Previous month:
July 2007
Next month:
September 2007

August 2007

Master of Science in Analytical Finance

I will mention one thing that bothers me, and I say this as a foreign scholar who has the utmost respect for international students and their determination to move away from family and friends in the hope of improving their education. At Lehigh we have a program called the Master of Science in Analytical Finance (MSAF), which is administered jointly by the College of Business and Economics, the College of Arts and Sciences and the P.C. Rossin College of Engineering. This program was launched in 2004 and has rapidly become the flagship Master degree of the university, because it trains students in the mathematical models and computing challenges that arise in finance - I fully expect to find many of our graduates in "quant" positions on Wall Street. It is an amazing program that draws on all the strengths of the faculty, and when our undergraduates (by "our" I mean those in the Industrial and Systems Engineering department) express interest in the degree we caution them that admission has become extremely competitive.

Now this semester I am supervising IE 441, the financial engineering project course that is reserved to MSAF students; it is a year-long project all students have to take when they enter the program but is only offered for credit in the Fall; at the end of the semester they receive an "incomplete", which is changed to their final grade at the end of the Spring when they have completed the project at last. All this to say, it is a problem if they cannot enroll in IE 441 in the Fall, because it is not officially offered in the Spring (although there has been some talk to change that). Well, there are at least two students who have been admitted to the program under the condition that they would first enroll in Lehigh's English Stepup program, which is a program for students whose English skills are so poor that they are not even allowed to enroll in classes on campus until they have completed it. (And after talking with such students, I can definitely agree that verbal communication is a problem, for them and for me, as I don't understand what they are saying. I can only hope that all the sacrifices they have made to come to Lehigh will pay off when they improve their English.) There is also a third student who wants to postpone taking the project because of language problems and mentions there are others, but maybe he is talking about the other two. 

And I wish international students the best because it takes courage to leave their friends and family behind, but really, we scare our own students (motivated, qualified, and with obviously superb English skills) away from applying to the program, and instead we admit those? I have been reminded of the apparent injustice of it when this week I dealt with a Lehigh Presidential Scholar (a student who graduated from Lehigh with a GPA of 3.75 or higher and as such was allowed to stay a fifth year for graduate studies for free - let me be clear that graduating from Lehigh with such a high GPA is no small feat) now enrolled in another Master program. The girl is exceptionally qualified (she mentioned an impressive list of grad-level courses in business and math she took as an undergraduate) and extremely enthusiastic, but I did not let her enroll in IE 441 because she has not been admitted into the program. She was planning to petition to get the degree but there are rules to follow to gain admission - if I let her enroll it will create a precedent for other students who try to get the degree without going through the regular admission process and news like these travel fast.

So now I feel horrible for not letting her enroll (although she will be able to late-add if her petition to get into the MSAF program is approved) because she so eminently deserves to be accepted, and meanwhile I have to deal with admitted students who cannot speak English and want to start the project in the Spring rather than now, which means that I would have to come up with a second project - more work for me! I am certain that the girl wanted to apply to the MSAF program rather the one she is now in, but enrolled in that other program as a fallback plan because she would have lost her free fifth year if she had been rejected and did not want to risk it - in my opinion she got scared by all the talk about how competitive it was. And as much as the admissions committee must have had very good reasons to admit the Asian students despite their English skills (they probably have outstanding computer abilities and an extensive finance background), it saddens me that one of Lehigh's finest is now struggling to get into a program where she would obviously excel, while it remains to be seen whether admitted foreign students starting with such a massive language handicap will be able to succeed. On the plus side, the students who are already enrolled and do not have any language issues really are fantastic.

First-Year Experience

The convocation for the first-year students was on Friday; after the presentation by the Dean we all went to lunch (the first-year advisors, the Rossin Fellows [upperclassmen who can give the freshmen advice] and, of course, the first-year engineering students) in the University Center. That was a nice way to get to know the students before the meetings with those who had advising questions. Out of 11 I only had 2 students drop by my office afterwards - one needed to move a lab to take a music course (the Lehigh computing system doesn't let them pre-register for those because they have to audition before they can enroll) and one who had placed out of Calc 1 and needed to enroll in Calc 2. Many students enter Lehigh with AP credits; it is amazing to see how much some have achieved already.

