Passing Prof. Greenspan's 'Golden Years 101' Course

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In most colleges,
there is one course, required for graduation, that worries students.
For humanities majors, it’s usually a math class. For science
majors hoping to go to medical school, it’s an art history or
literature class.

On the other
hand, there is usually another course that students take when
they are looking for a snap course to take in the same year that
the killer course is required. If it’s offered on a pass/fail
basis, so much the better. This leaves more time to study for
the killer course.

Every American
is enrolled in Lifestyle University. Some of them are getting
high grades. Others are on probation. Golden Years 101 is the
final required course in the curriculum. After that, it’s either
graduation day or dismissal.

has it that it’s a snap course. Everyone who has taken the class
so far has passed. But there is a rumor floating around that the
Administration is going to tighten the standards for passing the
course. It’s no longer going to be a snap. In fact, one rumor
says, the Administration is going to turn it into a killer course.

Are you
preparing in advance for this class? Probably not. You assume
that the rumor is unreliable. After all, why would the Administration
impose new standards for the course at this late date?

I have it
on reliable authority that the regional accreditation association
has sent down the word: either tighten standards for Golden Years
101 or else Lifestyle University’s accreditation will be revoked.
That would put a whole lot of administrators out of work, possibly

So, the
Administration faces two difficult options: (1) tell enrolled
students in advance about the proposed tightening and let them
start preparing in advance, preferably in summer, when the sun
is still shining; (2) let them keep attending, unaware of the
looming transformation, and then flunk 80% of them on the final
exam as a warning to lower division students. If the Administration
chooses option #1, too many students might decide to drop out
of Lifestyle University. The school could be forced to close its
doors, putting administrators out of work. But if they lose accreditation,
the place could also go under. It will become too difficult to
raise funds from donors. What’s an administrator to do?


Greenspan, the beloved but visibly aging chairman of the economics
department, is known for his ability to raise funds for Lifestyle
University under all conditions. No matter what happens to enrollment,
no matter what the competition is doing, he always comes through.
He gets the money to keep the doors open. That’s why the Administration
keeps him on the faculty. He is well beyond normal retirement

The Administration
generally trusts him. The students think he’s kind of quaint —
the 1964 black rim glasses, the weird way he lectures, and his
ability to answer questions at the end of class without giving
even a hint of what’s going to be on the final exam. A few economics
majors complain that his answers make no sense, but they are a
minority. The rest of the students don’t care, since almost everybody
passes the only course that the department offers that is required
for graduation, Golden Years 101. Professor Greenspan has taught
it for many years.

He has come
up with a plan. Go ahead, he has told the Administration: raise
the standards for his class. Get the accreditation association
to accept the new standards. Then, secretly, he will leak the
questions and answers to a few trusted students on the night before
the final exam. (All of these students are majoring either in
communications or political science. Not one is majoring in economics.)
The student grapevine will work, everyone will still pass, and
the Administration can tell the accreditation commission that
it’s the result of hard work by students.

The problem,
of course, is that the accreditation association is concerned
that the graduates are unprepared for the world beyond graduation
day. With everyone basically guaranteed a passing grade in Golden
Years 101, nobody is studying for the final. Why bother? Everyone
passes. The association is known to have student informants on
campus, and if the exam questions get leaked, the accreditation
commission will find out. They will revoke accreditation, and
the graduates, degrees in hand, will find that the degrees are
worthless, or close to it, in the real world.


A word to
the wise: the accreditation association has learned of Professor
Greenspan’s plan to get around the association’s new requirements.
Someone deliberately tipped them off. I mention no names.

They have
developed counter-measures. How I know about this, I am not at
liberty to say. Trust me. They have consulted with a team of little-known
economists from Austria to prepare a far more rigorous final exam.
On the day of the final exam, the accreditation commission’s representative
— again, I mention no name — is going to substitute
a different final exam for Professor Greenspan’s.

But, you
ask, haven’t I just let the cat out of the bag? Haven’t I blown
the cover for the accreditation association? Hardly. Most students
really don’t care. Lifestyle University is so much fun, and the
keg parties are so frequent, that they really don’t pay attention
to academic details. Their parents graduated from Lifestyle U
years ago, and they’re still doing just fine. Professor Greenspan
is grading the course the same way that Professor Volcker graded
it, at least after that brief tightening period back in 1980—83,
when it looked like a
lot of students were going to flunk Golden Years 101
. The
students’ philosophy is eat, drink, and be merry. Professor Greenspan
will find a way!

So, what
about you? Do you think my scenario is plausible? Will the accreditation
association substitute a different final exam at the last moment?
Will you walk into class, confident that Professor Greenspan will
hand out the same final that his favorite students leaked the
night before?

