Technology, Finance and Education

Yale Theatre

I have been trying out iTunes U by doing the Open Yale subject ECON252 Financial Markets. What attracted me to the subject was that the lecturer was Robert Shiller, one of the people responsible for the main residential property index in the US and an innovator in that area. Also, it was free. :)

I was interested in seeing what the iTunes U learning experience was like, and I was encouraged by what I found. While it was free, given the amount of enjoyment I got out of doing the subject, I think I’d happily have paid around the cost of a paperback book for it. I could see video recordings of all the lectures, or alternatively, read transcripts of them, plus access reading lists and assessment tasks.

The experience wasn’t exactly what you’d get if you sat the subject as a real student at Yale. Aside from the general campus experience, also missing were the tutorial sessions, professional grading of the assessments (available as self-assessment in iTunes U), an ability to borrow set texts from the library, and an official statement of grading and completion at the end. Also, the material dated from April 2011, so wasn’t as current as if I’d been doing the real subject today.

Of these, the only thing I really missed was access to the texts. I suppose I could’ve bought my own copies, but given I was trying this because it was free, I wasn’t really inclined to. Also, for this subject, the main text (priced at over $180) was actually a complementary learning experience with seemingly little overlap with the lectures.

While I tried both the video and transcript forms of the lectures, and while the video recordings were professionally done, in the end I greatly preferred the transcripts. The transcripts didn’t capture blackboard writing/diagrams well, and I sometimes went back and watched the videos to see them, but the lecturer had checked over the transcripts and they had additions and corrections in them that went beyond what was in the video. Also, I could get through a 1hr lecture in a lot less than an hour if I was reading the transcript.

Putting aside the form of delivery, the content of the subject turned out to be much more interesting that I expected at the beginning. Shiller provided a social context for developments in finance through history, explained the relationships between the major American financial organisations, and provided persuasive arguments for the civilising force of financial innovations (e.g. for resource allocation, risk management and incentive creation), positioning finance as an engineering discipline rather than (say) a tool for clever individuals to make buckets of cash under sometimes somewhat dubious circumstances. I’ll never think of tax or financial markets or insurance in quite the same way again.

I will quote a chunk from one of his lectures (Lecture 22) that illustrates his approach, but also talks about how technology changes resulted in the creation of government pension schemes. I like the idea that technology shifts have resulted in the creation of many things that we wouldn’t ordinarily associate with “technology”. By copying his words in here, I’ll be able to find them more easily in the future (since this is a theme I’d like to pick up again).

In any case, while I didn’t find the iTunes U technology to be a good alternative for university education, I think it’s a good alternative to reading a typical e-book on the subject. Of course, both e-books and online education will continue to evolve, and maybe there wont be a clear distinction in the future. But for now, it’s an enjoyable way to access some non-fiction material in areas of interest.

The German government set up a plan, whereby people would contribute over their working lives to a social security system, and the system would then years later, 30, 40 years later, keep a tab, about how much they’ve contributed, and then pay them a pension for the rest of their lives. So, the Times wondered aloud, are they going to mess this up? They’ve got to keep records for 40 years. They were talking about the government keeping records, and they thought, nobody can really manage to do this, and that it will collapse in ruin. But it didn’t. The Germans managed to do this in the 1880s for the first time, and actually it was an idea that was copied all over the world.

So, why is it that Germany was able to do something like this in the 1880s, when it was not doable anywhere else? It had never been done until that time. I think this has to do ultimately with technology. Technology, particularly information technology, was advancing rapidly in the 19th century. Not as rapidly as in the 20th, but rapidly advancing.

So, what happened in Europe that made it possible to institute these radical new ideas? I just give a list of some things.

Paper. This is information technology, but you don’t think – in the 18th century, paper, ordinary paper was very expensive, because it was made from cloth in those days. They didn’t know how to make paper from wood, and it had to be hand-made. As a result, if you bought a newspaper in, say, 1790, it would be just one page, and it would be printed on the smallest print, because it was just so expensive. It would cost you like $20 in today’s prices to buy one newspaper. Then, they invented the paper machine that made it mechanically, and they made it out of wood pulp, and suddenly the cost of paper went down. …

There was a fundamental economic difference, and so, paper was one of the things.

And you never got a receipt for anything, when you bought something. You go to the store and buy something, you think you get a receipt? Absolutely not, because it’s too – well, they wouldn’t know why, but that’s the ultimate reason – too expensive. And so, they invented paper.

Two, carbon paper. Do you people even know what this is? Anyone here heard of carbon paper? Maybe, I don’t know. It used to be, that, when you wanted to make a copy of something, you didn’t have any copying machines. You would buy this special paper, which was – do you know what – do I have to explain this to you? You know what carbon paper is? You put it between two sheets of paper, and you write on the upper one, and it comes through on the lower one.

This was never invented until the 19th century. Nobody had carbon paper. You couldn’t make copies of anything. There was no way to make a copy. They hadn’t invented photography, yet. They had no way to make a copy. You had to just hand-copy everything. The first copying machine – maybe I mentioned that – didn’t come until the 20th century, and they were photographic.