This year all of the Calc 1 sections filled out, and all of the Chem 25 sections too. In the past Lehigh assigned students to Engr1/Engr5 and Phy11/Chem25 depending on the first letter of the student's last name (since students have to take all four courses: two in the Fall and two in the Spring), but the introduction of the bioengineering major has complicated things since students must declare that major at the beginning of their freshmen year and take Chem 25 in the Fall. That might be why Chem 25 was so heavily subscribed to this semester. Another course that filled out was Engl 11 (Engl 2 for students who have placed out of Engl 1 but not out of Engl 2). And I thought the incoming class was smaller than in the previous years!

This evening I met another group of freshmen for the discussion about the Dalai-Lama's autobiography; the kids were quite talkative and made really good comments, although some of them hadn't finished the book - I'll grant them that it is a bit dry. Three days into the first semester, they all still seem very excited to be at Lehigh. One thing that surprised me when the students introduced themselves was that quite a few students came from outside the NY-NJ-PA area, which has long been Lehigh's recruiting turf. For instance one student came from Boston, one from Wisconsin and two from Chicago. At the lunch on Friday I even talked with a first-year student from Southern California; she heard about Lehigh when she researched Cornell. It is always good to see that Lehigh's reputation is reaching beyond the Northeast!

Dynamic Pricing at the Movies

Read in "The Wisdom of Crowds" by James Surowiecki (p.99 of the paperback edition): "After all, if theaters make most of their money on concessions, and their real imperative is to get people into the theater, then there's no logic to charging someone $10 to see Cuba Gooding Jr in Snow Dogs in its fifth week of release. Just as retail stores mark down inventory to move it, theaters could mark down movies to lure more customers. (...) Millions of Americans who won't shell out $8 to see a not-so-great flick in the theater will happily spend $3 or $4 to watch the same movie on their twenty-seven-inch TV. In 2002, Americans spent $1 billion more on video rentals than on movies in the theaters." The author then goes on to point out that Gigli and Finding Nemo were priced the same despite their widely different performances at the box-office - why wouldn't theaters price them differently to attract the video-rental crowd? Multiplexes charge customers less if they want to attend a matinee, but their revenue management attempts stop there.

It would make sense to price a movie differently depending on the number of weeks it has been playing - a lot of teenagers might want to see an action movie on opening weekend, while a married couple may not mind waiting one more week to watch a drama. Prices would then follow a predictable decreasing pattern. But when it comes to Gigli vs Finding Nemo, quality (what Surowiecki calls second-ratedness or A-movie vs B-movie) comes into play; the issue is that time-varying but fixed-in-advance pricing would not account for good or bad surprises at the box office. Many movie companies will not admit a movie of theirs displays abysmal mediocrity even if the critics lash out at the final product - after all, movie executives still have to work with the actors afterward.

That is when dynamic pricing could swoop in and help the theaters (and the studios) make more money. While Surowiecki mentions the retail industry as motivation for differentiated pricing strategies, a more appropriate example is airline revenue management: if the plane leaves with an empty seat, that seat is a lost opportunity for the airline to make money. If the movie starts and the theater is not full, those empty seats are wasted resources until the next show. It would be interesting to see what happens when all movies are priced the same on opening weekend and the ticket prices are adjusted upwards or downwards depending on the fill rate of the theater where the movie plays, and any lower/upper limits multiplexes' managers want to set. As a matter of fact, I cannot think of a better application of dynamic pricing - contrary to airline revenue management, where customers often feel trapped by the airlines' schemes and must part with significant amounts of money if they wait too much for a ticket (because they have to travel on these or those dates), it would be easy for moviegoers to renege or pick a cheaper-priced movie that fits their budget. It would also be a rare application of dynamic pricing that allows upward as well as downward changes of prices, while offering moviegoers the possibility of paying a baseline, known price on opening weekend before the adaptive-pricing phase kicks in. Blockbuster and Netflix beware!

