Build Your Own Loan Calculator 📆

This will show you how to build your own loan calculator in Excel.

Yes, there are plenty of loan calculators on the web, but they often require you to share your personal financial information, and often come with a submit button which leads to a “friendly sales call”.

No thanks. I’ll do it myself.

Working out repayments in Excel:

If you ONLY want to know the repayments, you can use Excel’s built-in function

=PMT(rate, nper, pv, [fv], [type])

The PMT function has the following inputs:

  • Rate: The interest rate for the loan per period

  • Nper:  The total number of payments for the loan. (Not the number of years!)

  • PV: The present value, also know and the loan principal. This is how much you are borrowing.

  • FV: (Optional) The future value, or the outstanding value remaining at the end of the loan. Many car leases will have a “balloon payment” where you pay the final amount outstanding to keep the car. This is unusual for mortgages since the aim to the pay off the loan entirely. If FV is omitted, Excel just assumes 0 (zero) which is the loan is fully paid off.

  • Type: (Optional) when payments are due. This can be either:

    • 0 (zero) [default] payments are made at the END of the period (technically known as an “ordinary annuity”), or

    • 1 repayments are made the START of the period (technically this is an “annuity due”).

Things to note: interest rates are often quoted in the annual form, but loans are often repaid more frequently (monthly or fortnightly). As such, you will need to adjust some of your inputs: RATE and NPER.

eg: A car loan of $40,000 for 9% pa repaid monthly over 5 years.

RATE = 0.09 / 12 = 0.0075
NPER = 5 * 12  = 60

The RATE is the interest per period, so we split up the 9% by 12 months which is 0.75% per month compounding. Likewise the NPER is the number of periods, in this case, the number of months over the life of the loan, being 5 years *12 month = 60 months.

=PMT(0.0075,60,40000)

=PMT(0.0075,60,40000)

Final answer: $830.33 per month.

The output will be negative because in finance we distinguish between cash flows made to or from the counterparty. Here when we originally borrow the money we have a cash inflow of $40,000, so that’s positive. But when we repay the loan, that’s a cash outflow so it automatically displays as a negative number.

If the negative number confuses you, just put a minus sign at the start of the function

=-PMT(0.0075,60,40000)


The math for loan repayments:

But we shouldn’t trust black boxes we don’t understand. This is what the PMT function is doing:

Again using the same example: A car loan of $40,000 for 9% pa repaid monthly over 5 years.

Excel Formulas to Calculate Offsets, Medicare, & the Surcharge.

I’m on a roll with Excel.

Following on from my previous posts where I provided a one line formula for Australian income tax, and NZ tax, it’s now time we look at the other common complications being: Medicare Levy, Medicare Levy Surcharge (MLS), the Low Income Tax Offset (LITO), and the Low & Middle Income Tax Offset (LMITO).

The following are for
the 2020-21 financial year.

Australian Money.png

Reminder:

Income tax formula

=SUMPRODUCT(--(B2>={18201;45001;120001;180001}),(B2-{18200;45000;120000;180000}), {0.19;0.135;0.045;0.08})

where B2 = Taxable Income



Medicare.jpg

Medicare Levy

=IFS(B2>29032,B2*0.02, AND(B2<=29032,B2>23226), (B2-23226) * 0.1,B2<=23226,0)

where B2 = Taxable Income

This formula includes the phase in limits for a single individual. Please note this isn’t correct for pensioners, or families with their dependants (if any). I will come back and update this for a family at a later date.



Meds.jpg

Medicare Levy Surcharge:

=IFS(B2<=90000,0, AND(B2>90000,B2<=105000),B2*0.01, AND(B2>10500,B2<=140000),B2*0.015, B2>140000,B2*0.015)

where B2 = Taxable Income

Again, this is for a single individual. I will come back and update this for a family at a later date.

Of course the MLS is easily avoided by simply purchasing appropriate private healthcare.




LITO: The Low Income Tax Offset

=IFS(B2<=0,0, AND(B2>0,B2<=37500),700 AND(B2>37500,B2<=45000),(700-(B2-37500)*0.05), AND(B2>=45000,B2<66667),(325-(B2-45000)*0.015), B2>=66667,0)

where B2 = Taxable Income

Like most offsets, the LITO is a non refundable tax offset on income tax. Medicare is a levy, and thus a separate charge to income tax. This means that in general most offsets, such as LITO and LIMTO, can not be used to pay the Medicare levy.



LMITO: Low & Middle Income Tax Offset

=IFS(B2<1,0,AND(B2>=1,B2<=37000),255, AND(B2>37000,B2<=48000),(255+(B2-37000)*0.075), AND(B2>48000,B2<=90000),1080, AND(B2>9000,B2<=126000), (1080-0.03*(B2-90000)),B2>=126000,0)

where B2 = Taxable Income

The LMITO is available in addition to the LITO.



Excel Formula for Marginal Tax Calculation in New Zealand

 
Kiwi+tax.jpg
 

Following on from my previous post on how to calculate Australian income tax in Excel, I’ve adapted the same idea to the NZ context.

Tax on primary income for NZ Financial Year ending 31/3/2021 is:

=SUMPRODUCT(--(C6>={1;14000;48000;70000}),(C6-{0;14001;48001;70001}),{0.105;0.07;0.125;0.03})

Where cell C6 = Taxable Income


The NZ Financial Year ending 31/3/2022 has an additional top marginal threshold starting at $180,000 NZD.

=SUMPRODUCT(--(D6>={1;14000;48000;70000;180000}),(D6-{0;14001;48001;70001;180001}),{0.105;0.07;0.125;0.03;0.06})

Where D6 = Taxable Income


Note: Again, this ignores secondary income and other complications which would be better to do as an additional step. 

Download the example spreadsheet https://drive.google.com/file/d/1b1DvHS7tIkivXPnjZ_ZCNZSM-3UGQXpj/view?usp=sharing ← New Zeland

For Australia please see the previous post, or jsut download the example spreadsheet https://drive.google.com/file/d/1bvaRrSjLqhJKjyg5t5kE19x1-y8-OBCm/view?usp=sharing ← Australia

Calculate personal income tax in Excel for 2021

 
IMG_0241.jpg
 

Here's a handy one-line Excel formula to calculate personal income tax

For the 2020-21 financial year:

=SUMPRODUCT(--(D5>={18201;45001;120001;180001}),(D5-{18200;45000;120000;180000}), {0.19;0.135;0.045;0.08})

Where: D5 = Taxable Income

For the 2019-20 financial year:

=SUMPRODUCT(--(C5>={18201;37001;90001;180001}),(C5-{18200;37000;90000;180000}), {0.19;0.135;0.045;0.08})

Where: C5 = Taxable Income

For Medicare in 2019-20 and 2020-21 we can use:

=IFS(D5>=28501,D5*0.02,AND(D5<28501,D5>22801),(D5-22801)*0.1,D5<=22801,0)

Where D5 is Taxable Income

Note: this includes the low income phase in for single individuals, but I haven't (yet) programmed in other complications such as seniors and pensioners, families and dependants.  Don't forget the Medicare Levy Surcharge also!



