Fall 2007: Economics

ECONOMICS may seem to be an art (or even magic) to some, while many others see it as strictly science. Perhaps the truth lies somewhere in between. Certainly, consumer culture has embraced the field of economics, due much to best-selling books like Freakonomics and The Tipping Point.

After all, it’s compelling, isn’t it? Economics provides us with a new way to engage and converse about societal issues, which tend to be emotional, politically-charged and not easily categorized into black and white perspectives.

In a typical year, about six percent of BBA graduates from the Hankamer School of Business have declared Economics as their primary major. About one fourth of them go on to law school. In addition, a handful of MS-Eco degrees are awarded each year from the Graduate Business Program. Because of the nature of the economics discipline, these alumni seek out a great variety of careers in a multitude of industries. In this issue of the Baylor Business Review, we explore economics applied to health care, gambling, litigation, bankruptcy ethics, third-world countries, and international trade.

Can economics save the world? I’m not sure. But it will provide us with a new way of understanding it.

Terry S. Maness, Dean

 

 

 

Baylor Business Review, Fall 2007

by Eric Krell

Judging by the wisdom of the crowd, “Freakonomics” – the application of the dismal science to address a wider range of societal issues (crime rates, education reform, baby names, drug dealing) in a compelling, often controversial and exceedingly user-friendly manner – has passed the tipping point.
Thanks to the very recent best-selling success of authors like Steven Levitt (Freakonomics), Malcolm Gladwell (The Tipping Point, Blink), James Surowiecki (The Wisdom of the Crowds) and others, it appears economics has gone mainstream. But appearances can be deceiving, as anyone who analyzes hard data for a living knows. In a twist Levitt and his co-author Stephen Dubner might appreciate – after all, their book claims to explore the hidden side of everything – modern economics, it turns out, has enjoyed a lengthy and, at times, influential presence in mainstream culture since its inception.

Whether that presence is helpful, harmful or neither remains open to debate.

For economists and writers who know how to translate highly complex economic analyses to engaging, well-written stories for mass consumption, this trend has proven lucrative. The Tipping Point, which examines the theory of “social epidemics,” has occupied the New York Times best-seller list for almost three years. Tack on the suffix “nomics” to almost any phrase, and there’s a good chance an ambitious acquisitions editor will snap up your manuscript (just don’t name it Freedomnomics because that book, which probes the logic of free-market economics, rolled off Regnery Publishing’s presses in June).

A brief history lesson sheds new light on economics’ most recent immersion into mainstream culture in the form of best-selling business books, newspaper columns and the ubiquity of their authors on television news and business shows and on the business conference circuit. That historical context, in turn, illuminates some of the impacts of this trend and pros and cons of “mainstreamnomics.”

As Gladwell’s blurb on the cover of Freakonomics warns, “prepare to be dazzled.”

Chapter 1: The Source of Supply
Steven Green, professor of Economics, department chair, and graduate program director in Economics at Baylor, has a theory about economics’ most recent incursion into mainstream culture. He points to three elemental forces:
1. Authors who want to popularize economics;
2.Technological advancements; and
3.The allure of the counterintuitive.

Steven Levitt, Steven Landsburg, Milton Friedman, Richard Posner and other “popularizers” – whether they are economists, or lawyers or writers who frequently write about economics – firmly believe the dismal science can illuminate discussions on a broad range of topics.

“As Levitt sees it, economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions,” writes Dubner of his Freakonomics co-author.” His particular gift is the ability to ask such questions. For instance:

If drug dealers make so much money, why do they still live with their mothers?

Which is more dangerous, a gun or a swimming pool? What really caused crime rates to plunge during the past decade? Do real-estate agents have the clients’ best interest at heart?” Those sorts of questions are much more likely to resonate with a popular audience, rather than addressing what may happen with interest rates next quarter, notes H. Stephen Gardner, Herman Brown professor of Economics and director of Baylor University’s McBride Center for International Business.

“When we economists weigh in on big social issues of the day – what can be done with health care reform, education reform, war and peace – we are more likely to get the attention of the general public,” Gardner explains.

Fortunately for Levitt, Dubner and their contemporaries, technology advancements have made it much easier to answer interesting questions today than it was even as recently as 10 years ago.

“Computers have come a long way in the past 20 years,” Green points out. “We can do more sophisticated data analysis, and we have better statistical techniques to apply.”Those advancements help economists disentangle causality issues that previously stymied them from answering many interesting questions. In the not-so-distant past, for example, it would have been difficult to know definitely if a correlation between the size of a police force and the frequency of crime in a metropolitan area occurred because more police officers cause crime rates to drop, or because cities hire more police officers when crime increases.

As the information age matures, the amount of data economists have to work with also expands. “Better data sets exist today,” Green adds. “That’s especially true for longitudinal data where you follow particular groups of individuals over longer periods of time.” More and more robust, data provides better control, which translates to more accurate and more rigorous analysis.