An English major in business

As you might have noticed from previous posts, I believe many English majors have a hard time making ends meet after graduation. It is only appropriate then to recognize the business acumen of the few who take the matter into their own hands and thrive despite the odds... actually, the only one I can think of: Edan Lepucki is a 2006 graduate of the Iowa Writers' Workshop who founded the Writers Workshop Los Angeles after graduation. She puts all these MBA holders to shame. If you are in the LA area and want to finally learn how to write fiction, read "Campus Ripoff: why adult ed isn't worth the price" in the May 2007 issue of SmartMoney, the Wall Street Journal Magazine, to understand why staying away from big-name schools might be a wise decision, and consider paying Edan a visit instead. And no, she did not ask me to post about her!

The Value of a College Education, Part 2

To follow up on a recent post of mine on the value of a college education, I found in "Basic Economics" a mention of Yale offering its students in the 1970s the option to pay their college loans using a percentage of their future income, but students picking high-income career paths such as business and law rejected the scheme (p.294, which is based on p.70 of "The Economics of Life" by Gary Becker and Guity Nashat Becker, according to the end-of-chapter notes). On the face of it, a flexible reimbursement schedule that takes into account graduates' earning power seems like an appealing idea, and should arouse the interest of many college-bound students, especially those interested in majors that do not pay well after graduation, but it also raises many questions. In particular, to what extent does your college major (I am not talking about grad school here) influence your future earnings and to what extent are your future earnings determined by the decisions you make after college? You can major in English, work two years and go to business school, after which you will command a much higher salary, or you can go to graduate school and spend a number of years as a lecturer or an adjunct, waiting for a tenure-track position to open. And how do you decide on the percentages across majors and colleges? If you do not think highly of the education you received but manage to make it big despite your college training, should you pay a higher percentage of your income for your troubles?

The financial burden of repaying student loans could regulate the supply and demand of graduates quite nicely, but students pick their major at an age where few understand the sheer magnitude of the loans they will end up straddled with upon graduation: at 19, three years seem like an eternity, and parents usually hold the purse's strings. When college loans become too burdensome and risk deterring students from accepting an offer (decreasing the yield, an important performance measure for administrators), alumni giving picks up the slack to offer students more generous aid packages - parents have developed outstanding proficiency in pitting schools against each other to extract better deals. Alumni giving remains a good measure of the value graduates give to the environment the university provided and to the opportunities their degree offered after graduation; in the end attending a university where alums value their college education highly decreases the present burden on the students, and should not increase their future liabilities when the time comes to reimburse their loans.

(PS: follow this link for the take of a doctoral student in literature.)

The calm before the storm

Tomorrow freshmen arrive on campus... I received my list of advisees on Friday (this year I have 11 engineering freshmen); yesterday I attended the training session for the faculty and students involved with the First-Year Reading Program and met the upperclasswoman assigned to my group, Erin (it turns out she is an IE major). I was very impressed by what the students said about the training they received as orientation leaders; their responsibilities go far beyond helping out with the reading program and Lehigh does not let them anywhere near the freshmen without extensive drilling on all things university-related. The orientation leaders will definitely be a fantastic resource for the first-year students, and so much more approachable than staff or faculty - they represent Lehigh at its best.  Interacting with such Lehigh undergrads really makes me proud of being part of this community. (Speaking of which, we moved up the US News rankings - we are now a well-deserved 31st! The press release indicates that "Lehigh received high scores in several key categories, including alumni giving (13th), faculty resources (19th), student selectivity (26th) and graduation and retention rate (31st)".)

Today I attended the yearly meeting of the academic advisors for engineering freshmen. This is always a very informative meeting where faculty members get to catch up with all the technological innovations put in place on campus (at least those that can help them with their advising duties). I remember when I first interviewed and later joined Lehigh, the commitment of the university to having top computing facilities everywhere on campus amazed me. For instance, the four classrooms in my building (Mohler) are equipped with a computer and a projector screen so that professors can present directly from the desktop or their laptop; when I was there, MIT only provided such equipment in the business school, and I doubt it has changed much. A major innovation this year is the introduction of "Faculty Channels", a tab in the Campus Portal about all things faculty-related that complements the online "Banner" system (where we enter grades and run degree audits). "Faculty Channels" is much easier to access than "Banner" and part of its appeal is that it allows faculty advisors to make, say, course recommendations accessible to the Registrar's Office which then processes the overrides. In the past students have showed up in the Registrar's Office with inaccurate recollections of what their advisor had told them and it took forever to contact the advisor and clarify what he had said and determine which courses the student should enroll in that semester. So the goal of "Faculty Channels" is to make the whole process easier. Another advantage is that it can help establish a paper trail with respect to students who later get in trouble (or sue the university...) Another upcoming innovation is the use of the students' ID pictures for the class rosters; this is not operational yet but there is hope it will be soon.

