By Alex Kessler
At the beginning of every semester, SAIS students gamble on their education through a complex bidding system. Popular classes such as Illicit Finance, Risk Modeling, and The Rise of Economic Nationalism drive a competitive auction, often resulting in a clearing price above 1000 points. While bidding exists to allocate finite classroom seats according to demand, many fundamental flaws will eventually render the system inoperable.
The SAIS Observer typically reports on the growing scarcity of seats of high valued professors or the unwavering rise in clearing prices across the board. Pulling data from SAIS’s historical bidding reports, on the new Sharepoint Portal, the Observer found concerning trends. In Spring 2020, for example, 22 classes went to bid. The maximum number of points a student can bid on any given class is 1300, and that semester just about 60% of those classes received a maximum bid– likely graduating students dumping all unused points to assure registration. Ninety-five percent of bidded-classes that semester had bids of 1,100 points or higher.
What about year-to-year comparisons? For a few classes, such as the Kissinger Seminar, the clearing price did not change between Spring 2019 to Spring 2020. However, two sections of Prof. Stevenson’s Conduct of Foreign Policy saw a 106% and 203% rise, respectively. Between 2019 and 2020, Baumgarten de Bolle’s Rise of Economic Nationalism had a clearing price jump from 100 to 1250, a 1,150% increase.
What exactly is happening, and what is causing the rise of clearance prices? The SAIS class bidding system is a blind auction, meaning competitors (i.e. students) place their bids in a type of ‘sealed envelope’ that is only visible to the seller (i.e. the professor). It’s not an open auction like eBay– students cannot see what others have bid, nor what the prevailing clearing price is in real-time. And unlike eBay, students cannot submit bids more than once, nor respond to the visible, real-time changes in clearing prices. This information asymmetry harms students and their ability to gauge the value or ‘price’ of a class.
How do students know what to bid on a class? The historical bidding report shows previous clearing prices, which students then use to anchor their bid. The clearing price is a price floor, the minimum threshold for entry into a bid-competitive class. Here is the crux of the issue: students will attempt to bid slightly higher than the previous clearing price to win a seat without wasting an unnecessarily high number of points. That means every year, students raise the clearing price.
Between Spring 2019 and Spring 2020 the average clearing price rose 163%.
There is ongoing inflation of clearing prices for classes. Essentially, this is not an accurate reflection of the true ‘price’ of the class, just a rising minimum cost. The barrier to entry for some classes perpetually climbs, not just due to popularity but also because of the arbitrary anchoring to the historical report. Unlike a regular auction, the price does not start at zero and increase according to leading bids.
Additionally, the number of bid points available to a student does not increase with inflation. At 1300 points maximum over two years, the window for successfully bidding on a class shrinks as the clearing price rises. As clearing prices exceed 800, students might only be able to win a spot in one class over four semesters. Any amount less will be below the price floor of a popular class. Taken to its logical conclusion, without intervention, clearing prices will plateau at 1300 and there will be no strategy left except to wait until one’s last semester and flood the market with bids, excluding all other students. How will class seats be assigned when every bid is 1300?
The information asymmetry, lack of price transparency, and inflation effect will eventually render the SAIS class bidding system defunct. Some classes may come and go, resetting the clearing price to 0, but for anyone still interested in taking Szubin’s Illicit Finance the only option is to save every single point until their fourth semester, forgoing all other bidding opportunities. In the interest of making the bidding system more equitable, and offering more chances to take bid-worthy classes, the Observer offers the following solutions.
A blind auction hides information on how other bidders value a class and obscures the true price. An open market auction, where bids are visible in real-time, provides far more meaningful information to the student. If a class has 5 slots open, and 10 bids with the highest at 550 points, how much would you bid now? Would you rescind your previous bid? This would require: (1) a live website to enter and track bids, (2) a limited number of (maybe two) bids to submit to a class as a chance to adjust one’s gambit, and (3) the ability to withdraw a bid before the deadline.
Just as important, but much easier to implement, SAIS Academic Services can stop posting the clearing price of the class. Without a clearing price to anchor on, the starting price of all classes resets to zero every semester, and inflation halts. A student would not need to pay an artificially exorbitant price to take a class that matches their career interest or graduation requirement. Students of the current year need not be hindered by the cumulative price-spiking behavior of previous students.
These proposed changes require more planning and discussion to execute on a school-wide system. The SAIS Observer would like to continue this conversation with professors of the International Economics department and the school’s administration. Only through open dialogue can the bidding system avoid gradual dysfunction and provide a more efficient and rewarding academic experience for all students.