Economics Education 101

Robert Frank discusses how "economic naturalism" helps teach basic concepts in introductory courses. With a podcast.
June 1, 2007

Market demand curves. Marginal utility. Dead weight loss. Those terms and others might awaken a dim flicker of recognition for anyone who's ever taken Economics 101. But chances are, according to new research, that even a basic understanding of fundamental economic concepts is lost on a majority of people who have ever taken an introductory course.

Robert Frank, the Henrietta Louis Johnson Professor of Management and professor of economics at the Johnson Graduate School of Management at Cornell University, and the co-author of a standard introductory text, Principles of Economics (McGraw-Hill), thinks he's stumbled onto a better way of introducing students to concepts like supply and demand and opportunity cost, foundational ideas of economics that apply to the real world. In his new book The Economic Naturalist: In Search of Explanations for Everyday Enigmas (Basic Books), Frank uses simple concepts to explain facts of life that, on second thought, are a little counterintuitive -- such as why the keypads on drive-through ATMs have Braille dots. Most of the questions he addresses came from students in his class. (Listen to the podcast for a sampling of enigmas and Frank's explanations demystifying them.)

Frank -- who also shares an economic perspective on contemporary issues through a monthly essay for the "Economic Scene" column in The New York Times -- sat down with Inside Higher Ed to discuss how writing is one of the best ways to learn a subject, what's wrong with how economics is taught today, and how the Peace Corps inspired his teaching method.

Q: One of the first themes that comes up in your book is how to teach economics, especially introductory economics. What’s your basic philosophy?

A: What we know is that the course as it’s traditionally taught doesn’t achieve much impact. Students are given tests six months after they’ve taken the course to see whether they understand basic economic concepts, and students who’ve taken the course don’t score any better on those tests than students who didn’t take the course at all. That seems like a pretty scandalous level of performance, to my eye. I think in other sectors of the economy we’d see malpractice lawsuits filed; in the university, maybe we get a pass on that sort of thing.

[Federal Reserve chairman and former Princeton professor] Ben Bernanke, my co-author on a Principles text and I decided that the real problem in the course was that people were trying to do way too much in it, so that you had these big encyclopedic texts with thousands of topics on the syllabus thrown at students. When you’re trying to throw that much information at a student, much of it in the form of equations and graphs, it all goes by in a blur and they walk away with nothing in the end. What we decided was that if you could commit yourself to the five or six key ideas, the ones that do most of the heavy lifting in economics, students really could master those after a semester, and the key device that we’ve stumbled onto for doing that is a writing assignment.

The narrative theory of learning now tells us that information gets into the brain a lot more easily in some forms than others. You can get information into the student’s brain in the form of equations and graphs, yes, but it’s a lot of work to do that. If you can wrap the same ideas around stories, around narratives, they seem to slide into the brain without any effort at all. After all, we evolved as storytellers; that’s what we’re good at. That’s how we always exchanged ideas and information. And if a narrative has an actor, a plot, if it makes sense, then the brain stores it quite easily; you can pull it up for further processing without any effort; you can repeat the story to others. Those seem to be the steps that really make for active learning in the brain.

The assignment that seems to have summoned those steps and put them to work in the best possible way is what I call the "economic naturalist" writing assignment. It’s a very simple assignment: You’re supposed to pose an interesting question -- and I stress interesting; nobody wants to read your answer if the question’s not interesting, I tell them -- and then use basic economic principles, one of these five or six principles that we hammer away at in the course, to try to construct a coherent answer in economic terms to your question.

So, for example, Bill Tjoa, one of my students in 1997, asked, Why do the keypads in the drive-up ATM machines have Braille dots on them? It’s a good question. Drivers obviously can see; why do they need Braille dots on the drive-up cash machines? Mr. Tjoa made use of the cost-benefit principle. That’s probably the simplest and most important of all of the ideas we try to stress in the course. It says that if the benefit exceeds the cost, then it’s a good idea. What he argued was that you’re going to make the machines with Braille dots on the keypads anyway for the walk-up machines, so you’ve got to incur the expense of designing and manufacturing the keypads with the Braille dots. Once you’ve done that, it’s just cheaper to make all of the machines the same way, rather than keep two separate inventories and make sure that the right machines go out to the right destinations. So: Cost lower, benefit the same, it doesn’t inconvenience drivers any to use the machines with the Braille dots, so it would be foolish to do it any other way. So the real question isn’t why should there be Braille dots on the keypads -- why shouldn’t there be? There’s no reason not to put them there.

Q: What happens after students decide to move on from your method of introductory economics, and they’re suddenly confronted with more graphs and charts that they may not have learned otherwise?

