Tag: robert frank

Assignment No. 1 (and No. 3)

Vidya Mahambare has a fun assignment for her students, and I fully intend to copy it this upcoming semester.

Roughly one-third into her microeconomics course at the Great Lakes Institute in Chennai, she asks her students to go take selfies. Not just any old selfie, note. She asks her students to go out into the world, and take a photograph of something that reminds them of a topic they’ve learnt in class.

Maybe a photograph of a coffee seller right outside college. Maybe differential rates of admissions at a tourist site ( x rupees for Indians, 10x for foreigners). Maybe a rickshaw driver whose rickshaw doesn’t have an operational meter. Each of these selfies should have something in the background that is related to a topic they’ve learnt in class.

And, of course, they’re supposed to write a little bit about it. The student who selected the coffee seller outside college might hypothesize that the seller is a monopolist, for example. The differential rates of admission could be price discrimination at work. And maybe the rickshaw driver with the non-existent meter is an example of information asymmetry.

Don’t worry just yet about whether these are good examples of the topic being discussed. This assignment is more about learning to see the world as an economist – or least, that’s how I understand it. Now that you’ve learnt how to think like a microeconomist, are you able to relate what you’ve learnt to the world around you? Show me!

And then, at the end of the semester, the assignment is repeated. Repeated doesn’t mean that students go out and take another selfie. It simply means that they get to look at the same photograph, but now with the benefit of a better knowledge of microeconomics.

Now that you know more about microeconomics, how does your understanding of (and therefore description of) that photograph change? Is the coffee seller really a monopolist? Is the permanently broken meter really an example of information asymmetry? Whatever your answer now, why has it changed? Or why has it not changed?

This is the first slide of my presentation with which I begin my principles of economics class, and you can see why I like Vidya’s idea so much. I give my students a similar assignment, and recently wrote one up myself. I look forward to writing one again this year, complete with a selfie.

I do have one question for you, and I haven’t asked Vidya this yet.

What is your best guess for making it a selfie with the topic in the background, and not just a photo of the topic itself?

Two Magic Questions

I’ve linked to this magnificent paper by Robert Frank quite a few times by now, and will begin today’s blogpost with a quote from it as well:

Again, the important point is not whether this is the best possible short list of principles but rather that instructors will teach their introductory students more effectively if they begin with a well-articulated short list of some sort and then doggedly hammer away at it, illustrating and applying each principle in context after context.

https://www.siue.edu/~wrichar/economic%20naturalist%20writing%20assignment.pdf

His list of principles is worthy of discussion, because it is different from mine. Of course, as he himself says, a different list is just fine (I would argue it’s a good thing, because there is then more to learn), and when I say worthy of discussion, I mean that as a “Yes, and” discussion rather than a “No, but” discussion. (Have I linked to this tweet before? Yes. And I will do so again, as will I link to Robert Frank’s paper again, because one should doggedly hammer away at points that need to be reiterated, giving context after context!)

But the reason I begin with this excerpt is because I want to add to my own list of principles two different questions which I believe help one become a better economist. I’ll speak about the first of these questions today, and add the second one in tomorrow.

Here’s the first question:

What are you optimizing for?

Here is a list of questions that I usually get at the start of every academic year:

  1. Which stream should I take, or if from a parent, which stream should my child take?
  2. Should I accept admission in xyz college, or should I go to abc college instead?
  3. Which universities should I apply to in which country once I graduate out of this course?
  4. Which textbook should I read to understand subject xyz?

And my answer to all of these questions is the same. I respond with a question of my own: what are you optimizing for?

With regard to the first question in the list, here are questions you might want to think about. Are you optimizing for a course that maximizes the likelihood that your (or your child’s) passion will be nurtured? Or are you optimizing for future income streams, regardless of passion? Are you optimizing for the ability to graduate without breaking into a sweat? Or are you optimizing for the best possible brand of university/college to graduate from? Or something else?

With regard to the fourth, here’s another list of questions. Are you looking for a book that will help you learn the most about this subject? Or are you looking for a book that will help you score well? Or are you looking for a book that will help you score reasonably well without working too hard? The fact that there are meaningful answers to each of these questions is an indictment of the way we teach and conduct examinations. But the fact that entirely acceptable (and different) answers exist for each category is the point.

And of course, one can come up with a similarly long list for virtually every single question that you can come up with, or will encounter. The reason you can always do so is precisely because of the fact that choices matter.

