4-ijeast-vol-no.4-issue-no-1-performance-measures-in-education-and-productive-efficiency-022-025

Performance Measures in Education

and Productive Efficiency

Asst. Prof. Dr. Akin Seber Department of Financial Economics and

Faculty of Commercial Sciences Yeditepe University, Istanbul, Turkey

[email protected]

Ahmet H. Kaya Graduate Student

Department of Financial Economics Graduate School of Social Sciences

Yeditepe University, Istanbul, Turkey

Abstract — We propose a different model of performance evaluation in education where the negative effects of childhood upbringing may be eliminated during the schooling years. The new set of values that may be given during the schooling years has the potential to change the performance of individuals both in school and in life, also having positive effect in social relationships, leading to healthier, happier societies.

Keywords – self-esteem, moral values, comparative versus absolute performance measures, distorted perceptions, productive efficiency, binomial decision-tree analysis.

I. INTRODUCTION One of the indicators of a healthy society is how well the

individuals who form it get along with each other, have respect for each other, which directly depends on how well the individuals who form the society feel about themselves. Psychologist Nathaniel Branden argues that the sign of a person who has high self-esteem (that is has respect for himself and fells competent – the 2 major dimensions of esteem) is that he is not at war with himself, or with others. Branden argues that in order to achieve this peaceful state of mind, the person needs to settle matters within himself, that is self-esteem can not be obtained from outside, for example with material possessions, the status one obtains in the eyes of others, number of friends one has etc..

Actually, the idea of respect for others is what many spiritual teachings suggest. For example, the Turkish poet Yunus Emre says “Treat others as you treat yourself; that summarizes the massage of all 4 books, if any”. Psychologist Eric Fromm agrees that the peaceful state of mind may be achieved not by owning but by being and loving relationships. Similarly, Maslow establishes the hierarchy of needs so that after a person meets his basic physical needs like food, shelter and clothing, he would like to meet social needs and self-esteem needs and finally tries to realize his potential at the top of the pyramid.

But, how does one achieve this peaceful state of mind which also helps to get along better with others and lead to healthier societies with less friction between its members. Friction between members of a society is similar to what we

know from physics that as friction increases the needed force to move an object from one place to another also increases. In societies this friction between individuals manifest itself in a viscous circle of unhealthy individuals, who bring up unhealthy children, who make up unhealthy societies, which further deteriorate the health of individuals, leading to a society of unhealthy, unhappy people.

Branden suggests that the respectful state of mind which one obtains within himself, so that he can reflect this peaceful state towards others, can not be achieved through comparison or competition with others, but through how well a person achieves the criteria that he has set for himself. Branden suggests conscious living (respect for reality), self-acceptance, self-responsibility, self-assertiveness, living purposefully, and personal integrity as the six-pillars of self-esteem. Self-esteem has nothing to do with others, but can only be achieved within oneself.

The foregoing analysis brings us to question the measures that we use in evaluating performance. Do we need to use relative performance measures – where we compare and compete with each other – or absolute performance measures – where we consider each individual as unique and valuable, who is capable of realizing his potential. Actually, relative performance measures can also be used in a constructive rather than destructive manner, but if they are used in a destructive manner, the outcome would be to turn a success potential person into a failure, which is a typical description of waste. A close analogy in economics would be productive efficiency, where all the resources one has are utilized to reach potential output. Our purpose in this paper is to analyze how using these different performance measures in education may affect the productive efficiency of individuals and societies.

We have 4 references for the paper. Reference [1] is among Nathaniel Branden’s many books about self-esteem, which support our recommendation of absolute performance measures over relative performance measures with the possibility of their destructive usage. Reference [2] is an example of Covey’s many books about how behavior is influenced by the different centers the individual acts from.

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Covey focuses on Principle Centeredness as the recommended base for action again in line with the absolute performance measure we recommend in this paper. Reference [3] is a finance book where binomial decision-tree analysis is used in pricing financial securities, whereas interested readers may find other books of psychology, education, or game theory for further analysis. Reference [4] is our recent paper related with the difference between the expected returns of risky and risk-free endeavors, and will be referred to in section II below. Furthermore, we don’t compare our study with any other work since the idea for the paper originated from an example we worked out in class, and the paper is based on this example.

II. METHOD Our analysis is based on an example where we compare

two individuals in a 2 period framework. Agent 1 is already endowed with a high level of outcome 100 and is able to increase its initial endowment with certainty with return rF = 0.1 in each of period 1 and 2, reaching 110 and 121, respectively. Meanwhile, Agent 2 is endowed with relatively less outcome of 80, and is taking risk to increase his outcome in a binomial framework of an up or down value. In period 1 his return may be 90 (after which in period 2 his return may be 102 or 96), or 70 (after which in period 2 his return will be 80 or 60) as shown in Figure 1. We might make an analogy in finance of a risk-free and risky security returns.

q 102

90

p (1 – q) 96

Risky 80 80 Alternative r

(1 – p) 70

(1 – r) 60

Risk-Free 100 110 121 Alternative Figure 1. The outcome of risky and risk-free alternatives in period 0,

1 and 2.

