Thursday, March 30, 2006

What to Teach

I was reading an interesting blog the other day. The author of "The Big Picture" is teaching Econ 101 and was looking for ideas. The article and the comments for the post are very interesting, and got me thinking.

Given the insight to what people think should be in Econ 101 at the college level, what do you think should be covered at the high school level? What is your approach?

1. "Cover as much as possible because much of this is important and my students might not go to college."
2. "Cover as much of the 101 course content to help my students have a better understanding."
3. "Cover only practical applications and personal economics because the 101 course seems to miss that."
4. "Something else entirely."

I understand that many of you are in states where the curriculum is governed by benchmarks and testing. But given the insights, what would you do?

Posted by TSchilling at 4:42 PM | Comments (0)

Tuesday, March 28, 2006

Nations Don't Trade

I've been on the road a lot lately. That means I haven't had the ability to post easily, and I have a lot of e-mail and blog-reading to get caught up on. It also means I end up with time to think. It doesn't necessarily mean I've thought things all the way through, just that I've thought about them.

During this road trip, I had occasion to hear students speak about the state of the economy. I've been amazed at the frequency with which trade issues have come up. Generally students don't speak about international trade. The frequency with which it has been mentioned made this all the more interesting.

What caught my attention is the belief among many students that the "government" or "big business" needs to do something to change the flow of trade. What has been totally absent is an understanding that the flow of trade will change only when individuals change their trading habits. Ultimately, it is individuals who trade, not nations or firms. Nations and firms are, as many economists will point out, convenient amalgamations, generalized combinations of individuals. And when these groups trade, it is the result of an individual's choice. And that individual usually makes the decision based on a belief that the goods or services bargained for will be resold to yet other individuals.

Trade balances are the net of all the purchasing information made by individuals (for themselves, their firms or their agencies) in the global marketplace. When your students choose to buy something, they influence that total. And they are the lynchpin for any continuity or change in the flow. For whatever they choose to do will impact on their real income, the basket of goods and services that they consume. That is the true measure of their wealth.

The classic classroom activity for this is the "inventory." Students can go home and inventory their room, their closet, or whatever. They can list the items, the nations of origin, and with a little research, the price of those items. They can then try to find substitute goods/services, the sources of those items, and the prices. They should then see if they can construct a totally domestic basket of goods/services, and whether or not they can get the same items, for the same price.

If the global market is working, chances are they will find that a totally domestic basket of goods will cost more than the international basket of goods. The choice is now theirs. Are they willing to pay more for certain products, and reduce the total goods in their basket, or not? They trade because, ultimately, they consume. It’s their money. It’s their basket of goods. It’s their choice.

As always, I welcome your comments.

Posted by TSchilling at 8:49 PM | Comments (0)

Friday, March 10, 2006

Land, Labor, Capital and ....?

There seems to be a resurging discussion about whether or not entrepreneurship should be included as a "Factor of Production." Mark Thoma discusses the issue at The Economist's View. It is an interesting post. In it he excerpts from an article in The Economist which reviews a paper by William Baumol, who advocates studying the role of the entrepreneur in the productive process.

I must admit that I was originally taught only the "big three". At the time, my instructors saw entrepreneurship as one more part of labor, similar to management. Yet that always left "profit" as a return that was, in my mind unassigned. (Rent was return on land, interest was return on capital, wage was return on labor, profit was...?)

In my mind, the case for entrepreneurship being a factor hinged on the extent to which you viewed the "entrepreneur" as an innovator. What did they do that was new or different? Ostensibly, they combined land, labor and capital in innovative ways. But what if they "merely" brought an existing concept to a new place? This then led to thinking about whether innovation took place in great leaps or was incremental (or both.) As is pointed out in the article The Economist, Baumol's work hearkens back to the work of Joseph Schumpeter.

I eventually came around to view entrepreneurship as one of the factors, and was interested to see it fall off in importance in recent years. It is heartening to see the study of entrepreneurship reviving. How do you address the factors of production? Is it only those of us of a certain age who can remember "three factors." Or is there a younger group that was taught the same way, discounting entrepreneurship.

Your comments are welcome.

Posted by TSchilling at March 10, 2006 3:28 PM

Entrepreneurship is small, profits typically being only 10% of the economy, but they are really the most important, as they drive the economy forward. Without it, stagnation sets in quickly.

Posted by: Lord at March 10, 2006 8:33 PM

Wednesday, March 8, 2006

Everyone Else is Asking

so I might as well go along with it. Will you buy Alan Greenspan's memoirs? I probably will, but I also suspect I'm different from many economic educators in that I find more value in biographies/memoirs than many of my colleagues. I find the historical context important to my understanding, and I find the application of economics (when well explained) enlightening. The personal view just "personalizes" the whole experience.

I really have two questions, I guess.
1. Will you buy (and read) Mr. Greenspan's book?
2. Do you generally buy (and read) biographies or memoirs of economists?

Posted by TSchilling at March 8, 2006 4:21 PM

Hi Tim!
1. No, but I might check it out at the library.
2. Not usually.

