Robert Whaples and the Modern Principles

A blog on my teaching with Modern Principles of Economics by Tyler Cowen and Alex Tabarrok

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End of Semester Thoughts

Posted by Robert Whaples on December 3, 2009

This week I discussed money, the Fed, and monetary policy in class — chapters 14 and 15 of Cowen and Tabarrok (Macro).  The chapters are integrated very well into the dynamic aggregate supply/demand framework.  I especially like the emphasis on how difficult it is for the Fed to do its job(s) effectively.  The discussions of liquidity crises, systemic risk and moral hazard are a real plus.  Once again, the authors have done a masterful job of picking photos to put in the margin and adding apt captions.  On page 323 there’s a photo of Ben Bernanke looking weary and pensive, captioned “it seemed so much easier in the textbook.”

Switching from a textbook that you’ve used for a decade or more is bound to be difficult, as is getting used to the new textbook and integrating its way of explaining things and unique features into your course.  And, there are an unavoidable host of little things to get used to — like using π as the symbol for inflation expectations rather than as the symbol for profits or looking at an AD/AS model, seeing a curve labeled SGC, and not saying “short-run.”  But for many professors the costs of the switch to Cowen and Tabarrok will be well worth it.  The text is certainly the most engaging I’ve ever used — it simply grabs the students’ attention with insightful examples and a freshness that I trust will endure as subsequent editions roll off the presses in the years (decades?) to come.


Posted in Ch 14 The Federal Reserve System and Open Market Operations, Ch 15 Monetary Policy, Why Switch to Modern Principles of Economics by Cowen and Tabarrok? | 1 Comment »

Making Macro Dynamic II

Posted by Robert Whaples on November 25, 2009

On Monday a good portion of my students slipped out of town early for Thanksgiving break.  Expecting this, I used the class to review Chapter 12, which uses the dynamic AS/AD model to explain business fluctuations. Now that I’ve spent a few days teaching this chapter, I’m less convinced that the dynamic AS/AD model dominates the traditional static AS/AD as a teaching device — perhaps they complement one another.

The dynamic model’s big upside is that there are fewer curves to be drawn since everything is about rates of change — and it thereby incorporates the relentless growth of productivity very easily.  However, the dynamic approach makes it harder to show an economy that’s recovering from a recession — as ours now is.  Last quarter the U.S. economy grew at 2.8%, close to the long-term average.  Thus, a dynamic graph of it would have the intersection of the AD and SRAS curves almost exactly at the Solow Growth Curve, as aggregate demand growth has picked back up.  What’s not shown is the incredible amount of slack in the economy and the opportunity for a spurt of growth to make up for lost time.  The graph is about the same when there’s no cyclical unemployment (a couple years ago) vs. when there’s huge cyclical unemployment (today).  Next time I teach this chapter, I intend to spend time to first derive the static model and then show how it works dynamically.  I’ve also found it harder (but not impossible) to use the dynamic model to explain one of my old favorites — Say’s Law — although I find it easier to explain stagflation in the model

My syllabus said we would cover Chapter 13 on Monday, but I decided not to  lecture on it.  It’s a fairly interesting chapter, but (as has happened with a couple other chapters) it’s pretty self-explanatory and there’s not much to be said in class to add value to it.

Finally, I’ve made a couple of Sporcle quizzes for my students to help them study for the final.  The great thing about Sporcle is that you get to see how well you did in comparison to everyone else, which really motivates some students.  And you get immediate gratification from a correct answer — another study motivator. There’s a micro terminology quiz and a macro terminology quiz.  Feel free to take the quizzes and/or to send your students/friends to them at and

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Growth Triumphant: The Chapter That Got Me to Switch

Posted by Robert Whaples on November 12, 2009

Yesterday I began Cowen & Tabarrok’s macro chapter 7, “Growth, Capital Accumulation, and the Economics of Ideas: Catching Up vs. the Cutting Edge.” (The title is a bit of a mouthful, so let’s call “Growth Triumphant” for short.)  This is the chapter that finally convinced me to switch to T & C, when I read it about a year ago.

