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Australasian Journal of Economics Education
Volume 11 Number 1 March 2014
ARTICLES
1001 Micro Nights: Teaching as Craig Freedman
Storytelling
Does the Sub-Field of Economics Michael P. Cameron
Studied at High School affect First Year Rebecca Williams
Economic Literacy: Evidence from
New Zealand
Are Employers Interested in Reforming Tim Thornton
the Economics Curriculum?
The Impact of ‘Demand Driven’ Higher Anthony Stokes
Education on the Teaching and Learning
of Economics: A Case Study
ISSN 1448-448 X
Editorial Executive Co-Editor Professor Rod O’Donnell Telephone: (+61 2) 9514 7738 Email: rod.odonnell@uts.edu.au Co-Editor Dr Peter Docherty Telephone: (+61 2) 9514 7780 Email: peter.docherty@uts.edu.au Co-Editor Mr Joseph Macri Telephone: (+61 2) 9850 6069 Email: jmacri@efs.mq.edu.au
Editorial Board Professor William J. Baumol, New York University, USA. Professor Harry Bloch, Curtin University of Technology, Australia. Professor Bruce Chapman, Australian National University. Professor Kenneth Clements, University of Western Australia. Professor David Colander, Middlebury College, Vermont, USA. Professor John Foster, University of Queensland, Australia. Professor Andrew Hannan, University of Plymouth, UK. Professor Yujiro Hayami, Foundation for Advanced Studies in
International Development, Japan. Professor Tim Hazledine, University of Auckland, New Zealand. Professor K.L. Krishna, Delhi School of Economics, India. Professor Alan Luke, Nanyang Technological University, Singapore. Professor Rod O’Donnell, Macquarie University, Australia. Professor David Round, University of South Australia. Professor Daniel Rubinfeld, University of California, Berkeley, USA. Professor Warren Samuels, Michigan State University, USA. Professor Amartya Sen, Harvard University, USA. Professor John Siegfried, Vanderbilt University, USA. Professor Jim Taylor, University of Lancaster, UK.
Secondary School Teaching Representatives Mr Doug Cave, Queensland Economics Teachers Association. Mr Ian Searle, Brisbane Boys Grammar.
AUSTRALASIAN JOURNAL OF ECONOMICS EDUCATION
MISSION STATEMENT The Australasian Journal of Economics Education is a peer-reviewed journal that publishes papers on all aspects of economics education. With a view to fostering scholarship in the teaching and learning of economics, it provides a forum for publishing high quality papers and seeks to bring the results to a widening audience. Given both the increasing diversity of the student clientele, and increasing calls for greater attention to the quality of tertiary teaching, this Journal seeks to foster debate on such issues as teaching techniques, innovations in the teaching of economics, student responses to such teaching, and the incentive systems which influence the academic teaching environment. The AJEE is interested in research involving both quantitative and qualitative analyses and also in interpretative analyses based on case studies. While the Journal is Australasian-focussed, it encourages contributions from other countries in order to promote an international perspective on the issues that confront the economics discipline. AJEE aspires to: 1. Report research on the teaching of economics, and cultivate heightened interest in the teaching of economics and the scholarship of teaching. Pedagogical issues will be a central feature, and will encompass work on the teaching of economics in diverse contexts, including large and small classes, undergraduate and postgraduate classes, distance learning, issues confronting foreign students on-shore and off-shore, and issues related to the teaching of fee-paying MBA and other post-graduate groups from diverse disciplinary backgrounds. Though economics is the prime focus, consideration will also be given to work on other subjects that have a demonstrated relevance for the teaching of economics. Such issues will also involve evolutionary issues in the teaching of economics, in terms both of effective ways to teach evolving theory and of evolving technology with which to teach that theory (including on-line teaching). Recognition will be given to the fact that economics as a discipline has not fared well in CEQ results (course experience questionnaire
results) since the reporting of those results began in Australia. Nor has economics teaching typically been well received in the USA or UK, according to survey evidence. In that context the relevance to teaching of changing administrative arrangements in universities will also be highlighted (eg in terms of contemporary quality assurance procedures and other government policy changes in Australia and New Zealand). 2. Report research on the nexus between teaching and research (including research on the diverse, changing and potentially conflicting incentives within the academic industry). Papers exploring the extent to which research and teaching activities are complementary or competitive will be welcomed. 3. Recognise the relevance of some more deep-seated implicit assumptions and issues of economic philosophy embedded in what is commonly taught, (as in Sen’s work on economics and ethics, for example). Inter alia, the question arises as to the way in which students respond to economics taught as a path to scientific certainty, as against economics taught as reflecting unsettled debate and vigorous controversy. 4. Recognise the place of history in the teaching of economics. Both HET and economic history tend to play a diminishing role in professional economics training, as emphasis on technique dominates. This a-historical approach to the teaching of economics has been criticised by many influential economists (including Joan Robinson, Leontief, Myrdal, Colander, and Robert Clower in his acerbic remarks about the value of much that is published in such prestigious journals as the AER). This line of criticism has been continued in the recent growth of heterodox economics associations in a number of countries (including one for Australia and New Zealand) and on the web through the Post Autistic Economics (PAE) newsletter. Historical and institutional factors will thus provide one focal interest. 5. Recognise interdisciplinary issues important to the presentation of economics in various contexts. On the one hand, economics students are not systematically exposed to the insights of other social sciences and the conformity or otherwise of their conclusions with those of economics. On the other hand, other disciplines within the social sciences and humanities (e.g. the Social Work profession) do not always include even an introduction to economics for their students, notwithstanding that economic issues are often very important
determinants of the environment within which they operate. More fundamentally, questions arise as to whether social science is more than the sum of its respective parts, and as to whether the roots of economics can be fully understood in isolation from the history not only of economics but also of politics and philosophy. 6. Establish a link to the teaching of economics in the secondary schools, given that tertiary enrolments in economics reflect fluctuating enrolments in economics in the secondary schools. 7. Encourage on-going surveys of student response to the teaching of economics across Australasian (and other) institutions, including response to experimental teaching and to differences between institutional approaches. (c.f. Colander and Klamer’s 1988 survey of economics students at USA ivy league institutions.) 8. Monitor trends in the teaching of economics both globally and in the Australian and New Zealand university systems (such as enrolments, staff-student ratios, international-domestic student ratios, offshore offerings etc), and the implications of those trends for various funding arrangements. 9. Promote a series of papers on specialised themes within the overall province of the teaching of economics e.g. on the teaching of Principles courses, the teaching of History of Economic Thought, the teaching of intermediate microeconomics and macroeconomics, the teaching of development economics, and likewise regarding teaching in such streams as Quantitative Methods, large first year classes, non-English speaking background students, the teaching of economics to non-economists, product differentiation in teaching economics, and professional education in economics in executive education programs outside conventional university contexts. 10. Monitor the measuring and rewarding of quality (economics) teaching within Australasian universities.
AUSTRALASIAN JOURNAL OF
ECONOMICS EDUCATION
Volume 11, Number 1
March, 2014
CONTENTS
ARTICLES
1001 Micro Nights: Teaching as
Storytelling
Craig Freedman 1
Does the Sub-Field of Economics
Studied at High School affect First Year
Economic Literacy: Evidence from
New Zealand
Michael P. Cameron
Rebecca Williams
24
Are Employers Interested in Reforming
the Economics Curriculum?
Tim Thornton
42
The Impact of ‘Demand Driven’ Higher
Education on the Teaching and Learning
of Economics: A Case Study
Anthony Stokes 63
Australasian Journal of Economics Education
Volume 11, Number 1, 2014, pp.1-23
1001 MICRO NIGHTS:
TEACHING AS STORYTELLING*
Craig Freedman
University of New South Wales and
Middlebury College, Vermont, USA
ABSTRACT
Good teaching ultimately boils down to good storytelling. All the technology in
the world will do little to help, if you fail to have a compelling story to tell and the
ability to tell it. By using the example of an introductory Microeconomics class,
this paper demonstrates how what is often viewed by students as a course lacking
any appeal can catch those same students’ interest. To do so, the course needs to
be transformed from one that dispenses information to one that tells the story of
how prices are used to coordinate individual activity, namely the story of markets.
Successful storytelling is essentially about taking chances. Only by doing so can
any one teacher hope to arouse a class’s interest and allow that teacher to impart
successfully some sense of economic intuition. The problem with the sort of
cookbook approach beloved by administrators is that it leaves not the slightest
impact or mark on the students themselves. The paper concludes that each lecturer
needs to find the courage to discover his or her inner Scheherazade and by doing
so retain both one’s head and one’s heart.
Keywords: microeconomics, storytelling, opportunity cost, pedagogy.
JEL classifications: A20, A22.
* Correspondence: Craig Freedman, Visiting Associate Professor, Middlebury College,
Middlebury Vermont, and Honorary Associate Professor, Industrial Relations Research
Centre, Australian School of Business, University New South Wales, 61-2-9398-7380,
University of New South Wales, Sydney, NSW 2052, Australia; cfreedma@hotmail.com.
Thanks go to a collection of anonymous referees for making several useful suggestions
that helped improve the paper. Perhaps most of all, I am obliged to acknowledge all the
untold suffering students who I stubbornly tried to convert to the joys of microeconomics.
I can only hope they weren’t too damaged by the experience.
ISSN 1448-448X © 2014 Australasian Journal of Economics Education
2 C. Freedman
1. INTRODUCTION
Tell me what thou dost want of me; here am I, thy slave, and the slave
of him who holdeth the Lamp.
(Lane-Poole (tr.) 2001/1909-1914, para.18 Appendix)
Many of us may recall, at least in some vague way, the story that frames
the 1001 Arabian Nights.1 A powerful Caliph has been disappointed by
the infidelity of his first wife. Heartbroken, he vows never to suffer the
same fate again. His fail-safe remedy is to first marry a virgin, thus
insuring a total absence of deceit. Then the very next morning, after the
marriage has been consummated, the bride is decapitated guaranteeing
that any subsequent unfaithfulness will never arise. Such measures
effectively solve the problem of infidelity, but as any good economist
would point out, they would also wreak havoc on the local supply of
eligible virgins. The market would essentially fall into total disarray.
Clearly the prevailing situation was ultimately unsustainable and
something had to be done to end the disastrous pattern.
Fortunately, the brave daughter of the Grand Vizier, a young woman
named Scheherazade, volunteers to marry the Caliph. She may have
been brave, but that doesn’t mean that she was entirely foolhardy. She
proved willing to take the risk because she formulated a plan which she
believed would stop this nightly depletion of the kingdom’s dwindling
stock of virgins.
Ultimately Scheherazade was successful. Perhaps the driving
incentive behind her accomplishment was the high opportunity cost of
failure. Her plan in retrospect might appear to have been effectively
simple, but it is based on a solid understanding of human nature. She
instinctively realized that humans are storytelling animals. Aristotle
might have insisted that humans are defined by being political animals,
but if closely observed, they turn out to at least equally belong to the
storytelling genus.2 People apparently all love to stop and listen to a
well told tale that takes them away from their everyday life.
1 Certainly some of the individual tales boast greater familiarity than the collection itself.
Aladdin (the boy with the magical lamp) for instance has been retold in countless versions
and distortions as well as in the Disney-fied animated feature which boasted the late
Robin Williams voicing the genie of the lamp. 2 There is actually a distinct relationship between the two definitions. People are
essentially gregarious, one aspect of such behaviour being the desire to entertain and
inform one another through the means of storytelling. The other aspect is the need to live
in governed societies exemplified by the Greek polis or city state. But the state itself is
Teaching as Storytelling 3
It is by playing on this deeply rooted desire that Scheherazade
manages to save her life and boost the expected life spans of the
kingdom’s remaining virgins. Each night she would commence a tale
but deliberately refrain from bringing it to a conclusion so that the
Caliph would spare her life in order to hear the ending on the following
evening. Whereupon the wily Scheherazade would finish the story she
had commenced the previous night and begin a new one which would
in turn go unfinished so that she would be called back yet again. She
proceeds in this manner for 1001 nights until the Caliph, either by this
time deeply in love with the young woman, or completely addicted to
her storytelling, decides to spare her permanently. Upon this news, the
few remaining virgins in the kingdom are heard to heave a heartfelt sigh
of relief. Whether the actual outcome turned out to be a fate worse than
death for young Scheherazade remains an unknown mystery. This
classic volume though is the ultimate tribute to the power of
storytelling.
Telling such tales most likely goes back to cavemen sitting around a
campfire.3 Homer would later evoke his muse to assist him in retelling
epic stories to the enthralled and largely drunken nobility of his time4
and other bards and minstrels throughout history became a fixture
among a ruler’s household.5 Traditional fairy tales have become
understood as the means by which children learn to cope with a
held together by a set of commonly held myths which to a large extent defines and
distinguishes it:
It follows that the state belongs to a class of objects which exist in nature, and that
man is by nature a political animal; it is his nature to live in a state. He who by his
nature and not simply by ill-luck has no city, no state, is either too bad or too good,
either sub-human or super-human.
(Aristotle 1962, p.28)
3 One wonders whether cave paintings were no more than an early prototype of
PowerPoint. Clearly though, storytelling has always been the best medium for teaching
and learning. 4 In the dramatic beginning of the Illiad, Homer sets the stage for his story by invoking
the rage (or wrath) of his complex hero, Achilles:
Goddess, sing the rage of Peleus’ son Achilles, murderous, doomed, that cost the
Achaeans countless losses, hurling down to the House of Death so many sturdy souls,
great fighters’ souls but made their bodies carrion, feats for the dogs and birds, and
the will of Zeus was moving toward its end. Begin, Muse, when the two first broke
and clashed, Agamemnon lord of men and brilliant Achilles.
(Homer 1990, p.77) 5 You might argue that many religions have at its core a collection of stories. There are
Hindu and Greek myths as well as numerous stories in the Bible.
4 C. Freedman
sometimes frightening and alien world.6 In more recent times,
Hollywood has understood that the way to a reliable box office success
usually lies through the means of good storytelling.7 The lives of few
lecturers in economics depend so crucially on their ability to hold an
audience, and especially not for 1001 lectures, but we nonetheless have
much to learn from Scheherazade about improving our effectiveness in
class. The dependable financial performance of Pixar films over its
rivals has always been based on the strength of its scripts. Certainly
special effects can enhance storytelling, but it is not really a reliable
substitute for a good screenplay. Directors without a story to tell resort
to simply blowing things up instead. This appeals mostly to teenage
boys (of whatever age) who are the ones willing to pay consistently to
see films where explosions and car crashes take the place of storylines.
2. STORIES ARE NOT JUST FAIRY TALES: THE NEED
FOR GOOD STORIES IN ECONOMICS EDUCATION
“Husband,” she said, “if I can’t make the sun and the moon rise, I won’t
be able to bear it. Do you think I want to just watch? No, I won’t have
any more peace until I myself can make them rise.” She gave her
husband such an awful look that a shudder ran through his bones. “Go
there at once! I want to be like God”.
(Brothers Grimm 1992a, p.79)
Telling stories somehow seems too homely an activity. Academics
prefer to at least pretend to be engaged in something loftier when
compelled to do their share of teaching. That has tended to blind us to
what actually drives effective teaching.8 The way we tell a story must
naturally differ even if the story itself is basically the same. Of course
6 Bruno Bettelheim (1977) has explained how stories like “Little Red Riding Hood”, serve
as a way to assist children in conquering their fears and boosting their self-confidence. 7 Storytelling has also been the mainstay of most political campaigns. Candidates are sold
as mythical characters with a compelling back story (Honest Abe the rail-splitter). In
recent times, Republicans have crafted human anecdotes, sometimes purely fictional, to
vilify policies enacted by opposition parties. In 2014, for example, the airwaves were
inundated with filmed ‘personal’ stories of individuals ruined by the new health care
coverage. Clearly in politics, people remember stories and not policies.
The most potent [political advertisement] feature Julie Boonstra, a Michigan cancer
patient obliged to change insurance plans by the Obamacare health law. In them Mrs.
Boonstra talks about her cancelled policy and her “unaffordable” new plan. Addressing
Mr. Peters [running for Michigan Senate seat] directly, she tells him that by voting for
Obamacare, he has jeopardised her health (The Economist 2014, p.43). 8 I’m embarrassed by the fact that it took me many years before I explicitly realized what
I was doing and when my teaching was most successful.
Teaching as Storytelling 5
different disciplines have different stories to tell and different ways of
telling those stories.9 So we discover upon examination different
language, metaphors and conceptual structures across different
disciplines. Some of these components may be used to bar entry to non-
professionals but the greater precision and efficiency of thinking they
facilitate also furnishes the potential for telling better stories about the
phenomena they are used to study:10
Stories are everywhere. We hear them, we write them. Perhaps on
occasions we feel them. We use them to motivate others, to convey
information and to share experience. We tell stories to entertain our
friends and families, to connect with new people and to make sense of
the world around us. As we tell stories we create opportunities to
express views, reveal emotions and present aspects of our personal and
professional lives. Frequently we engage in this uniquely human
activity in creative ways and in doing so stimulate our imagination and
enhance our memory and visualisation skills. Our ability to
communicate not just our own experiences but the experiences of others
enables us to transcend personal frameworks and take on wider
perceptions. This attribute, together with its international, trans-
historical and transcultural usage makes story telling a powerful
learning tool. It is therefore not surprising that it has endured.
(Alterio & McDrury 2003, p.7)
The objective of good teaching is to make the material being taught
accessible, to motivate, to capture interest. Think about it. What
students often remember long after the series of lectures are over, are
the embroidery of little anecdotes and tales related during the course of
teaching any given subject.
9 Curiously, some of the best economists in the profession see themselves as storytellers.
If we can conceptualize the way we convey research in this fashion, then it would be
surprising not to extend such an effective device to teaching as well.
Economists have an image of practicality and worldliness not shared by physicists and
poets. Some economists have earned this image. Others – myself and many of my
colleagues here at Chicago – have not. I’m not sure whether you will take this as a
confession or a boast, but we are basically story-tellers, creators of make-believe
economic systems (Lucas 1988, p.1). 10 One of Alfred Marshall’s great objectives was to professionalize economics by barring
outsiders (those without professional training) from entering into any serious discussion,
particular relating to policy debates. Employing specialized language facilitates this
process. Marshall actively attacked the great popularizers of his age, namely Henry
George and John Hobson (See Marshall’s lectures on George’s bestseller, Progress and
Poverty, vide Marshall 1969).
6 C. Freedman
Storytelling can be an incredible teaching tool. In the classroom, the
role of storytelling can go far beyond the acquisition of literature. I
believe this is due to the additional emotional content that can be
delivered through a story. Information that is then even more
thoroughly retained, because the input of facts is received on an
emotional as well as an intellectual level, allows for the new
information to be stored in a much deeper part of the memory within
the human brain. Because of this often overlooked fact, I feel that oral
storytelling should be considered one of the better ways to educate and
teach information. It can be used in all aspects of learning if applied
properly.
