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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Drinking Milk and Drilling Oil

Posted by Robert Whaples on October 29, 2009

I returned my second midterm exam yesterday.  The students did pretty well — although I was a little disappointed that many students didn’t get the gist of this question (which I had included on a practice study sheet): “True/False/Ambiguous and Explain Why: During the Texas oil rush in the early 1900s, oil wells crowded the landscape (e.g. the photo on page 349 of our text).  This was an efficient market response.”  This question comes almost directly from the “Challenges” section of Chapter 17 (which focuses on the tragedy of the commons) — and I love the accompanying photo of two cute little kids sharing a glass of cold chocolate milk and part c of the question in the book, which asks “Why did we put these two questions together?”

On Friday we begin macro!

Posted in Economics, MICRO, _MACRO | 1 Comment »

New Fashioned Supply and Demand

Posted by Robert Whaples on September 3, 2009

I’ve just finished covering the supply and demand chapters of Cowen and Tabarrok.  My students are always quick to grasp demand and have a good intuitive sense of what will shift a demand curve inward or outward, but a subset of them have a harder time with shifts in supply.  I always emphasize that they should think of the supply curve as a cost curve — if one of the costs of making the product rises, then the supply curve will vertically rise in the graph.  What I really like about C&T is that they have this same emphasis — driving home the point that supply reflects costs.  Their “horizontal reading” versus “vertical reading” of the demand and supply curves is especially clear.  I wish that all textbooks used this language, since it is so straight-forward and easy for students to grasp.

My favorite innovation in the equilbrium chapter is the coverage of Vernon Smith, his fit of insomnia and subsequent birth of experimental economics.  I asked an extra credit question on yesterday’s quiz, asking students to identify Smith and many of them rattled off the exact dates of the first experiments and his Nobel Prize — a pretty good sign that they were equally intrigued by this section.  A discussion showed that students are convinced that experimental results are an important addition to economics.

Posted in Ch 02 Supply and Demand, Ch 03 Equilibrium: How Supply and Demand Determine Prices | 2 Comments »

First Day of Class!

Posted by Robert Whaples on September 2, 2009

On “Day One” I always open with a discussion of how to “Think Like an Economist,” which emphasizes decision making by rational individuals who weigh costs versus benefits, especially at the margin.  One example that we discuss at length is the decision we make every time we get on the highway about how fast to drive.  Every student admits to regularly breaking the speed limit (as do I) and we discuss the marginal benefits and marginal costs of clicking the old cruise control button up one more notch. Another discussion concerns whether the police should install cameras to nab people who go through red lights.  Again we discuss marginal costs and benefits — eventually getting around to the point that doing so changes incentives to individual drivers giving them an incentive to drive more carefully and vigilantly but also to floor it to get through the light in time or to slam on the brakes to avoid going through on red.  Empirical evidence shows that cameras at traffic lights often leads to higher accident rates.

Cowen and Tabarrok’s list of Ten Big Ideas meshes nicely with this discussion, especially the first four Big Ideas — that “Incentives Matter,” that “Good Institutions Align Self-Interest with the Social Interest,” that “Trade-offs Are Everywhere,” and that “Thinking on the Margin” is smart.

I’ve also created a new opportunity cost question based on the famous economists introduced in Chapter 1 — “James walks into the Econ Tee-Shirt Shop with $10 in his pocket.  Every tee-shirt in the store has a price of $10.  His favorite two shirts are one with Adam Smith showing his invisible hands and one with Milton Friedman foolishly taking a shower.  He’s willing to pay $20 for the Smith shirt and $15 for the Friedman shirt.  What’s his opportunity cost for the Smith shirt? What is his opportunity cost for the Friedman shirt?”  The question helps emphasize that the opportunity cost of something needn’t be its price and is best expressed in terms of things rather than dollars.

Posted in Ch 01 The Big Ideas | 2 Comments »