As a politician in power, are you optimizing for long run growth, or are you optimizing for votes in the next election? As a politician in the opposition, are you optimizing for toppling the current government, or are you optimizing for what’s best for your constituency/country? As a judge, are you optimizing for the best application of accepted and laid-down principles of justice, or are you optimizing for currying favors? As a teacher, am I optimizing for pretending to finish a syllabus by putting in the least amount of effort, or am I optimizing for making sure that my students leave the class wanting to learn more? As students, are you studying a particular subject in order to learn as much about it as possible or are you optimizing to score the highest amount of marks for the least amount of effort? As an employee in an organization, are you looking to do the best possible job in your role, or are you looking to meet the minimum amount of effort required to keep your job?

Always remember, the question “What should I do?”, whether asked to yourself or to somebody else, always deserves to be met with a question in response. The answer to this question will go a very, very long way in terms of helping you answer the original one.

Here is the question once again:

What are you optimizing for?

A Shared Plate at Bedekar’s

My first assignment in the Principles course at the Gokhale Institute is essentially Robert Frank’s famous assignment (pp. 61 in this PDF). Submissions are due on the 5th of September, and I look forward to reading them.

In today’s blogpost, I am going to try and write one of these myself! Three reasons for doing so:

  1. Skin in the game, practice what you preach, only ask others to do something if you’ve done it yourself.
  2. Some students might find an example essay useful
  3. It will be fun!

The essay is below the fold.

One of my favorite places to eat in Pune is Bedekar Misal. The place has been around forever, and the quality of the food has remained consistently good. If you haven’t yet been there, consider trying it!

The last time I was there, though, I noticed something interesting. The menu is printed on two flex sheets that have been put up at both ends of the premises. And the menu says that a regular plate of misal costs 90 rupees. If, however, two people choose to share one misal, then the price goes up to 130 rupees.

Why should this be so?

The costs of production don’t change depending on how many people eat a plate of misal. Neither do the costs associated with serving a plate go up depending upon how many people share a plate. Why then should the owners be charging a higher price for a shared plate?

Because what is scarce, and therefore at a premium, is a place to sit within the cramped confines of the restaurant. Try visiting the place at around one pm, and you’ll see a queue of hungry but patient would-be patrons waiting outside.

Now, if two people occupy a table but have only one plate of misal, that is revenue foregone for the restaurant. If two strangers were sitting at the same table, that would be revenue worth two plates of misal. Even if they knew each other and ended up having one plate each, that would still count as revenue worth two plates. But if they share a misal, well, that’s a loss.

And so what Bedekar Misal does is it puts up a negative incentive in place. Sure, they say, you can have one misal between two people. But you must then pay more. In effect, you are getting half a plate of misal for 65 rupees. At the margin, there will hopefully be folks who will consider this deal and reach the conclusion that paying just 25 rupees more is worth it. If they do, Bedekar Misal gets revenue worth two plates.

And if people choose to walk away from the restaurant rather than pay more for the same plate, well, it still works out just fine for Bedekar Misal. Why? Because there is no shortage of hungry people waiting in line!

So the problem of scarcity of space is solved by not explicitly charging for renting a seat. It is solved, instead, by increasing the price of the good you consume while occupying the scarce resource. That lowers the demand for a shared plate, and therefore increases the number of customers paying full price, while occupying space.

And that’s why this rather odd policy makes sense, once you apply simple principles of economics. Incentives, as it turns out, do matter.

I ended up having two plates all by myself, for the record, but alas, Bedekar’s doesn’t yet offer bulk discounts.

This essay clocks in at 484 words, well within my strictly enforced limit of five hundred words. To everybody reading this, an invitation – and especially to my students: feel free to tell me how the essay could be better! In effect, grade my submission, because I will soon be returning the favor 🙂

P.S. There are some folks who don’t like misal, but that’s fine. Nobody’s perfect.

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.”

https://www.nytimes.com/2005/09/01/business/the-opportunity-cost-of-economics-education.html

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)

https://www.nytimes.com/2005/09/01/business/the-opportunity-cost-of-economics-education.html

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 Education, 37(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 Education, 37(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 Education, 37(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?

https://marginalrevolution.com/marginalrevolution/2021/07/why-do-they-keep-the-books-wrapped-in-mexican-bookstores.html

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?