Example spreadsheet can be found here:
https://drive.google.com/file/d/1bvaRrSjLqhJKjyg5t5kE19x1-y8-OBCm/view?usp=sharing

ADHD Father Reads Daughter's Report Card

I have ADHD, and my 6-year-old daughter displays familiar behavioural patterns.

While reading my daughter's grade 1 report card, I realised how strikingly similar this was to my performance 30 years ago.

ADHD is a real *thing*. It shows up early and is highly heritable. Take it seriously.

report card-ADHD.jpg

ADHD: MY EXPERIENCE

As an intelligent and driven individual, my problems were always ignored. I was eager to learn but often struggled to meet the expectations of the system. Teachers and parents never saw any issue to be addressed, mostly because I was polite and never disruptive in class. To them, there simply was no problem. The system chugs along smoothly.

Meanwhile, my 16-year-old younger brother was less interested in school. Perhaps he was a class clown at times. It was the 1990's, so a Ritalin prescription was carelessly thrown his way.

But when I asked for help? DENIED! I didn't display the outward (i.e. disruptive) signs of ADHD. And besides, the DSM 2 on the doctor's shelf said ADHD did not exist after age 18. I was only a couple of months from my 18th birthday. So they told me to wait 8 weeks and all these issues would magically disappear. After all, the DSM 2 said so.

Unfortunately real world biology doesn't care about APA publications. And I had a real problem, even if the system chose not to ignore it.

THE NEURO TYPICAL SYSTEM OF MASS EDUCATION

It is an indictment that our superficial system forced meds onto the practical kid who wanted to be a tradie, while denying help to the smart kid who wanted to be an academic. Madness!

Ultimately my brother and I struggled with the same problem. Not really the ADHD, but rather, we struggled with the systems expectations of "normal". Neither of us quite met their highest standard.

This is a system that was built by neuro-typical folks with a factory mindset of delivering education at scale. The defective can always be held back and reprocessed.

Click / Tap images to enlarge

THE KIDS ARE OK, BUT WE MUST TRULY LISTEN

While I caution against over diagnosing every human behaviour or quirk as a medical condition that conforms to the DSM5 guidelines, I also believe we should be try to understand what is happening underneath the surface.

Being vigilant and mindful of our children is not the same as parental hypochondria.

Sadly, ADHD specialist also struggle with the disingenuous. Many pushy tiger parents and opportunistic uni students who see these as "performance enhancing drugs". Perhaps we can dope our kids straight to Harvard! After all, if you don't, other parents might out compete you. We all want out kids to have an edge, so better to get them a diagnosis and gain access to doctor approved "study drugs". Safe, cheep, legal amphetamine sounds great, right? What could go possibly wrong?

Unfortunately, these drugs don't seem to have any affect on non-ADHD suffers beyond a placebo (Loo & Hale et al 2009).

No. A wiser middle way is needed.

Let the kids be kids. Let them be individuals. But also, let's be conscious of the things they are struggling with. Young children might not have the self-awareness or of the scientific vocabulary to explicitly tell you they have a problem. It's up to us to use our judgement. But good judgement demands that we first truly listen.

EDUCATION: WHAT’S IT REALLY FOR?

It's no surprise ADHDers struggle with school.

Education ought be about trying to make humans into their best possible versions of themselves. Currently we are manufacturing compliant students who are good for the standardised test, often to the detriment of all else.

NAPLAN → ATAR → GPA → GMAT

What do they really prove? They do not demonstrate genuine learning; they simply measure your ability to take a test.

Education is what remains after one has forgotten everything they learned in school [2]

A getting a grade and getting and education isn't the same thing. Qualifications alone are hollow, but true education may lead to wisdom.


TO MY DAUGHTER: DADDY IS PROUD OF YOU

So my dear daughter. I am proud of you.

You be YOU. You're great!

Yes, you will need to learn to fit in; you have no choice. No, it wont be fun. Yes, dad is trying hard to make a dent in the system but this wont help you in the short term.

But don't stop being you - even if you must struggle with your own muddled ideas. Don't try to be a drone.

Happy studies.

- Love Dad (Phillip Wong)


REFERENCES:

[1] Loo, S. K., Hale, T. S., Macion, J., Hanada, G., McGough, J. J., McCracken, J. T., & Smalley, S. L. (2009). Cortical activity patterns in ADHD during arousal, activation and sustained attention. Neuropsychologia, 47(10), 2114-2119.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2785488/

[2] No, this isn't Einstein's original work. Einstein quoted this citing unidentified “wit”. quoteinvestigator.com/2014/09/07/forgotten/

 

How to draw logos in PowerPoint

The Show Notes to Drawing Logos using only PowerPoint

These tips apply to any custom drawing done in Microsoft PowerPoint and are not limited to drawing logos.

 

Customise the Ribbon

customise ribbon.png

Firstly you will want to customise your ribbon to get access to the hidden tools in Powerpoint. These are part of the vanilla version of PowerPoint, so no special add-ons or downloads are required. Right-click the ribbon and select to “Customise ribbon.”

The “ribbon” is the term for the menu style at the top of all Microsoft Office products introduced with Office 2010.

commands not on the ribbon.jpg

Next, you will need to select the additional tools that you wish to access. There is quite a selection available. Use the drop-down box on the left-hand side to select “command is not currently in the ribbon”, and browse the additional tools you wish to add. The most important tools for this exercise will be:

  • Combine,

  • Union,

  • Fragment,

  • subtract, and

  • Intersect.

 

Searching for ideas

It is helpful if you have some idea of what your logo should look like. Here are some pointers to keep in mind while you are sketching out your ideas.

Are there any corporate colours? What are the specific RGB values and their CMYK variants? Various shades of colours will display nicely in RGB but will print in a smudged and dirty colour under CMYK. In my video, I used the (awful) default colours in Microsoft PowerPoint as the video was more of an instructional on how to draw rather than on colour choice, but colours should be chosen thoughtfully.

