Log in

No account? Create an account

Previous Entry | Next Entry

So we've established that opportunity cost is one of the key concepts of economics.

We've also established that most economics students can't answer a simple opportunity cost multiple choice question, and neither can most professional economists. (Ferraro & Taylor 'Do Economists Recognise an Opportunity Cost When They See One? A Dismal Performance from the Dismal Science.')

The concepts aren't really that difficult. A little counter-intuitive at first perhaps, but once you've got past that first hump, perfectly reasonable. So we have to ask why economists and students struggle with the concept.

I think the problem starts with the way most students learn their first economics.

I'm in Liverpool at the moment. Business not pleasure, but I did have the chance to walk around the shiny shops that have opened in the ten years since I stopped working here. I went into the very large Waterstones book shop and had a look at their Economics section. Probably about one fifth of the books there were actually about economics, the rest were business or accountancy tomes. ACCA textbooks, books by the dragons on Dragon's Den explaining how you too can be as successful as they are - that sort of thing. One of the proper economics books was 'Economics for Dummies'.

I love the '... for Dummies' books and go back a long way with them. I used to own 'DOS for Dummies' back when it was the only 'Dummies' book. Given how important opportunity cost is, you know how much 'Economics for Dummies' had on it? About three paragraphs.

But it had lots of curves.

The standard textbook when I did A-level economics and for the first year of my degree was an earlier edition of 'Economics' by Begg, Dornbusch and Fischer . It's full of curves. Economists love curves. Curves to show the relationship between demand and price, between supply and price will be most students' first lesson. When they get on to macroeconomics, they'll learn about the Phillips Curve. I'll save all these curves for another post.

Here's a typical curve that you might find in an introductory economics textbook:

Now consider the difference between the opportunity cost question I posed you and that curve. The curve looks pretty daunting if you're new to economics. It also looks pretty theoretical. The Eric Clapton tickets question on the other hand is a practical real-world problem.

So why the hell does economics teaching at A-level and first year degree level throw lots of curves at students, while very quickly moving past the practical everyday economics that students will be able to relate to?

Something that helped me when I did my A-level was that the teacher got ill. Despite its size, my sixth-form college was unable to find a proper replacement economics teacher, so we got a maths teacher instead. As you'd expect, he wasn't very good, so I had to teach myself for virtually the whole of the upper sixth. That worked pretty well, I got an A - and what's more, I think the fact that I had had to think everything through from first principles put me in good stead for my Oxford interview. When Dr Enos asked me questions that I hadn't heard before, I was able to construct answers from first principles (first principles like opportunity cost). I'm convinced that's the way to teach introductory economics.



( 6 comments — Leave a comment )
Sep. 9th, 2010 08:35 pm (UTC)
I also read 'Begg Dornbusch and Fisher' - I borrowed it from a friend and used to read it on the bus to work soon after uni. I also found it rather theoretical and not easy to get into. Years later I did a week long introductory course in economics and how to apply it to my work and then it did become much more clear, through the sort of practical examples you mention. So in short, I agree! Though I guess to finish teaching about opportunity cost it would be useful to show us when you would use the concept to actually help you make a decision about something or to understand behaviour: a practical application. (Rather than just deciding which concert to go to or whether to eat crisps or caviar, which is interesting but which I can manage for myself without understanding the economics of it!)

Oops I have just revealed that I know some basic economics. No gold stars for me!
Sep. 9th, 2010 09:48 pm (UTC)
I've just done another post on opportunity cost that might be some of what you are after. There is a very real example I might cover in a later post, but as it's a bit more complicated, I want to build up to it.

As someone with a good background in what business wants out of education, can I ask what your views are on teaching economics in schools? See my reply to kargicq here: http://philmophlegm.livejournal.com/165564.html
Sep. 10th, 2010 07:11 am (UTC)
I just tried to reply but it didn't come out - try again. The gist was, I think it depends and I've never looked specifically at economics. Key factors for me would be:

- what aspects of economics are going to be useful to those who don't want to become professional economists. Do you need to study economics to get those? Is some available in other subjects, like Geography?

- at what level do you need to start economics and what do you need to know before you can start? Traditionally I think it has been seen as a subject you can pick up at uni level without having done it at 6th form level. (Contrasting with other subjects like maths which are seen as more a matter of progression within the subject). Is that wrong and if so why not?
Sep. 11th, 2010 05:55 pm (UTC)
I think stuff like opportunity cost would be useful to teach at school. Some of the macro stuff would go well with politics, for example, explaining why some politicians want to reduce government spending and some don't. Most of the economics that I studied has not been useful to me in my career. However, when you think about it pretty much all of science courses are irrelevant to most people's lives.

The people who did PPE with me at Magdalen and hadn't done Economics A-level struggled with it, and mostly dropped the subject after prelims. (PPEists can drop one of the three subjects after prelims - I dropped Philosophy.) To be honest I wouldn't advise someone to do an Economics degree without the A-level.
Sep. 10th, 2010 07:14 am (UTC)
... and in my experience I haven't found business people saying 'what I want are more economists'! Yes a better understanding of what business is about is something I did pick up but it was part of a shopping list of things. The highest priority was always for stronger general skills.
Sep. 11th, 2010 06:09 pm (UTC)
I agree that what we (I'll include myself as a business person here since I am involved in graduate and post-A-level recruitment) want is general skills.

[Warning: personal opinion ahead!]

I'll also suggest that Economics is actually pretty good at teaching those general skills (or at least it could be if it was taught better). That would be general skills like making sense of complex data and expressing thoughts in writing. History also teaches similar skills (with less numeracy perhaps) but apparently schools don't teach history any more either.

I doubt that most of the science subjects teach the general skills well. Too much emphasis in schools is on preparing the clever kids to do Physics degrees. This makes perfect sense only if we need lots of physicists. Do we?
( 6 comments — Leave a comment )