Sadly, I
think most of you will. This bothers me. I like you. I really
do. But I have discovered over the years that whenever I begin
talking about Golden Years 101, most people get a wistful look
in their eyes, and start telling me stories about how their parents
passed the final exam with flying colors, as did their grandparents
under Professor
, who taught the class even longer than Professor Greenspan
has. Then they depart. There is always a keg party going on somewhere
at Lifestyle U.

Boola, boola.


Okay, now
that the others have gone, I’ll let you in on a little secret.
I have a copy of the accreditation association’s final exam. I
hope I can trust you to keep your lips sealed. I wouldn’t dare
hand this out to a large group, but by this time, there is hardly
anyone still reading this report.

The trouble
is, you will find this exam difficult, even with this prior warning.
I worry that you will not go through the questions, one by one,
and write down your answers. That’s the way it is with even the
best students. They prefer not to consider the possibility that
a final exam will be really difficult to pass. They would rather
think about the good old days, when things were easier. They prefer
to believe that things haven’t changed. Even when they have an
opportunity to get their hands on a purloined copy of the final,
most of them prefer not to think about the questions. They don’t
like to do the necessary research in advance to make sure that
they will pass the final. They say they never cheat. They say
they don’t want to gain an unfair advantage on their peers. Maybe
that’s true. But maybe they just don’t want to find out in advance
that they are going to flunk because they can’t answer the questions.
They find the questions quite difficult to answer.

But a handful
of you may decide to prepare for the final for Golden Years 101
— I mean the real final, not Professor Greenspan’s —
in advance. If so, here are the questions.

#1 (25%)

much money must you have in your pension fund on the day you
retire if your goal is to receive 50% of the income that you
will generate in your final year of full-time employment?

Because this
answer varies with each person, you are going to have to provide
the income numbers. The grader will give you a grade based on your
strategy in solving the problem, not the actual numbers. Here’s
the accepted strategy to solve the problem.

First, estimate
what your income will be in the final year of your employment.
This involves making guesses. Your grade will depend on how persuading
the grader will regard your assumptions. Here are the basic factors
he will be looking for:

income in that final year:

    1. Total from salary, bonuses, investment income, moonlighting,
      and inheritance

    2. Consumer prices in that year, adjusted for price inflation
      compared with prices today

by 2.

Ratio of
dividends to invested capital in your retirement portfolio:

  1. Past
    five years
  2. This
  3. The
    year of your retirement (guess)
  4. From
    retirement to the Final final exam

Security income

  1. What
    monthly income has the Social Security Administration officially
    promised you
    , given your level of “contributions”? (The
    answer to this question will not be known on final exam day
    by 95% of the students.)
  2. What
    is the likelihood that Social
    Security will still be solvent
    in your tenth year of retirement?
    (This is an essay question — possibly quite brief.)
  3. What
    is the likelihood that the U.S. dollar will still be solvent
    in the tenth year of your retirement, assuming that Social
    Security is still solvent? (Another essay question.)

#2 (25%)

will be the effect of prices on this level of income in the
years following your retirement?

The effect
of price inflation:

  1. What
    has the average rate of consumer price inflation been over
    the last five years?
  2. Why
    did you select either the CPI or the Median
    (published by the Federal Reserve Bank of Cleveland)?
  3. What
    economic factors are likely to raise or lower the rate of
    price inflation during your years of retirement?
  4. By
    how much?

#3 (25%)

A. If
your previous answer predicts price inflation:

will you keep pace with rising prices on a fixed monetary income?

  1. Moonlighting,
    wiser investing, inheritances, Social Security increases,
    sponging off your children
  2. What
    new expenses will you be paying after you retire that you
    do not pay now?
  3. Will
    Medicare still be solvent
    ? (An essay question — again,
    possibly brief)

B. If your
previous answer predicts price deflation:

  1. How will your investment portfolio continue to deliver the
    same ratio of dividends?
  2. How will the value of your investment portfolio continue to
    remain stable in an era of price deflation?

C. If your
previous answer predicts stable prices:

  1. How will the Federal Reserve System produce this outcome,
    given its failure to do so ever since 1929? (An essay
    question — probably quite long)
  2. How will the U.S. manufacturing sector do this, given China
    and India?

#4 (25%)

will be the likely result politically if 80% of the people who
take this final exam flunk it? (An essay question.)


You will
get five bonus points if you write this exam in red ink. This
indicates that you have understood Golden Years 101.

25, 2003

North [send him mail]
is the author of Mises
on Money
. Visit
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