Thinking Through the Economic Way of Thinking: Teaching and Training Future Teachers

|Peter Boettke|

At the recent Association of Private Enterprise Education (APEE), I participated on a panel discussing how one assesses teaching effectiveness in the basic economics class.  Though I was tasked with talking about how I have assessed my efforts to train students to become teachers who were effective teachers of basic economics.  Since early in my career I have been persuaded by Paul Heyne's advice to intro teachers --- "Teach the Intro of Economics to students as if it will be the last course in economics that they will ever take, and it will be the first of many classes that they will take."  This has also led me to have a simple metric for teaching effectiveness: teach intro, how many students become majors?; teach intermediate and advanced electives; how many students decide to go to graduate school?; teach graduate students, how many decide they want to be professors?  I am fully away this is a myopic metric, but it has the advantage of being (a) visible, and (b) valuable to your school because ultimately economic viability of departments is how many butts one can get in the chairs.  It also has the added bonus of signaling strongly that you have excited the minds of your students with the possibilities of the economic way of thinking about the human condition.

Anyway, here are my remarks from the APEE session.

 

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I often tell audiences that we should teach economics as an invitation to inquiry, and not as a catechism of received doctrine. We must excite the curiosity and imagination of our students, and get them to see the economic way of thinking as a golden key that unlocks the manifold mysteries of the universe. As “teachers” we don’t want to horde this key, but to share it with others as freely as we can. We do this in our lectures, in our writing, and in our conversations. The economic way of thinking applies to everything, everyplace, and everyone throughout the globe and across time. There is nothing like it.

What is the economic way of thinking? Very simply choice within constraints, and the consistent and persistent application of opportunity cost reasoning that choice within constraints implies. We live in a world of scarcity, scarcity implies trade-offs, and to negotiate trade-offs we need aids to the human mind, and that aid comes in the form of the incentives, the information, and the knowledge/learning that the institutions of property, prices, and profit/loss provide. In addition, as Adam Smith taught us, throughout our lifetime we have the opportunity to make a relatively few deep and close friends, but we rely, for our material survival, on the cooperation of hundreds and sometimes thousands of individuals that we will barely know, if we know them at all. We cannot appeal to their benevolence, but must in exchange offer opportunities for mutual advantage. We bargain, we haggle, we trade with one another, and how we do all this social interaction is a function of the institutional framework that govern the nexus of exchange.

Our subject matter is, in this light, exchange relationships and the institutions within which these exchange relationships are forged. The resulting order is recognized as emergent order, or what Smith dubbed “invisible hand”. The mainline of economic doctrine from Smith and David Hume to Ludwig von Mises and F. A. Hayek, to James Buchanan and Vernon Smith stressed that the invisible hand theorem was derived from the rational choice postulate via institutional analysis. As Buchanan stressed to his students, the primary didactic function of the economists is to teach their students an appreciation of the spontaneous order of the market so that those students can in turn become informed participants in the democratic process of collective action. Elinor Ostrom has pushed this role of the scholar/teacher within democratic society even more starkly:

one of our greatest priorities at the Workshop has been to ensure that our research contributes to the education of future citizens, entrepreneurs in the public and private spheres, and officials at all levels of government. We have a distinct obligation to participate in this educational process as well as to engage in the research enterprise so that we build a cumulative knowledge base that may be used to sustain democratic life. Self-governing, democratic systems are always fragile enterprises. Future citizens need to understand that they participate in the constitution and reconstitution of rule-governed polities. And they need to learn the “art and science of association.” If we fail in this, all our investigations and theoretical efforts are useless.

And, as Elinor put it another context with reference to her study of Common-Pool-Resources, "As an institutionalist studying empirical phenomena, I presume that individuals try to solve problems as effectively as they can. That assumption imposes a discipline on me. Instead of presuming that some individuals are incompetent, evil, or irrational and others are omniscient, I presume that individuals have similar limited capabilities to reason and figure out the structure of complex environments. It is my responsibility as a scientist to ascertain what problems individuals are trying to solve and what factors help or hinder them in these efforts. When the problems that I observe involve lack of predictability, information and trust, as well as high levels of complexity and transactional difficulties, then my efforts to explain must take these problems overtly into account rather than assuming them away. In developing an explanation for observed behavior, I draw on a rich literature written by other scholars interested in institutions and their effects on individual incentives and behavior in field settings” (Elinor Ostrom, Governing the Commons 1990: 26, emphasis added).