(Bones 2008, p.1)
We are all geared to respond mentally and emotionally to storytelling.
So we should learn how to best use it and understand that technology is
not a substitute for good teaching, nor is educating a simple task of
dispensing information. This goes against a strong trend seemingly
endorsed by a large majority of university administrations. The
objective, one that can be identified as a wave building over the past
two decades and gaining startling acceleration, is a regimen of
standardization and uniformity. Employing the guise of accountability,
administrators can increasingly gain greater control over the processes
that define a classroom. The tools here are technology and templates
which together somehow substitute for the individual skills and talents
of their faculty.11 In this focused attempt to equate mass education with
an assembly line process, the professionals, or experts, inhabiting the
teaching and learning centres that have sprung up across campuses, act
as zealous missionaries of such an approach. A closer examination
reveals that in adopting a one-size-fits-all methodology, these experts
are apt to stumble over the self-same hurdles that professionals in child
development discover. There is no simple pathway running between
theory and practice, namely behaviour that consistently works in any
given situation. In a similar sense, each lecturer has his or her own
specific strengths and weaknesses. Consequently, it would be surprising
if the exact same teaching methods brought out the best in each and
every teacher.12
11 Given the lack of flexibility in constructing a course, particularly at the first year level,
the actual role of the lecturer becomes limited. Greater efficiency might be gained by
hiring out of work actors to provide dramatic readings of textbook overhead slides. 12 A parallel can be drawn, if one wishes, to the movement for a more pluralist approach
to teaching economics. The logic here is that we do away with thinking of mainstream
economics as the one canonical approach to fruitful analysis. If alternative approaches are
Teaching as Storytelling 7
Given this diversity, a more logical approach would be to allow each
lecturer to discover how to move from specific individual talents to
specific outcomes.13
However, embracing storytelling is a more difficult and high risk
option to take as a lecturer. We have to be willing to give up the comfort
of structuring courses around materials and techniques that are focused
on the 2 T’s: easy to teach, easy to test. Such an approach is less labour
intensive but flirts heavily with being dead boring.14 For the serious
educator, inspiration should come from the storied Scheherazade.
Teach as if your life depended upon it. Lecturers should feel compelled
to tell no more than one clear story per course, a story that ideally leaves
students wanting to come back to find out what happens next. What I
need to demonstrate then is how storytelling techniques can be used to
enhance what is often considered to be one of the deadliest of all
economics courses in existence, namely first year micro-economics.
This is a course that can be described, with only a smidgen of
exaggeration as one where we pretend to teach and students pretend to
learn. If we can begin to transform a course such as this by means of
storytelling that should be the first step at least toward thinking of each
economics course in terms of the story involved and how best to tell it.
Remember, the key to this approach is to have a single story line that
carries on throughout the course. The worse approach is to take what
capable of shedding light on economic analysis then teaching methods should be allowed
a great deal of variance as well. In other words, different stories can be told in many
different ways and be equally effective.
Actually, critical pluralist economics aims to replace all orthodoxy with a real
understanding of variety. It aims to equip practitioners to select, from all appropriate
theories, that which best fits the evidence. To achieve this, students first need to
understand, not where economist agree, but why they disagree (Freeman 2009, p.25). 13 A similar problem inevitably crops up within the work of professional economists.
There is a tendency to jump from economic theory to policy prescriptions without fully
considering the specifics of the situation in which it is applied. The practice in economics
picked up particular momentum in the post war period. See Colander & Freedman (2011)
for one way to evaluate this phenomenon. 14 Rationalizing this approach as maintaining standards by taking the more rigorous road,
indicates a difficulty in distinguishing rigour from rigour-mortis. The more compelling
explanation depends on incentives and rewards. Lecturers are more heavily rewarded for
publications rather than for teaching. The opportunity cost of delivering a course with a
strong, easy-to-grasp storyline translates into less time for research and writing. Given
such unalterable constraints, most lecturers advance their careers by adopting the easy
way out. Newly hatched lecturers tend to replicate the mechanical style of teaching they
endured, only insuring that student complaints are held to an acceptable minimum.
8 C. Freedman
we might call the cookbook strategy, teaching topics by demonstrating
algorithms. ‘Today we are going to learn how to roast a chicken, next
week how to make a lemon meringue pie.’ Nothing is interconnected;
one unrelated topic follows the next. To be honest, this recipe following
technique is even a poor way to learn how to become a good cook. To
understand cooking, to develop a feel and intuition for the process, you
have to understand how the techniques work and why you are using
them. A good cook needs to develop something of an intuition about
the chemistry of flavours as well as to be able to combine them in new
and interesting fashions. If all we provide our students with is a
mechanical ability to manipulate supply and demand curves then we
have failed to achieve a worthwhile objective. That painstakingly
memorized ability will fade and vanish from their minds soon after they
have completed their final exam.
Ideally we need to develop our students’ economic intuition, an
understanding in the case of micro which involves an almost instinctual
feel for how markets work. To do so we must be willing to fight against
the layout of many textbooks which can best be employed merely as
background reading and backup support, something that approaches the
level of acting as a security blanket for students, not as a bible from
which to teach. Textbooks unfortunately tend to be a collection of topics
that are only loosely tied together. As a result, a course composed of a
string of topics can easily degenerate into something resembling an
Ionesco play where characters rush in and out of the drama for no
discernible reason.15 If you are telling a coherent story, where each
lecture forms an intrinsic step in what is a complete tale, then students
15 First year micro textbooks are remarkably predictable. A lecturer will know what will
be in the text and the order of presentation before opening the cover. There are seldom
surprises. What is missing is any real feel for the ordering (the story line) or how it all
ties together. Textbooks attempt to appeal to lecturers who are already familiar with the
material and want to avoid spending the time required to read the book in depth. (For a
jaundiced look at the economics textbook cottage industry, see Freedman (2003). There
are exceptions. Colander (2013) attempts to tell a somewhat intuitive story, one which
beginning students manage to grasp without too much difficulty. For Colander,
techniques and technical knowledge shouldn’t overwhelm the objective of the textbook.
“I’m trying to tell an intuitive story. Technical exposition can be tackled at a later time”
(David Colander conversation with Craig Freedman, August 2014). Too many textbook
writers, as well as teachers, have forgotten what it is to tell a good story.
Teaching first-year economics involves telling stories. These stories are
simplifications of far richer stories that we economists tell, test and study.
(Colander 2000, p.76)
Teaching as Storytelling 9
will understand that by missing a lecture they will fail to comprehend
fully the flow of the story. Moreover they will, with a necessary dollop
of luck, realize that they can’t strategically study for an exam by just
focusing on a few topics since the course is an integrated story with one
single story arc.
3. A GOOD STORY NEEDS A GOOD PUNCH-LINE
“Is your name Kunz?”
“No.”
“Is your name Heinz?”
“No.”
“Can your name be Rumplestiltskin?”
“The devil told you! The devil told you!” the little man screamed and he stamped
so ferociously with his right foot that his leg went deep into the ground up to his
waist. Then he grabbed the other foot angrily with both hands and ripped himself
in two.
(Brothers Grimm 1992b, p.212)
How then might a lecturer go about transforming first year micro into a
coherent story and by doing so stir the sleeping minds of a classroom
of students? Let’s start with a few possible suggestions. The critical
segments that transform an ordinary into a compelling story lie at the
very beginning and the end of a tale (much like a plane flight).
Beginnings are the most crucial since you need to hook your students
in from the start. That is when you hope to catch your listeners’ attention
and imagination. Blow the opening and you struggle thereafter to regain
lost ground. Yet, how many lecturers start a course by employing the
most boring and predictable alternative possible, namely going over the
administrative details involved, the bookkeeping minutia that is about
as interesting as reading from a University’s ‘student handbook’. Only
when students are properly stupefied does the course itself begin. By
following this procedure, the lecturer practically has guaranteed a
complete loss of the class’ attention before even beginning. This is a
strategy which is equivalent to the required safety instructions given at
the start of each flight and largely ignored by passengers. Such thinking
would have films present fifteen minutes of credits before starting the
action itself. Yes, if the lecturer lacks restraint a few words may do
minimal damage, but make these brief and have the sense to wait until
a start is made before explaining the heart and objectives of the course.
To adopt this standard method is the sort of poor storytelling that
10 C. Freedman
Hamlet fruitlessly railed against.16 In fact, the film industry over the
years has evolved away from beginning a movie by rolling out an
extended set of titles. Instead, a more frequent choice over the last
decade is to jump immediately into visual storytelling. In the more
extreme case, the title and players are revealed only when the film is
completed.
The first and most important issue to tackle then in teaching an
introductory course in microeconomics to what are mostly economic
virgins is to decide exactly what the nature of the story you wish to
relate is. Most likely it will be the same tale that Marshall attempted to
tackle and before him Smith. That story explains how markets operate
based on a foundation of individual choice. Economic growth and
progress come through a division of labour along with concomitant
specialization. But for this case to be effective (to achieve these
objectives) we need to understand how a coordinated system of activity
could be built upon a foundation of myriad individual decisions and
actions. In a market system, price signals basically coordinate the
choices made by individual economic agents. Therefore the story we
tell our students in such an intro course is the story of how price adjusted
markets work. In effect we are explaining how an economic system
built upon individual choice can yield coherent results.
Let’s stop and discuss a few issues that are bound to affect the nature
of the stories told. I realize that there are some lecturers who believe
and act quite differently, but my position developed from years of
missteps as well as successes is that no matter how you may regard
standard micro theory, it is important in teaching the subject to
suffocate your own underlying beliefs and ideological biases. At least
in my opinion, a course should not be a vehicle for pushing one’s
favoured ideology.17 The goal is to explicate the system and leave
students with a clear understanding or intuition of how structured
economic thinking is applied to these issues. Certainly, explaining the 16 For those with a literary bent (or even those who are literally bent) the reference is to
the scene where Hamlet uses a traveling acting troupe to re-enact the murder of his father
hoping that the usurper will betray his guilt by his reaction. “The play’s the thing, wherein
I’ll catch the conscience of the King” (Shakespeare 1963: Act II, Scene 2: 616-617).
Disregarding Hamlet’s instructions, the actors choose to start their performance with a
dumb show that gives away the action of the performance. “The players cannot keep
counsel; they’ll tell all” (Shakespeare 1963: Act III, Scene 2: 146-147). 17 None of us is a blank page when it comes to ideology, but by recognizing what our
individual slant is, we can hope to shove it into a box so that for the most part it doesn’t
rear its head during the extent of the first year microeconomics course.
Teaching as Storytelling 11
underlying assumptions and the limitations of such thinking is essential.
But the point is to explain and enlighten, not to sell a particular
viewpoint. The lecturer’s job then is not to build a corps of true
believers (marketeers) nor is it to encourage a flock of cheap critics.18
In a similar vein, there are also arguments for presenting alternative
economic approaches, but this would seem possibly to undermine the
coherent story a lecturer is trying to tell. One last, unrelated issue is
whether it is important to keep to a timetable. Most lecturers present a
course outline at the initial meeting and then frantically try to meet this
pace as though they were paid on a piecework basis. Clearly, it is not
how much you cover, but how well you do it that really matters.
Students will forget most of the details of the story told. So here is
another case where less can be more. In other words, it is simply not
crucial to cover all material which was initially proposed.19 A lecture
schedule should be no more than a suggestion of the reading students
should feel obliged to do each week. During that first lecture, students
can be informed that their lecturer is likely to fall behind such a
schedule and even not to cover everything listed in what should be
regarded as no more than a heroic wish list. If students are reassured
18 This may be no more than a preference on my part. Given that the objective of a first
year course is to develop something resembling a basic understanding of economic
reasoning and analysis, a multitude of storylines at this early stage, when a typical a
student is still trying to grasp basic economic thinking will tend to confuse. Alternative
approaches, history of thought and other courses which broaden a student’s vision are
best reserved for future years. Remember that the opportunity cost of introducing
disparate elements in the first year or two may be high. However, those who claim to be
able to integrate several perspectives in the first two years are perhaps simply more adept
story tellers than I am. Dismissing the success of this alternative approach out of hand
would seem to be foolish. Choices should be made based on one’s own strengths and
perceived results.
Intermediate macroeconomics courses also include a variety of theoretical
perspectives including Classical, Marxian, Keynesian, Post-Keynesian,
Monetarist, Rational Expectations, and Supply-side Economics. Students grapple
with the different questions that can be asked, tools that can be used, and
implications associated with different theories (Cooper & Ramey 2014, p.5).
19 Problem may arise since many large universities are driven by a need to centralize and
unify to meet administrative requirements, which seem at times motivated to meet
administrative, rather than educational objectives. The result of such subliminal desires
is an inevitable demand to formulate and lock-in final exams early in the semester. To
overcome this obstacle, while retaining scheduling flexibility, simply be conservative in
the material covered in that examination. Squashing any unneeded eruptions of optimism
will usually leave the lecturer in a desirable safe haven.
12 C. Freedman
that only material discussed during lectures is examinable, much
anxiety will be laid to rest.
Since the key storyline involves demonstrating the way in which it is
possible to connect individual choice with coherent market outcomes,
lecturers need to start with the idea of the individual (firm or consumer).
This concept is not only the starting point but the underlying and
repeated motif of the story being presented. Here the underlying insight
or functional glue holding the story together and providing the
mechanism for individual choice is the idea of opportunity cost.20 As
simple minded as this concept may seem to be, it is really the one big
idea that microeconomists possess. A course in microeconomics then
must make the idea of opportunity cost explicit throughout.
Unfortunately, though all textbooks seem to talk about this idea
initially, it is often quite lost after these first few chapters despite the
fact that the central supply and demand model utilized in the course
rests firmly on this one single idea.21 Using opportunity cost ensures
20There should be no surprise that an accomplished teacher like Peter Boettke (2012) also
stresses the importance of opportunity cost as a lynch pin of teaching economics. Given
his Austrian grounding this would be expected if not inevitable. But in this case perceived
ideological shadings are not unduly relevant. Economic analysis built on a foundation of
individual choice must provide a basis for those decisions. Without the concept of
opportunity cost, understanding price coordinated markets lacks any intuitive anchor. 21 The term opportunity cost is reported to have made its first appearance in 1914. The
concept was unveiled by Austrian economist Friedrich von Wieser in his book Theorie
der gesellschaftlichen Wirtschaft, (reputed to be a sparkling romp in its original German).
As is the case with much similar terminology, the idea, if not the exact words, can be
fossicked from earlier writings. The concept itself is ancient, being incorporated in the
phrase, ‘you can’t have your cake and eat it too’. An early recording of this phrase
appears, in a letter on 14 March 1538 from Thomas, Duke of Norfolk to Thomas
Cromwell, as “a man can not have his cake and eate his cake” (Gairdner 1892). The idea
itself is intuitively obvious. Most reasonable textbooks over the decades have identified
the central conceit, namely, that by choosing, one is freely willing to forego an alternative
which is also achievable. The problem comes not so much with the simple formulation,
but in measuring and applying the idea. This stumbling block may be the reason why
opportunity cost seems to fade with each ensuing chapter of any textbook. But it does
undoubtedly always take an initial bow:
Opportunity cost is the benefit that you might have gained from choosing the next
best alternative. To obtain the benefit of something, you must give up (forgo)
something else – namely, the next best alternative.
(Colander 2010, p.9)
If doing activity x means not being able to do activity y, then the value to you of
doing y is an opportunity cost of doing x … y is simply the most highly valued
alternative to doing x.
(Frank 2000, p.8)
Teaching as Storytelling 13
that the starting point of individual choice retains its core position
throughout the unfolding of the course or story line. Doing so is
important in telling a coherent story, even though price theory itself is
not really interested in individuals whether the discussion focuses on
firms or people.22
4. THE STORY BEGINS
"Grandmother, what big ears you have!"
"All the better to hear with, my child."
"Grandmother, what big eyes you have!"
"All the better to see with, my child."
"Grandmother, what big teeth you have got!"
"All the better to eat you up with."
"Grandmother, what big ears you have!"
"All the better to hear with, my child."
"Grandmother, what big eyes you have!"
"All the better to see with, my child."
"Grandmother, what big teeth you have got!"
"All the better to eat you up with."
(Charles Perrault 1697)
The following example is based in part on an initial interactive lecture
I have used a number of times.23 The story’s structure is easily adaptable
to any of the many popular textbooks commonly used. The text is not
It is the cost of one item in terms of the other. The economist’s way of measuring
the cost of, for example, studying economics one more year is not the pain and
suffering involved in the year, but the maximum amount of other scarce things
sacrificed by choosing the additional year.
(McCloskey 1982, p.10) 22 While a mythical or idealized individual or firm are used as building blocks to construct
a demand and supply model, the focus is on individual markets rather than on individual
players. 23 However, all classes are far from identical. The basic story conveyed has to be tailored
to the needs and ability of each specific group of students. Also attention needs to be paid
to insure that the storyline is maintained throughout the course. There can be a tendency
to let one’s vigilance slide as the course progresses. If though, a strong story is vigilantly
upheld, a noticeable difference in outcomes is discernible. The author taught two very
similar first year microeconomics courses in a highly respected small liberal arts college
(2011-2012). Thirty-five students in each class composed of a similar mix in each group.
By the second time through, the lecturer had a better idea of the nature of the students and
the storylines to which they were most likely to respond. Results varied significantly.
Students giving the course a high rating increased from just over 50 percent to over 75
percent. Also interactions, questions and responses demonstrated a higher degree of
interest in the second group.
14 C. Freedman
particularly important since as pointed out, these books serve merely as
a supplementary resource. PowerPoint slides are used as unobtrusively
as possible for a couple of reasons. Students expect not only to listen
but to look whether at slides or at snippets from the internet. However
I keep material on the slides to a minimum. They are mostly prompts
and questions to remind students of how the story is unfolding. But the
slides themselves, or at least the limited outlines appearing there, are
never read out loud since there is no real point in doing what each and
every student in a class can do individually. Remember that these slides
and storytelling precede any boring administrative dandruff. In fact,
there is no real reason for the lecturer to bother introducing him or
herself at this point. My suggestion is to curb one’s ego and forgo
behaving like a movie star who requires his or her name to be above the
title. Just launch into the story at hand.
I start off by making a confession, namely that the very first meeting
with any class is always my favourite part of the course since I know,
not think, believe or suppose, but know as a card carrying economist,
that there is no place else where these students would rather be than
right here listening to me. As a result of this unsolicited outpouring of
approval I am of course overwhelmed with gratitude and humility. Now
students at this point may suspect that they unfortunately have a looney
for a lecturer, someone who is at least a few sandwiches short of a
picnic, but these students are assured that this conclusion will be proved
to them beyond a reasonable doubt and this proof will turn out to be the
most important lesson they will ever learn in an economics class.