Of course "Faculty Channels" led straight into a discussion of FERPA. FERPA is the Family Educational Rights and Privacy Act which (quoting from the website) "protects the privacy of student education records." For instance, if one of my advisees' parents contacts me about their son or daughter, I am not allowed to discuss the kid's performance (schedule, grades) with them, and parents cannot obtain a transcript... unless they have the kid listed as a dependent on their tax records and make a written request to the Registrar's Office. But there is a whole procedure to follow to make sure this is done legally. Moreover, a student has the right to access all the records about him or her. The person making the presentation this morning explained that faculty members have sometimes (rarely, but sometimes) gotten themselves into trouble by writing a note about a student in front of that student, refusing to show him what they had written when he asked and then destroying the note. (Let's not comment on the appropriateness of writing a note about a student in front of that very person if you do not want him to know what is inside...) Let's repeat: a student has the right to access all the records about him, and that includes notes the faculty member made just to himself - this used to be an exception, known as the "sole proprietor exception" but apparently it was struck down in court. Other exceptions are police records held in the police department and health records held in the health care center, but as soon as these records leave their respective buildings (for instance if they are communicated to the Dean of Students for some obscure reason) the student has the right to access them too.

It was also interesting to hear about the legal issues surrounding letters of recommendation: if a student has not given his or her prior consent, a faculty member cannot write down the specific grades the student received in his recommendation letter but he can say the student was one of the best students, and the waiver that so many students sign, forfeiting their right to review the recommendation at a later date, turns out to be valid only for the specific purpose the letter was written for - typically, admission in graduate school. If the department the letter was sent to then uses it to request financial aid for the student at that university,  for instance, the waiver becomes null because the letter was used for a different purpose than originally stated, and the student can then have access to it even if he signed the waiver. But it is legal for the departments to shred all recommendation letters (if only due to space constraints in their offices) after admission/rejection letters have been sent out,  and from what I have heard this is a right departments use abundantly.

We laughed when we heard about the privacy woes at an Ivy League university - the story goes like this: the mother of a student wanted to see her kid's grades and he refused to let her, but she found the link to the online system and all she had to enter was the student's ID number and his PIN (Personal Identification Number). She knew his ID because it was on the bill she received every semester for tuition but she did not know his PIN. "Thankfully," students who had forgotten their PIN were allowed to log into the system if they were able to answer one security question - no big surprise here. And guess what the security question was? What's your mother's maiden name!! Lo and behold, the mother knew that. So she was able to log in and see her kid's grades, probably hoping that the kid would misplace his PIN number or think he had written it down wrong when he tried to log in (because the PINs are changed automatically after the security question is used). Well, the kid was very aware of what his PIN number was supposed to be, and went to the Registrar's Office to investigate, and that's how he realized what had happened. And guess who shouldered the blame for this infringement of his privacy? No, not the mother - the university! ...Because it had failed to emphasize that students should select a security question their parents would not know the answer to. As a result (I had not known it was a result of that story, but I had noticed the change), Lehigh started requiring three security questions rather than one about a year ago.

Next week a mailing will go out to all Lehigh faculty members to make them aware of FERPA; the Registrar's Office thought faculty were aware of these rules but it turns out many people aren't, and as long as Lehigh does not inform them it is an institutional liability for the university. Once the mailing goes out it becomes a personal liability for the faculty members who violate FERPA... At least I won't be one of them.

