Tuesday, October 22, 2013

When the Used Car Salesman Deceives Herself

In an earlier post, I used George Akerlof's analysis of asymmetric information in economics, The Market for Lemons, to suggest that universities treat deans as used car salesmen, knowing more about their car for sale (the tenure candidate) than could be known by committees or provosts. Hence, you want to be sure (saleman's guarantee, your own mechanic) that what you are being sold is not a lemon.

Let us say, however, that the dean or salesman is possessed of at best imperfect information, is doing their best to  be honest, and even offers a guarantee. Still, we know that some cases prove to be lemons none the less. How do we protect the dean from herself?

You could raise the standards. Or you could have a devil's advocate (DA) on the dean's staff, or on the provost's who brings up problems and makes sure the dean addresses them. The DA is responsible to the provost or at least is not under anyone's command. The DA is the expert mechanic, the legal beagle, the person who asks the embarassing questions. Perhaps the DA has an algorithm that predicts future performance, and uses it to raise red flags.

Now, you might make mistakes of rejecting candidates or cars that will prove to be fine performers. And surely some lemons will make it through. And some apparently fine candidates will for various reasons disappoint.

But, since these are lifetime commitments, and they involve millions of dollars, and opportunity costs of not hiring a stronger performer (or a weaker one!), it may be worth these precautions.

By the way, good performers should have no trouble with this arrangement. You are appointing people for their strengths. Their weaknesses are not crucial, as long as they are not debilitating for schoalrly performance.

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