I then proceed by choosing a random number of people and assigning
potential alternative choices to them. For instance, one of them could
be enjoying a late morning in bed, or having coffee with friends.
Another could be watching the latest cute kitten video on YouTube,
listening to the complete parliamentary speeches of Australian Prime
Minister, Tony Abbott, or making a fortune as a telemarketer. The clear
point is that each and every student in the class faced choices. Not one
of them had to be sitting in that class. Yet out of all the choices
available, each one chose to be here, seated before me.24 Therefore as
an economist I can only conclude that there is nowhere else these
24 Curiously enough a similar tactic appears in the less than critically acclaimed film,
Dangerous Minds (1995). Confronted with the usual clichéd group of ghetto students,
their teacher, played by Michelle Pfeiffer, challenges their class attendance by explaining
that no one was forcing them to be there.
Teaching as Storytelling 15
students would rather be. Naturally I am also obliged to feel humbled
at such an unsolicited vote of confidence in my abilities.
Here I point out that in the course of this proof I have deliberately
snuck in a few assumptions that are vital if the proof is to remain
credible. The key is assuming each and every student can be described
as a rational economic decision maker. It turns out that this isn’t an
entirely far-fetched assumption. The idea of economic rationality, at
least in its most intuitive aspect, is fairly simple, as are many key
economic ideas. There are three major components that comprise the
basis for economic rationality. One is that decisions have to have a
purpose. Economics really has little to say about random decision
making. Next a big, but essential jump made for purposes of analytical
simplicity is that an individual actually knows the consequence of each
decision made. In fact, this component will not hold in many cases. All
individuals are prone to making mistakes, often due to insufficient
information or faulty reasoning. But this aspect allows an economist to
start with a simple and easily understandable notion of human action.
Certainly individuals make many decisions based on what they suppose
will be the outcome even if such calculations subsequently turn out to
be erroneous. The final component is arguably the most important
aspect of economic rationality. The motivating idea is that individuals
try to avoid becoming worse off by the decisions they are forced to
make. They would prefer to improve their situation. Again, this is not
to say the individual could not err. Moreover, the idea is restricted to
narrow self-interest. Otherwise this key basis for rationality becomes
essentially empty, a mere tautology whereupon every human action can
be described as leaving the individual better off, while equally every
action can also be catalogued as being driven by self-interest.25 Of
course people don’t act from narrow self-interest 100 percent of the
time. But an economist can safely claim that it is a strong and persistent
motivation that tends to influence a good proportion of human decision
25 It is important to emphasize to students that this assumption has been shown to be a
useful one. To be useful, it does not have to apply in every single case. But in many cases
it is a relatively common motivation in explaining human decision making. The potential
quicksand presented to the unwary is what economist George Stigler has described as the
‘crankcase oil problem’:
If we see a person drink the used crankcase oil from his car, and he then writhes in
agony and dies, we can assert that he must have really liked crankcase oil. (Why else
would he have drunk it?) Virtually any behaviour, no matter how bizarre, can be
“explained” after the fact by simply assuming a taste for it.
(Frank 2000, p.223)
16 C. Freedman
making. Economists have in fact attempted to explain much of
economic activity by employing this starting point.
Let me repeat that although I don’t shun the use of PowerPoint in
telling my story, I don’t use it as a script. To do so would be the
equivalent of reading a story rather than telling your own. If reading a
series of slides was the only requirement for standing in front of a class
then the universities could simply hire out-of-work actors to do that task
and they would undoubtedly provide a more dramatic and interesting
reading then a mere academic could achieve.26 (Not that I doubt such a
plan is currently being considered.) So again, to repeat, keep the slides
in the background. Certainly, an occasional film or other video clip may
emphasize and underline a particular aspect of your story. But these are
supplements and not substitutes for a basic ability to tell an interesting
story. If a lecturer resorts with greater frequency to such devices then
like a desperate film director you are becoming addicted to the
equivalent of employing a car crash as a means to distract an audience
from the thinness of the story you are trying to cobble together.
Now that opportunity cost has been established as the starting point
for the economic story of markets, I proceed to reinforce the notion that
choice depends in part on what a person has to forego when making a
decision. I will then ask a student if he or she would like to own a new
car. The answer is predictable. I then ask if they do have one and if not,
why not. The class comes to the conclusion that by definition, a person
doesn’t own a car because the opportunity cost of doing so is too high.
In other words, what the individual has to sacrifice is simply too great.
What then is the implication? Students can grasp that by changing the
opportunity cost, it is possible to change the decisions that people make.
Changing incentives in this fashion is a key to understanding economic
behaviour. At this stage of our story, I put them into groups of two and
ask each group to imagine and describe a world in which there was a
zero opportunity cost to making a decision. These groups generally
come up with either of two options. In one scenario everything is
possible, no choices are necessary since every objective is achievable
26 In an almost surreal application emphasizing templates over storytelling or even
common sense, at least some economics departments in Australia insist that introductory
microeconomic classes use exclusively the PowerPoint slides associated with the
prescribed textbook and that no original additions or substitutions to those canonical
slides are permissible. In this situation, employing an out of work actor might be quite
appropriate.
Teaching as Storytelling 17
at all times. This imagined world is one where resources are limitless
extending even to time. In stark contrast another world where
opportunity cost ceases to exist is one that allows for no decisions to be
made because no alternative decisions are ever possible. Everything an
individual does in such a universe has been predestined and charted
from moment one of his or her life. I point out that these worlds might
make for an entertaining ‘Star Trek’ episode, but such worlds are hardly
descriptive of places in which we are likely to live. In our world, choice
involves foregoing or sacrificing something, giving up ‘a’ to get ‘b’.
This undeniable reality then defines the role that economists play. An
economist is responsible for explaining what people will have to be
willing to forego in order to achieve the goals they profess to desire.
Like any good story, this core insight needs to be embroidered and
applied if students are to grasp the intrinsic sense of this basic intuition.
Let’s look at just two examples of how such a story line can be
advanced. The first case assists students in using opportunity cost to
analyse a specific case. By doing so, students get an insight into how an
economist would try to understand a given event. More broadly, an
actual instance provides the fundamental structure that supports any
basic economic argument.27 Students are asked to try to picture the
uniform of the late 18th and early 19th century British soldier. The
outstanding memory of those who have watched films or television of
this era is the fact that the standard colour was a bright scarlet. This
choice seems to make little sense since it would serve to make these
soldiers better targets for the muskets of an opposing army. However,
attributing deliberate stupidity to explain observable decisions is not
acceptable as an economic rationale. Students are accordingly divided
into groups of two and asked to employ opportunity cost to analyse this
particular choice. An array of responses is usually evident. I counter by
taking them through a simple step by step approach which revolves
around incentive determined behaviour. Namely the example illustrates
how changing opportunity cost can in turn change individual decisions
and actions. Analysing this case first involves focusing on the objective
of the individual who makes the decision and how that objective can be
achieved. The key contrast must be with the objective held by the 27 I’ve also used a clip from the film Moneyball (2011) to provide a similar insight. In the
clip, the actor Jonah Hill presents his analysis for choosing what players the Oakland A’s
should seek in trade. The scene provides a textbook example of using economic type
reasoning when seeking to gain a given objective. The step by step argument realizes the
desired result while using the minimum resources (lowest opportunity cost) possible.
18 C. Freedman
ordinary soldiers, those actually required to wear the bright red. This
analysis sets up a classic conflict of interest. Armies exist to win wars
which they can only achieve by winning battles. The fate of battles
balance on whether soldiers are willing to march forward despite the
gunfire directed at them. The soldiers in contrast want to survive and
continue to live. They can best achieve this objective by running away
from the gunfire. By changing the relevant opportunity cost of a
soldier’s decision, this inherent conflict of interest can be resolved.
British officers were permitted to shoot any soldier attempting to run.
They were equipped with pistols having a greater accuracy than the
muskets any opposing army might fire. That enemy army was still far
away while British officers were quite close at hand. The bright scarlet
coats made any British soldier attempting to run an easy target for their
commanding officers. The uniforms then increased the opportunity cost
of running away and by doing so would have served to alter the choices
made by individual soldiers.28
The second case study utilised ties opportunity cost to another core
idea, that of economic efficiency. Achieving an objective inefficiently
means that the relevant opportunity cost, what necessarily must be
foregone, is simply too high. Resources are being wasted since the same
objective could have been achieved using fewer resources. The
resources wasted in this fashion could have been employed to achieve
additional objectives. Again I pose a simple minded question to
students. If a careful observer deigns to examine most public buildings,
he or she will find that female and male toilets are located
geographically close to one another. In their groups, students discuss
why this particular geographical reality prevails by employing the basic
and core concept of opportunity cost. The answer is usually self-evident
for most students. Locating these two facilities widely apart would
require extra resources in terms of additional pipes connecting
individual toilets with the main waste pipe. Since the same objective
could be accomplished using fewer resources, the opportunity cost of
placing male and female toilets widely apart would simply be too
great.29
28 There are of course other reasons for the chosen colour as well as for the individual
soldiers not fleeing to save their hides. The illustration serves as an example of
opportunity cost rather than a definitive historical statement. 29 Clearly an additional argument would indicate that making such facilities adjacent
reduces the opportunity cost of searching out these particular meccas, especially under
Teaching as Storytelling 19
This ends part one of our preliminary story. Again the initial
indoctrination is to provide students with an idea of what we are trying
to do in the course, why we are doing it as well as a brief and initial feel
for how to do so. Therefore, the next instalment of the story asks what
tools should an economist use to explore the idea of individual choice
leading to coordinated market behaviour. Clearly, the way economists
choose to do so is to construct models that explore and reveal key
economic relations. We can hope to accomplish such a task by
examining how a change in one decision causes a change in another.
But to explore such an inter-relationship requires the use of a particular
method. If we simply let everything change at the same time,
determining what change is the cause of what effect becomes difficult
and perhaps impossible. Instead, we can choose to keep all other factors
constant and focus on how a change in one simple decision results in a
change in another. Doing this creates a procedure that starts with the
very simplest case possible and then only gradually complicates this
basic model. Or to think of the procedure in a related manner, we start
with the most general model possible, which means the most abstract
and simplified. We abstract away from the specifics in order to
generalize.30 Then by adjusting underlying assumptions of the model
we can more carefully apply them to specific circumstances.
To get a grasp on how to apply such thinking to creating models, I
ask students to return to their groups and imagine they are transport
engineers. I have them think about the following situation. On a multi-
lane highway, would any one lane be consistently faster than another?
The resulting discussion involves the issue of how best to set up a useful
model which would effectively test this issue. If we abstract away from
all specifics, then we would be faced with absolutely identical
individuals with identical preferences, all of whom have the same
objectives. In addition, all drivers drive the same cars on a day with
urgent circumstances. Few things are more frustrating than constantly stumbling across
toilets of the wrong gender when the need grows overwhelming. 30 One simple way to demonstrate the power of abstracting in order to generalize is to ask
a student to explain the end result of a process that starts with him or her having one apple
and then receiving one more. Any student will simply reply two apples. Then ask the
same student the result of having one apple and then adding an orange. Some students
will reply quite literally, one apple and one orange. (I tell that student that he or she is a
prospective accountant.) But some other student will reply two pieces of fruit. That
student has abstracted away from the observed specifics in order to generalize. If the
process is taken one step further, abstract reasoning will declare that one plus one equals
two and the individual will have stumbled across the basis of mathematics.
20 C. Freedman
ideal driving conditions with no cars entering or exiting this stretch of
the highway.31 Given narrow self-interest and faced with the identical
low opportunity cost of switching lanes, most students easily see that
no one lane would be any more consistently faster or slower than the
other. Drivers would simply switch from slower to faster lanes in such
a way as to equalize the average speed on any lane over time. Only after
this analysis can we start to loosen some of the imposed simplifying
assumptions in order to customize the model for specific situations.
This allows for the production of distinct traffic models applicable to a
perceived set of circumstances.
One final preliminary step still awaits the class before pursuing more
specific elements of the market story. Prior to any initial economic
modelling that commences by employing opportunity cost decision
making as the keystone of the production possibility curve, students
need to clearly understand the differences represented by choosing
either market or planned coordination as the basis for a national
economy. In the latter case overall coordination is imposed from above
by some central planning agency. The former option is based on
corralling narrowly based self-interest by having an effective set of
incentives in place. The example used in class demonstrates the core
role of prices (opportunity costs) in achieving market results. The
overall objective must be to insure that the right incentives are in place
by making sure opportunity costs are correct. If done properly, the
observed outcomes should be societally desirable despite individuals
only looking after their narrow self-interest.
The problem posed to students is the classic puzzle of how a mother
should divide a piece of cake between her two children so that both
offspring will be satisfied. Most students would have the mother simply
divide the cake and give each child a piece. They are asked to examine
the assumptions underlying this option. Namely, the children would
have to trust their mother to such a point that each one would not think
31 Drivers are assumed to want to reach their destinations in the minimum amount of time
possible. They are unfortunately constrained by also wanting to avoid accidents that could
damage either them and/or their cars. The more they want to avoid this risk, the slower
they will travel and by doing so lengthen their journeys. However, since, by simplifying
assumption, each driver has the same attitude to risk, what they forego in order to reach
their desired destinations more quickly would have no impact in the original analysis of
differential flows of traffic. Let individuals differ in their response to risk and we soon
observe some individuals who wish to drive faster while others slow down. Such a
characterization would certainly affect the flow of any stream of traffic.
Teaching as Storytelling 21
of questioning the outcome. They would simply acknowledge that
anything their mother does must necessarily yield the best result for
them. Or they might simply be afraid to take issue with any decision so
made. This, I explain is a model of the planned economy. Usually
though, one group of students will offer the market alternative, have
one child divide the piece of cake and the other child choose first. This
alternative is the one closest to an economist’s heart. In this option, each
child is driven by self-interest to yield the desired result. In the market
solution, there is no necessity for individuals to be altruistic, to even
consider the well-being of another or to place a great deal of trust in
individuals. The implications of this example are that we can fall into
error if we ignore the incentives that are in place, especially those which
will affect individual behaviour. People will take into account, at least
imperfectly, the opportunity cost of their decision and will notice when
this cost changes. There lies the problem in supposing that it is possible
to simply dictate an outcome, as in the case of central planning, without
taking into account the way such dictates impact on incentives.
Only at this point do I introduce myself and quickly run through the
boring nuts and bolts of the course. This is done briefly, since a full set
of these instructions, in brilliantly sleep inducing detail, is enunciated
in the course outline. Reminders, when relevant, should also be posted
online as well as announced, when relevant, in class. So again, just the
highlights will do at a first meeting. The class then continues the story
by using opportunity cost to construct very simple, initial economic
models.
What conclusions can I draw about teaching and storytelling? We are
not of course saying that this is the only or even the best way to tell the
story of economics to a beginning microeconomic class. Each and every
instructor should find his or her own way to tell the same or similar
stories.32 Such an outcome would be quite natural since we each
possess markedly different storytelling abilities. One of the major
challenges facing any university instructor these days is the fervent
desire by many central planning administrators to homogenize courses,
justifying such a regimen by claiming the need for a greater level of
pseudo-monitoring and faux-accountability. Such imperatives resemble 32 Certainly storytelling embraces a wide array of aids with statistics, graphical models
and tables providing different, but equally relevant and valid tools as do movie clips or
anecdotes. Each individual instructor decides on a mix that will help to propel the core
storyline.
22 C. Freedman
those in general effect under the Soviet planning regime of the
Brezhnev era, though executed with less flair or wit. Think about the
result in past decades of forcing all film directors to follow the same
story template. The consequences of having all directors forced to tell
the same story in the same fashion would be films which all look
identical and manage to achieve a uniform low level of mediocrity.
Successful storytelling is essentially about taking chances. Only by
doing so can any one teacher hope to arouse a class’s interest and allow
that teacher to impart successfully some sense of economic intuition.
The problem with the sort of cookbook approach beloved by
administrators is that it leaves not the slightest impact or mark on the
students themselves. They remain economic free zones that have done
no more than acquired a definite distaste for the subject. In fact, the
painfully memorized recipes start to fade away while in the midst of
taking their final exam. Only a few hours later any momentarily
inscribed models or details are simply forgotten. Let us then conclude
this article by urging each lecturer to find the courage to discover his or
her inner Scheherazade and by doing so retain both one’s head and
one’s heart.
REFERENCES
Alterio, M. and McDrury, J. (2003) Learning through Storytelling in Higher
Education: Using Reflection and Experience to Improve Learning,
London: Routledge.
Aristotle (1962) The Politics, Harmondsworth: Penguin Classics, (translated
by Thomas A. Sinclair.
Bettleheim, B. (1977) The Uses of Enchantment: The Meaning and
Importance of Fairy Tales, New York: Alfred A. Knopf.
Boettke, P. J. (2012) Living Economics: Yesterday, Today, and Tomorrow,
Oakland, California: The Independent Institute.
Bones, I. (2008) “A Better Way to Educate through Storytelling!”, online at
Storyteller.net. http://www.storyteller.net/articles/243 08/02/2014.
Colander, D. (2000) “Telling Better Stories in Introductory Macro”,
American Economic Review, 90 (2), pp.76-80.
Colander, D. (2010) Economics, 9th edition, New York: McGraw-Hill.
Colander, D. (2013) Economics, 10th edition, New York: McGraw-Hill.
Colander, D, and Freedman, C. (2011) “The Chicago Counter-Revolution
and the Loss of the Classical Liberal Tradition”, Paper presented at the
Summer Institute for the History of Economic Thought, University of
Richmond, Richmond, Virginia, June 24.
Teaching as Storytelling 23
Cooper, B. and Ramey, E. A. (2014) “Pluralism at Work: Alumni Assess an
Economics Education”, International Review of Economics Education,
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Australasian Journal of Economics Education
Volume 11, Number 1, 2014, pp.24-41
DOES THE SUB-FIELD OF ECONOMICS STUDIED
AT HIGH SCHOOL AFFECT FIRST YEAR
ECONOMIC LITERACY?: EVIDENCE FROM NEW
ZEALAND*
Michael P. Cameron and Rebecca Williams
Department of Economics,
University of Waikato
ABSTRACT
In 2003, New Zealand significantly reorganised high school education by introducing the
National Certificate in Educational Achievement (NCEA) which moved to standards-
based assessment and divided traditional subject areas into component units called
Standards. Student performance in these Standards are now reported separately. This
paper investigates the effect of student completion of and performance in particular
Standards on economic literacy at first year university level, employing data from 2008-
2011 at the University of Waikato. We find significant associations between completion
of and performance in particular NCEA Economics Standards and first year economic
literacy. This association is explored for the total cohort of students in the data set,
separately for high aptitude and low aptitude students, and separately for effects on sub-
divisions of Walstad & Rebeck’s (2001) TEL3 economic literacy test. The paper
concludes by recommending particular Standards as minimal requirements for an optimal
high school course in economics.