A: That’s a fair question. It’s not as if the course doesn’t have equations and graphs; there are some. Really, I think one goal of the course ought to be that students be able to read a simple graph. The [traditional] course goes way beyond that; it throws extremely convoluted and complex graphs at students.... But the main thing is if they don’t learn something in the course, and they don’t like the course, if they don’t feel like they’re making progress thinking about things in the course, that’s the last economics course they’ll ever take. Most of them take only one course. The course is now taught as if everyone in it was going on to be a Ph.D. student. If you learn the basic principles, if you learn how to think clearly in cost-benefit terms, there’s no trouble at all with the intermediate course. The intermediate course teaches everything that’s in the traditional principles course for the second time. It’s repetitive in that sense -- they need to do that, really, because the students didn’t learn it the first time. If you’ve come into the intermediate course with the basic ideas under your belt, then you can focus without distraction on the graphs and the equations; that can be your chore in that course.

Q: You mention one statistic in your book about how poorly students who have taken an introductory course do when presented with a basic question, as compared with people who have never taken an economics class.

A: Well there’s a familiar saying ... a little bit of knowledge is a dangerous thing. The particular study you’re talking about was by Paul Ferraro and Laura Taylor, two economists from Georgia State, and they posed a basic opportunity-cost question to students. Opportunity cost is really one of the fundamental concepts. The question they posed was not a simple question, but it ought to be one students could have answered if they really understood the concept. Among the students who had taken an introductory economics course -- it was a multiple-choice question -- only [7.4] percent got it right. So if you just guessed you’d have gotten it right with a probability of 25 percent, so really not an impressive performance at all on the part of the students who took the course. The students who hadn’t taken the course got it right at almost-chance levels [17.2 percent].

So you can say the students who’d never had any familiarity with the term "opportunity cost" more or less guessed and got about what you’d expect. The ones who thought they knew something about it knew just enough to steer themselves in the wrong direction.

Q: What sort of data do you have that tells you how effective or ineffective different methods of teaching introductory economics are?

A: That’s exactly the right question to ask.... I think we’ll at some point have some systematic evidence. The trick is to come up with the list of questions that everyone can agree if they get these right, that shows that they know what they’re doing. So we’re working on compiling a list of questions like that, the gold standard for measuring whether you’ve really retained any knowledge about economics.

What I can tell you about the writing assignment, though, is that it’s not easy for [students] to come up with an interesting question the first time.... By the time the second assignment comes due, much more typically a student will come into my office and say, "Oh, Professor Frank, can I do a medley? I’ve got these three great questions!" So, it’s quite visible in cases of those students that there’s a lot of rewiring going on in the brain over the course of the semester. They’re learning to look around them and see economic principles at work in ordinary settings....

Those stories, they’re interesting. When you hear them, you want to go tell people about them. That’s how you learn. It’s by taking the ideas out and using them, so by the time you’ve repeated a story two or three times, the idea behind it is just your idea forever. Students come back to me at reunion time -- they’ll have been gone 10 or 15 years -- many of them, the first thing they want to do, is tell me about extra questions they’ve been thinking about, and what do I think of the answer to this question? So it’s not like economics disappears from their radar screens after they leave the course, which is what I think happens for the majority of the introductory students who go through the traditional course. They’re still at it, 15 or 20 years later.

Q: Is there something particularly counterintuitive about economics? Are we just not wired for it? You also tie it in your book somewhat to the theory of evolution: Have we just not evolved to understand economic concepts?

A: I think there are a lot of things that people seem to have trouble with. There’s a big branch of economics now called behavioral economics. One of its founders, Amos Tversky, was a psychologist at Stanford. He liked to say his colleagues study artificial intelligence; he prefers to study natural stupidity -- the cognitive errors people are prone to make. It’s not that we’re stupid, but we use heuristics, we use rules of thumb, and the heuristics work well enough on average across a broad range of circumstances, but unless you really understand the logic of weighing costs and benefits, it’s very easy to be fooled into making the wrong decision.

Q: Do you think the methods that you’re using in your classes are particularly tailored to economics, or would you see them applied to math, to computer science, to other fields?