“Before, much of [economic analysis] consisted of theorizing,” notes Van Pham, assistant professor of Economics at Baylor University. “Somebody who was very astute at observing patterns would then apply economic theory. Now, more people can really dig into the data. Thanks to the low cost of data storage, more people can run huge regressions that were not available before.”

Much of what mainstream economists do today is to apply sophisticated statistical techniques where they have not been applied before. “I think economists have tools that other social scientists do not,” Pham adds. “As the availability of data increased, economists branched out to answer many questions that other social scientists and economists did not previously address.”

The final dynamic in Green’s theory is what dazzles readers: the unexpected, counterintuitive and sometimes shocking answers. Most drug dealers earn less than minimum wage.

Real estate agents do not have their clients’ best interest at heart.

“You wouldn’t think on the surface that the way to save trees would be to have more logging and more private ownership of [logging] lands,” says Green. “But, in fact, when there is private ownership, there is the economic incentive to conserve. It turns out, in many cases, that the answers are counterintuitive. That’s controversial and it sparks interest.”

It also sells books. In fact, judging from Freakonomics’ success and the procession of similar titles its sales helped birth, there would appear to be an economic incentive to reach counterintuitive and controversial answers to interesting economic questions.

Add one more factor to Green’s theory: engaging story-telling. “That’s essential,” asserts Baylor associate professor of Economics Charles North, who ought to know (see “A Leap of Faith”). “If you’re going to write a book [about] economics for a mass audience, you can’t lard your writing with jargon or assume that people understand a theory. You have to take complicated issues [and] economic ideas and translate them to easy-to-understand language and compelling stories.”

Chapter 2: Talk to the Invisible Hand

Gardner agrees with North. He also notes that there has been a mass-market side of economics since its modern beginnings.

Gardner points to French political economist Frederic Bastiat’s 1845 book Economic Sophisms. One of the essays in that work took the form of a “candlemakers’ petition.”
The writing satirized the candlemakers guild by having them ask the government for protection from an unfair competitor, the sun. After all, the sun’s free and abundant supply of light was hurting their business (mostly during the day).

Bastiat, whose essay engagingly highlighted the flaws in protectionism, had his candlemakers request that the government require its citizens to cover their windows during waking hours.

Before Bastiat, there was Adam Smith, whose “invisible hand” may have been a late 18th century buzzword that rolled off tongues as easily as the “tipping point” does in 21st century mainstream America. Smith, Gardner notes, also addressed broader social issues that were considered relatively popular during his era such as the institution of education and the effects of colonialism on the British economy. While Karl Marx may have penned Das Kapital for other political economists and scholars, he most certainly wrote his Communist Manifesto to influence the much broader audience of the general public.

Some economists, including Milton Friedman, have enjoyed similar “dual lives,” writing for other economists on one level and then reaching out to a wider, more mainstream audience at another level. Levitt is one example. Other economists, such as John Kenneth Galbraith, enjoy the vast majority of their success and focus more of their energy on communicating their ideas to a mass audience. Still others remained largely anchored in the technical realm of economics, such as John Maynard Keynes, although their ideas were expertly translated to mass audiences by others, such as Paul Samuelson.

“It may seem as if economics has been popularized recently,” Gardner allows. “But
that perception may stem from the fact that we previously experienced a phase where [economics] was so mathematically technical that it was unavailable to almost everyone except for the initiated.”

However, Gardner adds, “You still have to be a mathematician to understand much of what’s written by economists. So, when we talk about the popularization of economics, it’s something that’s happening on the edges of economics. A few writers have done a good job of taking some of the technical literature and bringing it to the general public.”

Chapter 3: Educational Impacts

Have these writers done such good jobs of translating economics that they’ve helped make it the “sexiest trade alive,” according to a recent Newsweek headline?

Probably not.

While the recent best-selling success of economics books may have helped glamorize the subject in the past three or four years – the Newsweek article features a photo of Columbia University economics professor Jeffrey Sachs alongside actress Angelina Jolie while the two filmed an MTV documentary on Kenya’s economy – the popularity of economics in the U.S. had been increasing years before Freakonomics burst onto the scene. In other words, proving causality would be difficult.

The number of degrees in economics awarded by U.S. colleges and universities increased by a total of 56.7 percent from 1997 to 2005, according to John Siegfried, a Vanderbilt University economics professor who tracks these figures. But, as Siegfried points out, the bubble has burst: the number of degrees in economics awarded in the U.S. declined by about half of one percent from 2005 to 2006.

“I wouldn’t necessarily say that our students come in pumped up to study economics because they read Levitt’s book,” Green notes. “It’s more a matter of the book, and others like it, serving as good fodder for our students to learn more material. From a teaching perspective, it’s a whole lot easier to find cool stuff for students to read that addresses issues they care about while demonstrating that economics can help us think intelligently about many of those issues.”

