Here is an excellent blog that I make sure to read weekly:
I think it's important for all Americans to understand Brazil: It is the fastest growing and largest economy in the Americas outside the US!
It is necessary for professional accountants to be trained in econometrics.
Econometrics is the discipline involved in estimation of, and inferences about, causal relationships between economic variables.
Unless professional accountants want to abrogate their responsibility for accounting measurement to those trained in econometrics, they must be trained in econometrics themselves.
I once taught a mathematics course at the University of California to ... linguistic students who had a good understanding of how language systems work, but did not have an understanding of mathematical systems. ... I made my entire approach fit their model of the world rather that demanding they have the flexibility to come to mine. ... When you do that, you certainly do them a favor in the sense that you package the material so it's quite easy for them to learn it. You also do them a disservice in the sense that you are supporting rigid patterns of learning in them. [my emphasis]
Group 1 Students who always came to class but never really took notes, and generally alternated between paying close attention, spacing out, or intermittently dozing off. These students tended to ask the most meaningful questions.
Group 2 Students who always came to class, furiously took notes trying to write down every single word, symbol, or diagram I spoke about or wrote. These students generally did not ask any meaningful questions.
Group 3 Students who came to class but generally took no notes and just dozed-off most of the time. No questions here, needless to say.
Group 4 Students who rarely came to class. Plenty of questions here, but only about exams and exam dates and locations!
Rank 1 ... is dominated by Group 1 students.
Rank 2 ... is dominated by Group 3 students.
Rank 3 ... is dominated by Group 2 students.
Rank 4 ... is dominated by Group 4 students.
When presented with ideas students consider abstract, boring, and irrelevant, learning is maximized when students' conscious minds are not engaged in the learning process; rather, it is maximized when their conscious minds are substantially not present, thus allowing their subconscious minds to simply record, absorb, and assimilate the ideas into their existing mental models.But wouldn't active learning be best? Well, yes, if students don't detest (1) the subject matter, (2) the way it is presented , or (3) the instructor! In my experience, getting past these three prerequisites for the efficacy of active learning are almost insurmountable in classes meeting only about 45 hours in a semester. Moreover, in many cases it's not even reasonably possible to adjust (1), (2), or (3).
Intellectual growth involves three fundamental processes: assimilation, accommodation, and equilibration. Assimilation involves the incorporation of new events into preexisting cognitive structures. Accommodation means existing structures change to accommodate to the new information. This dual process, assimilation-accommodation, enables the child to form schema. Equilibration involves the person striking a balance between himself and the environment, between assimilation and accommodation. When a child experiences a new event, disequilibrium sets in until he is able to assimilate and accommodate the new information and thus attain equilibrium. There are many types of equilibrium between assimilation and accommodation that vary with the levels of development and the problems to be solved. For Piaget, equilibration is the major factor in explaining why some children advance more quickly in the development of logical intelligence than do others (Lavatelli, 40; see http://www.sk.com.br/sk-piage.html).While Piaget vehemently endorsed active engagement and learning, he was implicitly assuming it was possible to adjust the prerequisites for active learning I discuss above. In my experience and that of other colleagues I've had discussions with, these adjustments are very difficult in practice.
Traditional dry, boring lectures are optimal for teaching dry, boring material because it does not require distorting the subject matter, presentation, or instructor (ethos, pathos, logos, mannerisms or physical attractiveness) because it has the strong tendency to shut down students' conscious minds and all the ideas are presented directly to the subconscious mind, thus bypassing the (Piagetian) conscious equilibration process.So, there it is. A basic applied theory of subconscious learning. I've run the idea by several educational psychologists and clinical psychiatrists and they are extremely skeptical. But I believe the theory is logically consistent with other accepted learning theories (e.g., Piaget) and I actually have a lot of empirical evidence that is strongly consistent with the theory!
Theory and evidence presented above, skeletal though it may be, suggest that (1) to the extent Wall Street firms promote stability in the financial markets, they are good for US health care, and (2) to the extent Wall Street firms promote instability in the financial markets, they are bad for US health care.
Lenders systematically bought mortgages--with interest rates at levels representing rates well in excess of historical interest rate spreads over costs of funds--where the expected profit was negative due to excessive credit default risk; thus leading to widespread mortgage defaults, the related credit crunch feedback cycle, and the recent US recession.