Are what colours to there any existing mottos or corporate slogans which need to be incorporated? Generally, it’s a good design principle to minimise the amount of text in logos or other symbols.  While there are exceptions such as the Coca-Cola design, but note that Coke’s “Dynamic Ribbon” device or the distinctive shape of a bottle requires no text to communicate the same meaning.

Is there an existing proprietary font for the organisation? There are also pitfalls in selecting a font without checking the font license agreement. Many fonts are proprietary, although free to use for private use. For example, Helvetica is a proprietary font which requires a licence, and there are free GNU GPU substitute variants which are indistinguishable to most nonspecialists.

 

Is PowerPoint sufficient?

No. For large organisations with dedicated marketing budgets, this work should be given to professionals with better tools. This technique is appropriate for numerous small organisations with little or no budget.

PowerPoint is far more powerful than most people expect, and with a bit of coaxing, it can be used as a fantastic quick and simple drawing tool.

 

Happy studies!

Phillip Wong

Capital Markets Research ... what is it?

What is Capital Markets Research?  Simply put, it's research where we use the capital market prices and volumes to determine if we can detect the effect of a certain event. So, if a firm makes a a positive announcement, we would expect the stock price for that firm to increase.  

While the intuition is simple enough, there are many complicating factors in the real world that make it difficult to be certain that there is such an effect.  Some fancy statistics is required (which I do not cover here).  Nevertheless this is one of the great leaps forward in accounting and finance research that was able to really pull the research back to stronger scientific approach. 

Gaming the job hunting market

Gaming the job hunting market

#MS Office, #Job hunting, #Game Theory, #employment, #Computer Skills, #Graduates, #Gamification, #Skills, #IT skills, #CV, #Office

Yesterday I meet our Graduate Careers Officer who was describing how HR firms use computer algorithms to automatically filter out the rubbish CVs and cover letters, providing the time to humans to focus on the short list of good candidates. For many good applicants, this is a problem because they now have to guess what the computer will filter out, and what will get them to the inbox of a real human. 

Seriously, go talk to this guy. He is great!

This smells like a game to me. 

And all games can be beat!

Games have players, objectives (and interests), available resources, asymmetric knowledge and defined rules. Job hutting pretty much fits all of those elements, the only difference is that now the computer strengthens the rules. The problem is, candidates do not know what the rules actually are. 

Computer says: "No"We know computers have just made it harder to get the interview stage. We also know that the interview is a completely separate skill set. Let us narrow the game to encompass only "getting to the interview" range. 

The smarter players will think strategically, that is, "I think that you think <ABC>, therefore I will behave in <XYZ> manner so you react <123>". Strategy is about changing your behaviour and positioning  your resources such that that your opponent will react in a way that benefits you.

Smart job candidates know that employers will program their computers to hunt for words like "leadership", "self motivated", "attention to detail" and "teamwork". Further the position description has a lot of job specific buzz words - eg:  it might ask for "database skills" or "PeopleSoft". If your application doesn't say these words at least three times, you will be automatically filtered out. It's brutal. 

So how can we bomb the algorithm? Easy! Guess the keywords and repeat these words - a lot. This might beat the computers, but it would certainly make for boring reading when the human picks up the CV, so you would fail at that stage. Conceptually the candidate must write very tight writing that strikes a balance between being repetitive and being readable. 

We need a balance between writing for two audiences, the computer and the human. 

 


A better way would be to simple write stuff for the computer, and write different stuff for the humans. This is easy, as a computer will read all strings found on the CV or email, but it does not do so optically. Thus for everything you want the computer to read, but the humans to ignore, you change the font to WHITE. White text on white paper (or a white screen background) is illegible to humans, unless they select the text with mouse. 

For example, half of the text here is missing. I'm sure that the first thing you did was SELECT/HIGHLIGHT the text and you will beable to read it just fine - but you only do thisbecause you know that the text is really here. You don't want the HR person to do that, because they will think of it as "cheating." So put that test in your CV where there are white spaces on the document that are less obvious, such as headers, footers, a signature space, etc - cram all your computer-only text there and make the text white. 

Or you could just use metadata - but that is a blog post for another day. 

Happy job hunting.

-Tetracarbon out. 

           Always play by the rules, but be sneaky if the rules permit it. I hate Star Trek but the whole point of the Kobayashi Maru scenario was that it was designed as a no-win scenario to test the problem solving abilities to find the the best of the best. 

 

A marketing approach to social media for teachers

02 JUNE 2013

 A marketing approach to social media for teachers

 Primary Audience: Lecturers, tutors, and other adult educators.
 

Why educators need to know about social media:

It’s hard to get away from social media.  Traditionally teachers were able to keep their public and private lives quite separate, however that’s increasingly difficult as students often try to “friend” you on Facebook. Do your students really need see or “like” photos of your kids? No.

 

Rather than seeing this as an issue, I realise that this is an opportunity: Students are willingly engaged, they care, and most importantly they are coming to me. Teachers can use social media marketing techniques to influence and transform students’ lives in a way that would not be done easily in the classroom.

 

 

 

Social media is an effective 
communication tool.

Teachers must realise they live a public life, so must actively manage their reputations just as would any professional sportsman, celebrity or politician. Thus if celebrities and presidents can harness the power of social media in order to convince their audience, teachers should be able to do the same, since we are predominantly in the business of communicating to shape minds, just as are spin doctors. So while our message is more difficult and complex, the principles of good communication remain the same.

Although most educators hate the idea of participating in a popularity contest, a genuine connection between the learner and the teacher must exist for any message to have effect.  We must speak where our audience is most likely to listen. This means using what they use. 

 

Of course, there are many risks. And the burden of responsibility is disproportionately heavy on the teacher rather than the student – however these risks can be mitigated with prudent management.

 

Social media is broad; this guide focuses on using Facebook to influence student attitudes. 

 

SEGREGATE YOUR AUDIENCE

 

The best thing you can do is to create a separate work account and private account. Do not allow any overlap. Never allow anyone to friend both accounts. Never ever, If anyone tries, immediately ban them from one account or the other. Be brutal.

 

All social media tools use predictive technology that will suggest that you friend/connect/follow other people based on your connections.  You do not want your students contacting your children. Some things you must keep secret.

