Economics As It Could Be Taught

(Editor’s note: Kelly Markson has been a full-time economics instructor at Wake Technical Community College since 2005.)

I teach economics, but it’s not my first love. History is. The daughter of a master storyteller and social studies teacher, I spent my summers in history-rich upstate New York listening to my father unfurl the mysteries of our beloved nation. I continued studying history at Hamilton College. But I chose to get my graduate education in economics. The reason? I am much stronger at math than at reading.

Learning economics is easy for people like me. But the basic 100-level course is a dreadful experience for a weak math student. I know. I teach economics at Wake Technical Community College, full-time.

When I first started teaching the introductory economics course here, I felt as though I was teaching calculus to students who were barely ready for pre-algebra. The students hated it. I hated it. And the evaluations of the course reflected our feelings.

For the student with math anxiety, even the concept of supply and demand is challenging. But then there is the concept of elasticity, followed by chapters on productivity, costs, and market structure. These can be a nightmare. The students get so caught up trying to figure out what equals what and solving for Q that the economic lessons are lost.

Yet students who are weak in math can and should learn economics. These students—the ones who come to my rescue as I stand helplessly before the class, scratching my head trying to figure out the A-V equipment—are clearly capable of learning, but their comparative advantage is not in math. For many of them, my introductory class is the only economics class that they will experience—if they transfer to a four-year school, my 100-level course does not transfer as an economics course. It transfers as a social science class.

Given this, the goals of this class should be different from those of the traditional 200-level college-transfer principles class. Let me explain further.

Among the economic lessons I want to get across to my students is passion for the subject. What? Did she just use the words passion and economics in the same breath? Yes. I LOVE economics—the more basic the better. I want my students to get just as excited about the subject as I am.

Why is one-sixth of the world—the “first world”—different from the rest of the world? What did these countries do right that the rest of the world is not doing? This question is the focus of Adam’s Smith’s Wealth of Nations. I want to give my students the building blocks to answer this question. So, a year after I began teaching here, I tossed out the heavy principles text that I was given, adopted a small one, and narrowed the focus of my course.

In several principles-of-economics textbooks, the first chapter is devoted to the basic elements of economics such as scarcity, tradeoffs, opportunity costs, incentives, marginal thinking, etc. Most instructors spend very little time with this chapter.

I spend weeks on these concepts. These principles are at the heart of economics, which is, essentially, the study of human behavior. Economics explains how people make decisions—important ones such as where to go to college and unimportant ones such as which shampoo to buy.

Economics teaches us that if given a certain set of conditions and incentives, rational humans behave quite predictably. We need to look no further than the macroeconomic crisis that our nation is currently experiencing. As well-meaning government officials promoted homeownership over the years, the incentives they put into place led, gradually but almost inevitably, to a housing boom and then a bust. Those incentives included lower mortgage standards, the Federal Reserve’s low interest rate policy in 2002-2004, and changes in accounting rules that allowed financial institutions to expand their capital when asset prices rose but reduced their capital when asset prices fell.

Just as my students learn to understand the causes of today’s problems, they learn why conventional wisdom is often wrong. For example, most people think that rent control—government limits on rent increases—make the poor better off by keeping housing affordable. But my students understand the unintended side effects. In cities like New York, rich insiders are often the ones who get the breaks. Because landlords can’t get a market rent, few people want to build more apartments, so existing houses often cost more. When rents are low, landlords don’t want to make necessary repairs and in extreme cases they abandon the apartments.

When it comes to tradeoffs, scarcity, and opportunity cost, readers who know economics can follow a simple model, the “guns and butter production possibilities frontier model.” For the math-phobe, that model is not only a meaningless round curve, but boring and unrealistic.

So, I don’t use graphs to illustrate the concept of tradeoffs. Instead, I have my students look at data such as the real-world military spending as a percentage of GDP of North Korea. And then we look at a satellite image that suggests some implications of these data. If you haven’t seen it, check it out here. The picture shows darkness. The diversion of money to military spending means that there is little money for normal living—even electricity. The North Korean government has made a tradeoff between guns and butter.

What do the first-world nations have in common? Quite a bit: the rule of law, competitive markets, tax rates that are not excessive, efficient capital markets, etc. In short, the successful countries tend to have the most economic freedom.

Because the course content is limited to basic economic concepts, I can devote more class time to learning strategies that result in much greater retention rates than lectures do. These strategies include watching film clips, debating, discussion groups, classroom experiments, and oral presentations. YouTube is an excellent resource for illustrating economic concepts, especially with humor.

When we discuss the benefits of trade, I have my students bring in an item to trade. Students learn that trade moves goods from people who value those goods less to people who value those goods more. Trade will not exist unless both sides expect to benefit. The class also engages in a double oral auction (like a normal auction except that both buyers and sellers express bids). And students discover the tragedy of the commons by “fishing” for Starburst candies.

The result: The students are happier, and so am I. My teaching assessments are much better, although the grades I give are not necessarily any higher. No matter what the level of the student, after finishing my course, I believe each can think intelligently about basic economic issues. For example, my students understand that inflation is the likely tradeoff of a $787 billion stimulus package coupled with a $700 billion financial-sector bailout.

At the end of the course, we spend a little time on practical personal finance—not the ins and outs of investing today but the lessons that are timeless, such as discovering your comparative advantage and living beneath your means. Students find this section the most valuable part of the course.

When new acquaintances learn that I am an economics instructor, they often say something like, “Ugh! I hated that class.” Their antipathy for the course is their only memory. But not for my students. Many of them become engrossed in the subject and most of them leave the class having learned concepts that will help them make intelligent decisions for years to come. Students need an approach more like my new one if they are to understand what economics is all about.