For his part, Pham has noted a growing interest among students in the international trade issues he explores. “I’m not sure if that’s related or not,” he reports. “Students seem to be more in tune with globalization today and that may well be because the popular press frequently covers child labor, free trade and other aspects of globalization.”

Like Green, Pham is quick to point out that he has better access to teaching materials today than he did just a few years ago. Just as popular economists leverage stronger computing power, larger troves of data and smarter software to produce nifty insights, economics professors mine the same resources to bolster their teaching offerings.

“When I talk about trade, it’s so much easier to go online and get data and show concretely what it means when we talk about lowering trade barriers and the increasing imports coming from China and Mexico,” he notes.

That sort of analysis also represents a key part of the value proposition of the economics degree. Economics degrees at any level, Green says, “send a signal that you excel in analytical matters.”

Prospective employers, more so than ever, remain on alert for that signal. In Competing on Analytics: The New Science of Winning, co-authors Tom Davenport and Jeanne Harris emphasize that successful companies use increasingly sophisticated data analysis to distance themselves from competitors.

The authors emphasize that many previous bases for competition, including geographical advantages, protective regulations and proprietary technology, have simply faded. “What’s left as a basis for competition,” Davenport and Harris write, “is to execute your business with maximum efficiency and effectiveness, and to make the smartest business decisions possible.”

Chapter 4: Costs and Benefits (and Hammers and Nails)

If the most recent foray into mainstream culture by economics has helped make budding economists more attractive job candidates and more valuable managers, enter that gain into the benefits side of the ledger. That’s where most, but not all of the effects of this ongoing trend, appear to reside. “Mainly, I see plusses here,” Gardner observes. “Many of these large and important issues – education reform, health care reform, war and peace, third world poverty and others – can be better addressed if economists have a place at the table and are part of the conversation.” Gardner emphasizes the qualifier part. “Through our training, we tend to see a market around every corner,” he notes. As a result, economists tend to conclude that some sort of self-adjusting mechanism can be used to contribute to the solution of any problem.

As the only tool in a problem-solver or policy-maker’s tool box, economics resembles a hammer in search of nails. “If you’re focusing exclusively on measurable factors,” Green says, “you may ignore important qualitative issues.”

Some express more caution. John Pisciotta, professor of Economics at Baylor, has seen more signs of economics “overreaching” in recent years. “The risk is sending a message that not only is the economic perspective valuable, but that not much else is valuable,” Pisciotta explains. “It is sometimes implied that if you put together this economic way of thinking, you really have a road map for life.”

Pisciotta holds up marriage as an example. “If you’re applying an economic way of thinking to marriage, you’re thinking about self interests and entering into a contract that has mutual benefit,” says Pisciotta, who says that narrow view of a sacred institution diminishes it. “I think economics is very valuable, but I think other perspectives are very valuable,” Pisciotta adds. “As economists, we ought to be much more humble than is sometimes the case.”

Green, North and Gardner agree that their field represents one tool among many. Used in conjunction with other tools, Green notes, economics can help make individuals and groups more aware of the potential unintended consequences of their decisions.

End Note: The Theory of the Leisure Class Still Holds

North is motivated to add his own faith-based entry to the Freakonomics genre. “I’m probably very much of an economic imperialist,” North allows. “I think economics is a useful way to think about a lot of problems. It’s not the only useful tool. Economics doesn’t do a good job of telling us right from wrong. But, it does inform us if the consequences of an act will be what we want it to be or not.”

Do more police lower crime? Will interest rates keep inflation at bay? Does a higher minimum wage reduce poverty? Do our fascinations with iPhones and other electronic gadgets make us more productive?

Economists have answers to a broad set of questions, but that has always been the case.

Part of the answer to the iPhone question, for example, relates to “conspicuous consumption”— a phrase that has entrenched itself in the popular vernacular since being introduced to readers by economists Thorstein and Veblen in 1899.

 

 

 

Baylor Business Review, Fall 2007

by Caroline Korsawe

With such a definition, a background in economics could only lay the groundwork for careers as diverse as the students themselves. Baylor economics graduates are no exception. Not only are economics graduates scholars, economists and lawyers, but also diplomats, physicians, judges and entrepreneurs. We have profiled some successful alumni of Hankamer’s Economics department as they make their marks on their communities, states and the world.

Jessamyn F. Allen

Ben Davis

Thomas A. Doyle

Jennifer Elrod
 

 

 

Baylor Business Review, Fall 2007

by Barbara Elmore

The Census Bureau estimates about 44 million Americans do not have Health Insurance. The subject of health care insurance in America is a political and polarizing issue. Doubtless, you have heard presidential candidates from both sides of the political spectrum espousing their views on this issue in the media. Now, two respected economists at Baylor have put their heads together in an effort to propose a centrist solution to the American health care problem.