 

 

For the private profile you should:

  • Not use your real name (yes, this will break the ToS)

  • Not use your face on the profile picture (most people use pictures of their kids or pets)

  • Not publish your phone numbers or other identifying details

  • Lock your privacy settings down as tight as you can

  • Explain your actions to your private audience (so they don’t try to cross the line)


For the public profile you should:

  • Use your real name

  • Make every post public

  • Make your face as the profile picture

  • Publish your work email address

  • Always write in full sentences

  • Ensure you post according to the public persona you wish to create

 

Holding two contacts is a little controversial, and it technically breaks the Terms of Service.  Facebook inc isaware of the practice, and is publicly disapproving, although I notice they have not yet cracked down on the practice as many people have multiple accounts as identities for their kids or pets. So for the moment it’s a taboo. Both Zuckerberg and the NSA dislike multiple identities for roughly the same reasons.

 

Google+ has done much better to separate people's identities by creating “circles” that allow you to publish different post to different audiences. Unfortunately nobody (other than Google employees) uses Google+, so you will have to go where your audience is and stick to Facebook.

 

 

Logging in and out of different accounts is a pain, but if you use different browsers for different accounts you can easily segregate the two. For example, you can use Google Chrome for your public account and Firefox for your private account and remain simultaneously logged into both. This trick also works for smart phones but is less effective.






 

TIPS TO MAKE IT WORK 

 

The chances are that you are already using Facebook, however don't know how to turn your favourite toy into a rugged work tool.  It’s up to you to exercise soft skill and lead by example.  Unlike the classroom or LMS, you cannot control the social media ground.

 

The key is to maximise your message impact. Think about what marketing messages you receive on Facebook already – what things annoy you, and what things do you actually like?

 

The key difference between social media marketing and regular advertising is a sense of “being sold to”. Avoid sounding plastic at all times. Our whole lives we have desensitised ourselves to advertising.  Indeed, the court is expected that a reasonable person would be able to tell the difference between a genuine message and advertising that constitutes a “mere puff” (Carlill v Carbolic Smoke Ball Co 1893 Court of Appeal UK). Craft updates that really “sound like you”. Develop your own persona and use this voice, avoid merely parroting the corporate line.

 

Remember your audience (the students) do expect to be spoken to as students, so its ok can give them instructions. Just avoid “barking orders”. NEVER insult your audience. This makes you a target for attack. I have seen many teachers complain on Facebook that students are stupid, or are lazy - this is a great way to get fired!

 

If you do have a situation that could explode, alert a senior immediately. You never want to be seen to be covering up the truth.

 

Avoid being positive about everythingProvide commentary where appropriate. For example, I teach taxation, and while I remain politically neutral, I do regularly comment on the taxation policy of the government of the day. Some things I promote, but others I am very critical of. Students expect teachers to be able to apply their learning to the real world, and thus commentary demonstrates your mastery of your field, and also makes the learning realistic. You need to exercise tact; avoid being a shock jock.

 

Be passionate about your field. I constantly post about how much I love accounting. I make light of the matter, and even list Lucca Paccioli as my grandfather.  It’s a light hearted way of protecting my real family. Always love what you do. If you want the students to care, so should you.

 

Never use a linking tool that posts to twitter and Facebook (or elsewhere). Your audiences on each platform are very different. For the same reason, never use an RSS link feeder.

 

Do post links to interesting things you read on the net that are relevant to your field. Always make a quick comment on the link that contextualise why students should read the link.

 

Unless it’s part of your strategy, avoid ranting about politics or sport.  You might love Hawthorn, but most of your audience do not. If you really must post about sport, try to segregate your audience somehow or ensure it’s not sport-spam.

 

Never send friend requests to students.  Let them friend you. They consider this to be “THEIR” playground, and so you are a guest in their space. If they friend you, they probably want to read what you have to say. If they don’t like it, they don’t have to read it.

 

Don’t get upset if they unfriend you.

 

NEVER never never force students to use social media. Remember, it’s not your space to pollute with work.

 

wish people a happy birthday as it makes them feel special. Although, I don’t post my own birthday because I don’t want them to know, and it may invite presents from students that others might construe as “bribes”. Presents to teachers are not uncommon in Asian cultures.

 

Make ALL your posts publicly available. Most modern classrooms are designed to be visible from the outside. This transparency means that it is difficult for unscrupulous students to level false accusations against teachers, and likewise difficult for teachers to misbehave in private. Your dealings on Facebook should remain the same as your interaction in the classroom - open door and transparent at all times. Assume nothing you do using your work account is private. If a student has a private matter, invite them to e-mail you using your work address rather than Facebook chat messenger.


Be clear to them that you do NOT have to give instant replies.
 

Occasionally you will be criticised, so develop a thick skin. If remarks are inappropriate, simply delete them, however if the complaint contains any validity, you should address it publicly. If you are attacked, sometimes it is better to draw on your infantry of social capital and invite the discussion of others – many will support you. Many times silence is the best option.

 

Stand up to bullies when you see another person being victimised. The chances are that you won’t see it, but always provide the moral leadership.

 

Update regularly. I try to make one post every working day. An abandoned account shows students that the account is probably a decoy, and that students will keep searching until they find your real account. To ensure consistent updates, I use scheduling software to update my social media channels with my key central themes. This gives my message on track, and I randomise schedules over daylight hours to make it look as if I am on Facebook as much as my students are.

 

Encourage past students to give advice to current students.  This has helped me build a community where the class content can be discussed, and seniors can help juniors. This is especially true when past graduates let new graduates know about jobs! Networking is important.

 

Avoid posting 20 messages consecutively and nothing for days. This looks like spam. Timing is important so space out your message intervals. Try to leave at least 90 minutes between posts, but don’t post more than 6 times a day. If you do have lots of ideas down, use a scheduling tool such as Buffer.

http://bufferapp.com/

 

Photos generate more engagement than videos or text. Again, keep it real. Good photos taken from a smart phone generate more engagement than professional photos that look like an advertisement. Photos shot on campus make for great engagement. 

 

 

 

 

Celebrate their achievements. Like every photo of them on their graduation day. 


One idea per post. Longer or more complex writing goes into a “note”.

 

You need to understand that different social media platforms tend to attract different audiences with different attention spans. While this might be work for you, it’s a playtime for them. So keep it short and snappy!  Posts less than 2 lines long are almost always read. Paragraphs are not.  If you need practice, learn to tweet.

 

Social media is a risky environment, but ignoring it is likewise foolish. Even if you do not have a social media presence, you can still be the target of some very nasty attacks. I believe it is always better to show leadership and always be on the front foot.Displaying judgement, being tactful and maintaining dynamism are key points.

