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Saturday, August 24, 2013

A Rant on Teaching Economics

Caught Up in the Math
I'm an economist.  I know a lot about the allocation of resources, how demand and supply determines prices, and the difference between the Federal Reserve and the U.S. Treasury.  I know how purchasing power parity impacts long-term currency rates and Keynes' exposition of the "liquidity trap."  In fact, I taught these concepts for a number of years.

I taught economics by the book, and by the book is essentially in line with the Samuelson approach.  Paul Samuelson was a Nobel prize-winning economist who produced the text that was used to teach the flood of economists that descended on Washington, D.C. following WWII.  A huge part of the impetus was the discovery that managing fiscal and monetary policy could influence the macro economy.  Classical beliefs, that a free market economy was best left to heal itself after busting at the gut from overindulging, were tossed to the gutter.  Instead, government policies could fight both unemployment as well as inflation.

Samuelson no longer has the leading text.  That honor now goes to Mankiw.  His text has better explanations, examples, and problems for students.  As would be expected, it is up-to-date with recent findings in the field.  But still the approach and general layout are the same.

A distressing fact, that is swept somewhat under the rug, is that students polled several years after taking a course in economics recall very little in terms of basic economic principles.  A second distressing fact (at least I feel it is a fact) is that economists get caught up in demonstrating their prowess in mathematics and clever insights.  Did you know that the effort to reduce traffic fatalities by requiring seat belts produces what is called "an unintended consequence?"

Before getting up a petition to drive economists out of town, it is worth appreciating that economics isn't easy to teach.  I have reflected on this.  It is a challenge.  Most students taking Econ101 are there for the grade.  It isn't like teaching nursing, where you are showing how to take a blood sample and the students are there thinking "I'll be doing this myself one day so I need to pay attention." Again, the typical student in Econ 101 is there for the grade; and a goodly number are hoping to get out alive with a "C" or a "B."

So maybe it is time to rethink how Econ 101 is taught.  My thought is it can be made more personal and, in fact, should be part of a high school curriculum for all students.  For example, in teaching about economic systems, and in particular the free market capitalistic system, the emphasis can be explicitly put on the positives and the negatives of the system and the student's role in the system.  In particular, teach that the free market system is the best there is at creating material wealth; but the way for most participants to enjoy this wealth is to contribute a good or service that the rest of the economy values.
This is a simple idea that many young people just don't get.  They are graduating from high school, and college even, and thinking that the economy owes them a living.  They are flummoxed when their degree doesn't automatically produce a good job.  Then they point their finger at the economy.  They stress out, buried by student debt.

A second simple example is to pound home to students the incentives that get the best and brightest in the economy to seek, 24/7, to separate them from their wallet.  The best and brightest are producing goods and services they will promote with incredible ingenuity backed by a deluge of resources to sink the average consumer into debt.

Teaching how the economy works is the place to introduce students to the fact that going into the real world is akin to going into battle.  It is the place to begin to prepare them.

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