It’s not hard to imagine James Henderson wearing a white coat as he checks a patient’s vital signs, shaking his head. Or Earl Grinols asking sharp questions designed to get to the core of an illness, then drawing a straight line from Point A to Point B to illustrate how to get from here to there.

But the two are not doctors. A more appropriate garb would be the lab coats of veteran researchers, or “economists hats,” if such hats existed, and they would feature the Baylor logo.

Both are economists inside the Hankamer School of Business, and they are probing the sticky wicket of health care in the United States with the idea of helping solve what has become a crisis. The Census Bureau estimates about 44 million Americans do not have health insurance, which means they often don’t seek health care when ailments are most treatable, or they seek the most expensive health care available, often through an emergency room or trauma center. Or they get sick and die when death is preventable.

Henderson, the Ben H. Williams Professor in Economics, and Grinols, Distinguished Professor of Economics, discern two separate but related problems with the country’s health care system: The first one is that not everyone has health insurance, and the second one is that some people who don’t have health insurance cannot afford it. Identifying these as two separate issues helps them find solutions to both problems, and they want the proposals to carry Baylor’s identity. “Baylor should be doing health care education and research on the main campus,” Henderson says. “The brand identity at Baylor is nationally known. When you put the Baylor name on something that’s health care, people will take a look at it.”

The plan that he and Grinols designed is woven throughout a hefty manuscript that peers have extensively reviewed. “It’s a most detailed look at the health care financing problem,” Henderson says. Their goal is to give it a debut before and during the 2008 presidential elections.

To sort out the jumble, the duo started by establishing five objectives:

1. Every American should have the opportunity to have insurance.

2. Such insurance needs to be patient-centered instead of provider-centered. That is, respect for the individual is a central component, offering permanency throughout life, Henderson says. “Nobody should be in jeopardy of losing his health insurance when he changes jobs. Nobody should be in jeopardy of losing health insurance because he gets sick. This is essential.”

3. Insurance planning must show respect for the market. “That’s the best way to diligently serve the wants and needs of the customer,” Henderson says.

4. The plan must include cost containment. “The government must set a budget for its involvement,” he notes, adding that both Medicare and Medicaid need disciplined checks. “You’ve got to have dollar amounts, set in advance, and enforced with certainty.”

5. Finally, the program must be sustainable, lasting indefinitely without major revisions.

The researchers believe the only way to achieve these objectives is to concentrate on the cause of the current problems, not the symptoms. Thus they’ve identified three pitfalls and three plans of attack. Some of these, like the first pitfall the researchers list, include the creation of new words. “Polit-troughing,” for example. Coined by Grinols, this term translates to politicians feeding at the public trough. “It means promising constituents payment and aid with the benefits paid for by someone else,” Henderson says. The second and third pitfalls are governmentalizing (the government taking over a task better performed by the private sector) and a Ponzi scheme, or the “Rob-Peter-to-Pay-Paul” system, in which one person’s health care benefits are paid for by the contributions of others. Medicare is a Ponzi scheme, Henderson says.

The best path around the three pitfalls comes from three plans of attack that they have identified as the intervention principle, incentive symmetry, and “every pot sitting on its own base.” The intervention principle takes Grinols’ direct mathematical approach. “The best way to accomplish an alteration of a given economic system is to influence most nearly the margin you want to influence using a tax or subsidy at the least level needed to accomplish your objective,” Grinols says. “You go directly to the thing you want to accomplish.” Government often gets the program wrong by subsidizing the wrong thing, he says. If you want people to have health insurance, you target health insurance with incentives for that purpose.

The second principle, incentive symmetry, proposes incentives to purchase insurance. If you believe that some people cannot afford insurance and that others simply refuse to buy it, you must subsidize the purchase of health insurance for those who cannot afford it and tax everything else for those who refuse to buy it. “That way you are reminded daily that you are not buying health insurance,” Henderson says. “We don’t want to redistribute income; that’s not the purpose of health insurance. Make the tax burdensome enough and everyone will buy health insurance. This is not a mandate. These are incentives.”

That leads to the third principle of “every pot sitting on its own base,” Grinols says. This simply means that a sustainable health care system would not require external support to remain firm and strong. “Any government program that is designed to deal with a class of people should be designed in such a way that it does not require external support to remain standing. It should not need propping up,” he says. Any time a pot doesn’t sit on its own base, it likely includes unsustainable incentives, he adds.

The two believe that their plan can work if government steps in by regulating insurers in a couple of key areas. First, insurance companies must offer customers the same rates and guaranteed renewability depending only on such things as age, gender, geographic location and such lifestyle choices as smoking and obesity. Secondly, government must require that providers of health care provide rate transparency. That means that the price for every procedure – X-rays, for example – would be public and would be the same for everybody. Insurers would have no gate keeping role in a properly functioning market, they note. “Insurance companies don’t need to know about all treatments” a doctor recommends to a patient, Grinols says.