 

 

Positive and Normative theories, Inductive and deductive methods. What's the difference?

 

Let's try and separate the concepts of normative, positive, induction and deduction. First off, we need a distinction between the types of theories and the methods of proof that we use to test their validity. 

Here's an analogy:

  • Proof by INDUCTION and POSITIVE theories are kind of like ROAD and CAR
  • Proof by DEDUCTION and NORMATIVE theories are kind of like RUNWAY and AIRCRAFT

Roads and runways kind of look the same, they are black, hard, made of the same stuff, but they have very different designs and do very different things.

Cars and planes both get you places, but again, have very different uses. Which one is better? Well that depends on what you are doing. I can't just take a plane to Chadstone shopping center. Really a a car is only the best tool for this job. 

Naturally a car matches the road, and runways are used by planes. But they can swap if they have to. Cars drive on runways all the time. There are MANY cases of planes landing on highways in emergency because it's better than crashing. 

This what I mean by theories and their methods of proof crossing over. You simply use whatever theory is best able to do the job. 

For illustration, have a look at this image below. Cars, roads, planes, and runways all in one image. It's one of the few places where the country's main highway also crosses their international airport. You'd make sure you don't mix up the differences between road and runways here otherwise there could be a very messy outcome. So too it is with your theories. Mixing your meaning often means your ideas will crash. 


And this is 100% real. No Photoshop. 


 

The point is, don't confuse the two. If I want to fly to Gibraltar, I wouldn't say "I'm going to take the runway to Gibraltar". Likewise, I wouldn't say my idea is deductive. Instead you would say "I have a normative idea and I will show you how it works using deductive methods".

I hope this makes the idea clearer for all! 

-Tetracarbon out

Follow me on twitter @tetracarbon or subscribe to my YouTube Channel

Is education a commodity or a public good?

 

Is education a commodity or a public good? 

I'm not convinced that education is either commodity (fully fungible privately owned good) or a public good (owned by all, commonly enjoyed benefits). BOTH ideas have significant faults and BOTH are misleading.

Individually quality assured. I'm uncomfortable with education being "public" because the graduate is the person who privately extracts the most benefit from the education in the form of higher wages. People don't endure accounting degrees because they love it, they do it for purely selfish reasons such as employment. Sure public benefits from education, but that doesn't make it a public good. The public benefits from Cole or Woolies because we don't stave, but that doesn't mean selling food is a public good. Education is also experiential (not a physical good), it's a deeply personal thing.

Sometimes, we handle iron ore with 
more care than we do our students.
Nor is education a commodity. The “commodity” tag implies that you can just beat things down on price because it’s all “about the same”, but high end talent isn’t really like that. Commodities are bought (not earned), and you can always own infinitely more of the stuff. So, you don’t really “own” education, but nor can we say that it’s publicly “owned” either. Education is limited to lifespans, memory loss, attention spans. There is really only so much you can do with 24 hours (unless there’s 25+hours in your day). Further, public goods (like beaches, air, safe environments) are consumed without any effort. Conversely, it takes are fair whack of effort to both get an education, and yet more effort to actually use the knowledge in the community/workforce.   

I’m sceptical of analogies, but here goes:

It might be better if we think of we re-think of education as part of the “privately embodied infrastructure”.  Education is more like a private toll bridge. It goes somewhere that people want to go, and the provider can charge a price for the public to use it. Many decide to give it away for free, others charge high prices (think of the last time you had to use a medical specialist). 

I don't really care if you think of it as a 
"public benefit " or not, but somebody has to pay.Sure, some people go to school so they can be doctors in remote areas and willing chose to receive close to zero pay. But is totally selfless altruism true of half of our students? Even 10%? I don’t think any of my accounting grads enrolled because they felt that society would be better off if we “protected investors by providing them with the most truthful and useful information needs when choosing to allocate their resources” – yet that’s exactly what accountants do! People engage in education at great personal expense because it mostly yields private rewards. Positive effects on society is an externality. 

As educators, we are more like architects who show people how to build their own infrastructure, but we cannot install it for them.  When people pay tuition fees, they are buying themselves opportunities.  They are not buying a “thing”.

Education is a society building experience. I don’t believe it is a commodity, nor is it a public good. 

 

Observation to an Asian on Western writing styles: "less art more haste"

 

Observation to an Asian on Western writing styles: "less art more haste"

The following is an excerpt of feedback given to a Chinese student after reading their Advanced Accounting Theory report:
-----------------------------------------------
Dear STUDENT:

Observation on writing styles: 

There are several things that I find frustrating when reading your work. You over rely on quotations.  You do not say the most important thing first, instead you wait until the very end of your argument before getting to the point. Under Western writing styles, you need to assume that your readers are lazy and disinterested. In order to hook their attention, you must state your argument first, and subsequently go on to prove your argument.  You need to demonstrate that this is your own writing, and that you personally have a solid grasp of the concepts. Any evidence you cite is merely supporting what you are saying.  But at all times, this writing is your voice, except when you use direct quotations. Direct quotes shows that this is somebody else's voice speaking.

This is very different to writing styles under Confucius heritage cultures (ie, writing in Asia). Quotations are far more acceptable in Asia, as it is understood that students do not have their own voice, and are able to gain perfection by using the voice and tools of the masters. Therefore many Asian students use large numbers of quotations to show they can speak with the voice of a master. Unfortunately  this  is not appropriate to do so in the West.

Writing in Asia also tends to be far more circular. If you were to write your main argument in the first sentence in a Chinese language essay, this would be considered rude, and very direct. In the West, we believe that this makes for "honest" dealings. The Western reader understands who you are and what you are saying straight away. Confucius heritage cultures might consider this to be "blunt", or lacking any "art".

This system of writing is not something based in schools alone; your business audiences will demand this structure even stronger than I will. Irrespective of if you become an accountant in Australia, or you return to Asia, when you write in English you need to follow this style.

As a business teacher in a Western education system, I am trying to train you to write as a Western business person. This is not to say that your Asian way of writing is wrong – it is not wrong, it is just different. However when you write in English, you must write as your English speaking audience would expect.  Therefore you must translate both the concepts and styles, as well as the words. This is an extremely difficult thing to do.

So I am quite understanding. But at the same time I need to award marks based on a Western style of writing and education. I want you to speak with a Western strength in English, and with the beauty and wisdom of Confucius in Chinese. At all times, I want your writing to be respected.  