The excellent selling skills of mortgage brokers, in conjunction with the incentives provided to them to exercise the skills, caused the recent US credit crunch and recession.The proposition might seem a bit of a stretch but systematic micro-motives often result in macro-behaviors (i.e., pervasive incentives provided to individuals have large scale economic effects; see Schelling's book of a similar title), so it's really not so unreasonable. Let me explain. Here's what mortgage loan brokers do (or at least it is what they did before the credit crunch):
Interest rate up-selling -- Convincing prospective borrowers that they represent higher credit risks than they actually are, thus justifying higher than expected interest rates. (Mortgage broker: "Hey, I'm doing my best for you guys, but lenders are requiring a higher rate to compensate for the risk; you guys have some late payments on your credit history ... ." Late payments on a credit history can be pure gold for a mortgage broker with good selling skills.)
Credit risk up-selling -- Convincing loan underwriters employed by mortgage lenders that proposed mortgage contracts being offered for sale to the lenders have acceptable credit default risk (given acceptable collateral risk), even when they perhaps represent unacceptable risk. (This is how mortgage brokers can "help their customers": by misrepresenting facts and circumstances relevant to a mortgage lender's assessment of a borrower's credit risk, and "getting them loans".)
Why were both borrowers and lenders willing to accept such "up-selling"? They accept it largely unknowingly because of bi-lateral information asymmetry: In general, borrowers don't actually know what lenders think and say to mortgage brokers (even on average; many borrowers are quite naive when it comes to common lending practices), and mortgage brokers can withhold relevant credit risk information from lenders (e.g., the mortgage broker might realize a two income household will lose one income forthwith because of a new child and maternity leave, but choose not to disclose this to the lender since it might suggest higher, unacceptable credit default risk).
Why, exactly would mortgage brokers up-sell borrower credit risk to lenders? Two reasons: Strong monetary incentives and a decision horizon that is too short for a mortgage broker's reputation to matter. The basic monetary incentives are related to origination fees, which generally range from .5% to 2.0% (though there are perhaps additional fees as well). So that's between $500 and $2,000 on a hypothetical $100,000 mortgage.
Why, exactly, would mortgage brokers up-sell interest rates? Among other factors commonly listed in adverts for sales positions like being an Aggressive, Self-Starting, Team Player, the prominent reason brokers up-sell interest rates is very strong monetary incentives. To give one a rough idea of the incentives, consider a $100,000 mortgage loan offered by a broker to a lender at an annual interest rate of ...
... with daily interest compounding. It turns out that at the height of the US mortgage lending boom in about 2003, a certain mortgage lender/securitiser in the Western US would pay a mortgage broker an additional $250 for the daily interest compounding provision (as opposed to monthly or quarterly compounding) and an additional $2,000 for the .50% above the lender's normal interest rate spread.
So, adding a basic 1.0% origination fee of $1,000 to the additional 2,250 fees for daily interest compounding and the up-sold-by-.5% interest rate, the broker receives $3,250 on a $100,000 mortgage. One could easily say monetary incentives for credit risk and interest rate up-selling are "strong". (Kaaaa Ching. "Money talks ... and it's persuasive." Elvis Costello.)
Why, exactly, is interest rate up-selling a bad thing? Two reasons: Interest rates in excess of normal interest rate spreads (about 3.0%-3.5%) tend to attract higher-than-normal-risk borrowers since normal-risk borrowers can, and on average do, borrower at normal rates. Higher interest rates, holding all else equal, make it more likely borrowers will default on loans if--for whatever reason--their incomes decrease. (I recall having an interesting discussion in the mid-1980s with David Cates, a highly-regarded bank industry consultant, where he mentioned that rapid loan growth and increased interest rate spreads were the two primary predictors of credit quality problems in banks. It seems the half-life of knowledge in the lending industry is quite short or ... perhaps there is systematic ignorance of credit rationing theory.)
Without mortgage brokers' on-average-excellent selling skills that allowed them to strategically and convincingly misrepresent credit risk factors to both borrowers and lenders, they would not have been able to sell many billions of US dollars worth of improperly priced mortgage loans with excessive credit risk, which essentially caused a near-collapse of the US credit markets and represented the proximate cause of the recent US recession.