We develop our argument based on the following 3 Cases.

Case 1: Normally, we should expect a higher return for risky alternative as we propose in our recent paper [4], but let’s assume for simplicity that the expected risky alternative return is the same as the risk-free return rF = 0.1. Our task is to find the probabilities for each of the risky outcomes that would equate the return to risk-free return. The following equations describe the situation:

( ) (1)

( ) (2)

( ) (3)

The solution to these equations are probabilities p = 0.9, q = 0.5 and r = 0.85. As a result, period 2 outcomes will be

realized with probabilities P (w1) = p q =P (w2) = p (1 – q) = 0.45, P (w3) = (1 – p) r = 0.085 and P (w4) = (1 – p) (1 – r) = 0.015, where wi for i = 1 to 4 stand for outcomes 102, 96, 80 and 60, respectively for Period 2.

Case 2: Now we propose a different and distorted perception version of the period 1 and period 2 outcomes. In this distorted perception framework the relative probabilities are found from:

( ) (4)

(

) (

) ( ) (

) (5)

( ) (6)

The solution to these equations are probabilities p = 0.6, q = 0 since the solution to the relevant equation is negative and r = 0.5. As a result, period 2 outcomes will be realized with probabilities P (w1) = 0, P (w2) = 0.6, P (w3) = P (w4) = 0.2, where wi for i = 1 to 4 stand for outcomes 102, 96, 80 and 60, respectively for Period 2.

Case 3: Even though the individual has a distorted perception in period 1 as in case 2, he will have correct vision in period 2 as in case 1. In this case, the relevant probabilities will be p = 0.6, q = 0.5 and r = 0.85. As a result, period 2 outcomes will be realized with probabilities P (w1) = P (w2) = 0.3, P (w3) = 0.34 and P (w4) = 0.06, where again wi for i = 1 to 4 stand for outcomes 102, 96, 80 and 60, respectively for period 2.

The expected returns for Agent 2 in cases 1, 2 and 3 are 96.8, 85.6, 90.2 with 2 period returns of 21%, 7%, and 12.75%, respectively. Even the best case 1 for Agent 2 brings the same return as Agent 1 since we have made the simplifying assumption that risky and risk-free returns are the same.

As we compare these 3 cases, even though case 1 outcomes at Period 2 are preferable to case 2 and 3 outcomes, case 2 is much worse than case 3 with 2 consecutive success possibility totally eliminated. In case 3, the period 2 outcome is comparatively worse with respect to case 1, but even though with lower probability, success possibility for 2 consecutive periods is still positive.

The question we need to ask now is:

What in the first place causes the distortions we observe in case 2 that result in the lowering of expected outcome;

How it is possible to correct the situation in period 2 after being subject to the distortion in period 1, as in case 3. Or even better, is it possible to avoid the damage done at Period 1 altogether, so that we end up with full potential as in case 1.

Here, we will represent case 2 with “relative deprivation, comparative downgrading, denial of person, time and reality” (CD – comparative downgrading) approach to performance evaluation. As can be deduced from the approach, the

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performance measure used for analysis is relative based on comparison, destructive rather than constructive, giving negative-unrealistic feedback to the person, discouraging, de-motivating, and diminishing the willingness to work. On the contrary, we will have an absolute performance measure of “potential oriented, principle centered, respect for person, time and reality” (PO – potential oriented) policy, which gives positive-realistic feedback to the person. It is also possible to summarize the condition as having respect for ADVERBS – describing place, time person, situation etc., which may be acquired with a sound PO policy. The three cases given above enable us to analyze the performance and productive efficiency of CD and PO policies.

In case 2, after the success in period 1 of 90, Agent 2 is comparatively downgraded by comparing his success outcome with the initial outcome of Agent 1. The performance evaluation statement can be like this: “Yes, you have achieved success, but Agent 2 already has a high outcome even without working”. Here, we see the denial of person, time and reality at work, giving Agent 1 negative feedback on a positive outcome, confusing and discouraging him.

At stage 2 distorted evaluations and comparative downgrading continue. If agent 2 achieves success in period 2 as well, he is subject to normal comparison with agent 2 of 102 versus 121. However, in case of failure in period 2, he is subject to the following statement: “Agent 2 achieved 121 at the end period 2, but you only have 96. This shouldn’t be so, you should have gotten 121 and him 96”. Again, we see a denial of the outcome and the person, downgrading the previous success Agent 2 had in period 1, downgrading the value of Agent 2 by implying him to be someone else, which is not possible, and actually motivating him to take what Agent 1 has so that he will be comparatively in a better condition. Here, we also see denial of the fact that when risk is taken, it is normal to have up as well as down outcomes, discouraging the person from taking risk in the future at the first appearance of a failure.

