformed the setting of higher education and become one of the areas of knowledge higher education must impart to students.

This is an intriguing dissent from what Archibald and Feldman call the “new orthodoxy” or the “dysfunctionality narrative” of spiraling college costs.  As Fish himself opines:

As a dean who encountered the rising costs of personnel, laboratory equipment, security, compliance demands, information systems and much more every day, I knew [my own critiques written in 2003 were] basically right, but I am happy to ride (belatedly) on the coattails of people who really know what they’re talking about.

What do you think?  Is technology the major driver of increased costs in higher education?  Or are other, more relevant factors at work here?

Making big money in real estate in the online world

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A number of stories in recent years have highlighted the increasing amount of real money changing hands in online games or environments. A recent example comes from the Entropia Universe where a gamer sold his property for over $600,000:

Take, for instance, what just went down on Planet Calypso, where one of Entropia’s wealthier players has sold off his interests in a “resort asteroid” for an eye-popping $635,000.

The seller is Jon Jacobs, also known as the character ‘Neverdie’. He originally purchased the asteroid in 2005 — eventually converting it into the extravagant resort ‘Club Neverdie’ — for the then-record price of $100,000. For those keeping score, that’s a gain of over $500,000 in just five years. In nerdier terms, that’s an ROI of 535%. Match that, Citibank.

And we’re not talking about Monopoly money here. Launched by Swedish developer MindArk in 2003, Entropia Universe features a real-world, fixed-rate currency exchange that works just like chips at a casino: players trade real cash for in-game funds called PEDs (Project Entropia Dollars), which can at any point be redeemed back for real, spendable cash — minus a transaction fee, of course.

Jacobs was making money from the get-go, however, having earned back his initial hundred-grand investment in just eight months. How? By selling rights to hunt and mine on the asteroid, as well as selling off bits of real estate. He worked it much like any real world landlord, really, but with a lot less red tape and a lot more graphics.

With that kind of a return on investment, will more people flock to these realms to make money? How many people in the world make a steady income based on online gaming?

There has to be a good sociological study being done out there about these types of transactions…

The CTA makes it official: will sell naming rights to almost anything

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This has been in the works for a while (particularly with the revamped Apple stop at North and Clybourn on the Red Line) but the CTA officially announced today that it will solicit “bids soon to sell naming rights to just about anything it owns.”

The transit agency expects to award corporate sponsorships by next spring, officials said. Rodriguez said the CTA will go out for bids next week to hire a corporate adviser who will help package the sponsorship opportunities.

“We want to find new ways to generate revenue, and we want to do so in a way that will enhance the experience of our riders for improvements, services and amenities,” Rodriguez said.

But he and other CTA officials declined to offer any estimates on how much money the venture might generate.

“Providing 1.7 million rides every single day is a value to somebody someplace,” Rodriguez said. “The question is, What’s it worth?”

Savvy marketers will want some idea of how much bang they’re getting for their investment, experts say. Marketers also would have to look past the “what-ifs” of having their brand name associated with the unpleasant realities of public transportation, which include unkempt stations, rail line breakdowns and potential crashes.

A couple of things seem remarkable about this:

1. Sociologists are often concerned with the lack of true public spaces in cities (and suburbs). This is bound to have some effect on what were previously public spaces; now there were be even more reminders about corporations.

2. The CTA is going forward with this without being able to say publicly how much money they might be able to raise? This seems foolish. Will they still go forward if bids end up being lower than expected? Might it have been better to line up some more deals before going public with this?

3. How exactly will these new revenues be used within the CTA?

4. What are the next steps for expanding the CTA budget if these deals do not bring in as much money as expected or costs continue to rise and these new revenues are not enough?

5. The agency said it “will be sensitive to avoid naming rights that are in poor taste or at all questionable.” This could lead to some interesting battles over which companies can purchase naming rights and which cannot. What may be responsible to one neighborhood is not necessarily responsible to another.

The importance of perceptions: thinking about the golden age of flying

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There seems to be a lot of grousing about air travel these days, particularly with a flood of recent stories about full-body scanners and more aggressive pat-downs. These complaints raise a question: is flying today more troublesome and less glamorous than in the past? Some experts say today is actually the golden age for flying:

Whether it’s fees, crowded planes, no food or surly service, people will complain about the current state of air travel.

They’ll talk wistfully about the good old days of flying, of a bygone era when a glamorous stewardess delivered white-glove service with a smile, they had meals with real silverware and a courtesy cocktail was offered free on such carriers as Pan Am, TWA, Braniff or Eastern.

The so-called golden age of air travel in the 1950s, ’60s and ’70s has passed, they’ll say, just as those airlines have.

But has it? No, say some veteran fliers and industry analysts. With historically affordable fares to nearly everywhere, greater options for service if you’re willing to pay, and new information and entertainment technology, there’s never been a better time to fly, they say.

So some experts that suggest by some objective measures, such as price and service level, flying is now better than it was in the past. But the issue really seems to be whether passengers feel that this is the case. And this is what matters for airlines – if potential customers perceive that flying is difficult and then choose other forms of travel, these perceptions are real indeed.

What could be going on here? A few thoughts:

1. Memories and nostalgia are tricky things. People can romanticize the past and forget the troubles they experienced then.

2. Some of the security procedures instituted after 9/11 seem to irritate people. It adds an extra level of hassle and can make people feel like they are not trusted. On the other hand, there has not been a major airline incident in the US since 9/11.

3. Service and entertainment options may have increased but perhaps passengers expect even more. Does having more entertainment options offset sitting in cramped airplane seats?

