93
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

Australasian journal of Economics Education 11, Num… ·  · 2015-12-24Mr Ian Searle, Brisbane Boys ... ECONOMICS EDUCATION . MISSION STATEMENT . The Australasian Journal of Economics

Embed Size (px)

Citation preview

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: [email protected] Co-Editor Dr Peter Docherty Telephone: (+61 2) 9514 7780 Email: [email protected] Co-Editor Mr Joseph Macri Telephone: (+61 2) 9850 6069 Email: [email protected]

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; [email protected].

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,

16, May, pp.63-72.

Frank, R. H. (2000) Microeconomics and Behavior, 4th edition, New York:

McGraw-Hill.

Freedman, C. (2003) “Economic Textbooks: Missing and Misplaced

Incentives”, in Freedman, C. and Szostak, R. (eds.), Tales of Narcissus:

The Looking Glass of Economic Science, New York: Nova Science

Publishers, pp.159-174.

Freeman, A. (2009) “The Economists of Tomorrow: the Case for a Pluralist

Subject Benchmark Statement for Economics”, International Review of

Economics Education, 8 (2), pp.23-41.

Gairdner, J. (ed.) (1892) “Letter on 14 March 1538 from Thomas, Duke of

Norfolk to Thomas Cromwell”, Letters and Papers, Foreign and

Domestic, Henry VIII, Volume 13 Part 1, January-July 1538, p.189 ref.

504.

Grimm, J. and Grimm W. (1992a) “The Fisherman and His Wife”, The

Complete Fairy Tales of the Brothers Grimm, New York: Bantam Books,

(translated by Jack Zipes).

Grimm, J. and Grimm W. (1992b) “Rumpelstiltskin”, The Complete Fairy

Tales of the Brothers Grimm, New York: Bantam Books, (translated by

Jack Zipes).

Homer (1990) The Illiad, New York: Viking Penguin, (translated by Robert

Fagles).

Lane-Poole, S. (2001/1909-1914) “Ala-ed-Din and the Wonderful Lamp”,

Stories from the Thousand and One Nights, Vol. XVI, The Harvard

Classics, New York: P.F. Collier & Son, pp.1909-14.

Lucas, R. E. (1988) “What Economists Do”, Speech to the National Taiwan

University, December 9, pp.1-6, available at http://homepage.ntu.edu.

tw/~mjlin/lucas.pdf.

Marshall, A. (1969) “Three Lectures on Progress and Poverty by Alfred

Marshall”, Journal of Law and Economics, 12 (1), pp.184-228.

McCloskey, D. (1982) The Applied Theory of Price, New York: Macmillan.

Perrault, C. (1697) in D.L Ashliman (1999-2015), at http://www.pitt.edu/~

dash /type 0333.html.

Shakespeare W. (1963) Hamlet, New York: The New American Library.

The Economist (2014) “Lexington: Koch-fuelled Politics”, The Economist,

March 22, p.43.

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:

[email protected], 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: [email protected].

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

REFERENCES

Abelson, P. W. and Valentine, T. J. (1985) “The Market for Economists in

Australia”, Economic Papers, 4 (4), pp.1-16.

Ackerman, F. (1999) “Still Dead after All These Years: Interpreting the

Failure of General Equilibrium Theory”, Working Paper 00-01, Tufts

University, Global Development and Environment Institute.

Anderson, M. and Blandy, R. (1992) “What Australian Economic

Professors Think”, Australian Economic Review, 100, pp.17-40.

Banks, G. (2008) Challenges of Evidence-Based Policy-Making, Canberra:

Productivity Commission.

Bateman, B.W. (2007) “Predicting an Unexpected Future for the History of

Economic Thought”, Paper presented to “Whither the History of

Economic Thought?” Conference, Hitotsubashi University, Japan,

19 March.

Beckett, S. (1964) Endgame: A Play in One Act, London: Faber.

Binmore, K. (1998) Game Theory and the Social Contract: Just Playing,

Cambridge, MA: MIT Press.

Colander, D. C. (2005) “The Making of an Economist Redux”, Journal of

Economic Perspectives, 19 (1), pp.175-98.

Delong, J. B. (2011) “The Crisis in Economics”, The Economist’s Voice,

May, p.2.

Denniss, R. (2012) The Use and Abuse of Economic Modelling in

Australia, Canberra: The Australia Institute.

Economic Society of Australia (2011) Policy Opinion Survey, Sydney:

Economic Society of Australia.

