Trade and Peace

Don Boudreaux over at Cafe Hayek has an interesting post referring to a commentary he did for Christian Science Monitor. He cites some recent research that indicates that trading countries are less likely to develop into warring countries. I found this an interesting parallel to Thomas Friedman's idea in The World is Flat that countries with McDonald's have not gone to war against each other. Friedman's explanation is that the investment flows from outside have a way of exerting pressures to reduce geopolitical risk. Put simply, markets don't like risk. I found the comments at Boudreaux's post interesting, as well.

What are your thoughts?

Posted by TSchilling at 4:19 PM Comments (0)

A Story of Comparative Advantage

Of all the ideas in economics, comparative advantage may be the one that is most likely to bring forth the old line that "economics explains things that are good in theory, but don't work in practice." I won't bother to point out that if something doesn't work in practice, the theory usually doesn't last long.

But if you are looking for an interesting story to explain comparative advantage to your students, please look at this post at the Library of Economics and Liberty. It's written by Dr. Russell Roberts, a professor at George Mason University and titled Treasure Island: The Hidden Elegance of Comparative Advantage. It does a nice job putting the idea into a simple, easy to understand story.

Let me know how this works. I think it beats heck out of the wool/wine story that many of us use to explain the concept.

Posted by TSchilling at 4:15 PM Comments (0)

Milton Friedman, 1912 - 2006

Milton Friedman, winner of the 1976 Nobel Prize in Economics, died earlier today at the age of 94. Dr. Friedman's efforts to popularize (and some would say politicize, although I would disagree with that) economics were many. Few people had his intellectual capacity to debate, nor thought as deeply and widely as he did. He was responsible for turning many on to the subject of economics through his TV series Free to Choose, as well as a vast number of books and articles.

In my experience, few Nobel Prize winners in any category had the ability to get students attention to the extent that he did. The world of economics and economic education is better for his contributions. Thank you Dr. Friedman.

Other comments are welcome.

Posted by TSchilling at November 16, 2006 6:56 PM


Comments
I like using fables to show how abstraction can be used to show complex ideas. Do you think a faster approach would be to show how people use comparative advantage in their own lives? For example, like making a meal where everyone has a task. Thanks for working in education...flad

Posted by: mike fladlien at November 18, 2006 6:11 PM


Bless...

Posted by: lia at November 20, 2006 4:38 AM

How Do You Teach "Rich?" (Part III)

There's an interesting web site that can help your students understand how our nation compares to most of the world. The site, How Rich Are You? allows students to enter an income in one of five major currencies, then shows where that income ranks relative to a world scale. For example, plugging the median U.S. income of $46,242 shows that to be in the richest 1.36% of world population. It also shows some interesting choices one can make regarding donating part of one's salary.

Now, it does not discuss issues of income disparity aside from making a statement about how much better off people are in wealthy countries vs. those where the poorest 20% live. Nor does it discuss economic institutions. That is important because in many of the "richer" countries, institutions exist that allow people some income mobility throughout their life cycle. While the institutions in many poor countries would limit the impact of the donations through corruption, etc. Nevertheless, the site is an interesting place to start.

Thanks to Greg Mankiw for the pointer, and Marginal Revolution before that.

Your thoughts on how to use this in the classroom are encouraged.

Posted by TSchilling at 3:09 PM Comments (0)

Opportunity Cost, Choice and Alzheimer's Disease

I must apologize for not posting in a while. The past few weeks have seen me tied up with the College Fed Challenge program . Last week we had 13 teams in the Bank from universities around the Chicago Fed's district. In front of panels of Fed economists, they provided analysis, forecasts and monetary policy recommendations. Northwestern University emerged from a strong field to represent the Seventh District against teams from the Boston, New York and Richmond Districts later this month.

One of the highlights was meeting fellow blogger William Polley who teaches at Western Illinois University and who brought a first-time team to the competition. I always enjoy his posts, and I find I learn a lot as well.

Now down to the topic at hand. Yesterday morning, as I was driving to the train station, I was listening to Morning Edition on NPR and heard this interesting piece on Alzheimer's Disease. The article pointed out that Alzheimer's was first described in the medical literature 100 years ago. It was received with little fanfare as the symptoms were thought of as basic to the aging process.

I was particularly struck when one of the folks being interviewed talked about the opportunity cost we face with the disease. He thought that the funds spent on research looking for a cure may better be put to use in providing support for families and victims. I don't know enough about Alzheimer's to comment on whether or not it is curable, but I think the case for making healthy lifestyle choices to slow or prevent its onslaught, and the idea of support for those who already have the disease, could make for interesting discussion in the classroom. I have no doubt that the emotional price paid by those who suffer from Alzheimer's is high. This goes for those diagnosed as well as for family and friends.

What do you think about using this as a discussion starter when talking about opportunity cost?

Posted by TSchilling at 3:00 PM Comments (0)

Money and Barter (yet again)

Back in April, 2006 I posted about "one red paper clip." It was an interesting exercise that had someone trying, through a series of trades, to barter a red paper clip for a house. I used it as an example about inefficiencies of barter, etc. I followed up in July when the last trade was made.

Now I draw your attention to an article by Tyler Cowen in National Post that examines the real cost of bartering. It's worth a read.

Do you think this would be a usable example for your students on the inefficiencies of barter, and why we use money?

Posted by TSchilling at October 20, 2006 5:12 PM


Comments
That is a great, timely story illustrating barter. In the classroom, it might be nice to find numbers and estimate time to compare bartering for a house to buying a house with money. I think the costs might be close to equal. In this case I think the publicity generated by barter, probably made bartering a better deal - score one for rational economic decision making!

Posted by: Jennifer at October 20, 2006 9:25 PM

Mathematics and High School Economics

I believe that one of the objectives for high school economics classes should be for students to learn how to apply some mathematics skills to economic situations. That can range from calculation to data interpretation. It is the latter area this entry is addressed.

I was recently talking with an economics teacher who was explaining how he helped students analyze economic information and data. He told me taught a very traditional one-semester course with a wide variety of students in the class. He said he wanted to give the students a simple way to distinguish between coincidence, correlation, and causation when looking at economic data. The teacher told me he used three explanations with his students.
Coincidence - Two things happen at or about the same time.
Correlation - Two things happen at or about the same time with some frequency or regularity.
Causation - Two things happen at or about the same time frequently with consistent and observable sequence and connection.

I was impressed with the simplicity but expressed some reservation, largely because of time issues. I know how hard it is to get the average economics students to realize that just because two things happen at the same time, it doesn't mean the events are connected.

I found this interesting because back at the end of September, Greg Mankiw posted a rather heated entry about people who confuse correlation with causation.

I have two things to ask you as a reader of this blog. What changes (if any) would you make to the explanations above? (Keep in mind, we don't want to get too complicated, given the audience.) And what are some of the activities you use to teach students how to analyze data?
I look forward to your comments.

Posted by TSchilling at October 17, 2006 3:03 PM


Comments
Logic should be the objective of economics and math. Economists use math to check the consistency of their logic. Math scares students. The trick is to teach them logical thinking first and connect that slowly to the math. We should teach students the following: math is a tool to analyze the world around you not a scary thing which they are not good at!

Posted by: Mike Javanmard at November 5, 2006 11:09 PM