I wish you all the best for your exam.

-Tetracarbon out

Regulatory capture theory

 

Regulatory capture theory

 by Doris Luya Xiao

dorisluyaxiao at gmail dot com



Capture theory was introduced by George Strigler (1971) that says a firm or an industry can benefit from the legislation if it captures the related regulatory body. In Public interest theory government find some firms or industries have issues that may harm the society. To protect social interest from those harms, government set regulatory body to regulate thebehaviour of those firms and industries. The regulatory body could be officers, legislations or guiding principles. They monitor organizations to act good for the public. Capture theory agrees that regulations are introduced aim to benefit the public at first. But the aim will eventually fail because as time flews regulator are controlled by regulated party (firms or industries), and then regulator will protect the 'regulated party'. Industries are unhappy about being monitored. They could have more benefits or profits without regulation. Those greedy industries will do whatever they can to capture or we could say control the regulatory body. Once industries succeed in controlling, regulators can no longer perform their roles to regulate. Furthermore, regulators being captured will make new decisions in favor of industries rather than the public.
Capture theory was developed while the decline of [[Public interest theory]] during the period of 1967 to 1983(Merrill 1997). Rather than describe the reason to introduce regulation, it emphasis on the development of regulation. In reality there are many cases all around the world support this theory. In Australia the former ARSB was captured by accounting professions; Tobacco industry in China had captured the State Tobacco Monopoly Administration; American had the Federal Reserve Bank of New York captured. In spite of this, the capture theory is not perfect. There are criticisms of this theory.

Illustration of Capture Theory

Structure of theory

Assumption

The regulatory capture theory was build based on following assumptions:
  1. The regulator agency, regulated party and customers are all greedy and seeking to maximise their own interest.
  2. All interest related party have a rational expectation for another party.
  3. It might take a long period of time and huge effort for industries (regulated party) capture the regulator. To get though this theory the impact of cost of capture to efficiency should be ignored.

Arguments

One of the arguments is that the interest of a regulated party was harmed by a regulation; the regulated party want to get its interest back, and then it seeks opportunity to control the regulator. Also regulated party expects that by controlling the regulator, legislating will be in favour of parties subject to regulation. Considering the perspective for the regulator agency, its survival depends on satisfying the expectations of regulated party. If the regulated party does not exist anymore, the regulators are no longer needed.

Conclusion

All of the above concludes that regulators cannot keep their independence; and regulation will eventually lose its basic aim to regulate.

Capture of accounting standard setting in Australia

Background

Before ASRB (Australian Accounting Standards Review Board, later replaced by AASB) was established in 1984, according to Walker (1987), it is the accounting profession who is in charge of accounting standard-setting process. Only members of profession will be sanctioned for non-compliance. That is, accounting profession acts on both regulator and the objective of regulation. At that time, over 40% of company were found fail to comply with the accounting standards. Public confidence in capital market was reduced. ASRB was then established for public good to increase the level of compliance.

Regulatory capture evidence

Here are some evidences on ASRB were captured:
  • While discussing the establishment of ASRB, accounting profession lobbied to ensure that the board would have no independent capability, no academic as chairperson, and would receive administrative officer instead of a research director.
  • In 1985, ASRB update its procedures to ensure priorities would only be set after consultation with AARF (directly controlled by accounting profession). Its priority was previous set on the basis of public submission.
  • The board initially put AARF and other interests group in the same ground. Later, it changed to offer a fast track procedure only for dealing with submission from AARF.
  • Most members of ARSB were professional accountants and financial directors. The regulator lacked independence.

Capture of China cigarettes

The Economist (2014) published an article about the monopoly tobacco industry in china and the government’s control in this area. It seems that tobacco industry have captured the tobacco regulator.
The problem tobacco bring to health have become more aware in global. Below is a table of what World Health Organsation suggests on prevention of tobacco and China's action.
WHO SuggestionChina PerformanceDepartments issue reliable data on tobacco use.China lacks disclosure on tobacco use.Government sweeping imposition of smoking bans.This issue is still on discussion.Government set well-funded accessible scheme to help people quite smoking.Little funds were set in China.Broadcast on the harms of tobacco.Not many people know the harm.Complete ban on marketing.Cigarette brands are seeking chances to survive.Impose high tax on tobacco.Cigarette in China is quite cheap, everyone can afford it.

Obstacles

In fact China agreed that WHO was right on banning cigarette. There are numerous policies on forbidden smoking in public area. First lady of China is the official anti-smoking ambassador. But there are obstacles on dying out smoking in China.
First, the tobacco business and the government are entwined with each other. This relationship prevents the efforts of smoking ban. This could be seen from the above table. The largest part of government revenue is from tobacco industry.
Second, the tobacco industry is almost monopolized by China National Tobacco Corporation. The State Tobacco Monopoly Administration plays the role on monitor. However, these two organisations have intertwined structure and they share managers and use the same website. The situation is that the tobacco industry regulates itself.
It’s clear that there are many ways china could adopt to prevent smoking. But as the regulation setting process is controlled by the Tobacco Co, the law cannot be so persuasive on regulate tobacco in China.

Capture of Federal Reserve Bank of New York

In this case the Federal Reserve Bank of New York (New York Fed) regulate Wall Street banks though the Federal Reserve Banking System. The New York Fed should be independent from the Wall Street banks considering its role as a regulator. However, the president of NY Fed is selected by a board formed with some of the Wall Street banks. Timothy Geithner who was the president of NY Fed from 2003 to 2009 always had a closer relationship with Wall Street while in position (Becker & Morgenson 2009).
During the 2008 financial crisis, Geithner made NY Fed purchase credit default swaps from AIG. In return banks received full value payment. Usually when a company wind up, creditors may be court ordered to accept payment at a discount value, otherwise taxpayers will suffer. Thus the full payment on the AIG debts was unusual; and Geithner argue that this was to save the banks from their own mistakes. He also refused to disclose the hidden parties benefit from this activity (Reilly 2010).

Criticisms of capture theory

According to Posner (1974) this theory has some weakness in its theoretical foundation. There are questions cannot be answered. Though the theory describes that the deal between regulatory agency and the regulated party affect regulatory process, it does not suggest what process the regulated party did to capture the regulator. Customer’s interest will also be affected by the new set up rules. The theory did not explain why customers cannot capture the regulatory agency to protect their interest. Now that the regulated party have the ability to capture the regulator, why don't they prevent the creation of regulatory agency in the first place?