4. I would be curious to know how many people actually enjoy flying versus feeling that it is the best, or perhaps only, transportation option to get them where they want to go.

h/t The Infrastructurist

Shopping for cheaper goods appeals to more people in the Great Recession

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The AP reports that more Americans are willing to be frugal in the their shopping and shop at places, like Goodwill or Aldi, that they wouldn’t have considered before the Great Recession:

And it’s not just about Goodwill. Americans, even those with jobs, are shopping for brands, buying at stores and eating at restaurants that they shunned before because they are trying to get more for their money.

At the supermarket, shoppers are buying more store-labeled products, like no-name detergents and cereal, and not returning to national brands.

And in a telling trend, Americans are turning to layaway more often when they buy expensive items such as engagement rings and iPads. The wealthy are also using layaway more often, a drastic change from the past.

This story seems plausible – but can’t we get any data in the story to back this up (beyond the 11% in revenues for Goodwill)?

Some questions about this trend:

1. Will this change when the economy picks up again? Is this just a short-term response that people will abandon once they have the ability to again shop elsewhere?

2. How much of the stigma of this kind of shopping once existed and how much has been removed? Is stigma just measured by the willingness of people to shop at such places? Where does this stigma come from – people seeing other people shopping, people seeing goods in the homes of their friends, or something else?

3. Are there certain areas where people haven’t picked up on this trend? Are certain people particularly resistant to this?

4. What are the income levels that this applies to? What is the rough cut-off where people still wouldn’t shop at these places or use these more frugal practices?

Happy employees = better workers

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Forbes has developed a list of the 10 companies in the United States that have the happiest employees. This happiness is not just a good thing for the personal well-being of the employees – it eventually helps improve the company’s quality and bottom line:

Studies show that positive employees outperform negative employees in terms of productivity, sales, energy levels, turnover rates and healthcare costs. According to Shawn Achor, Harvard researcher and author of “The Happiness Advantage,” optimistic sales people outperform their pessimistic counterparts by up to 37%. In fact, the benefits can be seen across industries and job functions. Doctors with a positive mindset are 50% more accurate when making diagnoses than those that are negative.

I’ve seen articles/studies like this before. If this is a consistent finding, why don’t more companies make this a priority? It might take some extra money and convincing up front, but if the payoff is harder-working yet more relaxed employees, who wouldn’t want that?

What to do with a sociology PhD: become the father of the hedge fund

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A common question arises regarding sociology degrees: what can you do with that? The man behind the hedge fund, Alfred Winslow Jones, held a sociology PhD from Columbia University before going on to becoming a financial writer and inventor:

In fact, by the time the article hit the newsstands, Jones was already well in the process of setting up his own investment firm, A. W. Jones & Co. While reporting on the latest investment strategies, Jones had begun to contemplate a new approach, one that would include selling short some stocks in a portfolio as a way to protect against the market’s uncertainties.

Such a portfolio, Jones would explain to his investors, was a “hedged” fund..

In 1941, Jones received a sociology doctorate from Columbia University. For his research, he interviewed 1,705 residents of Akron, Ohio about their attitudes toward corporations and property. He found that, despite local labor unrest and political tensions, Akron was not divided rigidly along class lines. His dissertation was published as a book titled Life, Liberty, and Property, which became a much-used text in sociology circles…

Landau highlighted Jones as the man who had started this trend, noting however that the sociology Ph.D. “actually seems to be more interested in things other than finance,” including finding self-improvement alternatives to welfare and organizing a Reverse Peace Corps to bring foreigners to work with poor Americans. Jones was quoted complaining that “too many men don’t want to do something after they make money.” Many of Jones’s early investors, Landau wrote, were scholars, social workers and others whom Jones had met over the years and was trying to free from financial concerns.

Sounds like an interesting life. It would be fascinating to hear Jones talk about how his PhD in sociology helped push him toward his financial inventions and actions. Was it something about the way sociology views the world that helped him develop the idea of the “hedged fund”? Perhaps sociology gave him some unique insights into the operation of economic markets. Additionally, it sounds like Jones had some sociological thoughts about what one should do with an accumulated fortune: it should be put toward new social ideas and goals.

Brand favorites by political party

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AdvertisingAge reports on the favorite brands of Republicans and Democrats. There are some differences between supporters of the two parties:

The Republican Top 10: Fox News Channel, History Channel, Craftsman, Discovery Channel, Johnson & Johnson, UPS, Fox, FedEx, Lowe’s, Cheerios.

The Democrat Top 10: Google, Sony, Discovery Channel, UPS, Craftsman, Johnson & Johnson, Cheerios, History Channel, FedEx, Amazon.

Some interesting differences, particularly the presence of Google and Fox News Channel. Do these company’s political contributions match up with their favored status among each party?

Two economists explain why college has come to cost so much

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Two economists first summarize some of the arguments for why a college education has become so expensive and then provide their own overview based on “the technological forces that have reshaped the entire American economy”: rising costs relative to the price of goods associated with the time necessary to build relationships between faculty and students, a highly educated workforce, and the necessity for schools to purchase expensive technology devices to keep up with particular fields of research.

Taking this sort of view suggests that it won’t be easy to reduce costs of education since the issues present in colleges and universities are issues the entire economy faces.

h/t Instapundit

How the liberal arts can be good for a future in business

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Edward Tenner argues that there is evidence that liberal arts degrees can be very helpful for business careers. Tenner considers the ramifications of one survey that showed that certain fields assumed to have direct links to jobs, like psychology, do not lead to satisfied majors:

The survey has clear implications for the humanities. Their degrees are not the prologues to flipping burgers that some people suppose. Many students are using degrees in humanities to launch satisfying careers. Why not study how their courses have helped them? Why not find better ways to link the humanities with business?

What might be most helpful for students is to hear this information directly from business owners and managers.