Keywords: Economic literacy, standards-based assessment, National Certificate in
Educational Achievement, New Zealand.
JEL classifications: A21, A22.
* Correspondence: Michael P. Cameron, Senior Lecturer, Department of Economics,
University of Waikato, Private Bag 3015, Hamilton, New Zealand 3240, Email:
mcam@waikato.ac.nz, Phone: +64 7 858 5082; Fax +64 7 838 4331. The authors are very
grateful to Steven Lim, Mark Johnston, and Mary McKnight, who commented on earlier
drafts of this paper, and to two anonymous reviewers. We also acknowledge the support
of the Waikato Management School, who allowed administrative student data to be used
in the analysis.
ISSN 1448-448X © 2014 Australasian Journal of Economics Education
High School Economics and Economic Literacy 25
1. INTRODUCTION
Many studies have investigated the relationship between high school
economics education and performance in undergraduate economics.
Cameron & Lim (2015), for example, show that students with prior
economics study (usually at high school) have much higher economic
literacy in their first-year economics class at the University of Waikato
(see also Becker et al. 1990; Myatt & Waddell 1990; Brasfield et al.
1993; and Anderson et al. 1994). Lopus (1997), however, argued that
not only did economics background generally have an impact on first
year undergraduate economics performance but the specific sub-field
of study (microeconomics or macroeconomics) undertaken at high
school might also make a difference. He showed that students having
undertaken microeconomics study at high school did better in questions
that tested the implicit application of economic concepts. This suggests
that a more nuanced approach to exploring the impact of previous
economics study on undergraduate performance might be required than
the inclusion of a simple a binary variable to capture the effect of such
prior study in regression equations.
In 2003, New Zealand significantly reorganised high school
education, including economics, by moving to a standards-based
assessment approach: the National Certificate in Educational
Achievement (NCEA). This approach not only benchmarked student
performance against specific criteria for particular levels of
achievement, it also divided traditional subject areas, such as
economics, into component units called Standards. Student
performance for these Standards are now reported separately. This
policy change thus provides an opportunity to explore Lopus’s findings
in the New Zealand context by examining the impact of performance in
various Standards on student economics knowledge at first year
undergraduate level. To that end this paper investigates the impact of
student completion of and performance in particular NCEA Standards
on economic literacy at first year university level, employing data from
2008-2011 at the University of Waikato and using Walstad & Rebeck’s
(2001) economic literacy test.
Following Walstad & Rebeck (2001), we define economic literacy
as a measure of student economic understanding. The underlying
theoretical model is a standard education production function, where
the output is economic literacy, and a student’s completion of NCEA
economics standards is included as an input. This type of investigation
26 M.P. Cameron & R. Williams
has been conducted for mathematics standards (James et al. 2008), but
not for economics. The findings of this research can be used to evaluate
the effectiveness of NCEA Standards and to identify particular
Standards where improvements could be made, and possibly to consider
whether changes in the number of credits awarded for each Standard
may be appropriate.
The paper is structured as follows. Section 2 described the NCEA
changes in more detail. Section 3 describes the data set and outlines the
methodology to be followed. Section 4 reports and discusses the key
results, and Section 5 draws some braod conclusions and makes a policy
recommendation.
2. THE NATIONAL CERTIFICATE IN EDUCATIONAL
ACHIEVEMENT (NCEA)
Until 2002, secondary students in New Zealand were awarded
qualifications based on a norms-referenced marking scheme. This
meant that only a certain percentage of students were able to pass the
assessment (Shulruf et al. 2008). In addition, tasks graded at the school
level (internal assessments) were scaled to match those graded
externally, even where these tasks were assessing different knowledge
or skills.
The introduction of the National Certificate in Educational
Achievement (NCEA) saw a shift to standards-based assessment. This
approach specified particular concepts or the characteristics of
particular skills, and students are now graded on the extent to which
they can show evidence of having mastered that knowledge or having
acquired the possession of those skills. Rather than receiving a grade
for the subject as a whole, subject curricula are now divided into various
components (referred to as standards) each covering only a small
portion of the overall curriculum, and students are assessed against
these individual standards. This means that it is now easier to see which
particular components of a subject a student has mastered rather than
simply being able to observe their overall performance in the subject as
was previously the case. The certificate is awarded at three levels
typically studied during years 11 to 13 (approximately ages 16-18).
There is, however, some flexibility as to when these levels may be
attempted so that students with greater ability can sit some levels earlier
(for example, NCEA Level 1 subjects in Year 10 rather than in Year
11).
High School Economics and Economic Literacy 27
NCEA standards are of two types: Unit Standards are competency
based and are assessed on what is essentially a pass-fail basis (graded
as Achieved or Not Achieved); whereas Achievement Standards are
more complex and have four achievement levels: Not Achieved where
a student has failed to meet basic performance criteria for the standard;
Achieved where the student has met these basic performance criteria;
Merit for students who have met a more demanding set of performance
criteria for the standard; and Excellence for students who have met a
yet more demanding set of performance criteria. Whereas Unit
Standards are assessed on a purely internal basis, Achievement
Standards can be either internally or externally assessed. Most courses
have a mix of internal and external assessment.
NCEA is also standardised across schools and regions – all students
studying NCEA Level 3 Economics in the same year, for example, sit
an identical three-hour exam for external standards, and internal
standards are moderated at the national level. It should be noted,
however, that not all students are enrolled in every standard, and some
may choose not to sit a particular standard once they get into the final
examination. Unfortunately, there is no way of identifying students who
engaged with a particular standard but did not attempt it in the
examination.
As of 2011, a total of 12 standards in Economics were offered at
NCEA Level 3 – five Achievement Standards and seven Unit Standards
– for a total of 60 credits (24 and 36 respectively). Of the Achievement
Standards, four are assessed externally, with most students attempting
Achievement Standards rather than Unit Standards. The four external
standards have remained largely the same since their introduction – all
are worth the same number of credits and cover roughly the same topics
– however this is likely to change from 2013. The five most attempted
standards are: AS90629 (Understand marginal analysis and the
behaviour of firms); AS90630 (Describe an economic problem,
allocative efficiency, and market response to change); AS90631
(Describe market failure and government interventions to correct for
market failure); AS90632 (Describe aggregate economic activity); and
AS90778 (Collect and process information and carry out an economic
analysis). These standards are described further in the Appendix.
28 M.P. Cameron & R. Williams
3. DATA AND METHODS
The data used in this study come from 1,232 students who took the
introductory economics paper1 ECON100: Business Economics and the
New Zealand Economy at the University of Waikato between 2008 and
2011. The sample is restricted to A-Semester students, of which 8.12%
were repeating the paper. Administrative data on students’ age, gender,
domestic/international status, university Grade Point Average (GPA,
calculated on a nine-point scale from A+ = 9 to Restricted Pass = 1),
and NCEA achievement were obtained from University records.
Of the 1,232 students in the sample, 796 students (64.61%) sat at least
one NCEA Level 3 Standard in any subject, and 369 of those students
sat at least one NCEA Level 3 Economics Standard. Of the 369 students
who sat Economics Standards, 116 (31.44%) completed at least 24
credits, which is approximately the equivalent of a full course in NCEA
Level 3 Economics. Table 1 shows the number of students in the sample
that completed each Economics Standard and the break-up of this
number by result obtained. As can be seen from this table, the majority
of completed credits came from the five Achievement Standards noted
earlier, while only 125 students achieved any of the Unit Standards.
Table 1 – Number of Students Completing Each Economics Standard and
Distribution of Students by Result Obtained
Achievement Standards Unit Standards
Standard E M A N All Standard A N All
90629 13 45 194 98 350 5863 44 15 59
90630 16 54 146 130 346 5864 76 15 91
90631 14 34 128 162 338 5865 42 20 62
90632 19 59 113 135 326 5866 34 11 45
90778 49 64 130 61 304 5867 63 15 78
10928 4 5 9
10931 4 8 12
E = Excellence, M = Merit, A = Achieved, N = Not achieved.
1 In New Zealand, courses are referred to as “papers”.
High School Economics and Economic Literacy 29
All students who were present in the first week of lectures were
invited to complete an economic literacy test, the Test of Economic
Literacy, 3rd Edition (TEL3) (Walstad & Rebeck 2001). TEL3 is a test
designed to measure economics learning at the high school level, and
as such lends itself readily for use as a pre-test of economic literacy for
incoming university students. The test contains 40 multiple-choice
questions in four content categories: fundamental economic concepts,
microeconomic concepts, macroeconomic concepts, and international
economics concepts. The questions can be categorized by cognitive
character into three levels which correspond to the first three levels of
Bloom’s (1956) taxonomy: (1) knowledge - recognition and recall,
remembering information close to the way it was first presented; (2)
comprehension - understanding the meaning and intent of information;
and (3) application - applying learning to new situations (see Walstad
& Rebeck 2001). The test contains 6 knowledge, 12 comprehension and
22 application questions. Of the 1,232 students in the sample, 285
attempted at least one NCEA Level 3 Standard in economics and
completed the economic literacy test. The mean economic literacy score
in this sample (measured as the number of questions correct out of 40)
was 30.12, with a standard deviation of 4.83. Including the students who
attempted any NCEA Level 3 standard (n = 588) has only minor effects
on the key results reported in the remainder of the paper; notably GPA
becomes a much more important predictor, and all of the Achievement
Standards become statistically significant for low-aptitude students.
Similarly, including all of the (mostly international and older) students
who completed the economic literacy test but had no NCEA Level 3
credits (n = 922), has little effect on the results, other than age becoming
statistically significant (and positive) in some of the models.
Ordinary least squares regression (OLS) was used to analyse the
economic literacy score, with student characteristics, year dummy
variables, and NCEA economics performance as explanatory variables.
Student demographic characteristics such as gender and age were
included as control variables. Male students have been shown to
perform better in multiple choice economic literacy tests (Cameron &
Lim 2015). Similarly, student origin (domestic or international) is
known to affect performance on economic literacy tests conducted in
English (Cameron & Lim 2015). Whether this was the first enrolment
in a university-level economics paper was included, to control for
students who may have developed economic insight over-and-above
30 M.P. Cameron & R. Williams
any effects of high school study. Finally, student aptitude was proxied
by GPA, calculated for each student’s entire first year at university
(including the first-year economics paper).
Separate models were estimated that included NCEA Standards as
binary variables (achieved/not achieved) and NCEA Standards as
ordinal variables (with each level of achievement in each standard as a
separate binary variable). Due to the small number of students who
completed Unit Standards, Unit Standards were included in the models
as a single binary variable, indicating that the student had completed
any Unit Standard. In addition, models were estimated for each
cognitive level of economic literacy (knowledge, comprehension, and
application) as dependent variables. As the dependent variables are
count data, Poisson regression models were also estimated, but the
results were qualitatively the same as those reported here. Heckman
selection models (see Heckman 1979) were also estimated, to account
for any selection bias where there may be systematic differences
between the 922 students who sat the economic literacy test and the 310
students who did not. Again, the results from those models were
qualitatively the same as those reported here, so we choose to report the
results from the simplest (OLS) models. The regression models
displayed no significant heteroskedasticity, and the models passed
conditional RESET specification tests, demonstrating that the model
specification was appropriate.
4. RESULTS AND DISCUSSION
Results for the two models estimated to explain economic literacy using
dummies for successful completion of Achievement Standards and any
Unit Standard are shown in Table 2. Model I excludes GPA as an
explanatory variable, while Model II includes it. In both cases male
students demonstrate higher economic literacy than female students.
Students who were enrolled in the ECON100 course in 2009 and 2010
had higher economic literacy than those in 2008. Each one unit increase
in GPA is associated with an additional 0.33 correct answers (out of 40)
in the economic literacy test.
Unit Standards appear not to be significantly associated with
economic literacy, and only three of the five Achievement Standards
are significantly positively associated with economic literacy: AS90630
(Describe an economic problem, allocative efficiency, and market
response to change), AS90631 (Describe market failure and
government interventions to correct for market failure), and AS90632
High School Economics and Economic Literacy 31
Table 2 - Results for Economic Literacy Model using Standards Dummies
Variable Model I Model II
Gender (1 = male) 2.6906***
(0.4845)
2.9904***
(0.4963)
Student origin (1=domestic) 2.2302
(1.5409)
2.1254
(1.4288)
Student age -0.0060
(0.2879)
0.0531
(0.2850)
Year 2009 2.0865***
(0.6975)
2.1639 ***
(0.6916)
Year 2010 1.1837*
(0.6966)
1.3298 *
(0.6850)
Year 2011 0.4322
(0.7556)
0.2585
(0.7442)
First enrolment 0.9713
(3.0211)
0.5156
(3.0949)
Grade Point Average 0.3312**
(0.1302)
AS90629 0.8450
(0.6386) 0.5227
(0.6613)
AS90630 1.6164***
(0.5888)
1.3130**
(0.6104)
AS90631 2.4331***
(0.5122)
2.1285***
(0.5235)
AS90632 2.1917***
(0.4962)
2.1791***
(0.5056)
AS90778 0.1301
(0.5240)
-0.1249
(0.5370)
Any Unit Standard 0.0055
(0.4872)
-0.0081
(0.4817)
Constant 20.397***
(6.7897)
18.852**
(6.7257)
R2 0.4138 0.4268
n = 285; *** significant at the 1% level; ** significant at the 5% level; * significant at the
10% level; robust standard errors are reported in parentheses below the coefficients.
(Describe aggregate economic activity). Including GPA reduces the
size of the coefficients for all Standards, because high school students
who attempt (and achieve) Economics Standards are generally more
32 M.P. Cameron & R. Williams
academically able than the average student. Based on Table 2, the three
statistically significant Achievement Standards appear to have
substantial effects on economic literacy; in the case of AS90632, the
difference between successfully completing this Standard and not
completing it is about 7 percent of the mean score in the economic
literacy test.
Results for models which explain economic literacy using the level
of performance in various Standards are shown in Table 3. Similar to
the results in Table 2, the Standards AS90630, AS90631, and AS90632
are significantly associated with economic literacy, at all three levels of
performance (achieved, merit and excellence). Furthermore, higher
levels of performance in these Standards are associated with
monotonically increasing levels of economic literacy, with excellence
being associated with greater economic literacy than merit, which is in
turn associated with greater economic literacy than achieved. This
suggests that AS90630, AS90631 and AS90632 may be the only
Standards that provide economic literacy gains for all students,
regardless of their innate ability. To further explore this, we separated
the sample from the previous regression into two groups – a high
aptitude group comprised of those above the median grade point
average of 5 (n = 143), and a low aptitude group comprised of those
equal to or below the median (n = 142). As expected, students in the
high aptitude group had, on average, significantly higher economic
literacy with a mean test score of 31.51 compared to the mean score of
the low aptitude group of 28.73 ( p < 0.001). We then re-estimated the
regression separately for each group. The results for both groups,
controlling for aptitude, are reported in Table 4.
The results for the low aptitude group have to be interpreted in the
context of their level of performance. Very few students in this group
performed at the excellence level in any Standard; none in AS90629.
Only small proportions of students gained a merit. However, ceteris
paribus, it appears that at the achieved level, three Standards are
significantly associated with higher economic literacy for low aptitude
students: AS90630, AS90631, and AS90632. The results are quite
different for high aptitude students. Whereas student origin is
significant among the low aptitude students and GPA is not, the reverse
is true for high aptitude students. In terms of the Achievement
Standards, for high aptitude students only AS90631 and AS90632 are
High School Economics and Economic Literacy 33
Table 3 - Results for Economic Literacy Model using Level of
Performance in Various Standards
Variable†
Coefficient
(Robust Std.
Error)
Variable†
Coefficient
(Robust Std.
Error)
Gender (1 = male) 2.9384***
(0.5120) AS90631 Excellence 3.2854***
(1.0249)
Student origin
(1=domestic) 2.7652**
(1.3738) AS90631 Merit 2.4977***
(0.7406)
Student age 0.1087
(0.2918) AS90631 Achieved 1.9633***
(0.5505)
First enrolment 0.6028
(3.1162) AS90632 Excellence 2.6546**
(1.0543)
Grade Point Average 0.2510*
(0.1386) AS90632 Merit 2.1131***
(0.7065)
AS90629 Excellence 2.1906
(1.3656) AS90632 Achieved 2.0153***
(0.5458)
AS90629 Merit -0.2120
(0.9243) AS90778 Excellence -0.1634
(0.7991)
AS90629 Achieved 0.6148
(0.6838) AS90778 Merit -0.4373
(0.7518)
AS90630 Excellence 2.7828*
(1.4604) AS90778 Achieved -0.0525
(0.5769)
AS90630 Merit 1.4737*
(0.8158) Any Unit Standard 0.0217
(0.4956)
AS90630 Achieved 1.3001**
(0.6302) R2 0.4464
n = 285; *** significant at the 1% level; ** significant at the 5% level; * significant
at the 10% level; robust standard errors reported in parentheses below
coefficients; † year dummy variables and constant term omitted for brevity.
significant, and only AS90631 is significant at all levels of
performance. These results provide additional context for the earlier
results – low aptitude students have higher economic literacy associated
with three Standards, but high aptitude students only benefit from two
of the Standards.
34 M.P. Cameron & R. Williams
Table 4 - Results for Economic Literacy Model using Level of
Performance but Separated by Student Aptitude
Variable† Low Aptitude
Group
High Aptitude
Group
Student origin (1=domestic) 5.0339***
(1.9966)
0.1422
(1.3383)
Grade Point Average -0.1060
(0.2779)
0.7610**
(0.3518)
AS90629 Excellence 5.8590**
(2.6800)
1.1584
(1.9093)
AS90629 Merit -0.9866
(1.7245)
-0.8014
(1.5994)
AS90629 Achieved 0.8021
(0.8978)
-0.0071
(1.4474)
AS90630 Excellence 1.7051
(1.5376)
AS90630 Merit 0.8955
(1.3916)
1.5577
(1.1120)
AS90630 Achieved 1.9986**
(0.9118)
0.2703
(0.9340)
AS90631 Excellence -0.9621
(1.7242)
3.3640***
(1.1350)
AS90631 Merit 2.6008
(2.0463)
2.2327**
(0.8961)
AS90631 Achieved 2.0331**
(0.8572)
1.5614**
(0.7349)
AS90632 Excellence -0.0666
(2.1662)
1.9418*
(1.0522)
AS90632 Merit 2.6350*
(1.5722)
1.2913
(0.8964)
AS90632 Achieved 2.2749**
(0.8982)
1.5861**
(0.7811)
AS90778 Excellence 0.5314
(2.1823)
-0.8574
(0.9930)
AS90778 Merit -1.7797
(1.7644)
-0.0801
(0.8118)
AS90778 Achieved 0.3283
(0.7894)
-0.3363
(0.9753)
Any Unit Standard 0.4033
(0.8316)
-0.4337
(0.5969)
n 142 143
R2 0.4653 0.4283
*** significant at the 1% level; ** significant at the 5% level; * significant at the 10% level;
robust standard errors are reported in parentheses below the coefficients; † constant term
and some control variables are omitted from the table for brevity.