Reference

‘Government coughers’ 2014, The Economist, 1 March, viewed 1 April 2014, http://www.economist.com/news/china/21597958-smoking-course-kill-100m-chinese-people-century-will-latest-anti-smoking.

Becker, J & Morgenson 2009, ‘Geithner, member and overseer of financial club’, The New York Times, 26 April, viewed 7 April 2014, http://www.nytimes.com/2009/04/27/business/27geithner.html?_r=0.

Merrill, TW 1997, ‘Capture theory and the courts: 1967-1983’, Chicago-Kent Law Review, vol. 72, viewed 1 April 2014, http://scholarship.kentlaw.iit.edu/cklawreview/vol72/iss4/6.

Peltzman, S 1976, 'Toward a more general theory of regulation', Journal of Law & Economics, vol. 19, no. 2, pp. 211-240, viewed 1 April 2014, http://www.nber.org/papers/w0133.

Posner, RA 1974, 'Theories of economic regulation', Bell Journal Of Economics & Management Science, vol. 5, no. 2, p. 335, viewed 1 April 2014, http://www.nber.org/papers/w0041.

Reilly, D 2010, ‘Secret banking cabal emerges from AIG shadows’, Bloomberg, 29 Jane, viewed 7 April 2014, http://www.bloomberg.com/news/2010-01-28/secret-banking-cabal-emerges-from-aig-shadows-david-reilly.html.

Strigler, GJ 1971, 'The theory of economic regulation', Bell Journal of Economics and Management Science, pp. 2-21.

Walker, RG 1987, ‘Australia’s ASRB: a case study of political activity and regulatory capture’, Accounting and Business Research, vol.17, no. 67, pp. 269-86.

Regulatory capture theory

 

Regulatory capture theory

 by Doris Luya Xiao

dorisluyaxiao at gmail dot com



Capture theory was introduced by George Strigler (1971) that says a firm or an industry can benefit from the legislation if it captures the related regulatory body. In Public interest theory government find some firms or industries have issues that may harm the society. To protect social interest from those harms, government set regulatory body to regulate thebehaviour of those firms and industries. The regulatory body could be officers, legislations or guiding principles. They monitor organizations to act good for the public. Capture theory agrees that regulations are introduced aim to benefit the public at first. But the aim will eventually fail because as time flews regulator are controlled by regulated party (firms or industries), and then regulator will protect the 'regulated party'. Industries are unhappy about being monitored. They could have more benefits or profits without regulation. Those greedy industries will do whatever they can to capture or we could say control the regulatory body. Once industries succeed in controlling, regulators can no longer perform their roles to regulate. Furthermore, regulators being captured will make new decisions in favor of industries rather than the public.
Capture theory was developed while the decline of [[Public interest theory]] during the period of 1967 to 1983(Merrill 1997). Rather than describe the reason to introduce regulation, it emphasis on the development of regulation. In reality there are many cases all around the world support this theory. In Australia the former ARSB was captured by accounting professions; Tobacco industry in China had captured the State Tobacco Monopoly Administration; American had the Federal Reserve Bank of New York captured. In spite of this, the capture theory is not perfect. There are criticisms of this theory.

Illustration of Capture Theory

Structure of theory

Assumption

The regulatory capture theory was build based on following assumptions:
  1. The regulator agency, regulated party and customers are all greedy and seeking to maximise their own interest.
  2. All interest related party have a rational expectation for another party.
  3. It might take a long period of time and huge effort for industries (regulated party) capture the regulator. To get though this theory the impact of cost of capture to efficiency should be ignored.

Arguments

One of the arguments is that the interest of a regulated party was harmed by a regulation; the regulated party want to get its interest back, and then it seeks opportunity to control the regulator. Also regulated party expects that by controlling the regulator, legislating will be in favour of parties subject to regulation. Considering the perspective for the regulator agency, its survival depends on satisfying the expectations of regulated party. If the regulated party does not exist anymore, the regulators are no longer needed.

Conclusion

All of the above concludes that regulators cannot keep their independence; and regulation will eventually lose its basic aim to regulate.

Capture of accounting standard setting in Australia

Background

Before ASRB (Australian Accounting Standards Review Board, later replaced by AASB) was established in 1984, according to Walker (1987), it is the accounting profession who is in charge of accounting standard-setting process. Only members of profession will be sanctioned for non-compliance. That is, accounting profession acts on both regulator and the objective of regulation. At that time, over 40% of company were found fail to comply with the accounting standards. Public confidence in capital market was reduced. ASRB was then established for public good to increase the level of compliance.

Regulatory capture evidence

Here are some evidences on ASRB were captured:
  • While discussing the establishment of ASRB, accounting profession lobbied to ensure that the board would have no independent capability, no academic as chairperson, and would receive administrative officer instead of a research director.
  • In 1985, ASRB update its procedures to ensure priorities would only be set after consultation with AARF (directly controlled by accounting profession). Its priority was previous set on the basis of public submission.
  • The board initially put AARF and other interests group in the same ground. Later, it changed to offer a fast track procedure only for dealing with submission from AARF.
  • Most members of ARSB were professional accountants and financial directors. The regulator lacked independence.

Capture of China cigarettes

The Economist (2014) published an article about the monopoly tobacco industry in china and the government’s control in this area. It seems that tobacco industry have captured the tobacco regulator.
The problem tobacco bring to health have become more aware in global. Below is a table of what World Health Organsation suggests on prevention of tobacco and China's action.
WHO SuggestionChina PerformanceDepartments issue reliable data on tobacco use.China lacks disclosure on tobacco use.Government sweeping imposition of smoking bans.This issue is still on discussion.Government set well-funded accessible scheme to help people quite smoking.Little funds were set in China.Broadcast on the harms of tobacco.Not many people know the harm.Complete ban on marketing.Cigarette brands are seeking chances to survive.Impose high tax on tobacco.Cigarette in China is quite cheap, everyone can afford it.

Obstacles

In fact China agreed that WHO was right on banning cigarette. There are numerous policies on forbidden smoking in public area. First lady of China is the official anti-smoking ambassador. But there are obstacles on dying out smoking in China.
First, the tobacco business and the government are entwined with each other. This relationship prevents the efforts of smoking ban. This could be seen from the above table. The largest part of government revenue is from tobacco industry.
Second, the tobacco industry is almost monopolized by China National Tobacco Corporation. The State Tobacco Monopoly Administration plays the role on monitor. However, these two organisations have intertwined structure and they share managers and use the same website. The situation is that the tobacco industry regulates itself.
It’s clear that there are many ways china could adopt to prevent smoking. But as the regulation setting process is controlled by the Tobacco Co, the law cannot be so persuasive on regulate tobacco in China.