High School Majors

In a recent article in the New York Times ("Forced to pick a major in high school", dated August 16, 2007), parents and spokespeople voice their concern about a New Jersey high school about to force students to declare a major their freshman year. "I thought high school was about finding what you liked to do", whines a mother, while a spokeswoman for the Association of American Colleges and Universities complains that: "A lot of jobs that high school students are likely to have 10 years from now don't yet exist, so preparing them too narrowly will not serve them well." But given the terrible state of K-12 education in the United States today, a lot of jobs that high school students are likely to apply to 10 years from now might well be filled by better-trained foreigners.

I was educated in the French high school system, which requires students to declare a major at the end of their sophomore year, and to this day it amazes me that some engineering seniors at Lehigh (a top-tier national university) struggle with math I learnt my junior year in high school. (We had the choice between three majors: "scientific" major, with lots of math and science, "economic" major, with a lot of economics and business, and "literary" major, with a focus on, you would have guessed it, literature. I have listed the majors in order of desirability, as it remains well-known in France that the best students pick the scientific track and the weakest ones major in literature. The underlying idea is that if you can develop the critical skills needed to succeed in the scientific track, you will do well at anything you set your mind to - this echoes a common marketing argument of engineering departments in U.S. colleges.)

Preventing students from building on their strengths and forcing everyone through the same classes in math, physics and history is not doing anyone a favor - at the end, the American high school system in its current form spits out only mediocre students. According to the 2007 economic survey of the United States, carried out by the Organization for Economic Co-operation and development, "US students are outperformed in international tests by their peers in many other countries. It is also a concern that many students seem underprepared for work and higher education. Although large achievement gaps persist between population groups, performance is broadly unsatisfactory, including affluent and academically successful students, and hence appears to reflect above all system level weaknesses." To keep their college applications competitive, high school students need to take AP courses, many of which serve the same purpose as courses in a major but are not combined by the school to make a coherent curriculum. As a result, good students lose a valuable opportunity to strengthen their education (because they decide on their own which AP courses to take) while weak students struggle with concepts or lab experiments they will not need (because they cannot opt out of the mandatory courses).

Of course, the American system also has its advantages - I sometimes wish I could have taken an elective in, say, history when I was in engineering school. But the breadth of course offerings at the university level, which provides college students with a welcome well-roundedness, also represents the mean weakness of the high school system: kids end up knowing a little about a lot of things but become proficient in nothing. While having students declare majors four years before they graduate from high school might be a bit extreme, developing math/science, business or humanities tracks for juniors and seniors would help students challenge themselves - and catch up with their foreign counterparts - in the fields that interest them most.

First-Year Students' Reading Program

There was an article in the New York Times yesterday about "summer reading programs gain[ing] momentum for students about to enter college." The second paragraph says it all: "Nationwide, hundreds of colleges and universities, large and small, public and private, assign first-year students a book to read over the summer, hoping to create a sense of community and engage students intellectually." I volunteered for Lehigh's program, run by the Office of the First-Year Experience (see my old post here) and got my very own copy of "Freedom in Exile", the autobiography of the Dalai-Lama, via campus mail this week. (Yes, we do get a two-hour long training session later this summer. Then I will lead a discussion group early in the Fall semester; the group will meet three times for one hour. Last year this was done in one single afternoon on the day after move-in day, but students probably had too much on their mind to take full advantage of it. And anyway I will be busy on the day after move-in day too, since I am also an academic advisor for the engineering freshmen. Looking forward to meeting "my" new kids!) As pointed out in the NYT article, many reading programs try to have the author speak on campus or show a movie related to the book, and Lehigh is no exception to the rule as the Dalai-Lama - yes, the Dalai-Lama - will come to speak in July 2008, in "the most extensive teaching on the classic Tibetan Buddhist text that the Dalai Lama has presented in North America" (see Lehigh's press release.) So here I am with the Dalai Lama's autobiography; there are fifteen chapters and I have read Chapter 1. So far so good!

Revenue Management in Unlikely Places

I recently discovered an unlikely application of revenue management: the Pennsylvania police, and in particular its regionalization - a fancy word for resource pooling in rural areas, and a way to get townships operating without their own police force off the hands of the state troopers. (It also raises interesting facility location problems when it comes to locating police headquarters.)