High School Economics and Economic Literacy 35
As noted earlier, the TEL3 economic literacy test can be broken down
into three cognitive levels: knowledge, comprehension, and application
(Walstad & Rebeck 2001). Knowledge questions test recognition and
recall, essentially the ability to remember facts. Comprehension
questions test the ability of the student to interpret information.
Application questions test the ability of students to use information and
to apply learning to new situations. We extended the previous analysis
to separately consider the knowledge, comprehension and application
components of students’ economic literacy. The results for all three
components, controlling for student aptitude and other variables, are
shown in Table 5. The coefficients are not directly comparable between
the different cognitive levels, due to the differing number of questions
at each cognitive level.
The Standard AS90629 appears to be associated only with
significantly higher levels of economic literacy for comprehension
questions, but only for students performing at the excellence level (but
not at the merit or achieved levels, and not overall). AS90630 is
associated with higher levels of economic literacy only at the
application cognitive level, and only at the achieved and excellence
levels of performance. Standards AS90631 and AS90632 are also
associated with greater economic literacy for all question types.
However, in both cases for comprehension questions, the achieved
performance level is significant, but not performances at the merit or
excellence levels for AS90631, and not at the merit levels for AS90632.
For both Standards, it is clear that the monotonic increase in economic
literacy across performance levels observed in earlier tables is driven
by effects in knowledge and application questions, but not
comprehension questions. Standard AS90631 is also generally
associated with larger effects in all question types than is the case in
any of the other Standards. Finally, Standard AS90778 and Unit
Standards are not associated with higher levels of economic literacy at
for any question type, consistent with the previous tables.
Overall, the results in Tables 4 and 5 seem to confirm the experience
of secondary school teachers in New Zealand. The Standards AS90631
and AS90632 are more contextual and generate greater interest in
students – AS90632 lends itself to discussions of Reserve Bank and
government policy and issues in the global economy that students
encounter regularly and can identify with, while AS90631 involves
36 M.P. Cameron & R. Williams
Table 5 - Regression Results for Various Economic Literacy Question Types
Variable† Knowledge Comprehension Application
I II I II I II
AS90629 0.1677
(0.1880) 0.1128
(0.2257) 0.2422
(0.4103)
AS90629 Excellence 0.4783
(0.3956)
0.7476*
(0.4194)
0.9647
(0.8369)
AS90629 Merit 0.1689
(0.2442)
-0.0013
(0.3352)
-0.3796
(0.6331)
AS90629 Achieved 0.1787
(0.1928)
0.1369
(0.2313)
0.2992
(0.4239)
AS90630 0.2551
(0.1560)
0.2964
(0.2139)
0.7615*
(0.3984)
AS90630 Excellence 0.3736
(0.3295)
0.3088
(0.4398)
2.1004**
(1.0186)
AS90630 Merit 0.2744
(0.2147)
0.4784
(0.3172)
0.7210
(0.5257)
AS90630 Achieved 0.2409
(0.1632)
0.3020
(0.2118)
0.7572*
(0.4159)
AS90631 0.4617***
(0.1307)
0.5018***
(0.1898)
1.1650 ***
(0.3453)
AS90631 Excellence 0.8235***
(0.1979)
0.4087
(0.3976)
2.0532***
(0.7873)
AS90631 Merit 0.5469***
(0.2024)
0.2302
(0.2986)
1.7206***
(0.4727)
AS90631 Achieved 0.4041**
(0.1387)
0.5488***
(0.2026)
1.0105***
(0.3647)
AS90632 0.4163***
(0.1466)
0.3864**
(0.1735)
1.3763***
(0.3276)
AS90632 Excellence 0.4931**
(0.2420)
0.7237*
(0.4291)
1.4378*
(0.8220)
AS90632 Merit 0.4304**
(0.1940)
0.2711
(0.2755)
1.4117***
(0.4485)
AS90632 Achieved 0.3653**
(0.1524)
0.3712*
(0.1909)
1.2788***
(0.3551)
AS90778 -0.2247
(0.1500)
-0.1203
(0.1938)
0.2201
(0.3398)
AS90778 Excellence -0.2539
(0.2183)
-0.2079
(0.3066)
0.2984
(0.5036)
AS90778 Merit -0.2740
(0.2048)
-0.2559
(0.2775)
0.0926
(0.4774)
AS90778 Achieved -0.2198
(0.1610)
-0.0741
(0.2063)
0.2413
(0.3675)
Any Unit Standard -0.1292
(0.1266)
-0.1134
(0.1348)
0.2119
(0.1704)
0.2163
(0.1735)
-0.0908
(0.3195)
-0.0812
(0.3349)
R2 0.3046 0.3167 0.2007 0.2172 0.4091 0.4343
n = 285; *** significant at 1% level; ** significant at 5% level; * significant at 10% level; robust
standard errors reported in parentheses below coefficients; † control variables and constant term
omitted for brevity.
High School Economics and Economic Literacy 37
issues such as pollution that students are familiar with. That is, these
Standards may provide a greater opportunity for experiential learning
(Kolb & Fry 1975), which in turn leads to greater understanding and
retention of knowledge. This also explains why these Standards were
highly significant for application questions. However, experiential
learning cannot be the only important factor as the results for AS90778,
where students are generally asked to work with real-world data and
where experiential learning might readily occur, are not significant.
Finally, some limitations of the analysis in this paper should be noted.
First, the sample was composed of university students enrolled in first-
year economics at the University of Waikato. While we have no a priori
reason to believe that the choice of institution will make a difference, it
is possible that the results are not representative of all tertiary
economics students in New Zealand. It is also possible that more able
students may choose programmes of study such as law, medicine or
engineering, which do not require a first year economics course. Some
of these students may take economics as an elective course, but many
will not. Similarly, some students who study economics at high school
may not proceed to university study at all. However, to some extent this
limitation is overcome by controlling for student aptitude. Second, as
the economic literacy test was optional for students, there is a
possibility that students who choose not to complete the test introduce
bias into the results. However, as noted earlier Heckman (1979)
selection models result in qualitatively similar results to those presented
in this paper. Third, the content in the TEL3 economic literacy test
appears to match most closely with all the Standards except AS90629.
This may explain why that Standard was generally insignificant in the
results. Fourth, the elapsed time between the student completing their
high school Economics Standards and completing the economic literacy
test is not the same for all students. While the age variable may control
for this to some extent, the results of our analysis would likely be
different if they were based on an economic literacy test conducted at
the end of high school, rather than at the beginning of university study.
Finally, we are unable to fully attribute causality from NCEA
Economics Standards to economic literacy. In order to do so would
require randomisation of a group of students into different NCEA
standards – a situation that is unlikely to present itself to researchers!
However, notwithstanding the inability to fully attribute causality, these
results do provide guidance as to the association between NCEA
38 M.P. Cameron & R. Williams
standards and economic literacy among entry-level university students
in economics.
5. CONCLUSION
These results show that there is significant association between NCEA
economics and economic literacy for students as they start university
study. In and of itself, this result is unsurprising and simply confirms
earlier findings such as those by Cameron & Lim (2015). However, it
is clear from the results that some Standards have a much closer
association with economic literacy, in particular AS90631 (Describe
market failure and government interventions to correct for market
failure) and AS90632 (Describe aggregate economic activity). Those
two Standards appear to provide for increases in economic literacy for
students that are robust to their level of aptitude, and the association
holds for all levels of performance in the Standard. For low aptitude
students, all standards are associated with higher economic literacy.
This difference between the effects for high aptitude and low aptitude
students suggests that more targeted course design in NCEA Level 3 is
appropriate for high performing students, if economic literacy is the
goal. Where a general course in economics for all students is required,
the optimal economics course would likely include both AS90631 and
AS90632 as a minimum starting point, along with AS90630 which is
likely a pre-requisite for understanding the other Standards. Such a
course would remain within the aims of the economics curriculum (see
Ministry of Education 1997), while providing significant benefits for
high performing economics students at secondary school.
APPENDIX – NCEA ECONOMICS ACHIEVEMENT STANDARDS
This appendix provides a brief description of each of New Zealand’s
National Certificate in Educational Achievement (NCEA) Achievement
Standards in economics as discussed in the paper.
Standard 90629: Understand marginal analysis and the behaviour of firms
– 5 credits
The main focus of this standard is recognising the different types of markets
which might exist (for example perfect competitors or monopolies), and how
High School Economics and Economic Literacy 39
marginal analysis can be applied in the different market structures to
determine factors such as pricing decisions.
Standard 90630: Describe an economic problem, allocative efficiency, and
market response to change – 4 credits
This standard looks at the determinants of demand and supply, the shape of
the respective curves, and how demand and supply (and the quantities of
each) can change. The effect on consumers and producers is studied, as well
as the effect of government interventions on efficiency.
Standard 90631: Describe market failure and government interventions to
correct for market failure – 4 credits
Market failures studied in this standard are externalities, merit versus demerit
and public versus private goods, natural monopolies and income distribution.
Once market failures have been identified, government interventions to
correct for market failures are explored and, at Excellence level, evaluated.
Standard 90632: Describe aggregate economic activity – 6 credits
This is the biggest of the economics standards at Level 3, and the only one
where the main focus is macro-economics. The aggregate demand and
aggregate supply model is studied using New Zealand as an example.
Students look at the circular flow model and business cycle, and are required
to calculate GDP using a range of methods. They also look at what factors
affect aggregate demand and aggregate supply, and policies specific to New
Zealand.
Standard 90778: Collect and process information and carry out an economic
analysis – 5 credits
In this internally-assessed standard students are required to collect and
analyse both primary (raw) and secondary data to test an economic
hypothesis. As this is an internal standard, no set assessment is provided to
teachers. They can develop their own or adapt one created by others,
provided it meets the assessment criteria. At the time of writing, the Ministry
of Education resource site Te Kete Ipurangi has two different assessments
which would fulfil the criteria for this assessment. The first has students
determining “whether the economic relationships predicted by economic
theory occur in macroeconomic statistics for the New Zealand economy over
10 time periods” (Ministry of Education), whereas the second asks students
40 M.P. Cameron & R. Williams
to analyse “the relationship between capital formation through foreign
investment and economic growth” (Ministry of Education).
REFERENCES
Anderson, G., Benjamin, D., and Fuss, M.A. (1994) ‘The Determinants of
Success in University Introductory Economics Courses’, Journal of
Economic Education, 25 (2), pp.99-119.
Becker, W., Greene, W., and Rosen, S. (1990) ‘Research on High School
Economic Education’, Journal of Economic Education, 21 (3), pp.231-
245.
Bloom, B.S. (ed.) (1956) Taxonomy of Educational Objectives: The
Classification of Educational Goals, Handbook I: Cognitive Domain,
New York: McKay.
Brasfield, D.W., Harrison, D.E., and McCoy, J.P. (1993) ‘The Impact of
High School Economics on the College Principles of Economics Course’,
Journal of Economic Education, 24 (2), pp.99-111.
Cameron, M., and Lim, S., (2015) ‘Recognising and Building on Freshman
Students’ Prior Knowledge of Economics’, New Zealand Economic
Papers, 49 (1), pp.22-32.
Heckman, J. (1979) ‘Sample Selection Bias as a Specification Error’,
Econometrica, 47 (1), pp.153–161.
James, A., Montelle, C., and Williams, P. (2008) ‘From Lessons to Lectures:
NCEA Mathematics Results and First-year Mathematics Performance’,
International Journal of Mathematical Education in Science and
Technology, 39 (8), pp.1037-1050.
Kolb, D.A., and Fry, R. (1975) ‘Toward an Applied Theory of Experiential
Learning’, in Cooper, C. (ed.) Theories of Group Process, London: Wiley,
pp.33-57.
Lopus, J.S. (1997) ‘Effects of the High School Economics Curriculum on
Learning in the College Principles Class’, Journal of Economic
Education, 28 (2), pp.143-153.
Ministry of Education (1997) Social Studies in the New Zealand Curriculum,
Wellington: Ministry of Education.
Ministry of Education, Te Kete Ipurangi, avsilable online at
http://www.tki.org.nz/, viewed 5 December 2011.
Myatt, A. and Waddell, C. (1990) ‘An Approach to Testing the Effectiveness
of the Teaching and Learning of Economics in High School’, Journal of
Economic Education, 21 (3), pp.355-363.
Shulruf, B., Hattie, J., and Tumen, S. (2008) ‘The Predictability of
Enrolment and First-year University Results from Secondary School
Performance: The New Zealand National Certificate of Educational
Achievement’, Studies in Higher Education, 33 (6), pp.685-698.
High School Economics and Economic Literacy 41
Walstad, W.B., and Rebeck, K. (2001) Test of Economic Literacy, Third
Edition Examiner’s Manual, New York: National Council on Economic
Education.
Australasian Journal of Economics Education
Volume 11, Number 1, 2014, pp.42-62
ARE EMPLOYERS INTERESTED IN REFORMING
THE ECONOMICS CURRICULUM?*
Tim Thornton
Politics and Public Policy,
Swinburne University of Technology
ABSTRACT
It has recently been argued that the economics curriculum can only meet the full
spectrum of employer needs by becoming more plural. While the reasoning and
evidence in support of this argument is compelling, it is less clear that employers
themselves currently fully appreciate the linkages between a plural economics
curriculum and more able graduates. This article assesses what employers are
currently seeking from the curriculum. It draws on survey evidence from the
Economic Society of Australia as well as interviews conducted by the author to
examine employer attitudes to potential curriculum renewal. Its findings suggest
that while Australian employers are currently expressing some desire for a
broadening and modernising of the curriculum, the strength of this expression is
limited.
Keywords: economic pluralism, economics curriculum, graduate attributes,
employer needs.
JEL classifications: A20, A22.
1. INTRODUCTION
Ah, the old questions, the old answers, there’s nothing like them!
(Beckett 1964, p.38)
There is ever-increasing interest in ensuring that education meets
employer needs. It is not just employers who have this interest; groups
such as politicians, university administrators and students themselves
are increasingly keen to have a curriculum that meets the preferences
* Correspondence: Tim Thornton, Politics and Public Policy, Swinburne University of
Technology, 9 Traill Street, Northcote VIC 3070, Australia. Phone: +61 3 9481 0962;
E-mail: tthornton@exemail.com.au.
ISSN 1448-448X © 2014 Australasian Journal of Economics Education
Employers and Curriculum Reform 43
of employers. In many ways this narrow vocational focus is
undesirable; indeed, if pursued too excessively, it can be self-
defeating (if not for the individual employer, then for society in
general).
Against this background of better tailoring education to the needs of
employers, it has been argued that the economics curriculum can only
meet the full spectrum of employer needs by becoming more plural.
At issue is the requirement to develop graduate attributes. The
attributes are centred around the capacity to communicate, think
critically and creatively, appreciate different points of view, work in
teams, and to engage in ongoing learning. While the traditional
curriculum can make some contribution to graduate attributes, it
cannot cover the full spectrum.
The evidence and reasoning supporting the view that only a
pluralistic curriculum can develop the full range of graduate attributes
is compelling (O’Donnell 2010, 2013). It is not, however, the focus of
this article. Instead, the focus is on the question of whether Australian
employers currently appreciate the linkages between a plural
curriculum and graduate attributes. In other words, how likely is it that
employers could create pressure on Australian universities for
curricular reform? The analysis of this question draws mainly on
survey evidence from the Economic Society of Australia supplemented
by interview evidence and evidence from other sources. The findings
suggest that Australian employers of economists are currently
expressing some desire for a broadening and modernising of the
curriculum, though in some respects the evidence is mixed.
2. AN EMPLOYER BACKLASH?
Some have asserted that both employers and society in general are
increasingly taking issue with the type of graduates that economics
departments produce and thus building pressure to force real reform of
the curriculum. For example, Groenewegen and McFarlane speak of:
...a possible backlash among staff and students once the trivialisation
of economics becomes obvious and it is realised that graduates
working in business and the public service are hampered in solving
concrete problems by an inadequate training and perspective. If this
happens, pressure to reintroduce comprehensive instruction in aspects
of the discipline such as the history of economic thought . . . is certain
to occur.
(Groenewegen & McFarlane 1990, p.235)
44 T. Thornton
A variant on this theme is the aforementioned argument of
O’Donnell’s (2004, 2007, & 2010) that employers will increasingly
demand a plural and political economics curriculum because it is the
superior vehicle to develop the generic skills and graduate attributes
that employers are said to value so highly:
…well-designed pluralist courses possess large natural advantages
over orthodox courses in developing specific skills in graduates, such
skills being important drivers of innovation, creativity and efficiency.
These advantages in human capital formation are maximised when
pluralist courses consciously incorporate activities that synergistically
interact with the pluralist content.
(O’Donnell 2007, p.1)
Another variation on the argument is that economics departments
will not so much be forced to mend their ways as that they will simply
be left behind as employers (and the world in general) turn to other
sources to gain economic knowledge:
Government employers are themselves already disillusioned with
economics, as the financial crisis has demonstrated the futility of
standard economic advice and theories. Economics departments may
become like departments of philosophy, theology, or ancient studies.
(Lavoie 2010, p.199)
Perhaps academic economics departments will lose mindshare and
influence to others—from business schools and public policy
programs to political science, psychology, and sociology
departments. As university chancellors and students demand
relevance and utility, perhaps these colleagues will take over
teaching how the economy works and leave academic economists in
a rump discipline that merely teaches the theory of logical choice.
(Delong 2011, p.2)
All these assertions are interesting, and it’s always worth pondering
what the economics curriculum should provide, but what does the
current evidence on employer needs actually indicate? In particular,
are employers strongly indicating the need for graduate attributes or
are they mainly looking for narrowly educated neoclassical
economists that are technically proficient in using standard lines of
analysis?