The heart of the chapter is a student-friendly version of the Solow Growth Model. I’ve used the Solow model in my intro course for years because it shows the sources of growth so clearly and pushes students to think abstractly.  Some other intro textbooks invoke it (usually behind the scenes), but they typically are afraid of it — fortunately T & C aren’t.  They demonstrate the model with a three equation framework:  (1) Y = the square root of K; (2) I = 0.3Y; and 3) Depreciation = 0.02K.  After setting up the model, they use it to demonstrate fundamentally important concepts including catch-up growth, the post WWII miracles of bombed-out Germany and Japan, why capital alone cannot be the key to economic growth (because we reach a steady state), what happens if investment rates differ, conditional convergence, and how “cutting edge” growth (i.e. increases in total factor productivity/technology) drives long-term growth.   The framework is simple enough that one can easily solve for the steady state in class.

The chapter closes with an excellent discussion of the economics of ideas — including an aside about how culture influences entrepreneurship and how John Kay, eighteenth-century inventor of the flying shuttle, had his house destroyed by machine breakers.  The crowning touch is an optimistic conclusion about the future of economic growth.  Tyler and Alex conclude that the supply of new economically useful ideas is a function of population x incentives x ideas per hour.  Standing Malthus and neo-Malthusians on their heads, a rising population is good because there are more human brains around to hatch new ideas.  Likewise, it doesn’t appear that the law of diminishing returns applies well to the creation of new ideas.  This section mirrors my own long-term optimism about the global economy, an optimism shared by the bulk of the profession.  As reported in “Collapse? The ‘Dismal’ Science Doesn’t Think So: Economists’ Views of the Future,” The Independent Review, 11 (2), Fall 2006, the cross-section of economists I surveyed are very optimistic about the long-term growth of the U.S. and global economies.

At the end of the lecture, I began to show how the Solow model can incorporate the Malthusian model — changing the axes from Y and K to Y/L and K/L and demonstrating Malthus’s dismal predictions that population growth will drive mankind inevitably back to the subsistence rate.  On Friday, we’ll explore how we moved from a Malthusian world to a Solovian world to a Romerian world.

Posted in Ch 07 Growth, Capital Accumulation and the Economics of Ideas: Catching Up Vs. The Cutting Edge, Why Switch to Modern Principles of Economics by Cowen and Tabarrok? | 1 Comment »

Day 2

Posted by Robert Whaples on September 2, 2009

On the second day of class, we took a timeout to discuss the recent macroeconomic performance of the U.S. economy.  The unemployment and inflation graphs from C&T’s macro chapters work well — although I supplemented them with the latest numbers from the BLS — but it’s too bad that Table 5.1, which compares GDP and GDP-per-capita across the world’s 15 largest economies, refers to 2003.  The Penn World Tables are the best source to use, but it’s unfortunate that we have to wait so long to get consistent numbers across countries, especially since GDP is growing so rapidly in India and China that six-year-old data seems kind of obsolete. C’est la vie.

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Making the Invisible Hand Visible

Posted by Robert Whaples on September 1, 2009

I decided to adopt Cowen and Tabarrok this semester after over a decade of using Parkin. I did this, not because there’s anything wrong with Parkin but because reading a few sample chapters of Cowen and Tabarrok convinced me that this is a remarkable textbook, full of unusually insightful examples, with an uncanny ability to make the invisible hand of the market visible — to show students the wonders of the market.

I teach a one-semester course that covers both micro and macro and the publisher has been very accommodating in sending me copies of the uncorrected page proofs of the micro half of the text to distribute in class.  Wednesday, August 26th was our first day of class.

Posted in Why Switch to Modern Principles of Economics by Cowen and Tabarrok? | 3 Comments »

Teaching with Modern Principles!

Posted by Robert Whaples on August 31, 2009

This blog will follow a Fall 2009 class taught by Robert Whaples in which he uses the new text Modern Principles of Economics by Tyler Cowen and Alex Tabarrok.

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