And the typewriter. That was invented in the 1870s. Now, it may seem like a small thing, but it was a very important thing, because you could make accurate documents, and they were not subject to misinterpretation because of sloppy handwriting. … And you could also make many copies. You could make six copies at once with carbon paper. And they’re all exactly the same. You can file each one in a different filing cabinet.

Four, standardized forms. These were forms that had fill-in-the-blank with a typewriter.

They had filing cabinets.

And finally, bureaucracy developed. They had management school. Particularly in Germany, it was famous for its management schools and its business schools.

Oh, I should add, also, postal service. If you wanted to mail a letter in 1790, you’d have trouble, and it would cost you a lot. Most people in 1790 got maybe one letter a year, or two letters a year. That was it. But in the 19th century, they started setting up post offices all over the world, and the Germans were particularly good at this kind of bureaucratic thing. So, there were post offices in every town, and the social security system operated through the post offices. Because once you have post offices in every town, you would go to make your payments on social security at the post office, and they would give you stamps, and you’d paste them on a card, and that’s how you could show that you had paid.

– Robert Shiller, ECON252 Financial Markets, 2011

The Things We Tell Our Children

If you’re under ten years old, stop reading now. Spoilers are coming.

There’s a community of atheists who all teach their children to believe in God. They enjoy seeing the comfort that this brings their kids, and the kids enjoy hearing about Jesus and the various Saints. As the children get older though, they question their parents whether God is real, and the atheist parents go to some trouble to persuade their children that it is so, because they want to keep the beliefs going as long as possible. However, inevitably one of the children discovers that the parents don’t really believe, and then tell all their friends.

Except, there is no such community – I just made it up. It would be absurd. It would also be absurd if a creationist community brought up their children with stories about evolution, or an Islamic community taught their children to believe in the Norse Pantheon.

I found myself reflecting on this over the Easter weekend, as I was caught up in the exercise of teaching children about the Easter Bunny. Are kids really better off with me telling them it’s real when I don’t believe it in myself? I have previously found myself conflicted over the Christmas-time story of Father Christmas / Santa / St Nick, and I expect I’ll find it troubling to get involved in the Tooth Fairy when our kids get older.

An article over at Parenting Science states that one researcher found there was no anger when children found out that their parents were lying to them. But on the other hand, that researcher didn’t interview me, and I recall being angry at the time I found out Santa wasn’t real.

Just like most caring parents, mine took extra effort to build up evidence of Santa’s existence: presents mysteriously appeared under the tree in the dead of night, food left for Santa was eaten, and sometimes Santa even left a note. I stayed up late to try to catch Santa in the act or spot a reindeer, but I never did. One year I did suspect the truth, and confronted my parents, but they denied it and talked me around to believing again. In the end, it was my younger brother who forced the situation, later getting my parents to admit it. I was absolutely distraught. Not really so much because Santa wasn’t real but because I’d been deceived, and (if I’m being honest) that my younger brother managed to discover the truth before me.

However, even if I am an exception (although some other people’s recollections suggest otherwise), and in fact no children are at all distressed by discovering the truth, then why should parents be anxious about their children finding out?

If anything, this is one of the things worrying me about being truthful with my own children: how other parents will react. There is the unspoken basic rule of parenting that no-one else should interfere with how you raise your kids, and others’ children finding out the truth from my own children could be seen as interfering. Unfortunately, it’s not clear how I could tell the truth to my own children and yet prevent them from telling this to their friends.

Still, learning the truth didn’t prevent me from continuing to enjoy Christmas and Easter traditions. An easter egg hunt is still fun even if the eggs were hidden by adults rather than a mystical rabbit. Receiving presents is still a delight even if it is adults giving them. I don’t feel I’ve lost anything important by gaining the truth about what is really going on. All the good stuff keeps happening, despite what Virginia was told.

One strategy I’ve heard is to share the truth but engage in some kind of doublethink where children are told that if they stop believing, then the good stuff  will stop happening, eg. “if you don’t believe in Santa, he won’t bring you a present”. This doesn’t sit well with me, as the solution to a lie from an adult appears to be to invite lies from children: even if they don’t believe, they have to say that they do.

Another strategy I’ve heard is make the truth the answer to a puzzle. For example, if a child works it out, let them know they have been a clever-clogs but keep it a secret so as to not spoil their young friends’ and relatives’ efforts to work it out also. However, surely there’s no quicker way to encourage a child to share the secret than to tell them that?

A final strategy I’ve heard is to answer children’s questions truthfully, but position the belief in Santa et al as a game. For example, adults typically don’t have to explain to their children that Peter Pan (or Shrek or Cinderella) isn’t real, and acting out parts of the story in play-time isn’t engaging in deception.  I feel that this strategy is probably a good one, but I’m not sure how easy it will be to implement in practice. It must be possible, since there are a couple of discussions of this approach on the Gransnet forum, including this gorgeous story from “veronica”:

I could not bring myself to lie to my children but they just grew up knowing that FC was a traditional thing that it was fun to keep up. My daughter when she was was about two had a red coat and she dressed up as FC with a beard and distributed presents to those present.

I’m aware that I’m not yet ready for The Question. However, with Easter successfully navigated and Christmas eight months away yet, the need to find The Answer is not an urgent one. But it would be great if Santa could bring it to me as a present.