The two economists were brought together in their health care research by something Henderson describes as a providential alignment of planets. Grinols’ arrival at Baylor several years ago honed the interest of both men in expanding Baylor’s influence in health care policy. “He’s got some excellent organizational and technical skills,” Henderson says of his colleague. Meanwhile, Henderson possesses an extensive knowledge of the U.S. health care system. His textbook, Health Economics & Policy, first came out in 1995, and he is revising the fourth edition for 2008 publication. His interest in health economics turned into a Healthcare Administration Program as part of the business school’s MBA program.

Also key to their health care push was the arrival at Baylor of Scott Garner. After a distinguished 30-year career in the Air Force as a hospital administrator and member of the medical services corps, Garner joined the Baylor faculty in 2000 as the administrative director of the Healthcare Administration program.

Soon after Grinols’ arrival, he and Henderson began looking into alternatives to pharmaceutical patents, which led to presentations at national meetings. One such showing at the American Society of Health Economists a year ago led to suggestions that their proposals be submitted to the journal PharmacoEconomics. Their submission will be published this year, Henderson says.

But more to the point, they are hoping that their plan, in manuscript form, gets a thorough airing before and during the 2008 presidential election. “Four years ago, we figured the ’08 election was about health care,” Grinols says. Although health care issues are complicated, they feel confident in the answers provided by their research and analyses. “If you set everything on a proper basis, you can deal with the other things that arise,” Grinols says. “Any person who accepts our three principles and applies them to reaching the objective is going to be led to a program pretty much like what we’re saying. The game itself leads you to what the economics tells you should be the answer.”

 

 

Baylor Business Review, Fall 2007

Patricia ‘Sister’ Schubert, founder of Sister Schubert’s Homemade Rolls, began her career in the food business in 1989 in her hometown of Troy, Ala. Schubert started taking orders for her rolls at a small church frozen food fair, and within a few years she was able to expand her market to Ingram’s Curb Market in Troy and several other food corporations.

Today, Sister Schubert’s is one of the of the finest U.S. southern delicacies actually sold in a supermarket.

Webster’s dictionary defines an entrepreneur as someone who undertakes the startup of a business and is responsible for every aspect of it, including the manufacture, the service and the sales. He is responsible for the financial cost, but he also gets rewarded for that. I do not think of myself exactly as an entrepreneur, because back in 1991, when I finally made the first step towards starting this company I had a talk with God and I asked Him that if He would help me, I would help Him to feed the hungry people of this world. So truly I have had a partner from the very beginning. I have not really done this by my own. I never have.

I think that some of you may be familiar with the story of our bakery, and how it grew from our little home kitchen in Troy to a small warehouse facility in downtown Troy and finally to the current 100,000 square foot facility we have in Luverne, Ala., today. When I started this business I had to learn bit by bit. I had absolutely no real business experience other than just working for my father in his furniture store.

I loved to bake and cook, and I felt that I have always been very blessed to have been from a family of great cooks. One of them was my grandmother, who taught me how to bake these wonderful Parkerhouse rolls. From that day on, I have served them for family gatherings and for friends. I had a small catering business before I actually came into the real food business. But the story of how this product came to be on the marketplace is one of hope, determination, enthusiasm, hard work and generous and inventive backers. More importantly, it is mainly about having faith in yourself and in your product. I think my company has been very lucky, but I also believe in Thomas Jefferson’s interpretation of luck. Once he said: “I believe in luck, but it seems the harder I work the more of it I have.”

In 1989, our church in Troy, Ala., St. Mark’s Episcopal, held a frozen food fair where we baked our specialty items and sold them. I baked about 20 pans of rolls and they all sold. So the next year they asked if they can put them on a list and have people take orders. I agreed and we had 80 orders that year. About the third year we had 300 orders for rolls being taken. I had to stop taking orders, because in my old kitchen at home we baked 300 pans of those rolls and that was enough. It was very exhausting and hard work. My two girls, a couple of my sisters and several other people helped us. It was very exhausting, but it was very satisfying. And I realized that maybe people from other places would like our rolls, not just in Troy and not just during holidays.

So this is what I did. I made up my mind to try to do this. It was the first step that I took, but it was by far the hardest one. I went to Sears and I bought the largest double-oven that they had, and installed it out on my sun porch because it would not fit in my kitchen. My mother donated a large chest type freezer that we put out there opposite the oven, and I started baking rolls. I went around to the little local grocery stores in Troy and nobody seemed to be very interested. Then I went to Ingram’s Curb Market. Mrs. Ingram tried my rolls and took a dozen pans. We made them with full pans and Ziploc bags from the grocery store and hand-typed labels that came off more often than they stayed on. That was a big problem for us, but nevertheless things were starting to look pretty good. When Mrs. Ingram was up to about ten cases of rolls a week, I decided to take another giant step for the company.

