Improving Econ 101

In a recent BloombergView article Noah Smith argues that the reason introductory economics classes are so bad is that they have few empirical demonstrations of their basic insights.  He draws a contrast between Econ 101 and introductory Physics classes.  While the physics classes actively demonstrated that their theories had merit, in Econ 101 and 102, 

… there were no demonstrations. There was basically nothing but theory — all the pretty little theories of comparative advantage and monopoly pricing and loanable funds, and not a whiff of evidence to back them up.

This observation leads Noah to conclude that introductory economics classes need a greater emphasis on empirics — much the way that the profession has shifted emphasis towards empirics recently.  

There might be some truth to Noah’s argument and his recommendation but I have some doubts all the same.  

Introductory economics – particularly introductory microeconomics – introduces students to, as Greg Mankiw summarizes it, “comparative advantage, supply and demand, market efficiency and market failure.”  That sounds about right but I would say that supply and demand reasoning is the most important tool the students are exposed to. Supply and demand models have a huge number of applications: labor markets, rental markets, the market for illicit drugs, the market for video rentals, the market for foreign currency, the market for short term lending, etc.  Moreover, there are many compelling empirical examples of supply and demand analysis in action. Obviously there is a huge literature on the effects of minimum wages which requires nothing more than supply and demand. There is a literature on rent control. There is the famous empirical study of labor markets (and capital markets) during the Black Death. There are empirical results on tax subsidies, tariffs, farm subsidies, … There are empirical studies of the market for banking reserves. Empirical studies of the effects of entry on prices (think jetBlue) and so on.  Instructors should definitely expose the students to these results — none of which are really new.  

I’m a bit surprised that Noah didn’t mention the increasing prevalence of in-class experiments. (I’m surprised because Noah’s Ph.D thesis focused on experimental analysis of asset pricing games). There are tons of fun in-class demonstrations that can be run.  In-class auctions, bank-run experiments, prisoner’s dilemma experiments, price ceiling experiments, and so forth. Students often really appreciate these demonstrations and they have a way of bringing to the material to life in the way that a review of empirical studies cannot.  

However, if I were to guess, the most important problem holding back many introductory classes is inadequate preparation on the part of the instructors. The textbooks (conspicuously the principles texts) are actually pretty good but if the instructor doesn’t take the time to draw in his or her knowledge about real-world applications, or to introduce interactive demonstrations of the material, then the class will be a typical example of a “chalk and talk” class. I should mention that professors at most universities are not encouraged to be particularly good teachers.  Most universities pay lip service to the idea that teaching is valued but tenure, promotions, salaries etc. are not based on teaching – they are based on research. Assistant professors in particular are well advised to spend a minimal amount of time on preparing classes. Even faculty who want to teach well often have limited training in *how* to teach well. In the typical Ph.D. sequence, virtually no time is spent developing teaching skills even though many grad students go on to work in academia.  

Noah is right to point out that introductory classes are often bad. Fixing them however will require more than just importing empirical results though.  It’s going to require real work.  It might even require a change in the attitude toward good teaching that prevails in academia.