Posts Tagged ‘credit


Easy as A, B, C

Jackson Five of course.

I’m TAing an ethics class for some extension school students and it looks a lot of people are going to drop out after hearing my comments on their first papers. The people who DID finish the process and so submitted a final draft are all pretty good writers and their papers are good.

What this suggests to me is that perhaps grade inflation isn’t really that damaging. Well, let me rephrase. There are two problems with grade inflation.

One is that if grades inflate, then RANKING information is lost as grades get pressed toward the “100” or “A” mark. If everyone is getting an A, then how can we distinguish students. This supposedly penalizes really good students and perhaps allows poorer students to find themselves in classes they can’t handle.

Another criticism of grade inflation is that it’s rewarding laziness and making our generation less education or less prepared for things.

The first criticism is the one that I think is falsified by my recent experience as a TA. What I mean is that it is possible that these days there is a more aggressive selection effect than was in place before. I don’t know this for a fact, but I suspect that students these days are really good at taking classes not for a grade when they know it will be really hard or dropping it before a really nasty grade gets put on their transcript. The result is that it grades are inflating not due to teachers handing out better grades to everyone, but rather being UNABLE to hand out bad grades to bad students before these kids jump ship or escape the class.

If this were happening, then grades would be a poor indicator of how a student is doing, but it would mean that the same information could be gleaned by looking at WHAT CLASSES a student is taking. So, if I’m looking at a pile of applications and everyone got A’s, then I know that this bunch of students is perhaps savvy in avoiding bad grades. But then I can look to see what classes they took to see what those A’s really mean.

It also might mean that students aren’t getting worse educations, but rather, are just more able to find what things they are good at. This reduces information (O everyone looks good at whatever stuff they did), but it may not indicate students are learning less or are less prepared.


Obama’s bank tax

It’s too early to tell what sort of form Obama’s proposed bank tax will take, but I confess that I don’t really know what’s going on.

First, the idea was that the banks needed subsidies because if they were forced to accept the consequences of their risky actions, then we would all lose due to the freeze of credit markets. So we gave the banks a bunch of money.

But having done that, Obama’s new idea is to tax banks based on the assets that they have. In a recent speech, Obama said “we want our money back, and we’re going to get it,” which is fine, but I thought we loaned money to the banks (actually, I’m not really sure how TARP works), so won’t we get it back? In this same speech though, Obama also says that his economic team has gotten most of the money back, but if that’s true, why get so heavy-handed about getting it back? Is it just a political maneuver that is supposed to play on a supposedly innate prejudice against wall street?

I don’t mean for this to be a whiny ad hominem attack on Obama’s policies though, so I’ll try to get to a substantive point. Here it is: how will taxing assets make banks take less risky decisions. Sure, a tax will reduce the payoff to gambling by making the “winnings” less, but if the tax is on current assets as well, then it also makes banks poorer if they don’t gamble at all. To dissuade a certain type of behavior, one has to tax that behavior and not just the wealth of the banks in general, which will just leave them poorer. Now, as I understand, traditional capital that is raised from savings accounts (like mine and yours) is immune to this tax, and so in that sense, some amount of risk taking will be averted since banks who raise capital the old fashioned way — by holding it for people — will gain under this regime.

Maybe there is something here about bonuses, and Obama seems to get pretty worked up when talking about them (and I don’t blame him), but surely there is a better way to get at large bonuses other than taxing the entire asset bases of large banks.