I found a wholesale supplier for ingredients and packaging, and decided that we needed to make that step into a real business, into a business location where we could get a license and we could start to go after larger grocery store chains. The site was the least of my priorities, because my father had a furniture warehouse in downtown Troy. I was just sure that daddy was going to let me have some space there and he did. We got some used commercial equipment and a little 20-quart mixer. I say little now, but it looked like a monster to me that first time I saw it. We set to work altering my grandmother’s recipe to suit the new batch capacity.

At that time I had five employees, and realized that I was going to need to have a way to sell more products if I was going to keep these ladies in a job. And so Mrs. Ingram suggested that I go to Fleming foods and talk to the frozen food buyer, which is a wholesale distributor in that area. The frozen food buyer instructed me that I was going to have to have UPC codes, and I was going to need to have a food broker if I were going to take my products into bigger grocery store chains.

The very next day I met with a fellow named George Barnes, who has happily been my husband for the last 15 years. Together we took the next giant step for the company. He went to work on Winn-Dixie and Fleming foods, and I concentrated on a smaller grocery store chain in Birmingham, Ala., Western Supermarkets. They agreed to try my rolls and ordered 96 cases. That was more than my little van could deliver, so I had to find a frozen food carrier that would take less than a trailer load and deliver those. I was sure to tell friends, relatives and everyone that I could in Birmingham where they could buy the rolls.

That wonderful word of mouth, which has done more in the way of advertising for me than anything I have ever paid for, certainly paid off. Before Christmas we were in three Western Supermarket stores and I was up to 12 employees. We could barely keep up with the orders. So, I contacted a government agency that helped with job training. It was a huge relief because they paid half the salary for my employees who I was training for the first six months. For small business, government has a wonderful way of helping you if you ask for it. They have lots of things available to help you when you start out the business. That was one thing that I did take advantage of, and I am very happy to say that it is still in effect all over the country. It is a great way to get some help when you are starting a business.

About that time I realized that we really were going to have to continue to grow because George had succeeded in getting the rolls into Winn-Dixie and Fleming foods. I knew that I was going to have to expand. We evicted all of my father’s furniture and we took over the whole warehouse. At that time I realized that I was going to have to have more money. It just so happened that a really good friend of mine introduced me to his banker. He loved my rolls and had faith in me. He loaned me the money that I needed in 1994 to take a really giant step for our company, and opened our first bakery in Luverne at 25,000 square feet. It was a huge investment for me, but it was an affirmation of my faith and my vision for the company. At that time I was sure that it was just going to be a very long time before we needed to grow or do any more expansion. I thought, “We will make so many rolls here, and this will be wonderful.”

I remember that little Sunbeam mixer in my kitchen and the people who helped me roll those rolls by hand. I just thought that this was wonderful and I was so thankful that we did not need to really grow anymore, but I was wrong. In 1998 we completed a second expansion at the bakery, allowing us to produce over a million rolls a day at that time. We were in 3,000 grocery stores with five premium rolls and two wonderful corn breads. Over the course of seven years, I realized that we were gaining the attention of some international food corporations. And I started finding myself telling people, presidents of Sara Lee, Mrs. Smith and Flower’s bakery that I was not interested in selling the stock of my company.

One day George and I were talking and he said: “You know, honey, it is probably not a real good business move on your part not to find out what these people feel the value of your company is.” Do not ever say anything that you cannot take back because I said, “Well, I guess if one of these people would be interested in paying me X amount of dollars I’ll just have to take it.” And so we entered into a contract with an independent company to initiate bids for the purchase of the stock of the company. We narrowed it down to five, and after numerous meetings and much conversation in September of 2000 we did sell the stock of Sister Schubert’s to Lancaster Colony. They were a specialty foods cooperation out of Columbus, Ohio. We did it for two reasons. First, they had a broad-based marketing system and all the resources out there to propel the Sister Schubert brand to a national brand status. But more importantly, they historically purchased family-run companies and then asked those families to continue to run the company, which thankfully, they did.

George and I do remain at the helm of Sister Schubert’s and feel very blessed, every day, to have the opportunity to go to work and take care of our family. But also to get up every morning and truly love what you do. Now, that is what I call a real blessing. And with God being my partner in this business I have been afforded many blessings. So many that I cannot even count them. With that, to me, has come the responsibility to love and care for people all over the world. I have a new calling now that does not involve baking. Our legacy has become advancing the kingdom, rather than just building an inheritance for our children and grandchildren.