The distortions continue at the up state in Period 2 with even denying the success of 90 that Agent 1 obtained in period 1 by the following statement: “You are a failure already in period 1 since you got 90, but Agent 1 already got 100 at period 0, but this is not enough, he got 110 in period 1 and you should have gotten 110 and even 100 would be a failure for you”. With such a distorted relative performance measure in effect, Agent 1’s success possibility in period 2 reduces to zero, even though he achieved success in period 1.

In case Agent 2 had failure of 70 in period 1, he is subjected to the following evaluations: He is considered normal if he achieves success in Period 2 after the failure in period 1, and his outcome of 80 is compared with the 121 outcome of Agent 1 in period 2. However, he is subject to the following statement in case of failure: “You got 60 with 2 consecutive failures, whereas you should have gotten 96 as in the case of failure in period 2 after success in period 1”. Here, we see the denial of the fact that the person actually failed in period 1 and shouldn’t have failed in the first place, denial of

the past situation. Furthermore, he is subject to the following distorted statement: “Agent 1 had 110 in period 1, and you shouldn’t have failed in period 1 and your performance will be evaluated as if the failure in period 1 never happened, with period 0 outcome of 80”. Again, we see the denial of the reality of failure in period 1, which is a normal condition of risk-taking.

III. APPLICATIONS The next question we need to answer is how we can

correct the situation in Period 2 as in case 3, or in Period 1 as in case 1, so that we don’t end up with case 2 at the end of Period 2. We will apply the example to education system. Period 1 represents a period of childhood upbringing until primary school, where the person is subject to all negative influences of his parents and is equipped with little mechanism to avoid the negative massages given to him. Period 2 represents time in education, starting from primary school until the end of university, the time when the correction can be made. The correction will both benefit the student’s performance in school, and after school in life, having a positive effect on social peace and success as well.

We recommend that the student to be equipped with values of “honesty, hard-work, and patience” (HHWP) as a policy, even though other alternatives that could serve the same purpose could have also be chosen. Let’s try to analyze how the person equipped with the HHWP value system as a PO performance measure would cope with the distortions of CD policy.

The person will value himself to be an important person when he judges himself with the HHWP policy, negating the effects of distortions given to him in Period 2. This can be achieved either by the person recognizing the condition and the need to use a PO policy, or even better the Education System becoming aware of the situation and teaching students that the PO policy will lead to healthier, more productive individuals and societies. With the new policy, the individual will have respect for the facts and reality, judge himself with whether he acted congruently with what he believes to be true and be patient and accept the results whether it is good or bad, being content and peaceful that he has done what he was supposed to do. This person would not be affected by any CD performance measurement having a PO performance measurement system in place. Even though he lost some of his potential output with negative influences of his parents in period 1 when he was incapable of understanding what was happening to him, he will be able to pull himself out of case 2, ending up maybe not in the first-best scenario of case 1, but second-best scenario of case 3.

It is even possible to obtain case 1 outcome, which is better than case 3, with appropriate education of parents by giving them values based on HHWP and PO rather than CD policies. When the parents are equipped with the appropriate performance evaluation framework in bringing up their children, the damage at period 1 would not have been done and the first-best result could be achieved. Therefore, we may conclude that awareness and usage of correct performance

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measures in educating students and parents have a vital role in the health, success and happiness of individuals and societies.

IV. CONCLUSION In this paper, we have analyzed how to correct the negative

effects of childhood upbringing during the schooling years through the use of correct performance measures. It is also possible to totally eliminate the negative effects of distorted performance evaluations by teaching the same measures to parents to be used in child-upbringing. We recommend PO performance measurement systems over CD systems, and suggest the HHWP system related with values as a candidate

for a PO performance measurement system. We show in the paper that the use of such a policy has the potential to break the viscous circle of failure, unhealthiness and unhappiness and achieve productive efficiency in an economic sense both for individuals and societies.

REFERENCES [1] N. Branden, The Six Pillars of Self-Esteem, Bantam 1994. [2] S. Covey, The 7 Habits of Highly Effective People, Fireside, 1990. [3] M. Capinski and T. Zastawniak, Mathematics for Finance, Springer, 2003. [4] A. Seber, “Risk-including probability measure and arbitrage pricing

theory” , International Journal of Advanced Engineering Sciences and Technologies, February 2011, Vol.3, Issue No.2, p.159-160.

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