Enthoven, A. C. (1963) “Economic Analysis in the Department of

Defense”, American Economic Review, 53 (2), pp.413-23.

Gittins, R. (2011) “It’s a Load of Hot Air: The Coal Lobby Is Mining for

Favourable Treatment”, The Age, June 20, pp.20-21.

Gittins, R. (2012) “The Very Model of a Future Based on Guesswork”, The

Age, February 4, pp.3-4.

Groenewegen, J. (ed.) (2007) Teaching Pluralism in Economics,

Cheltenham UK: Edward Elgar.

Groenewegen, P. D. and McFarlane, B. J. (1990) A History of Australian

Economic Thought, London: Routledge.

Hellier, P., Keneley, M., Carr, R. and Lynch, B. (2004) “Towards a Market

Oriented Approach: Employer Requirements and Implications for

Undergraduate Economics Programs”, Economic Papers, 23 (3), pp.213-

21.

Keen, S. (2001) Debunking Economics: The Naked Emperor of the Social

Sciences, Sydney: Pluto Press.

Employers and Curriculum Reform 61

King, J. E. (2011) “Arguments for Pluralism in Economics”, in Argyrous,

G. and Stilwell, F. (eds.) Readings in Political Economy: Economics as a

Social Science, Melbourne: Tilde University Press, pp.54-56.

Krueger, A. O. (1991) “'Report of the Commission on Graduate Education

in Economics”, Journal of Economic Literature, 29 (3), pp.1035-53.

Lavoie, M. (2010) “Are We All Keynesians?”, Brazilian Journal of

Political Economy, 30 (2), pp.189-200.

Matchett, S. (2009) “Dismal Science of Economics Faces Dilemma”, The

Australian, March 25, p.25.

Millmow, A. (2011) “Economists All Dressed up with Nowhere to Go”,

Australian Financial Review, February 28, p.29.

Monash University (2012) Graduate Diploma in Economic Studies,

Monash University at http://www.monash.edu.au/study/coursefinder/

course/0172/ viewed 3 March 2010.

O’Donnell, R. (2004) “What Kind of Economics Graduates Do We Want?

A Constructive Critique of Hansen’s Proficiencies Approach”,

Australasian Journal of Economics Education , 1 (1), pp.41-60.

O’Donnell, R. (2007) “Teaching Economic Pluralism: Adding Value to

Students, Economies and Societies”, Paper presented to Second

International Conference for International Confederation of

Associations for Pluralism in Economics, University of Utah, 1-3 June.

O’Donnell, R. (2010) “Economic Pluralism and Skill Formation: Adding

Value to Students, Economies, and Societies”, in Garnett, R., Olsen, E.

K. and Starr, M. (eds,), Economic Pluralism, New York: Routledge,

pp.262-77.

O’Donnell, R. (2013) “What Do Graduate Attributes Have to Do with

Teaching Political Economy?”, in Schroeder, S. K. and Chester, L.

(eds.), Challenging the Orthodoxy: Reflections on Frank Stilwell's

Contribution to Political Economy, New York: Springer.

Pierce, C. S. (1878) “How to Make Our Ideas Clear”, Popular Science

Monthly, 12, pp.286-302.

Reardon, J. (2009) The Handbook of Pluralist Economics Education,

London: Routledge.

Samuels, W. J. and Medema, S. G. (1998) Foundations of Research in

Economics: How Do Economists Do Economics?, Cheltenham, UK:

Edward Elgar.

Schroeder, S. K. and Chester, L. (eds.) (2013) Challenging the Orthodoxy:

Reflections on Frank Stilwell's Contribution to Political Economy, New

York: Springer.

Sent, E. M. (2003) “Pleas for Pluralism”, Post-Autistic Economics Review,

18, pp.1-4.

62 T. Thornton

Thornton, T. B. (2010) Interview with Economic Honours Student,

Melbourne, 15 January.

Thornton, T. B. (2012) “The Economics Curriculum in Australian

Universities 1980 to 2011”, Economic Papers, 31 (1), pp.103-13.

Thornton, T. B. (2013) The Possibility of a Pluralist Economics

Curriculum in Australian Universities: Historical Forces and

Contemporary Strategies, Unpublished Ph.D. Thesis, La Trobe

University.

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: [email protected]; 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.

REFERENCES

Abelson, P. (1996) “Declining Enrolments in Economics: Australian

Experience”, Royal Economic Society Newsletter, 96 (1), October,

pp.19-20.

Abelson, P. W. (2005) Surveying University Student Standards in

Economics. Sydney, Department of Economics, Macquarie University.