A: I stumbled onto this writing assignment by accident. It was a result of the fact that I had been given a teaching assistant by the [John S.] Knight Institute for Writing in the Disciplines at Cornell. [Half of the book's proceeds will go to the program. --ed.] The idea of the program is that a good way to learn about a new idea is to write about it. As someone who’s written a lot, I can attest to the validity of that. I’ve never learned as efficiently about something as when I’m trying to write about it. So they gave me a T.A., the T.A.’s job was to grade the papers in my course. They realized that professors under time pressure don’t assign papers because they don’t want to take the time to grade them. So I started assigning a term paper in my upper-level course, which I hadn’t done for the reason of being pressed for time to do other things, and I noticed that the students got way more engaged in the course as a result of that paper. And I started cutting it back from 20 pages to 10 pages when I lost the T.A. (the grant ran out). And then from 10 to 5 -- each time I cut it back in length, the papers seemed to get better. Right now the length of the paper is maximum 500 words. I can spot 500 words no matter what size font they use, so I tell them I won’t read past 500 words, but I stress that the best papers are often only one, two paragraphs. The Braille dots example you can do in 80 words without any trouble at all.

So that exercise was developed as part of a program that’s shown evidence that if you write about things in general, in a whole variety of disciplines, it’s a good way to learn. And so what I think we’ve shown -- I’ve talked about these ideas, and the approach that the course is offering, to physicists now, the College of Engineering [at Cornell], to a conference of public policy professors. At each of those meetings, people have come up to me, and said, yeah they think they have the same problem, their syllabuses have way too much stuff on them, they’re trying to ask how much can I cover today? When really the right question to ask is, How much can my students absorb from what I present today?

I’m very confident that the problem we’ve spotted is there in deep measure in economics, but it seems to be present in a lot of other disciplines, too.

Q: Are there any efforts to spread these methods?

A: There’s constant innovation in the teaching of the introductory [economics] course. I think one of the main things we’ve seen in the last decade or so has been the refinement of online problem sets and tutorial programs. Many courses use those; I used one in my course this term. It’s a very efficient way to guide students through problem sets and give them feedback when they make mistakes, so I think that’s been an improvement. ...

But I think unless people really end up liking the course and realizing that they can do something with it, then it’s just not likely to leave a lasting imprint on them. Languages was what first caught my attention that "less is more" might be a better way to go. I had taken four years of Spanish in high school, a couple years of German in college. When I traveled to Spain and Germany, it was very difficult to make myself understood in those languages. They weren’t trying to teach us how to speak. Basically, we were learning about the pluperfect subjunctive tense and other grammatical arcane details that the professors thought important but weren’t really the way you learn how to speak as a practical matter. The Peace Corps language training program I went through really showed me a different way. Their goal, plain and simple, was to have us speaking Nepali after 13 weeks. We had to go into the classroom and teach in Nepali after having arrived at the training site not knowing a word. What they did was they tried to mimic exactly the process that a small child goes through learning its native language, so very simple stuff drilled over and over again.

The idea of taking a few core things, working on them until you get them, and then moving on and adding complexity only when the root stuff is firmly embedded, that just seemed like such an eye-opener to me. It really really worked. And why not in economics? So I’ve been trying it there, and I’m convinced that it works there as well as in language.

Q: Do you think it’s catching on?

A: I do think it’s catching on. Ben Bernanke and I warned our [textbook] publisher, McGraw-Hill, that this was going to be a tough sell. Everybody agrees in the abstract that if you just concentrate on a few important ideas, that would be better. But then when they see that their pet idea isn’t among the list, then they said, well we can’t teach out of that [teaching method]. So I said to them, we’ll fight for every adoption we get, and in fact it was a struggle coming out. A lot of people were leery about trying a new approach, but I can say happily now, every edition [of the textbook] has seen very sharp growth. We’re just now launching work on the fourth edition, and what the company has now authorized us to do is write the true less-is-more book that we wanted to write from the beginning. As a bow to the realities of the marketplace, there’s a lot more complexity in our [current] book than I would have chosen. Now they’ve been having focus groups with professors around the country, and they really feel that people are ready to embrace a true stripped-down approach to the course. ... The way I read the movement in the profession, the day will come when the brief book -- the stripped-down book -- will be the consensus book for how to teach the course.

Q: You had an interesting segment in the book about why the most prestigious universities are not-for-profit institutions.

A: Well, if you imagine two universities trying to compete with one another, one for-profit and the other a nonprofit, the advantage the nonprofit has is that it can solicit tax-free donations. So if you go to a nonprofit university, you could pay a lower tuition and then make a gift. Let’s say the cost of educating you in both places is $20,000. The for-profit university has to charge $20,000 or else it will go out of business; it won’t cover its costs. The nonprofit could charge, say, $18,000 in tuition and then rely on you to give a gift at some point of $4,000, which if you’re in the 50-percent tax bracket would mean a gift that out of pocket costs you $2,000. So you’d be paying the same at both schools. The difference would be that you’d be getting $22,000 worth of instruction at the nonprofit institution, only $20,000 [at the other]. And then as endowments accumulate over time, the difference gets bigger and bigger.

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