We began to understand that we have a responsibility to all of the children of the world and to all the people of the world. One fallacy concerning working for God and doing His will is that people think you have to have lots of resources in order to do a good job of that. But if you wait for lots of resources those might not ever arrive. It is wiser to begin working to further the kingdom of God with whatever you have been given right now. The story of the poor little widow who gave all she had was seen as an extravagant gift by Jesus. It has been very instructive for me in my life. It is the amount of the sacrifice, not the amount of the gift. God can do much more with great sacrifice than He can with great riches. Paul gives us good counsel when he advises Christians at all levels to understand who you are working for and what you are working to accomplish. Whatever you do, work at it with all your heart as if working for the Lord. You will receive an inheritance from the Lord as a reward. It is the Lord Christ You are serving. By viewing all of our work as working for Jesus, we gained a whole new perspective on our work and also on our fellow workers. We serve Jesus by serving people, specifically the widows, the orphans, the strangers and the poor of the world.

That opportunity came for me about ten years ago. I was approached by a missionary couple, Kenny and Laura Payne, who were ministering to the people of Ukraine. He needed financial support to help fill shipments of staples, medical supplies and clothing headed for Ukraine. I was happy to help provide some financial assistance, as well as flour, beans and rice. But that was just the beginning of helping these wonderful people. About six years ago, Laura Payne discovered a need that weighed very heavily on my heart. She volunteered in the children’s hospital there and discovered the deplorable conditions that those children were being kept in. In Ukraine, babies are abandoned because their mothers or families cannot take care of them on the meager means that they are given. Other babies are abandoned in the hospital at birth because the mothers only had them in order to get the money that the government hands out to help their dwindling population.

When I was there once, a baby was brought to us that was found in the forest. The hospital does not have the funds to take care of these abandoned children and therefore provides very little for them. They are provided a cloth diaper they wear in the morning and one at night. They have two bottles a day, a little cup of sour yoghurt type substance and some broth that more often than not has nothing in it. They are kept in the same wing of the hospital with the sick babies and thus remain unnecessarily ill. Not only are babies abandoned, but also small children whose families are no longer able to provide for them. They too, are submitted to the deplorable conditions.

One day Laura was working in the hospital and discovered that a second floor had a whole vacant wing. She and Kenny brought this to me, and we realized that we had this wonderful opportunity to help these babies. Laura contacted the hospital and asked if we could take over that second floor wing in the hospital and use it for abandoned babies if we could supply the work force, the clothes, the furniture and all the needs of these children. After much time our request was granted. I was elated to have the opportunity to help refurbish that wing in that hospital and finance it. But that was not enough. God said He wanted me to go and see these children. And every time I return from the trip to Ralevka, I cannot tell you what it is like for me to be with these children that have been so left behind. I am sure many of you have made a mission trip or have been somewhere where you have seen the conditions of the Third World. I can’t tell you what it’s been like for me to be with these children that have been so left behind. It has been a life-changing experience for me.

The wing is beautiful. It is painted with bright colors and biblical stories. Each baby has its own bed and its own little wardrobe. We have a care giver for every four children. They have formula and diapers. We also have strollers, a beautiful playroom, toys and everything that a child here has. It is a truly wonderful place, but sadly, it is the best place that most of them will ever see, because they have to be taken back to the state-run orphanages in order to be adopted. With the Paynes, we hope to change that. We are setting new ground in the country of Ukraine. They have allowed our family foundation to finance an orphanage for children zero to three years of age, so that we can take them from our abandoned site where we give them wonderful care to our orphanage site where we can find Christian loving homes for them. They never have to go back to the meager conditions that sadly this state can offer these children. And to look into the eyes of these precious babies and know that you have made a difference by giving them a home – that is better than anything they could have ever hoped for, is a joy and it surpasses anything that I have felt.

I have always believed that we should bloom where we planted. My hope for these babies is that we can find Christian homes in Ukraine. If not there, wherever God wants them to be, so that they can bloom and help make their country a better place. I heard Chancellor Jack Hawkins at Troy University state once that leadership is the management of hope. William Frye says that hope is the ability to hear the music of the future and that faith is the courage to dance to it today. I’d like to leave you with just one question. Shall we all dance?

 

 

 

Baylor Business Review, Fall 2007

by Kristin Todd

Do you solemnly swear to tell the truth, the whole truth, and nothing but the truth so help you God?

If you are a forensic economist testifying as an expert witness, choose your words wisely. Don’t forget to be well-spoken, intelligent, charismatic and unbiased as you present a hopefully error-free analysis of economic damages. After all, there are only millions of dollars and people’s lives at stake. No pressure.

Dr. Kent Gilbreath, professor of Economics, has taught at Baylor for 34 years; however, his forensic economics class is a new addition. The class was offered for the first time in the 2007 spring semester.

“It started as an experimental class,” Gilbreath said. “Forensic economics is a fairly new academic field.”

The study of forensic economics applies economic theories to litigation involving public interest disputes; such as employment discrimination, and private interest disputes; such as breach of contracts and other torts. Only six universities in the country have offered a class in forensic economics to students, and Baylor now joins this movement.