3. SURVEY EVIDENCE
There are number of surveys that examine what Australian employers
require of economics graduates. Abelson & Valentine (1985) argue
Employers and Curriculum Reform 45
that employers seek “an ability to interpret economic data and events,
a good knowledge of economic theory, and a good command of
expression, both in writing and verbally” (Abelson & Valentine 1985,
p.15). Notably, they assert that complementary studies
(interdisciplinarity) in an economics graduate are not highly valued, as
“employers place much more importance on the acquisition of sound
economic skills than they do on training in complementary studies”
(Abelson & Valentine 1985, p.15). They argue that “it is important
that students be adequately trained in basic economics and not be side-
tracked on to studies which are of minor value to them as potential
economists” (Abelson & Valentine 1985, p.15). In terms of what other
disciplines are valued (to the extent that they are valued at all) the
disciplines of accounting, business management and law feature most
prominently. Such preferences, if still valid and correct, sound more
like an expressed need for a narrow, rather than plural and
interdisciplinary, curriculum.
More recent survey work by Hellier et al. (2004) agrees to some
extent with the earlier Abelson and Valentine study, though it also
provides evidence that employers seek graduates with good generic
skills. Hellier et al. define generic skills as the ability to write clearly
and concisely, analyse data, present and communicate, be effective
interpersonally and have a practical orientation. In further contrast to
the 1985 study of Abelson and Valentine, Hellier et al. argue that
employers seek a more multi-disciplinary and business problem-
solving approach from graduates. Interestingly, they point out
problems in developing this type of multi-disciplinary economics
education: it cuts across established departmental and faculty
structures. They also wonder how such courses can be balanced
against the substantial mathematical and quantitative prerequisites that
are required for postgraduate studies in economics.
More up-to-date information about employer requirements is
provided by the Economic Society of Australia, which in July 2011
conducted a survey of policy opinion amongst Australian economists
(ESA 2011). A total of 577 economists participated: 25 per cent from
the private sector, 33.5 per cent from the public sector, 3.8 per cent
from the not-for-profit sector, and 37 per cent from the university
sector. The survey questionnaire had a total of 61 questions, seven of
which pertained to the adequacy of the economics curriculum. These
seven questions outlined the following propositions to which
46 T. Thornton
respondents were asked to express their level of agreement or
disagreement:
1. Australian undergraduate economics degree programs should
contain more subjects that place economics in a broader context,
such as economic history, history of economic thought and
political economy.
2. Australian undergraduate economics degree programs should
contain more behavioural economics and experimental
economics.
3. In Australia, undergraduate economics is taught with excessive
mathematical rigour.
4. Undergraduate pass degrees in economics should be four years.
5. Australian undergraduate honours economics programs
sufficiently prepare students for work as economists in the
public sector.
6. Australian undergraduate honours economics programs
sufficiently prepare students for work as economists in the
private sector.
7. Doctoral programs in economics in Australia generally offer
high quality training.
The results are presented in Table 1. About 75% of the 529
respondents to question 1 agreed or strongly agreed that
undergraduate students should be provided with greater context for
their economics studies in the form of more economic history, history
of thought and political economy than is currently the case. A smaller
majority thought that more behavioural or experimental economics
should be taught. There was much less agreement that undergraduate
economics programs were too mathematical or that they should be
extended to four years. Respondents were also quite ambivalent about
the idea that programs were preparing graduates well for their careers,
whether in the public or the private sector. There was not strong
agreement or disagreement with this proposition, the modal response
in each case being neutral. There was also a large proportion of neutral
responses to the idea that Australian doctoral programs provided a
sufficiently rigorous training with a slight bias towards agreement
rather than disagreement.
This information provides some illumination, but a sectoral
breakdown of responses by employment area would be more helpful.
Towards this end, the author contacted the Economic Society of
Employers and Curriculum Reform 47
Table 1 - Opinions of Australian Economists on the Economics Curriculum
Proposition SD D N A SA n
1. More economic history, history
of economic thought and
political economy is needed.
2.1%
9.3%
13.0%
43.9%
31.8%
529
2. More behavioural &
experimental economics.
2.8%
12.5%
27.0%
42.1%
15.7%
530
3. There is excessive mathematical
rigour.
12.3%
36.4%
26.4%
17.7%
7.2%
530
4. Undergraduate pass degrees in
economics should be four years.
6.2%
35.2%
29.1%
23.6%
5.9%
529
5. Honours programs prepare
students for the public sector.
3.4%
19.7%
30.7%
40.2%
6.1%
528
6. Honours programs prepare
students for the private sector.
3.6%
18.1%
38.7%
34.9%
4.7%
530
7. Doctoral programs offer high
quality training.
4.3%
12.7%
47.4%
30.2%
5.3%
529
SD = strongly disagree; D = disagree; N = neither agree nor disagree / unsure;
A = agree; SA = strongly agree; n = number of respondents.
Source: Economic Society of Australia (2011).
Table 2 - Sectoral Breakdown by Employment: More Context
Sector of
Employment SD D N A SA n
Private Sector 0.8% 9.8% 11.5% 45.9% 32% 122
Public Sector 1.9% 10.8% 17.1% 43% 27.2% 158
University Sector 3.9% 9.4% 11% 41.4% 34.3% 181
Not-for-profit Sector 0% 5.3% 5.3% 36.8% 52.6% 19
No Sector Reported 0% 4.1% 14.3% 53.1% 28.6% 49
Overall 2.1% 9.3% 13.0% 43.9% 31.8% 529
SD = strongly disagree; D = disagree; N = neither agree nor disagree / unsure;
A = agree; SA = strongly agree; n = number of respondents.
Source: Economic Society of Australia.
48 T. Thornton
Australia to obtain a breakdown of responses by sector. This more
detailed information is presented in Tables 2 to 6.
Table 1 indicated that 75.7 per cent of respondents agreed with the
proposition that more context in the form of economic history, history
of thought and political economy should be provided to undergraduate
students. This initially suggests that there is a general demand for the
very type of changes advocated by O’Donnell and others.
Interestingly, 75.7 per cent of academic economists were also in
agreement with this proposition. Such a finding was consistent with
earlier surveys that show academics want their students to have,
among other things, a “head for the social and political dimensions of
the profession” (Anderson & Blandy 1992, p.17).
If nothing else, such findings of majority support for a broader
curriculum provide reformers with the very rare opportunity to cast
themselves to the mainstream as advocates of the stated majority will
(the opportunity to do this was taken in Thornton 2012). However, the
survey’s results tell us nothing about the intensity of the preference for
change or the amount of change that is desired or what other subjects
economists might be prepared to trade-off to have more of these
broader subjects. There are some obvious indications that suggest the
desire for substantial change is absent, the intensity of preference for
even small changes is rather low and that there would be little demand
to reduce the role and presence of mainstream subjects if it was
required.
The obvious question to ask is that if 75.7 per cent of academic
economists wanted more broadly based subjects in the curriculum,
why have they not acted on their preferences, given they are in a
position to offer such subjects? Given the healthy numbers for
political economy courses that are apparent in survey work on the
curriculum (see Thornton 2012, 2013), this does not make sense at
face value. Rhetoric would appear to be running in inverse proportion
to reality.
Table 3 indicates that 57.8 per cent of respondents agreed with the
proposition that Australian undergraduate economics degree programs
should contain more behavioural economics and experimental
economics. So there is majority approval within the profession for
subjects that better reflect developments in our knowledge of
economics. However, less than half of academic economists agreed
with the proposition. These findings provide some encouragement for
Employers and Curriculum Reform 49
Table 3 - Sectoral Breakdown by Employment: Behavioural Economics
and Experimental Economics
Sector of
Employment SD D N A SA n
Private Sector 0.8% 12.2% 26.8% 44.7% 15.4% 123
Public Sector 0.6% 9.5% 25.3% 48.1% 16.5% 158
University Sector 5.5% 17.7% 27.1% 36.5% 13.3% 181
Not-for-profit Sector 5.3% 10.5% 36.8% 42.1% 5.3% 19
No Sector Reported 4.1% 4.1% 28.6% 36.7% 26.5% 49
Overall 2.8% 12.5% 27.0% 42.1% 15.7% 530
SD = strongly disagree; D = disagree; N = neither agree nor disagree / unsure;
A = agree; SA = strongly agree; n = number of respondents.
Source: Economic Society of Australia.
Table 4 - Sectoral Breakdown by Employment: Mathematical Rigour
Sector of
Employment SD D N A SA n
Private Sector 10.6 35.0 35.0 13.0 6.5 123
Public Sector 8.2 36.7 31.0 19.0 5.1 158
University Sector 17.7 39.2 17.7 18.8 6.6 181
Not-for-profit Sector 0 26.3 26.3 21.1 26.3 19
No Sector Reported 14.3 32.7 22.4 20.4 10.2 49
Overall 12.3% 36.4% 26.4% 17.7% 7.2% 530
SD = strongly disagree; D = disagree; N = neither agree nor disagree / unsure;
A = agree; SA = strongly agree; n = number of respondents.
Source: Economic Society of Australia.
reformers, though the lack of majority support within economics
departments is not a particularly good omen. In any event, the early
indications are that interest in areas such as behavioural economics is
very much in the ‘new’ rather than the ‘old’ behavioural economics.
Indeed, subjects such as ECON2060 Behavioural and Evolutionary
50 T. Thornton
Economics at the University of Queensland, which was based on the
‘old’ behavioural economics, have clearly been redesigned to be much
closer to the ‘new’ behavioural economics. It seems unfortunate that
two subjects (one for each variant of behavioural economics) could
not have been created. The failure to do so demonstrates both a lack of
value ascribed to the old behavioural economics, and a limited
appetite for behavioural economics in general.
There was no majority preference for or against the proposition that
economics is currently taught with excessive mathematical rigour (see
Table 4). However, it is noteworthy that almost twice as many
economists disagreed or strongly disagreed with the proposition
(48.7%) as agreed or disagreed with it (24.9 per cent). Just as notably,
the sector that had the highest level of disagreement with the
proposition was academic economists (56.9 per cent), followed by the
private sector (45.6 per cent), the public sector (44.9 per cent) and the
not-for-profit sector (26.3 per cent). It should also be pointed out that
the not-for-profit sector had a high level of strong agreement with the
proposition (26.3 per cent) relative to the other sectors.
Part of the requirement for mathematical rigour by employers may
be due to signalling. Successful mastery of this content can be seen as
signalling determination and application and a certain type of
intelligence. Indeed, even the harshest critics of orthodox economics
acknowledge that “it requires intellectual muscle to master” (Keen
2001, p.20). Robert Solow picks up on the signalling issue by arguing
that the ability of a graduate to master high-level orthodox theory
indicates that she or he will be a more reliable practitioner of more
basic orthodox theory:
In economics I like a man to have mastered the fancy theory before I
trust him with simple theory. The practical utility of economics comes
not primarily from its high-powered frontier, but from fairly low-
powered reasoning. But the moral is not that we can dispense with
high-powered economics, if only because high-powered economics
seems to be such an excellent school for the skilful use of low-
powered economics.
(Solow cited in Colander 2005, p.194)
An alternative way to understand the requirement for advanced
theory is that it sets up a self-reinforcing loop between self-interest
and genuine belief. This is quite evident in Enthoven’s explanation of
the making of a working economist:
Employers and Curriculum Reform 51
The tools of analysis that we use are the simplest, most fundamental
concepts of economic theory, combined with the simplest quantitative
methods. The requirements for success in this line of work are a
thorough understanding of and, if you like, belief in the relevance of
such concepts as marginal products and marginal costs, and an ability
to discover the marginal products and costs in complex situations,
combined with a good quantitative sense. The advanced mathematical
techniques of econometrics and operations research have not proved
to be particularly useful in dealing with the problems I have described.
Although a good grasp of this kind of mathematics is very valuable as
intellectual formation, we are not applying linear programming,
formal game theory, queuing theory, multiple regression theory,
nonlinear programming under uncertainty, or anything like it. The
economic theory we are using is the theory most of us learned as
sophomores. The reason PhDs are required is that many economists
do not believe what they have learned until they have gone through
graduate school and acquired a vested interest in marginal analysis.
(Enthoven 1963, p.422; emphasis added)
What Enthoven describes here is not just a simple case of self-
interest due to sunk costs; rather it is that the habitual patterns of
thought acquired during an education in marginal analysis shift belief
in, and preference for, marginal analysis (note Enthoven’s use of word
belief ). Habits are too easily seen as an optimising response to the
actioning of given preferences and beliefs when the reality is that
habits can shape preferences and beliefs. On this point it is relevant to
recall Pierce’s point that the “essence of belief is the establishment of
habit” (Pierce 1878, p.29).
Currently undergraduate degrees in Australia are usually three years
in length. The ESA survey put forward a proposition regarding
whether an undergraduate degree in economics should be four years,
but it also failed to get a majority verdict (see table 5), and it is thus
difficult to draw many firm conclusions. The most enthusiastic
supporters of the proposition appear to be the not-for-profit sector.
Given their expressed preference for less mathematical rigour in the
curriculum, their requirement for an additional year may suggest a
need for more of the social science wing of the discipline, but we
cannot really know this for sure. The relatively high level of
satisfaction with a three-year degree in the private sector (47.2 per
cent) and the public sector (42.2 per cent) could also be read as
suggesting satisfaction with current economics graduates. Clearly,
52 T. Thornton
Table 5 - Sectoral Breakdown by Employment: Degree Length
Sector of
Employment SD D N A SA n
Private Sector 6.5 40.7 29.3 21.1 2.4 123
Public Sector 6.3 36.1 32.9 21.5 3.2 158
University Sector 5.0 35.6 24.4 26.1 8.9 180
Not-for-profit Sector 10.5 15.8 36.8 31.6 5.3 19
No Sector Reported 8.2 24.5 30.6 24.5 12.2 49
Overall 6.2 35.2 29.1 23.6 5.9 530
SD = strongly disagree; D = disagree; N = neither agree nor disagree / unsure;
A = agree; SA = strongly agree; n = number of respondents.
Source: Economic Society of Australia.
Table 6 - Sectoral Breakdown by Employment: Doctoral Programs
Sector of
Employment SD D N A SA n
Private Sector 6.5 40.7 29.3 21.1 2.4 123
Public Sector 6.3 36.1 32.9 21.5 3.2 158
University Sector 5.0 35.6 24.4 26.1 8.9 180
Not-for-profit Sector 10.5 15.8 36.8 31.6 5.3 19
No Sector Reported 8.2 24.5 30.6 24.5 12.2 49
Overall 4.3 12.7 47.4 30.2 5.3 529
SD = strongly disagree; D = disagree; N = neither agree nor disagree / unsure;
A = agree; SA = strongly agree; n = number of respondents.
Source: Economic Society of Australia.
there is a need to look to other evidence in order to draw reliable
conclusions (see sections to come).
Table 6 shows the sectoral breakdown for the proposition ‘Doctoral
programs in economics generally offer high quality training’. This is
yet another proposition that fell short of a majority verdict. The not-
for-profit sector did consider Australian doctoral programs as being
high quality (55.6 per cent support), but they were only a small
Employers and Curriculum Reform 53
proportion of the sample. The proposition elicited an interesting
response from the university sector, which in this instance is both a
producer of doctoral graduates and a potential employer of such
graduates. The survey found that 44.2 per cent of university
economists agreed with the proposition, yet this is somewhat at odds
with the ongoing trend of Australian economics departments to
employ US-trained Ph.D. graduates over Australian graduates
(Millmow 2011).
Interestingly, the US Ph.D. programmes have been criticised for
their narrowness and lack of plurality (Krueger 1991). This is despite
the fact that the programmes are typically now 6-7 years of study
(where in the 1980s they were usually of 3-4 years duration). This
expansion has allowed ever more orthodox technical coursework, but
little else. Given that economics departments in the Group of Eight
universities often seek to emulate, for better or worse, what is done in
North American universities, they may follow suite on such
‘international best-practice innovations.’
4. INTERVIEW EVIDENCE
In order to supplement the quantitative evidence presented in the
previous section, I interviewed two employers, one from the public
sector and one from the private sector. The results of those interviews
are presented in this section.
(a) A Public Service Employer
A key employer of economists is the state public service. To get a
sense of what is required of graduate economists by this level of
government, I interviewed a senior economist with the Victorian
Treasury, on 12 March 2009. The economist in question has been
closely involved in the recruitment of graduate economists and was
able to provide authoritative information on what Treasury requires. It
was emphasised that Treasury requires orthodox microeconomics and
macroeconomics (years 1, 2 and 3 and preferably 4). Gaining a
Distinction grade (or above) in these areas was generally viewed
favourably. These subjects are required primarily because Treasury
continues to undertake cost-benefit analysis and some general
equilibrium modelling. This is consistent with Ackerman’s point that
general equilibrium remains fundamental to the theory and practice of
economics (Ackerman 1999).
54 T. Thornton
It was also emphasised that public policy subjects were highly
valued, particularly in areas such as labour economics, environmental
economics and regional development. Applied economics subjects
were much more highly valued in economist roles than specialised
finance, accounting or management subjects - though it was noted that
first or second-year finance could be useful. A dedicated economics
degree is still seen as having a clear advantage over more general
business based degrees, though double degrees in law and economics
were seen as particularly useful.
There was some interest in behavioural economics within Treasury.
For example, Treasury economists had recently participated in a one-
day workshop on behavioural economics run by Monash University.
However, whether this interest in behavioural economics (even in its
‘new’ variant) will develop, or even persist remains to be seen, given
that it sits awkwardly with the type of modelling and cost-benefit
analysis that is clearly still so central in economic analysis undertaken
in the public service. Consider Bateman’s point about the strong
implications of behavioural economics for techniques such as cost-
benefit analysis:
The most fundamentally unsettling thing about discovering that people
might value fairness more than more personal pleasure is that the
whole traditional applied welfare economics is undercut if we need to
consider anything besides utility in trying to compare two situations.
In all applied microeconomics, from resource and environmental
economics to transportation economics, cost-benefit analysis is the
basic tool. But if the model of cost-benefit analysis does not fully
represent what people value when they are faced with a change in
policy, and so does not take into consideration some of the most
important dimensions of how people assess the effects of policy, then
the tool is no longer a legitimate way to assess the effects of policy. It
certainly does not do the work that it claims to do.
(Bateman 2007, p.5)
A substantial embrace of behavioural economics suggests that large
parts of applied microeconomics would need to be discarded, or at
least be used with greater modesty, and in conjunction with some new
and different tools. This is a challenge to how many economists do
their work (Samuels & Medema 1998). It is currently hard to see any
demand among employers for such revolutionary changes to daily
practice. Behavioural economics may turn out to be a curiosity or
fringe concern.
Employers and Curriculum Reform 55
Interestingly, perhaps tellingly, when I followed up this 2009
interview in December 2012 it became clear that Victorian Treasury
had moved away from behavioural economics towards experimental
economics. In particular, ‘market design outcomes’ were a focus.
There is now a dedicated executive that leads a team of economists on
this with Victorian Treasury now working closely with the Centre for
Market Design at Melbourne University.