And I have a question for you. What affect do you think the Kalamazoo Promise program will have on the quality of the Kalamazoo school system?

"Civics Lesson: Kalamazoo, Mich., Pegs Revitalization On a Tuition Plan --- Promise of College Funding Stokes Housing Demand, But Will Jobs Come, Too?"
By Neal E. Boudette
The Wall Street Journal

I have been meaning to comment for a while!

Posted by: Amanda Gibson at March 10, 2006 9:37 PM

Friday, March 3, 2006

Signs of a "Well Regulated" Economy

This is an old joke, but a good one. I just wish I could remember which blog I saw it on so I could give credit. Help me out.

There were three prisoners in a jail cell. They started talking and comparing what they were in for.

The first one said, "I'm a gas station owner and I set my prices above market, so I'm in for price-gouging."

The second one said, "I'm a gas station owner too, and I set my prices below market, so I'm in for predatory pricing."

The third one said, "I'm a gas station owner as well, and I set my prices at market. I'm in for collusion and price-fixing."

Posted by TSchilling at March 3, 2006 8:03 PM

Let's hope they learned their lessons and change them daily (or hourly) like the local ones, ;-). One has to wonder whether price instability is a sign of efficiency or inefficiency. Note that price-gouging only occurs when prices are high, predatory pricing when they are low, and price fixing when they are level.

Posted by: Lord at March 7, 2006 6:19 PM

Interdependence and Trade

I've been traveling a bit recently. This usually means I spend the first part of my morning back in the office getting caught up on phone calls, e-mails, etc. Once that's done, I find some time to check out the handful of blog sites I try to read regularly.

Don Boudreaux at Cafe Hayek had an interesting post on Jane Jacobs. The post and subsequent comments are interesting in their own right and definitely worth your time. But the post made me think about a different selection. In the same book cited by Boudreaux, Jacobs pulls a quote from Henry Grady, wherein Grady is describing funeral. I was struck by the great example of trade and interdependence this made and how it could be used to highlight those concepts in the classroom. See if you agree.

"The grave was dug through solid marble, but the marble headstone came from Vermont. It was in a pine wilderness but the pine coffin came from Cincinnati. An iron mountain over-shadowed it but the coffin nail and the screws and the shovel came from Pittsburgh. With hard wood and metal abounding, the corpse was hauled on a wagon from South Bend, Indiana. A hickory grove grew near by, but the pick and shovel handles came from New York. The cotton shirt on the dead man came from Cincinnati, the coat and breeches from Chicago, the shoes from Boston; the folded hands were encased in white gloves from New York, and round the poor neck, which had worn all its living days the bondage of lost opportunity, was twisted a cheap cravat from Philadelphia. That country, so rich in undeveloped resources, furnished nothing for the funeral except the corpse and the hole in the ground and would probably have imported both of those if it could have done so. And as the poor fellow was lowered to his rest, on coffin bands from Lowell, he carried nothing into the next world as a reminder of his home in this, save the halted blood in his veins, the chilled marrow in his bones, and the echo of the dull clods that fell on his coffin lid." (From The New South: Writings and Speeches of Henry Grady, Beehive Press, 1971)

Your response is encouraged.

Posted by TSchilling at 10:05 AM | Comments (0)

Wednesday, March 1, 2006

Economics in History, Part II

While the link I'm going to suggest may be a bit much for your students, it is certainly good background if you're teaching trade in economics, or if you teach a course in European or World History that includes the 19th Century.

The Economist is a well-respected periodical. Some people think of it as the British predecessor to U. S. News & World Report. I won't get into whether it is or isn't. Suffice it to say that the British magazine has been around longer and is a good review of news and economic events from outside the U.S.

On the website of The Economist, there is a link that will take you to the text from the Preliminary Number, dated August 5, 1843. The text, while lengthy, provides a contemporary view of English trade, and lays out the case for the magazine. It discusses trade in coffee, sugar, wool and wheat, and the impact of trade barriers on these basic items.

You might well want to take a look. But do so when you have the time to examine it. I think you'll find it useful and interesting in providing background for your classes.

Posted by TSchilling at March 1, 2006 4:40 PM

The date of the article is, as you note, August 5, 1843. Right below it says it is from the print edition. I am glad The Economist clarified that because I thought it might have been from The Economist's 1843 World Wide Web edition.

Posted by: Tom at March 1, 2006 7:33 PM

A Little Fiscal Policy

When you're covering fiscal policy in your survey course, nothing seems to generate a lively debate than discussion about "tax fairness." Whether discussing on a theoretical level, or as an adjunct to a "prepare your return exercise," the topic generally will get some reaction. I certainly don't claim to have the answers, but a couple of sources for information to include in your classroom are worth looking at.

First, the United States Treasury Department release of March 2, 2005 has some interesting information. While dated, it does provide some fodder for discussion.

Second, the Tax Foundation released some information back in October of 2005. If you're not familiar with this group, they publish the "Tax Freedom Day" information each year, stating on which day the average American taxpayer "stops working to pay taxes."

Thanks to The Amateur Economist and Curmudgeon blog for pointing these out.

Posted by TSchilling at 4:03 PM | Comments (0)