What I want to stress here is Elinor’s willingness to address social tensions and to deny neither their existence, nor deny their possible resolution. One way we economists and political economists do this is by demonstrating that there are Smithian answers to Hobbesian problems. We do a disservice to our students if we instead teach them only that either the so-called tensions and paradoxes of the market economy and a society of free individuals don’t exist (as in the perfect competition model) or don’t have a resolution within the system but only external to the systems (as is taught in market failure theory). Rather than “the dry rot of postulated perfection,” Buchanan taught us (1964: 218), we economists should draw our students’ attention to the evolution toward a solution that the ongoing process of exchange and production sets in motion.

So far I have emphasized what to teach – basically, in communicating the economic way of thinking to beginning economic students what you emphasize is what they will remember; I say emphasize the invisible hand theorem of the market as understand in the tradition of mainline economics from Adam Smith to Vernon Smith. And I would add quickly, pepper your presentations with constant applications from the world outside the window rather than merely with abstract examples on the black-board. All the doings of men are a subject matter – from the most profane to the most profound, so enlist your students natural curiosity about the world and demonstrate to them again and again and again the power of the economic way of thinking to render even the most unusual of practices sensible. Another great Buchanan point was the following: it takes varied iterations to force alien concepts upon reluctant minds. Economics to the novice often seems counter-intuitive. Teach the economic way of thinking in such a way that it becomes the intuition of your students when attempting to crack a serious puzzle in the sciences of man.

What I have just presented is how I try to teach basic economics, but it also permeates my advanced classes as well. I am have been very fortunate throughout my career to have primarily taught graduate students. As I have advanced in my career, this became even more pronounced as my teaching load was reduced. For years, though, I taught the very basic economics course 1 semester a year, while teaching 3 PhD seminars to constitute my 2-2 load. People used to ask me, “how do you do that?” It wasn’t, let me assure you, by trying to teach a water-downed version of my graduate classes to freshman. If anything, it was reiterating basic economics to graduate students who often had their intuition beaten out of them by a profession that emphasizes formalism and cleverness over basic economic reasoning and correctness. A persistent and consistent application of opportunity cost reasoning is as valuable to communicate to Ph.D. students as it is to freshman. I have at times achieved this by giving my Ph.D. students a pre-test made up of questions from principles of economics textbooks, or from old qualifying exams from the 1950s and 1960s from UCLA or Chicago that stressed economic theory and economic intuition over formal proofs and mastery of models. In my Ph.D. seminar on the history of price theory, just last fall, I stressed to the students 5 canonical models: utility maximization, Edgeworth Box, Supply and Demand, Competitive Markets, and Production Possibilities Frontier. I asked them to think deeply about each of these models, how we understand them if we think about them in simple environments, how our understanding changes if we think about them within complex environments, and finally how they are interrelated in an intellectual chain of expressing the mainline understanding of the invisible hand as derived from the rational choice postulate via institutional analysis. Do these models help our mainline understanding, or hinder it?

Drilling your graduate students in the intuition of basic economics and stressing the importance of communicating that intuition clearly and forcefully is vital to influencing how they will teach economics themselves to their students. Economics should be presented as a joyous intellectual adventure, but also an adventure that is deadly serious. The consequences of failing in our task as teacher/scholars for self-governing and sustainable democracies is not trivial. Ludwig von Mises put it even more crisply to conclude Human Action:

The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.

My students are exposed to my texts (which I inherited from Paul Heyne) The Economic Way of Thinking as well Institutional Economics: Property, Competition and Policy (which I was brought on as a co-author for the 2nd edition). These are texts that I taught from before I was ever involved with them as I believe they are great examples of how to communicate basic economics. Like Alchian and Allen’s University Economics or Rothbard’s Man, Economy and State they are equally useful for the beginning and the advanced student. To echo Buchanan again – it takes varied iterations to force alien concepts upon reluctant minds.

This is how I train my PhD students, and this is also how I expect them to teach. It is an old saying that we become our parents when we ourselves are thrust into the challenging of parenting. This is true I believe of how we will write and how we will teach.

So in conclusion this cycles back into some very basic advice --- care passionately about the world, believe passionately in the logic of economic analysis, seek to apply economics to understand that world, and do so with clarity of thought, clarity of exposition, and let reason and evidence be your guide as you unlock the mysteries of the universe with the golden key that is the economic way of thinking as it has been developed from Adam Smith to Vernon Smith. If you do that not only will you be a great teacher, but you will train others to be great teachers.

Comments

[Ryan Murphy]

Those are good metrics.

[guillermo barba lluch]

As usual, an excellent article.
In teaching economics, what do you think about Rodrik's "Economics Rules"?

[Bill Kern]

One short note on doctrinal history. You may have gotten the "it takes varied iterations to force alien concepts upon reluctant minds" from Buchanan but he got it from Frank Knight.