Robert Ayers, a Katy senior, said the class is anything but routine.

“The semester is filled with case studies from Dr. Gilbreath’s extensive work history, guest speakers, recruiting employers and depositions; it is truly something new and exciting each day of class,” he said.

The class requires more than just the analysis of numbers, and students are encouraged to think outside the box.

“Forensic economics forces its practitioners to find creative solutions to complex problems,” Ayers said.

Gilbreath said the class is designed for pre-law and business consulting students, accounting students that go into litigation support, or students who hold a general interest in the legal and political systems.

That doesn’t mean students in other fields of study can’t benefit from forensic economics. Nicole Anderson, a Pasadena, California junior, experienced the class as a marketing major.

“When I noticed flyers up around the business school advertising the new forensic economics class, I immediately signed up because I knew Dr. Gilbreath would be a wonderful teacher, and the class sounded interesting,” Anderson said. “One aspect of the class I could apply to my major was how you could market yourself as an expert witness and have a successful practice.”

Through the class curriculum, Gilbreath proves there is more to litigation than meets the eye.

“Being an effective witness is an art,” he said.

Gilbreath, who was selected as a Piper Professor of 2007 for superior teaching, draws on his 29 years of courtroom experience to impact his students’ learning. His students receive the opportunity to see forensic economics in action by attending local trials where he serves as an expert witness.

“Dr. Gilbreath gave us the opportunity to watch him testify as an expert witness in both depositions and court cases, which I consider to be invaluable and unique experiences in understanding intricacies involved in a case,” Anderson said.

Attending the trials gives students a glimpse of courtroom proceedings and serves as a sensory experience.

“The students see the issues lawyers face and how to respond effectively to them,” Gilbreath said. “It’s about dealing with uncertainty and grappling with unanticipated issues.”

As a class project, Gilbreath allowed students to create their own cases to understand how to properly prepare an assessment of economic damages as if they were going to present their reports at trial.

“Many cases serve as illustrations I can tell students about first-hand,” he said. “The cases are interesting, but the real essence of the course is assessing damages and calculating them.”

“I told the students to make themselves their own client,” he said. “This involves them in assessing the economic value of their own lives. Students analyzed aspects of lost income, lost household services and loss of benefits as applied to their cases.”

Lloyd Franklin, a Grand Prairie junior, is an accounting major who found the project beneficial.

“Using the techniques we learned from Dr. Gilbreath and the text, we calculated economic damages that resulted from a tort,” he said. “Dr. Gilbreath gave us the freedom to determine our own scenarios. Our reports were complex enough to withstand the scrutiny of another forensic economist, and simple enough to communicate the economic loss to a jury.”

The projects underwent further evaluation as students offered each other constructive criticism when reports were presented in class.

“Constructive criticism of our projects was very helpful as we tried to strengthen our reports,” Franklin said. “Suggestions given to me by Dr. Gilbreath and my classmates helped me recognize that I could make more accurate calculations that were based on better assumptions.”

Franklin, who plans on becoming a certified public accountant, said the class helped him better understand legal matters.

“Our many class discussions about a variety of torts made me realize that, in the real world, we must be aware of the economic damage our actions can cause,” he said.

Gilbreath further explored his subject through collaboration with his nephew, Robert B. Gilbreath, a practicing attorney in Dallas, in a paper entitled “Working Together: Some Practical Advice for Lawyers and Forensic Economists.” The paper was published in Litigation Economics Digest, a journal of the National Association of Forensic Economics.

Overall, the paper examines both the art and the science of forensic economics regarding when to employ an economics expert, effective presentation in the courtroom, jury expectations about economics experts, and other issues relating to the work of economists and attorneys. Gilbreath specifically notes the importance of appointing an economics expert. This appointment “brings closure to the goal of almost every civil action-providing legitimacy or illegitimacy of the damages sought in the case.”

Through the application of his interactive teaching methods combined with real-world trial experiences for students, Gilbreath hopes they gain an understanding of the importance of forensic economics in our justice system.

“I want them to see the academic application not as an abstraction, but as it is actually used in the real world,” he said. “There are few absolute answers in the business and legal worlds, and students must observe the process of compromise in conflict.”

As Gilbreath raises his right hand to testify as an economics expert, he encourages his students to raise their hands as well – in the classroom, that is. Gilbreath uses the Socratic teaching method in his class for encouraging student participation and information retention.

Anderson said she found the method to be conducive to learning the class material.

“Being asked questions not only helped us engage more fully in the class, but also created an environment which was open to learning and encouraged other questions by peers,” she said.

“They learn to understand and articulate their ideas, which is what you have to do in the courtroom,” Gilbreath said. “They also learn from their mistakes without the lessons being too costly.”

And it’s a safe bet that the benefits of Gilbreath’s forensic economics class will far outweigh any costs.

 

 

 

Baylor Business Review, Fall 2007