Capture of Federal Reserve Bank of New York

In this case the Federal Reserve Bank of New York (New York Fed) regulate Wall Street banks though the Federal Reserve Banking System. The New York Fed should be independent from the Wall Street banks considering its role as a regulator. However, the president of NY Fed is selected by a board formed with some of the Wall Street banks. Timothy Geithner who was the president of NY Fed from 2003 to 2009 always had a closer relationship with Wall Street while in position (Becker & Morgenson 2009).
During the 2008 financial crisis, Geithner made NY Fed purchase credit default swaps from AIG. In return banks received full value payment. Usually when a company wind up, creditors may be court ordered to accept payment at a discount value, otherwise taxpayers will suffer. Thus the full payment on the AIG debts was unusual; and Geithner argue that this was to save the banks from their own mistakes. He also refused to disclose the hidden parties benefit from this activity (Reilly 2010).

Criticisms of capture theory

According to Posner (1974) this theory has some weakness in its theoretical foundation. There are questions cannot be answered. Though the theory describes that the deal between regulatory agency and the regulated party affect regulatory process, it does not suggest what process the regulated party did to capture the regulator. Customer’s interest will also be affected by the new set up rules. The theory did not explain why customers cannot capture the regulatory agency to protect their interest. Now that the regulated party have the ability to capture the regulator, why don't they prevent the creation of regulatory agency in the first place?

Reference

‘Government coughers’ 2014, The Economist, 1 March, viewed 1 April 2014, http://www.economist.com/news/china/21597958-smoking-course-kill-100m-chinese-people-century-will-latest-anti-smoking.

Becker, J & Morgenson 2009, ‘Geithner, member and overseer of financial club’, The New York Times, 26 April, viewed 7 April 2014, http://www.nytimes.com/2009/04/27/business/27geithner.html?_r=0.

Merrill, TW 1997, ‘Capture theory and the courts: 1967-1983’, Chicago-Kent Law Review, vol. 72, viewed 1 April 2014, http://scholarship.kentlaw.iit.edu/cklawreview/vol72/iss4/6.

Peltzman, S 1976, 'Toward a more general theory of regulation', Journal of Law & Economics, vol. 19, no. 2, pp. 211-240, viewed 1 April 2014, http://www.nber.org/papers/w0133.

Posner, RA 1974, 'Theories of economic regulation', Bell Journal Of Economics & Management Science, vol. 5, no. 2, p. 335, viewed 1 April 2014, http://www.nber.org/papers/w0041.

Reilly, D 2010, ‘Secret banking cabal emerges from AIG shadows’, Bloomberg, 29 Jane, viewed 7 April 2014, http://www.bloomberg.com/news/2010-01-28/secret-banking-cabal-emerges-from-aig-shadows-david-reilly.html.

Strigler, GJ 1971, 'The theory of economic regulation', Bell Journal of Economics and Management Science, pp. 2-21.

Walker, RG 1987, ‘Australia’s ASRB: a case study of political activity and regulatory capture’, Accounting and Business Research, vol.17, no. 67, pp. 269-86.

Why I doubt my economics training

 

Why I doubt my economics training.

The nice thing about Economics is that it gives us simple explanations about the world which are natural truths about human, thus we can use the conclusions drawn as axioms to guide our everyday life on what behaviour is good and evil.

Ok: now swap "economics" for "religion" and read the sentence again.

My alma mater was the School of Economics at the Australian National University.   The ANU is one of the most staunchly neoclassical schools in all Australia. Obsessed with markets, marginalism, and mathematics, the school was supposedly one of the very toughest in the land. I was not the very best student, but I did drink the Kool Aid. 

More recently my understanding has become more nuanced, not just because of the shift in public attitude largely driven by the global financial crisis. no longer can I believe that is possible the loan optimal to follow the path of ubiquitous unfettered markets as idealised by libertarians. But economists are asking the right questions, mostly. 

Although I do not agree with the recommendations set by Pickette, his work is certainly nuanced, will supported by evidence and is not set ideal logically opposed to the Say or Jevons. Rather, he accepts the vast majority of the orthodoxy, and proposes a critical way of thinking about the problems. The problem is that this critical approach was missing from an otherwise stellar education at the ANU. 

The use of mathematics and algebra is in fact a constructed for the indoctrination of potentially powerful individuals. By simplifying out all the problems, we are able to come up with simple models that contain one one, or a perhaps a few of variables, which will ultimately determine the outcome.

But the real world is not like this.

Much like in physics class, students will study aerodynamics, Newtonian physics, fluid dynamics, friction, etc, and typically study these in isolation. Usually a problem starts with a scenario such as"a ball is rolling down a hill", commonly followed by a long list of assumptions to isolate out any unwanted effects, "assume that there is no friction, air resistance, and that the ball is perfectly round". 

The real-world engineer will understand the physics, but will have to take account of the all the things that have been assumed away. So it is with economics and business.

The problem is, when a physicist is applied to a particularly difficult engineering problem, they will tend to accept the operating environment, and adapt their apparatus accordingly. The Economist on the other hand is more likely to attempt to change the environment or blame other exogenous variables. Physicist do not hold on to their Newtonian way of thinking when it fails to explain the pre-ambulation of mercury around the sun. The answer is, "the model does not explain the behaviour". This spurred on Einstein to develop his theories, and we now have Lagrangian mechanics, which is a re-formulation of classical mechanics. 

Basically, scientists went looking for a more complex models that closer match reality rather than trying to change reality to match the model. Economists usually don't do this.

The antidote is "we need to imagine people more complexly", as championed by John Green of crash course. Conversely, I am concerned that the default assumption that "everything is complex" would also lead people to give up on trying to understand. "Complexity" isn't an excuse for giving up.

So therefore it is very useful to start off with the simplicity of powerful models, but insufficient to accept them at face value. We must be able to relax the strict assumptions, and allow for multiple models each having their own effect simultaneously. Much like the ball rolling down the hill, gravitational forces might be the main driver, but air resistance and surface imperfections do exist, and do play their part. 

So yes, we need to imaginable more complexly, and the complexity of algebra does not make up for the lack of imagination in accepting which variables might be playing their part. 

I believe that we can go a lot further in teaching our students to think critically at the undergraduate level.