This is one of the very few applications I know of (actually, the only one) where the costs associated to resource pooling are freely available on the Internet: companies tend to guard this information jealously; townships, however, need to discuss (property) tax increases with their constituents. The Morning Call, in its typical dry fashion, provides the following numbers in this August 7 article regarding a possible joint force for Lower Mount Bethel (LMB) and Upper Mount Bethel (UMB) ("neither township has a police department, relying on state police coverage"; a related version dated July 18 is a bit clearer - see end of article - and also suggests the possibility of purchasing police services from neighboring townships):

  • in the case of a full-time police force (10 people: 1 chief, 2 supervisors and 7 officers): LMB would pay $360,000 in start-up costs and the average assessment to property owners in LMB would increase by $296 a year. UMB would pay $541,330 in start-up costs and the average assessment to property owners in UMB would increase by $430 a year.
  • in the case of a part-time police force (16 hours a day, 6 people: 1 chief, 1 supervisor and 4 officers): LMB would pay $248,080 in start-up costs and the average assessment to property owners in LMB would increase by $204 a year. UMB would pay $372,885 in start-up costs and the average assessment to property owners in UMB would increase by $384 a year.

The residents also have the option in the survey of recommending that things be left as they stand now. Remarkably, officials recognize the uncertainty in some of their numbers, for instance warning that the total start-up costs could increase from $900,000 to $1.2million - in that respect they are ahead of quite a few industry practitioners, but since the article makes no attempt whatsoever at educating the public regarding why these changes are needed (see this House Resolution), it seems that the residents are being asked: "would you prefer to keep receiving police services for free or would you like to pay for them?" Let me think... That's a tough question... Do I want to spend money for something I am currently getting for free...

The following link provides much valuable information on crime statistics in PA; of course it is tempting to think that rural counties don't need any police force because nothing ever happens, but drug abuse has become an epidemic over the recent years. In 2004, "rural counties had 6,294 reported incidents per 100,000 residents while urban counties had 8,231 per 100,000 residents" and 62.7% of the rural counties relied exclusively on the state police. Quite frankly I'd rather see the state police busy with state police matters, of which there are plenty. 40% of the municipalities surveyed said they had discussed the possible regionalization of their police force between 2003 and 2005, suggesting the trend towards resource pooling is only going to increase, in possibly one of the largest-scale experiments ever in revenue management.

The fact that police departments join forces doesn't mean they always get along: a case that has received much publicity recently is Hanover's decision to leave the Colonial Regional Police over a dispute regarding the future headquarters' cost, then its decision to rescind its decision, followed by the decision of the Bath and Lower Nazareth townships not to accept Hanover's decision to rescind its decision (my head spins), although "losing Hanover would cripple the police force because the township provides more than half of Colonial Regional's $2.2 million annual budget. Hanover's $464 million tax base is roughly nine times the size of Bath's, and the township could afford its own police force if it quit Colonial Regional" (see the Morning Call dated July 24, 2007, "Colonial Regional, minus Hanover?"). Don't they have trained mediators? Can't they get along? What a great start to their partnership.

Another case that is still making headlines is Sellersville's 2002 decision to leave the Pennridge Regional Police and contract police services from Perkasie: Sellersville left because it felt "the $440,000 it was paying for police protection was too much" but now "expects to pay the neighboring Perkasie police department $525,000 for its services in 2007", on top of the legal costs associated with the dispute (the need to pay for the relocation away from Sellersville, for instance), which would amount to $485,000 if they are not overturned on appeal (Morning Call, December 23, 2006) The day the Perkasie police department merges with Pennridge (and if demand for Perkasie's police services continues to increase, it would not seem far-fetched to have the department enlist the help of the regional police) will certainly make for interesting conversations at police headquarters. By then revenue management might have found other applications in Pennsylvania's police forces - maybe the flexible assignment of police officers across neighboring townships, or the pricing of the fines (for instance based on a person's income or the number of his previous offenses), or topics no academic would think about by herself - after all, the first regional police department in Pennsylvania appears to have been created in the early 1970s in Northern York County, and I doubt operations research academics shared many of their insights on resource pooling with officials back then, if only because little had been studied (in resource pooling and also operations research in general.) The Northern York County regional police turned out alright all the same.