Moving from the state to the federal public service, the Australian
Federal Treasury has been so afflicted by a shortage of suitable
graduate economists that it has had to train graduates from other
disciplines, such as law and mathematics. Since 2008, this training has
been contracted out to Monash University, which has simply taught its
long-established Graduate Diploma in Economic Studies to Treasury
staff. The diploma represents one year of full-time study, though in
the case of Treasury staff, it will almost certainly be undertaken part-
time over two or more years. The Graduate Diploma is notable for its
orthodox focus, being “designed to provide a sound understanding of
economic and economic statistics issues and their function in the
business world” (Monash University 2012, p.1). It is heavily
neoclassical and quantitative. While there is scope for a small number
of electives, there is no requirement for any subjects from the social
science wing of the discipline. Nor are any subjects from the
mainstream research frontier required.
Another important employer of economists is the Productivity
Commission. Its head, Gary Banks, appears to argue that government
agencies require, above all, more of the same in terms of the content
of their training. For Banks, the key problem is insufficient numbers
of economists being produced, rather than the narrowness of their
training:
We have seen shrinkage of the recruitment pool of economics
graduates in recent years and I wonder whether the study of
economics may be turning into a niche discipline in our universities . .
. You can’t have good evidence, you can’t have good research,
without good people. People skilled in quantitative methods and other
analysis are especially valuable. It is therefore ironic that we appear to
have experienced a decline in the numbers with such skills within the
Public Service at the very time when it has been called upon to
provide an evidence-based approach that relies on them.
(Banks 2008, pp.13-14)
56 T. Thornton
To his credit, Banks ascribes some value to ‘other analysis’ beyond
quantitative methods, yet this is a long way from calling for greater
plurality and significant reform of the curriculum.
Some indication of what the Productivity Commission requires from
graduates came to me via a 2010 interview I conducted with an
Honours graduate who had recently had a job interview at the
Productivity Commission for its graduate program. The graduate
reported being struck by the questions about economics, which were
all focused on first-year microeconomics — for example, the graduate
was asked to continually identify when a dead-weight loss had
occurred. The graduate also expressed frustration at how black-and-
white the line of questioning was and at the overall level of
superficiality and simplicity of the analysis they were seeking (see
Thornton 2010).
(b) A Private Sector Employer
Professional philosophers do not need to be reminded how easy it is to
gain popular acceptance by telling people what they want to hear and
papering over the inconsistencies that this entails with various
obscurantist devices.
(Binmore 1998, p.ix).
The requirement for more economics graduates, rather than differently
trained economics graduates, seems to also be evident in the private
sector. For example, the HSBC chief economist John Edwards states
that “economics honours graduates are very employable but not
enough of them are being turned out” (Matchett 2009, p.25). In
response to this shortage, the Economic Society of Australia has in
recent years held information sessions at university campuses
encouraging students to study economics. The sessions usually
include economists from both the private and public sector to speak
about the benefits of doing economics and to spruik their own
organisations as employment destinations.
Having observed one of these information sessions, it was quite
apparent that the demand from employers was very much for
graduates trained in orthodox economics, particularly cost-benefit
analysis and econometric modelling. This preference by employers is
not surprising, given that some have argued that there has been a
“modelling mania” that has developed among government
departments and economic consultants in recent years (Gittins 2011,
p.21). Indeed, politicians are now almost reflexively demanding the
Employers and Curriculum Reform 57
modelling behind any figure or policy idea that an opposing politician
put forward:
Economic modelling has, for many people involved in Australian
policy debates, become synonymous with the process of serious
policy development. Proponents of policy change that are armed
with economic modelling are often taken more seriously than those
with 20 years’ experience working on the same problem. The
modelling result that suggests tens of thousands of jobs will be lost
or created often trumps logic or experience that suggests such claims
are nonsensical.
(Denniss 2012, p.1)
What should be noted in this excerpt from Denniss is the point
about how modelling has ‘trumped’ other forms of knowledge: case
studies, historical evidence, or experience from the field is simply not
valued anywhere near as much, yet it can clearly be at least as
valuable in many instances.
A particularly enthusiastic employer of economic modellers in
Australia are big business lobby groups. Indeed, Gittins argues that
this group is currently the largest producer of economic modelling in
Australia, paying significant amounts of money to economics
consultants to produce supposedly independent and objective
scientific analysis (Gittins 2012). The underlying objective of the
research is less to do with the pursuit of truth, than it is with
advancing the interests of the business that has commissioned the
analysis:
In the old days, businesses would pluck some big-sounding figure out
of the air. These days, the fashion is to pay one of Canberra’s many
firms of economists-for-hire to do some “independent” modelling.
Any economist who can’t juggle the assumptions until they get the
kind of findings their client is hoping for isn’t trying. If you come up
with a big-sounding figure for supposed job losses, you can be
reasonably sure the media will trumpet the figure in shocked tones.
You can also be sure few (if any) journalists will subject your claims
to examination to see how credible they are.
(Gittins 2011, p.21)
Why is this increasingly occurring? It is relevant to note that
knowledge is only a form of power when there is an information
asymmetry. Most people in society (including politicians) simply do
not know enough about these models to understand their limitations
and so this creates the capacity for such modelling to mislead as much
as illuminate. Economic modelling (whether it is good, bad or
58 T. Thornton
otherwise) will always exclude a very large section of the public from
following the detail and substance of the argument in a way that case
studies or other forms of analysis do not. Modellers can thus all too
easily exploit the information asymmetry for their private gain (or the
larger gain of whoever has employed them to undertake the
modelling). Modelling also carries an additional attraction in that it is
imbued with the aura of science (as the concept of science is popularly
understood). This aura of science comes by virtue of the fact it is
characterised by the use of mathematics and statistics; these things are
associated with rigour, precision and objectivity.
What is the remedy for the overuse and misuse of modelling and
econometrics? That the abuse of econometrics will somehow resolve
itself is unlikely, given that “bad economic modelling is preferred by
many advocacy and industry groups to good economic modelling for
three main reasons: 1. it is cheaper, 2. it is quicker, 3. it is far more
likely to yield the result preferred by the client” (Denniss 2012, p.1).
Part of the solution relies on better trained economists and also on a
more economically literate populace. Towards this end Denniss
(2012) has produced a practical guide for anybody (politicians, the
media, the general public) that will help them to identify poor quality,
and or intentionally mischievous, economic modelling. Denniss
provides a list of straightforward questions such as: Does the model
rest on structural or technological changes that are yet to occur? What
linkages between variables are assumed? Do problems of circularity
exist (does the model assume the very conclusions it supposed to
prove)? Is the type of model used being used outside its normal
domain of applicability? If the modeller cannot, or will not, answer
such questions, then this in itself, argues Denniss, should raise
immediate questions about the quality of the modelling.
It is useful to think of economic modelling in terms of instrumental
versus ceremonial institutions. Economic modelling can surely be an
instrumental institution, and can genuinely be a source of knowledge
and social benefit when used honestly and intelligently. However, the
fact that it can make this positive contribution and that it necessarily
will make a positive contribution are of course two different things
(Denniss 2012). Because of issues of information asymmetry and the
aura of science as popularly understood, economic modelling is
particularly prone to being a ceremonial institution that exists to
support established hierarchies of status, wealth and power.
Employers and Curriculum Reform 59
5. CONCLUSION
It has been argued by many people that a more plural economics
curriculum carries multiple significant benefits (Groenewegen 2007;
King 2011; Reardon 2009; and Sent 2003). A broader curriculum
would not only give students a deeper understanding of economics, it
would also promote enrolments and student engagement. Furthermore,
it has also been argued that a plural curriculum is uniquely placed to
supply graduates with generic skills, knowledge and attributes that
employers are demanding (O’Donnell 2007, 2010; Schroeder &
Chester 2013). However, whilst employers of graduate economists (or
of graduates with some economics training) are open to change in the
curriculum, they are not expressing a strong desire for this change.
Indeed, the evidence in the latter part of this chapter indicates that
what might trigger an employer backlash would be to reduce the
dominance of the orthodox economics within the economics
curriculum. Such a finding does not invalidate the general conclusion
that employers are interested in graduate attributes: it just suggests
that the particular sub-section of employers surveyed in this article
does not yet have a strong appreciation of the linkage between
economic pluralism and what this might deliver to their organisation.
What to do? If we accept that a pluralist approach to economics
would make for better graduates (including economics graduates),
reformers have got a task in front of them to persuade Australian
employers that what they say they want may not be everything that
they actually need. This process of persuasion will be a long-term
process, but continuing to produce research on this issue (and to
publicise this research widely) would be time well spent. O’Donnell’s
recent work in this respect is exemplary (O’Donnell 2004, 2007,
2010). Another possible mechanism of change is that as the few
graduates that have been broadly trained establish themselves, and
eventually come to sit on employment selection panels, they will
increase the demand for a more plural, and thus more adequate,
economics curriculum. Obviously, this latter mechanism for change is
more long-term, but given the clear evidence on how highly valued
these students have found pluralist subjects in economics (O’Donnell
2013) it might perhaps be the most significant driver of change.
60 T. Thornton
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Australasian Journal of Economics Education
Volume 11, Number 1, 2014, pp.63-81
THE IMPACT OF ‘DEMAND DRIVEN’ HIGHER
EDUCATION ON THE TEACHING AND
LEARNING OF ECONOMICS: A CASE STUDY*
Anthony Stokes
School of Arts (NSW),
Australian Catholic University
ABSTRACT
In 2008, the Bradley Review recommended a more deregulated higher education
system for Australia giving students from lower socio-economic backgrounds
increased access to this level of education. The ‘demand driven’ system
introduced in 2012 in response to this recommendation removed limits on the
number of students that universities could admit but in anticipation of this change
universities were allowed to ‘over-enrol’ students from 2009. Australian
Catholic University (ACU) in Sydney was one of the universities that took
advantage of this over-enrolment policy and significantly expanded its intake
from 2009. This paper provides a case study of the impact this change had on the
teaching and learning of economics at ACU between 2009 and 2012. It shows
that entry standards fell as students with lower ATAR scores and students from a
wider range of non-year 12 level educational backgrounds were accepted under
this approach. The study also shows that this lowering of entry standards was
associated with a decline in average student performance in the core introductory
level economics unit between 2009 and 2012.
Keywords: demand driven higher education, student achievement, academic
standards.
JEL classifications: A21, A22.
* Correspondence: Anthony Stokes, Senior Lecturer in Economics, School of Arts
(NSW) Australian Catholic University, Locked Bag No 2002 PO Strathfield. NSW.
2135. AUSTRALIA, Email: Tony.Stokes@acu.edu.au; Phone:(61 2)97014210; Fax: (61
2) 97014263.
ISSN 1448-448X © 2014 Australasian Journal of Economics Education
64 A. Stokes
1. INTRODUCTION
Since the middle of the 1990s there has been growing concern among
Australian economists about a decline in the number of students
pursuing majors in economics and an associated perception of falling
student standards (see Abelson 1996; and Lewis & Norris 1997).
Some studies have also observed a large increase in the proportion of
students in economics courses that service other disciplines in
business and commerce programs (see Alauddin & Tisdell 2000; and
Millmow 2000). A study by Abelson (2005), based on an Economics
Society of Australia (2004) survey of Australian economics programs,
found that the standard of economics students in these programs had
declined and that this was associated with “high student/staff ratios,
poor English standards, competition with other subjects, and a
declining student culture of university work” (Abelson 2005, p.132).
A further factor impacting student standards, especially in
business/commerce programs, has been the growth in international
student numbers, especially from non-English speaking backgrounds
(NESB). Foster (2012) used multi-institutional panel data on
undergraduates studying in Australian business schools to measure the
impact of international and NESB profiles on levels of achievement
and educational outcomes. She found that international and NESB
students performed worse than students from English speaking
backgrounds. That study also found that as the percentage of students
with international and NESB characteristics increased, the
performance of the overall cohort declined. Foster suggested that this
could be explained in part by the poor English skills of some students
consuming the attention of lecturers and tutors consequently
‘hindering the learning’ of the overall cohort. She also suggested that
there are “downward adjustments to the difficulty of material or
grading standards applied when large concentrations of (international
and NESB) students are present in a course” (Foster 2012, p.596).
The most recent factor affecting teaching and learning outcomes in
Australian tertiary economics programs has been the implementation
of some of the recommendations of the Bradley Review, and the way
some universities have responded to the uncapping of course places.
In 2008, the Bradley Review recommended a more deregulated higher
education system for Australia. It proposed that the Australian
Government introduce a ‘demand driven’ entitlement system for
domestic higher education, where recognised providers would be free
The Impact of Demand Driven Higher Education 65
to enrol as many eligible students as they wished in eligible higher
education courses and would receive corresponding government
subsidies for those students. The Bradley Review, also recommended
expanded access to higher education to students from low socio-
economic backgrounds:
National targets for attainment of degree qualifications and for
participation of low socio-economic status students will be set and
institution-specific targets for participation and performance
established and monitored.
(Bradley et al. 2008, pp.xiii-xvii)
The target proposed was that 40 per cent of 25 to 34 year-olds should
have attained at least a bachelor-level qualification by 2020. This was
to be achieved by removing the cap or quota on university places from
2012. As a lead-in to the removal of these quotas, the Department of
Education, Employment and Workplace Relations (DEEWR)
introduced transition arrangements in 2010 that allowed universities to
accept students above their quota (so called “over-enrolments”) by a
factor of 10 per cent.
In the light of previous studies that have examined the impact on
standards of increasing student numbers by widening entry criteria,
these recent arrangements raise similar questions about the impact
they are likely to have on academic standards. This paper suggests that
some indication of this effect may be gleaned from the increase in
over-enrolments in the lead up to 2012. Since Australian Catholic
University (ACU) made substantial use of the over-enrolment policy,
its experience could be taken as indicative of the kind of effects one
might expect to see under the demand-driven system. The remainder
of the paper, therefore, outlines the effects of increased student
numbers in economics at ACU across the 2009-2011 period. The
following section begins by examining the impact of increased over-
enrolments on enrolment patterns and student quality generally across
the country.
2. THE QUANTITY AND QUALITY OF STUDENTS UNDER
A DEMAND DRIVEN SYSTEM
One of the principles of ‘demand driven’ higher education is that
better universities will attract more students and should therefore be
given more funding. It is up to universities to ensure that they are able
to cope with the number of students they enrol. Presumably the quality
66 A. Stokes
Table 1 - Estimates of Australian University Over-enrolments,
2010 and 2011
Institution 2010 2011
Australian Catholic University 39%* 32%
Curtin University 12%
Flinders University 14–18%
Griffith University 11%
La Trobe University 15%
Macquarie University 19%
Monash University 12%* 12–13%
RMIT 13%
Swinburne University 32%
University of Adelaide 15%
University of Canberra 27%* 27%
University of New South Wales 17%
University of Queensland 10%*
University of South Australia 8%
University of Southern Cross 16%
University of Western Australia 10%
University of Western Sydney 23%
Victoria University 17%
* Reported target figure rather than actual.
Sources: ACER (2011) derived from various media outlets including Hood (2011),
Lane (2010a, 2010b) and Trounson & Hare (2011).
of education will decline at those institutions that enrol more students
than they are able to teach effectively, student demand for places at
those universities will fall, and they will, therefore, lose funding. The
trick for them is to balance additional funding from higher intakes
with the impact more students will have on education quality. But the
‘demand driven’ funding model also brings competition for students
to the fore, and with it, attention to market share. It holds out the
promise of additional funds that university administrators can see as
The Impact of Demand Driven Higher Education 67
providing resources that will place their institution in a better
competitive position in the future.
In the period leading up to the uncapping of places in 2012,
therefore, universities had an incentive to position themselves relative
to their competitors by attempting to attract students and obtain
additional funding that would enhance their attractiveness to students
in the future. There is evidence that this is precisely what universities
did, with some increasing student enrolments by up to 30 per cent in
excess of their government funding quota in this period. Table 1
shows estimates of over-enrolments at Australian universities in 2010
and 2011. Trounson & Hare (2011) reported that ACU over-enrolled
students by 30 per cent in 2010 and 2011. The University of the
Sunshine Coast reported a 16 per cent growth projection for 2011,
Deakin University 14 per cent, with several others, including the
Universities of Newcastle and Wollongong, aiming for a 10 per cent
over-enrolment. In addition, ACER (2011) provided estimates of over
enrolment at Swinburne University of 32 per cent, the University of
Canberra of 27 per cent, and University of New South Wales (UNSW)
of 17 per cent in 2011.
The overall result of the introduction of the ‘demand driven’
system, therefore, was that in the period 2009 to 2013 the number of
students offered places at university rose 16.8 per cent from 191,068
to 223,200 and the offer rate increased from 76.5 per cent to 81.5 per
cent.
The consequences of these attempts to increase enrolments was a
reduction in admission scores at many of these universities. Table 2
shows that ATAR entry scores have been reduced since 2007 across
universities in NSW in Arts and Business/Commerce related degrees
most notably at ACU, University of Newcastle and the University of
Wollongong in order to achieve these aggressive targets. Overall,
lower entry scores reflect a lower standard of student entering degree
programs. While there has been a smaller effect on the high ATAR
entry score at institutions such as the University of Sydney and UNSW,
there have been reductions in middle and lower range ATAR level
universities.
At the same time the proportion of students being accepted into
university with low ATAR entrance scores has increased in New
South Wales. From 2011 to 2013 the proportion of Year 12 applicants
with ATAR bands of 50 or less who were offered university places
68 A. Stokes
Table 2 - Australian Tertiary Admissions Rank (ATAR), 2007 and 2013
University and Course 2007 ATAR (equivalent)a
2013 ATAR
University of NSW
Arts 81.65 78.00
Business/Commerce 95.50 96.30
University of Sydney
Arts 84.40 81.10
Business/Commerce 95.35 95.00
Macquarie University
Arts 81.65 75.00
Business/Commerce 84.55 81.00
University of Wollongong
Arts 79.85 75.00
Business/Commerce 81.65 75.00
University of Western Sydney
Arts 72.60 70.00
Business/Commerce 73.55 65.00
University of Newcastle
(Callaghan)
Arts 67.35 60.00
Business/Commerce 67.35 60.40
Australian Catholic University
(Sydney)
Arts 68.05 58.55
Business/Commerce 72.70 58.50
a In 2007 universities in NSW applied a Universities Admission Index (UAI) for university
entry. For 2007 the UAI has been adjusted to an equivalent ATAR, using the Universities
Admission Centre conversion table.