Alauddin, M. and Tisdell, C.A. (2000) “Changing Academic Environment

and Teaching of Economics at the University-level: Some Critical Issues

Analysed with the Help of Microeconomics”, Economic Papers, 19 (1),

pp.1-17.

Australian Council for Educational Research (2011) “Student Demand -

Trends, Key Markets and the Movement towards Demand Driven

Enrolment”, Research Briefing, 1 (1), April, pp.1-5.

Australian Council for Educational Research (2013) Programme for

International Student Assessment (PISA): PISA 2012 How Australia

Measures Up, available online at http://www.acer.edu.au/documents

/PISA-2012-Report.pdf.

Australian Government (2013) My University, available online at

http://myuniversity.gov.au.

Barrett, G. and Milbourne, R. (2012) ‘Do Excellent Research Environments

Produce Better Learning and Teaching Outcomes?’ Economic Record,

88, pp.70-77.

80 A. Stokes

Bradley, D., Noonan, P., Nugent, H. and Scales, B. (2008) Review of

Australian Higher Education Final Report, Canberra: Australian

Government.

Department of Industry, Innovation, Climate Change, Science, Research

and Tertiary Education (DIICCRTE) (2013) Undergraduate

Applications and Offers, Canberra: Australian Government.

Economic Society of Australia (2004) A Survey of Student Standards in

Economics in Australian Universities in 2003, Sydney: Economic

Society of Australia.

Foster, G. (2012) “The Impact of International Students on Measured

Learning and Standards in Australian Higher Education”, Economics of

Education Review, 31, pp.587-600.

Fox, K. and Milbourne, R. (1999) “What Determines Research Output of

Academic Economists?”, Economic Record, 75, pp.256-267.

Hood, L. (2011) “Unis Voice Caution on Lifting Cap on Places”, The

Advertiser, 8 March, p.27.

Lane, B. (2010a) “Curtin Goes for Growth”, The Australian, 1 December,

p.27.

Lane, B. (2010b) “Unis Expect to Overenroll on a Large Scale”, The

Australian, 1 September, p.24.

Larkins, F. (2001) “The Economic Benefits of Australian University

Degrees: Bachelor and Research Higher Degrees”, Economic Record, 34

(4), pp.403-414.

Lewis, P. and Norris, K. (1997) “Recent Changes in Economics

Enrolments”, Economic Papers, 1 (4), pp.1‐13.

Lodewijks, J. (2011) “The Elephant in the Room: Conflicting Demands on

Academics in Australian Higher Education”, Australasian Journal of

Economics Education, 8 (1), pp.17-40.

McInnis, C. and Hartley, R. (2002) Managing Study and Work: The Impact

of Full-time Study and Paid Work on the Undergraduate Experience in

Australian Universities, Canberra: DEST.

McMahon, W. (2004) “The Social and External Benefits of Education”, in

Johnes, G. and Johnes, J. (eds.), International Handbook of the

Economics of Education, Surrey: Edward Elgar, pp.211-259.

Millmow, A. (2000) “The State We’re In: University Economics

1989/1999”, Economic Papers, 19 (4), pp.43-51.

New South Wales Board of Studies (various years) HSC Statistics,

available online at http://www.boardofstudies.nsw.edu.au/bos_stats/hsc-

stats.html.

The Impact of Demand Driven Higher Education 81

OECD (2012) Education Indicators in Focus, available online at

http://www.oecd.org/edu/skills-beyond-chool/Education%20Indicators%

20in%20Focus %206%20June%202012.pdf.

Stokes, A. (2014) “The Economics of the 2014-15 Federal Budget”,

Ecodate, 28 (3), pp.1-6.

Stokes, A. and Wright, S. (2010) “Are University Students Paying too

Much for their Education in Australia?”, Journal of Australian Political

Economy, 65 (2), pp.5-27.

Stokes, A. and Wright, S. (2012) “More Effectively Engaging Students in

University Economics Courses”, Australasian Journal of Economics

Education, 9 (1), pp.1-20.

Trounson, A. and Hare, J. (2011) ‘Cash Gap if Cap Doesn’t Fit -

Universities Raid Funds to Shore up Markets’, The Australian, 26

January, p.33.

Universities Admission Centre (2008) UAC Guide 2008, Sydney:

Universities Admission Centre.

Universities Admission Centre (2013) Cut-offs for Main Round Offers

2013, Sydney: Universities Admission Centre, available online at

http://www.uac.edu.au/documents/atar/2013-main-cutoffs.pdf.