#21 - Finance minister: The World Bank’s “Doing Business”

[Malila Robinson]

Hi gcs4v333,
You are correct that we don't know the size of the hypothetical business that is used to create the rankings in the report. In an Evaluate the Argument question we are trying to clarify a weak point in the argument so that we can determine whether it is a good or bad argument. In this case the weakness is that we don't know whether the small and mid-sized businesses in the Finance Minister's country are comparable to the hypothetical business. Using the Variance Test on Answer D would address that weakness. If they are smaller then it would not necessarily be comparable so we wouldn't know that their ranking would improve. If they are not smaller then it is more likely to be comparable and so their ranking might improve.
As mentioned earlier one of the main problems with C is that the rankings may still improve regardless of whether the tax prep and filing is more difficult than compliance with other regulations. So if it is more difficult and it is simplified then it is likely the ranking would improve. But even if it were not more difficult, the fact that they are simplifying it still makes it possible that the ranking could improve. One the former may result in more improvement than the latter, but we are not trying to figure out what will improve the ranking the most, we simply need to know whether the ranking is likely to improve or not, and that is what is addressed in Answer D.
Hope that helps!
-Malila

[snowy]

However, there's a problem. First, given improvement in some area used to create the "Doing Business" ranking, we can reasonably conclude that the ranking will probably improve. In other words, whether or not the tax filing is harder or easier than some other regulation, if we improve one area, we can probably expect a rankings improvement.

I actually didn't think this was necessarily the case - I had first circled C but then changed my answer to D. The reason was because I realized that even if tax filing was simplified, whether or not the rankings improved depended on if the regulations changed and to what degree. For example, if taxes and regulations were on a scale of 0-100 (with the higher number correlating with a higher difficulty of compliance and therefore lower ranking), then let's say during the last report taxes were 50 and regulations were 20. The total is 70 (IF they are both weighed equally in deciding the rankings, which is another assumption that weakens this answer choice. But let's ignore right now). Now, during this report, let's say that the taxes were simplified to the extent that tax = 10 now. As per answer choice C, tax prep has to be harder to comply with than the regulations, meaning the regulations have to be over 10. Let's say the regulations = 80 now. Now, the total is 90 -- but this is an overall poorer ranking than during the last report, which is not what the conclusion said.

The possibility of the numbers working out this way within answer C made C irrelevant for me, because as those example numbers show, C doesn't necessarily support or weaken the conclusion either way -- it depends on the more specific amounts of changes that occur. That left me with D, so I changed my answer to that!

Is this fair reasoning?

[Erik Shum]

Hi Snowy,

I believe you are focusing on the potential change in the other relevant variable (regulatory compliance) for the ranking. It is true that changes in regulations could affect the ranking and help us evaluate the minister's argument however answer choice (C) does not provide us with information about any regulatory changes.

Answer choice (C) focuses on the relationship between the tax and regulatory variables. Whether the paying taxes is more or less difficult than complying with regulations is irrelevant to the minister's argument: the minister is only arguing that the ranking will improve.

The minister does not assume anything about the relative difficulty to pay taxes and complying with other regulations. If paying taxes is extremely difficult and complying with other regulations is extremely easy, the ranking will probably improve. If paying taxes is extremely easy and complying with other regulations is extremely difficult, the rankings will still probably improve. It does not matter which variable has a heavier weighting: improvements in either are a reasonable basis to argue that rankings will probably improve.

Please let me know if I misunderstood your post.

[Tami Taylor]

Hello,

What is the Variance Test that's referred to in this post? Is it a strategy that you recommend using for any Evaluate question?

Thanks!

[Adam Tyson]

That's exactly what it is, Tami. The Variance Test is where we supply two opposing answers to the questions that are posed in each answer choice to an Evaluate the Argument question. For the credited response, one of those supplied answers will strengthen the argument while the opposite answer will weaken it. You can start with your prephrase and get down to your contender answers and then apply this test to see which answer does the job. One example here might be to look at answer B and supply two answers:

Yes, compliance among these types of businesses has increased.