Source: UAC (2008, 2013).
rose from 18.2 per cent to 32.5 per cent (DIICCSRTE, 2013). In
addition, the proportion of students with ATAR scores between 50
and 60 who were offered places increased from 64.9 per cent to 75.8
per cent (see Figure 1). Between 2011 and 2013 the proportion of
university offers going to Year 12 students with ATARs less than 60
rose from 10.1 per cent to 13.3 per cent.
The Impact of Demand Driven Higher Education 69
It is important to note that in recent years many universities have
accepted students with lower ATARs than those officially advertised.
Most universities offer up to 10 mark bonuses based on the subjects
that students have studied at high school level . In addition,
some universities also apply bonus points if the applicant lives in, or
attends a school in, a designated region. This inflates the actual
ATAR score required to study a course and would generally produce
much lower real ATAR scores than those shown for 2013 in Table 2.
Most of the universities listed in Table 2 did not have bonuses of up to
10 marks in 2007.
Figure 1 - Australian Tertiary Admissions Rank (ATAR),
2007 & 2013
Source: DIICCSRTE (2013).
In regards to the fields of economics and commerce, the proportion
of Year 12 offers with ATARs less than 60 was 15.5 per cent and
altogether one third of students accepted into courses in the field of
management and commerce had ATARs less than 70. This creates a
great challenge for lecturers of economics to cater to such low-ability
cohorts. This challenge is not equally spread as many of the high
ATAR entry level universities, such as the University of Sydney and
UNSW, will have few, if any, students with an ATAR of less than 70.
These institutions will, however, still face more students with lower
levels of ability studying economics than previously. The real
challenge will be in the universities teaching economics to students
where a large percentage of the cohort have lower ATARs such as
70 A. Stokes
ACU, the University of Newcastle and the University of Western
Sydney.
To increase student numbers, universities have not only reduced the
required entry scores for school leavers but are also offering more
places to mature age students and those from the technical education
sector. In some university courses, students are being admitted with
only low level TAFE preparation, such as a Certificate in Tertiary
Preparation.
3. ARE “DEMAND DRIVEN” ECONOMICS STUDENTS
DIFFERENT FROM PREVIOUS COHORTS?
There is growing anecdotal evidence that ‘demand driven’ economics
students are different from previous cohorts, creating serious
challenges for the teaching of economics. Lodewijks (2011, p.21)
describes this new environment as one where “many students seem
solely employment focused and view a university education as a
paper-chase at minimalist effort and with modest targets where bare
passes are satisfactory”.
A survey of economics and finance students at the University of
Western Sydney found that by far the major outcome that students
desired from their university studies was to gain employment in their
chosen area of study (Lodewijks 2011, p.26). They wanted staff that
were good teachers and who had up-to-date knowledge in their subject
area. But in addition, they wanted “study times and locations that
make their attendance as convenient as possible”. Lodewijks points
out that academics perceive that the students they are teaching have
changed. Academics “lament falling standards, declining attendances
in lectures and a fall-off in the number of students that attend their
office hours” (Lodewijks 2011, p.21). He argues that the impact of
the ‘demand driven’ approach has led to significant enrolment
increases and higher student-staff ratios. This has added further to the
burden on staff as many of the additional students often lack basic
literacy and numeracy skills so that their preparation to enter higher
education is deficient. The challenge to successfully teach economics
increases when the ability levels and attitudes of the students are
lower. Many students have an expectation of passing with minimal
effort. This is something that does not fit well with the rigour of an
economics course.
Anecdotal evidence at ACU supports Lodewijks’ (2011) findings
that university is only a small part of the life of a university student.
The Impact of Demand Driven Higher Education 71
Many are working full-time jobs and simultaneously attempting full-
time university study. It is usually their university studies that suffer in
this situation but students often demand ‘special consideration’ for
their work commitments. Others plan their course timetable not by
course enrolment guides but in terms of which classes are perceived to
be the easiest, requiring a lower level of effort, and in terms of which
classes will best suit their work commitments. This set of
circumstances often leads to fail grades and the repeating of units.
ACU dramatically increased its enrolments in the Bradley Era and
this has been accompanied by lower entry standards. The new
generation of low ability economics students has tended to come in
two types. Type one is made up of students who did not work to their
best ability at school and continue to underperform at university. They
are surprised that they were accepted into university but think that if
the level of effort employed at school was good enough to gain them
entrance into university, it should be sufficient to pass when enrolled.
They subsequently find what is required to study economics very
demanding, and they tend not to respond very well to this. This is the
group that tends not to attend lectures or tutorials, and hands poorly
attempted work in late or not at all.
The second type of low-ability student tends to have tried their best
at school and continues to try their best at university. They attend all
classes and hand their work in on time. Their level of understanding is
quite low but they are very positive, continue to try, and are prepared
to seek help from lecturers on a regular basis. Such one on one support
imposes considerable time burdens on lecturers and the challenge is
compounded by the fact that at ACU, 75 per cent of students have not
studied economics previously and a further 30 per cent have not
completed Year 12 mathematics.
This is a trend that has developed over the last two decades. The
number of students studying economics the NSW Higher School
Certificate in 2013 was only a quarter of the number in 1990 (see
NSW Board of Studies, various years). In addition, the number of
students studying mathematics in the NSW Higher School Certificate
declined by 17 per cent between 2003 and 2013. This is largely a
result of students choosing easier and often more vocationally oriented
courses. Not only is the quantity of students studying mathematics in
decline but so is the quality. Australia’s mean mathematical literacy
performance as measured by the Programme for International Student
72 A. Stokes
Assessment (PISA) declined between 2003 and 2012 by 20 points.
ACER (2013) reported that there had been a significant decline in the
performance of students in mathematics in every quartile during the
same period. Many students without Year 12 mathematics have
serious attitude problems demonstrating difficulty with such tasks as
drawing basic graphs and doing simple calculations. It requires
considerable effort from lecturers to break these barriers and develop
students’ basic mathematical skills. Overall a common complaint
made by the new ‘demand driven’ students is that economics is “hard”
although, interestingly, many of them preface such comments with
“but we actually like economics”.
The following section documents how these changes in student
characteristics under the ‘demand driven’ system translate into student
performance.
4. THE IMPACT ON STUDENT PERFORMANCE
This section describes the results of research carried out in first year
microeconomics classes at ACU between 2009 and 2012 to investigate
how changes in the cohort affected educational outcomes. McInnis &
Hartley (2002) describe a positive relationship between a student’s
university entrance score and their overall grade point average. We
thus investigated whether the change in cohort under the ‘demand
driven’ system led to a change in average GPAs.
ACU does not have a standard economics cohort made up primarily
of business/commerce students with a few students studying a
Bachelor of Arts degree. Instead, economics is taught in the Faculty of
Education and Arts at ACU. This is designed so that the economics
program is available to a diverse range of students in a variety of
courses including: the Bachelor of Arts, Bachelor of Arts and
Economics, the Bachelor of Arts (Business and Communication), the
Bachelor of Arts (Psychology), the Bachelor of Arts/Bachelor of
Commerce, the Bachelor of Arts/Bachelor of Social Work, the
Bachelor of Arts/Bachelor of Global Studies, Bachelor of
Arts/Bachelor of Laws and the Bachelor of Teaching/Bachelor of Arts.
During the period 2009 and 2012 introductory level economics
students at ACU were surveyed across this range of courses. The
survey asked students their identification number (for tracking of
results over the three years of the study), age, gender, place of
residence by postcode (for measuring average incomes of residents – a
proxy for socio-economic background), country of origin, ATAR (a
The Impact of Demand Driven Higher Education 73
proxy for measuring the level of educational achievement on entering
university), whether they had previously studied economics, the
school type they attended, and the course that they were enrolled in.
Student results in their economics courses across three years were then
mapped against this survey data.
Table 3 shows that there was little change in the composition of
student entry into first year economics at ACU across the 2009-2012
period, with more than 85 per cent of students entering via an ATAR
score. There was, however, a small increase in non-ATAR entries
from 2011, mainly from TAFE colleges. The most significant change
was the level of ATAR scores with which students undertaking the
introductory economics course were admitted.
Table 3 - Percentages of First Year Economics Students at ACU by
Entry Criteria
Year ATAR or equivalent Other form of entry
2009 89.5 10.5
2010 91.5 8.5
2011 84.0 16.0
2012 88.0 12.0
Table 4 - Commencing Economics Students ATAR Scores by Category,
2009-2012
Year 60 or less Under 70 Over 80 Over 90 Median
2009 6 35 23 5 77
2010 10 38 21 5 75
2011 11 46 20 2 72
2012 26 63 11 0 66
Table 4 shows that in the period of reduced entry cut-offs at ACU, the
proportion of low ATAR students rose considerably while the
proportion of high ATAR students declined. In 2009, five per cent of
commencing economics students reported ATARs of 90 or above and
six per cent reported ATARs of 60 or less. In 2012 the proportion of
students with ATARs over 90 had declined to zero while the
proportion of those with an ATAR of 60 or less had risen to 26 per
74 A. Stokes
cent. Subsequently the median ATAR scores declined in this period
from 77 to 66. In order to measure the impact of the lower entry levels
of the cohort, the student entry scores (ATARs) were compared to
performance in terms of final marks in the first year microeconomics
unit for the period 2009-2012. To ensure validity of the results,
assessments were made comparable during the period and marking
was carried out and results assessed by the same staff member. There
was peer checking of these results by another staff member who also
did this consistently across the period.
Table 5 - Median ATAR Scores Compared with First Year
Microeconomics Results, 2009-2012
Year Sample
Size
Median
ATAR
Score
Mean
Assessment
Results
Standard
Deviation
Range
2005 -
2008
190 N/A 64.2 14.9 43.9
2009 73 77 63.6 11.9 61.5
2010 76 75 59.9 12.1 57.5
2011 70 72 61.7 12.8 65.0
2012 65 67 60.1 10.4 50.0
The sample was made up of a combination of students undertaking
the introductory microeconomics level unit as an elective, a core unit,
or part of their economics minor or major. The study measures the
effect of the ATAR entry score on the actual results of the students.
Table 5 indicates that the decline in the ATAR was associated with a
lower average for the students’ results. In the period 2009-2012 the
median ATAR entry scores declined from 77 to 67 and the mean
results of the students declined by 3.5 marks from 63.6 to 60.1
(statistically significant at the 5% level). In the period 2005-2008,
prior to the introduction of the ‘demand driven’ system, the mean
results were on average 4.1 marks higher than in 2012 and the failures
rates were considerably lower.
The impact of the lower entry standards in the introductory
microeconomics unit from 2009 to 2012 was an increase in the failure
rates in the period and a subsequent decline in the proportion of
students receiving Distinction and High Distinction results. These
The Impact of Demand Driven Higher Education 75
results are consistent with those of McInnis & Hartley (2002) who
found a positive relationship between a student’s university entrance
score and their subsequent grade point average. Other things being
equal, a continuation of this trend of reduced entry level standards
would most likely produce lower quality graduates overall.
5. OTHER POSSIBLE IMPLICATIONS OF THESE TRENDS
The ‘demand driven’ system has led to universities increasing student
enrolments across the disciplines generally as a result of lowering
entry requirements and there is anecdotal evidence that this is having a
trickle-down effect on the number of students studying economics.
The universities with the highest entry scores are often perceived by
students to be the best universities. This is often based more on
research profile or age of the university than on teaching quality. As
the higher ATAR universities accept more students, this reduces the
pool of students capable of and interested in studying economics in
the middle and lower ATAR universities (see Table 2). As the middle
range ATAR universities allow more students to enrol, there are fewer
students wanting to enrol in the lower ATAR universities. This pattern
is reflected in the decline in enrolments in economics majors at the
University of Western Sydney and ACU.
The impact of this trend resulted in the phasing out of the Bachelor
of Economics degree, Bachelor of Economics (Honours) and Bachelor
of Economics/Law at the University of Western Sydney from the start
of 2013. While this was going to lead to the end of economics as a
discipline at University of Western Sydney there has been a minor
change of heart (as a result of a strong protest movement), with the
economics major to be returned to the business degree in 2014, but
with a reduced choice of economics subjects. A consequence of this
development is a substantial reduction in the number of economics
staff at the university.
Having a higher concentration of economics students in the
‘sandstone’ universities may not be a good outcome for the economics
staff at those universities or for their students. The ‘Group of Eight’
universities are well known for their high quality research outcomes
but are not necessarily noted for their high quality economics
teaching. Barrett & Milbourne (2012), for example, provide evidence
that strong research performance (a characteristic of the Group of
Eight) exhibits a significantly negative effect on student satisfaction
with teaching. They conclude that “the competing nature of teaching
76 A. Stokes
and research outweighs the complementary nature; Undergraduate
students possibly perceive inadequate time or interest devoted to them
in research-intensive faculty environments” (Barrett & Milbourne
2012, p.76). Fox & Milbourne (1999) use Australian data to show that
the median time spent by economics academics on teaching-related
activities was 7.7 hours per week and that a 10 per cent increase in
teaching time leads to a 20 per cent decline in research output. More
time, therefore, devoted to teaching at sandstone universities as a
result of taking in cohorts with larger proportions of poorer students
has the potential to reduce the research performance of these
institutions. This does not seem to be an efficient or a desirable
outcome.
This is supported by My University (Australian Government 2013)
results for 2011, based on CEQ data, which show that the highest level
of ‘student satisfaction with good teaching’ in economics was at two
of the lowest ATAR universities, ACU and the University of Western
Sydney. At the same time, the two Go8 universities scored in the
bottom third of the universities in NSW for ‘student satisfaction with
good teaching’. Having more students is likely to reduce the time for
research at universities with the best research outcomes. In addition,
the need to cater for lower ability students will add to teaching
burdens for staff at those universities. Neither of these outcomes seem
good for economics teaching and research at universities in general.
Another challenge for the teaching of economics to cohorts with
large proportions of lower ability students is simultaneously managing
the demands and maintaining the interest of high ability students.
Introductory economics classes at ACU would normally have students
with ATARs over 90 sitting next to others with ATARs under 40 or
those with less than Year 10 schooling. Given such student
heterogeneity, traditional teaching methods of ‘one approach fits all’
will not work and the effort required to develop more complex,
alternative teaching strategies is considerable (see Stokes & Wright
2012).
6. ARE THERE ALTERNATIVES TO DEREGULATION?
Along with the developments that have already occurred, there are
further changes proposed by the Australian Government. As
demonstrated in the proposed changes to higher education funding in
the 2014-15 Federal Budget, the Government’s contribution towards
tertiary education was to be reduced on average by 20 per cent. While
The Impact of Demand Driven Higher Education 77
this proposal met with resistance in the Australian Senate it reflects an
attitude to higher education funding driven by a desire for fiscal
consolidation in Government finances. The contribution students will
make will have to at least cover the reduction in government funding,
therefore instantly increasing the level of student fees. In addition to
this the deregulation of fees by the Government will allow universities
and other higher education providers to take advantage of price
flexibility and set fees similar to rates paid by their international
students. If this occurs then the costs of a university degree will
increase considerably. While some degrees like agriculture may only
increase by a relatively small amount (28 per cent), others such as
medicine are likely to increase by over 280 per cent (Stokes 2014).
Another serious concern is the indexing of student loans to the 10
year government bond rate. Currently HECS debts of university
students are adjusted in line with inflation (CPI). The government
bond rate has on average been about three percentage points higher
than the CPI. This change will increase the debt for students who wish
to defer their cost of university studies. Traditionally students from
lower socio-economic backgrounds would defer their HECS debt and
wealthier students would pay their HECS payments upfront. This
change will discourage poorer students from going to university.
The impact of these changes will also be felt in TAFEs and
colleges. From 1 January 2016, the Government will be extending the
‘demand driven’ funding system to include all diplomas, advanced
diplomas and associate degree courses. This will allow the institutions
to increase their fees and allow students to take out loans to pay for
the courses.
These changes are designed to allow for the reduced funding of
higher education by the Australian Government. In some other
nations, such as the USA, there is considerable private investment in
higher education which makes up for the funding shortfalls to some
degree. This has not been the case in Australia except in the more elite
universities. The Government’s failure to properly fund higher
education represents, in the view of this author, a serious economic
and social error. Numerous studies (Larkins 2001, McMahon 2004,
Stokes & Wright 2010, OECD 2012) have shown that the return to
higher education through increased tax revenue from graduates far
exceeds the costs of higher education for the Government. The
Government profits from the funding they provide to students
78 A. Stokes
undertaking higher education. One of the impacts of the ‘demand
driven’ system and the increased numbers of university graduates is
the higher unemployment rate for those graduates. This in itself would
reduce the profit of the Government as these additional graduates are
not earning the increased lifetime earnings or paying the additional
taxes.
In order to satisfactorily meet the needs of the labour market in the
future, the Australian Government needs to support and encourage
appropriate educational opportunities in both universities and TAFE
and VET courses. This outcome will not be achieved by higher
university and TAFE/VET fees and the lowering of educational
standards.
7. CONCLUSION
The decision to move to a ‘demand driven’ higher education system is
already impacting on the teaching and learning of economics and
other disciplines throughout Australia. There have been substantial
increases in the number of students being accepted into universities.
The increase in university offers has been accompanied by a decline in
the entry level requirements at many universities. The increase in
student numbers and the lower ability level of students has impacted
on the teaching and learning of economics. There are increasing
numbers of students studying economics at university with no prior
knowledge of economics and reduced levels of mathematical ability.
Allowing for these problems, it is important to consider possible
ways to minimize the negative outcomes of this situation. One method
that is applied at ACU is to have a very structured first year program
with weekly tutorial questions and a tutorial participation mark. The
role is taken in both lectures and tutorials to assess the efforts and
commitment of the students. The lecturers and tutors are former
teachers who have experience with high school students and
understand their prior learning. Students have an economics workbook
that includes the tutorial activities and guides to studying economics,
writing economics essays, and sample economics essays and exam
papers with answers. There is a plan to introduce weekly mentoring
sessions for students who are having difficulty with key skills required
in economics or who need assistance with understanding basic
economic concepts and terminology.
Another method that has been applied at other universities includes
having compulsory remedial mathematics and English language
The Impact of Demand Driven Higher Education 79
classes prior to the start of the year. Students must pass these classes
before being permitted to undertake mainstream study. Some
institutions require students to complete remedial mathematics and
English classes along with a lighter load of perhaps two units instead
of four in their first semester. This can be useful to international
students as well as to low ability domestic students.
The expansion of places in most universities is leading to a greater
proportion of economics students studying at the higher ATAR entry
level universities and a smaller proportion at lower ATAR
universities. This may not be a good development given Barrett’s &
Milbourne’s conclusion that higher ATAR universities have higher
rankings for research but do not perform as well on teaching and vice
versa. If the best teaching universities have fewer students and the
better research universities have greater demands put on them to teach
less able students, the resulting allocation of the nation’s resources is
not likely to be optimal.
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