Less is More

We had the honor of hosting Robert Frank for a talk at the Gokhale Institute the other day.

There’s a lot to learn from that talk (duh), but there was one particular thing he mentioned in that talk that I want to focus on today:

When it comes to teaching principles of economics, less is more.

I’m paraphrasing here, and what you’re about to read is my interpretation of his point – but when it comes to a subject like Principles of Economics, width isn’t the point, depth is.

Unfortunately, however, most students seem to emerge from introductory economics courses without having learned even the most important basic principles. According to one recent study, their ability to answer simple economic questions several months after leaving the course is not measurably different from that of people who never took a principles course.
What explains such abysmal performance? One problem is the encyclopedic range typical of introductory courses. As the Nobel laureate George J. Stigler wrote more than 40 years ago, “The brief exposure to each of a vast array of techniques and problems leaves the student no basic economic logic with which to analyze the economic questions he will face as a citizen.”


Honestly, if you understand the principles of economics well enough, that alone suffices to get a grasp on how economists view most things about society. Each economist has his/her own list of what they might consider to be the principles of economics, but I’d argue that there are some that will certainly be on everybody’s list:

Incentives matter | Costs Matter | Trade matters | Externalities matter | Prices matter

As I said, some folks might include other principles, some folks might include a whole lot more, and some might provide our field with some much needed levity. It’s not so much about what makes each economists’ list and what doesn’t (although that is a topic that us economists can keep going for days on end) – but it is about two very different, and very important things:

  1. How well do you teach these principles?
  2. How much do you stress upon the application of these principles?

Learning about the principles doesn’t take all that much time, and neither does understanding them.

Applying them? Trust me, that takes a lifetime, and even us economists can trip up every now and then:

Virtually all economists consider opportunity cost a central concept. Yet a recent study by Paul J. Ferraro and Laura O. Taylor of Georgia State University suggests that most professional economists may not really understand it. At the 2005 annual meetings of the American Economic Association, the researchers asked almost 200 professional economists to answer this question:
“You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50.”
The opportunity cost of seeing Clapton is the total value of everything you must sacrifice to attend his concert — namely, the value to you of attending the Dylan concert. That value is $10 — the difference between the $50 that seeing his concert would be worth to you and the $40 you would have to pay for a ticket. So the unambiguously correct answer to the question is $10. Yet only 21.6 percent of the professional economists surveyed chose that answer, a smaller percentage than if they had chosen randomly. (Emphasis added)


It gets even worse, because as Robert Frank goes on to say in that article, students were likelier to give the correct answer if they had not taken an introductory econ course. And if that is not a damning indictment, I don’t know what is.

And so one thing that I’ve tried to change in how I teach Principles of Economics is to take things really, really slowly. Answer as many questions as possible for every nuance related to every principle, and not worry about the schedule and the teaching plan. Soak ourselves as thoroughly and as extensively as possible in each principle, ruminate about potential applications, wonder about exceptions, and then move on.

We might end up covering less, but that which we will cover, we will cover as thoroughly as possible. It is, I think, a better way to go about things. We’ll find out, at any rate 🙂

P.S.: One principle that I would want to talk about (and think about myself, to begin with!) is the principle that time matters. What is the best decision is as much a function of the choices, the trade-offs and the incentives, but each of these are subject to the time horizon that you have in mind. The decision about whether or not to have a second helping of desserts after lunch today (yumm!) is about choices, trade-offs and incentives, but it also is a function of what time horizon one has in mind:

And that principle is applicable in so many different ways! So yeah, about the list of principles of economics, my addition to the list would be “Time Matters”.

Observe, and Ask

Most students who take introductory economics seem to leave the course without really having learned even the most important basic economic principles. For example, their ability to answer simple economic questions several months after leaving the course is not measurably different from that of people who never took a principles course (Hansen, Salemi and Siegfried 2002). The problem seems to be that instructors of principles courses almost always try to teach students far too much. In the process, really important ideas get no more coverage than minor ones. Everything ends up going by in a blur

Frank, R. H. (2006). The economic naturalist writing assignment. The Journal of Economic Education37(1), 58-67.

So begins a paper called “The Economic Naturalist Writing Assignment”, a paper that everybody can (and dare I say should) read. Robert Frank has forgotten more about teaching principles of economics than most of us will ever learn. 48 years of teaching, so that last sentence isn’t rhetorical.

A successful economics learning experience should mirror these same steps. A short list of basic principles should be presented to students, one at a time in the context of simple examples drawn from familiar settings. Following each, students should be asked to practice the principle by using it to solve simple problems that are closely parallel to the ones used to illustrate the principle. The student should then be given the opportunity to pose original questions and use the same basic principles to answer them.

Frank, R. H. (2006). The economic naturalist writing assignment. The Journal of Economic Education37(1), 58-67.

Readers who are familiar with the book The Economic Naturalist will have guessed where this is going. For years, Professor Frank asked his students to write essays about things they saw around them that they found puzzling, interesting, or counterintuitive. The point of the essays was to, well, observe and ask. And then, using the principles of economics that had just been taught to them, try and come up with answers.

A really successful paper is one that begins with a really interesting question (one that makes the listener instantly curious to learn the answer) and then uses an economic principle or principles to construct a plausible answer. You’ll know you have a good paper if the first thing your roommate wants to do upon reading it is to tell friends about it.

Frank, R. H. (2006). The economic naturalist writing assignment. The Journal of Economic Education37(1), 58-67.

What kind of questions? Here are just two (the names in parentheses are of the students who asked the question, and went on to answer them in their essays):

  1. Why do brides spend so much money on wedding dresses, whereas grooms often rent cheap tuxedos, even though grooms could potentially wear their tuxedos on many other occasions and brides will never wear their dresses again?
    (Jennifer Dulski)
  2. Why are round-trip fares from Hawaii to the mainland higher than the corresponding fares from the mainland to Hawaii? (Karen Hittle)

Curious to hear the answers? Please, read the paper as an appetizer, and for the mains, buy the book.

In the paper I have been excerpting from, Professor Frank uses the analogy of how tennis is taught to beginners, beginning with basic drills (of which the forehand comes first).

Those who aspire to move their games to a higher level typically continue with formal instruction. However, for them, too, an important part of the learning process is continued play.

Same as earlier, which is what ibid means

Now, about that “continued play” being an important part of the learning process, Tyler Cowen has a post out today, titled “Why do they keep the books wrapped in Mexican bookstores?“:

Yes, wrapped in clear shrink wrap. So you can’t page through them and see what the book might be like. I can think of a few hypotheses:
They don’t want you standing in the bookstore reading the thing, rather than buying it. A bit like some U.S. comics news stands in days past. Yet this doesn’t seem so plausible for longer books or most novels.
They want the books to look nicer and less grimy.
How about price discrimination?


If Tyler Cowen can take the time out to practice his forehand, surely the rest of us can also train like athletes?

Principles of economics can be learnt for free online, using any resource of your choice. I’m not linking to any specific one because I want to make the point that you can very, very easily choose a resource, and it will likely be great.

But better still, principles of economics can be practiced very easily too! What are you waiting for? 🙂

Finally: Crosswords (at least the one closest to my home) wraps some books in clear shrink wrap, but not others. Does anybody know why?