No, compliance among these types of businesses has not increased.

Does either the "yes" or "no" answer impact the claim that our country's ranking will improve? No, because the rankings are based on the difficulty of compliance, not the actual rate of compliance. So answer B does not help us to evaluate this argument.

But for answer D, if we say "yes, the definition of midsized is different from what they used as a benchmark" (I am paraphrasing here), that hurts the argument, because we aren't comparing apples to apples and it may still be very difficult for the hypothetical businesses as defined in the report to comply. And if we say "no, they are the same size," then there is good reason to believe that our rankings will improve because we have addressed the same type of businesses that the report covers. One answer weakens, the other strengthens, and that gives us a winner!

p.s. The good people of Dillon, Texas miss you, and they hope you and Coach Taylor and the baby are doing well in Philadelphia. Have Matt and Julie given you two any grandkids yet?

[Tami Taylor]

Hi Adam! Thank you so much for going into detail here -- this really helps me understand the Variance Test.

Oh, thank you so much for the well wishes! Texas is our home. We do miss it. But Eric , Grace, and I are doing just fine up here. The seasons are such a nice change for us, and Eric is still finding ways to coach and change kids' lives. Matt and Julie are taking their time and focusing on building their careers, which is good because they got together so young, you know? But, if I'm being really honest, Eric and I are just about ready for some grandkids.

[silver2731]

I totally disagree with the reasoning given to justify D as answer.

Finance minister is talking about improving "our" ranking, meaning comparing the "our" ranking from the last report and "our ranking" to be reported. Whether the financial minister considers his mid size company against the hypothetical business by World Bank or not shouldn't matter. His mid size companies are the same mid size companies evaluated in the past report and future report.

It intuitively doesnt' make sense either. World Bank supposedly have "doing business" report to evaluate the country's easiness to do the business in general. If we take the reasoning that there will be no improvement in ranking IF the country has made improvement only in small business, the country doesn't deserve to be recognized for its effort? Why would World Bank ignore the country's improvement on business smaller than their hypothetical business?

[Beth Hayden]

Hi Silver,

This is a really tricky question!

On your first point, you're right that the finance minister is talking about whether their own country's rating is going to improve as opposed to last time. The problem comes with the next part--we don't actually know whether the businesses that were impacted by the tax filing changes were included in the past report or will be included in future reports. Why? Because this ranking might not be taking into account every single business in a country, it only says it looks at a "hypothetical" business. That is not the same as an "average" business.

What does that hypothetical business look like? Is it the type of business affected by the tax filing change? This is confusing because it's not what you might be used to when you think about rankings.

If the tax filing changes only impacted really small businesses that aren't even contemplated in the World Bank's rankings, then these changes aren't going to have any impact. Maybe the "hypothetical business" that the rankings examine as a benchmark is one with 1,000 employees. In that case, a law that only impacts businesses with 10 or fewer employees isn't going to matter when World Bank does their analysis.

Hope that helps!
Beth

[a.hopp]

Can someone explain why B is a poor answer choice? I'm understanding the reasoning for D a bit better after reading all the responses, but was pretty confused on this question in general.

[Adam Tyson]

I'll refer you back to my analysis earlier in this thread, a.hopp:

One example here might be to look at answer B and supply two answers:

Yes, compliance among these types of businesses has increased.

No, compliance among these types of businesses has not increased.

Does either the "yes" or "no" answer impact the claim that our country's ranking will improve? No, because the rankings are based on the difficulty of compliance, not the actual rate of compliance. So answer B does not help us to evaluate this argument.

What this means is that answer B is not relevant to the argument. It doesn't matter what's happening with compliance rates, because all that matters is the difficultyof compliance for businesses that are like the hypothetical business described in the report.