Indonesia | Economics

Saturday, November 04, 2006

High school, quality TV, and the teaching of economics

A pair of entries from Greg Mankiw's blog got me thinking. In this entry, one high-school student began a short e-mail to Mankiw as follows:
Hi Dr. Mankiw,

I'm a high school senior from Montclair, NJ, an avid reader of your blog (and textbook), and generally, a big fan of economics...

and went on to ask of the best way to choose an undergraduate economics program. The second one is from an undergraduate student taking Mankiw's intro to econonomics course:
I just was watching some West Wing in my room and they were talking about protecting pharmaceutical patents. The one guy says "Those pills cost them four cents a unit to make..." and the other guy says "You know that's not true! The second pill costs them four cents, the first pill costs them four hundred million dollars!" Just thought it was cool that I understood why this was and I wouldn't have a few weeks ago.

I envy economics education for the general public in the United States, where all types of medias are available (in abundance) to provide economics education. If a high school student can claim to be "an avid reader of [Greg Mankiw's] blog" and a highly-popular TV show can allude to the (proper) economics of pharmaceutical researches, is it any wonder that the quality if policy debate there is so much better?

When I graduated from one of the better high schools in Jakarta..., I understood economics as "a science of money", particularly with relations to businesses and governments. My high-school education led me to believe that economics was mainly about all those things ― interest rates, exchange rates, and what have you ― that mattered mainly for people with money. As a left-leaning teenager, I took no interest in such a thing.

It took a while before some serious economists set me straight: Modern economics ― particularly, modern microeconomics ― is not mainly a science of money, nor a science of "organizing one's household" (as, I remember, was taught in my first year of high school). It is a science of decision-making ― and hence, about behaviour ― founded on the assumption of rationality, and epitomized in Steven Landsburg's little dictum, "people respond to incentive".

I think most Indonesians still believe what I used to believe about economics. I recently had a discussion with a reader of my blog who respected economic models but objected to its use to analyze behaviours. Having seen this as a typical role of much of modern economics, I was puzzled by the objection. But after reflecting on my own experiences, I begin to see why. This is indeed what was (and, I believe, still is) being taught.

There is, hence, a case to be made for more general economics education. In the United States, there is the National Council on Economic Education which promotes "economic literacy with students and their teachers". That's one way. Another would be for economists to write more ― preferably in Indonesian ― in mainstream medias (newspapers, magazines), as well as non-mainstream medias (blogs, mailing lists).

Meanwhile, for all of you still led astray by your high-school economics teachers, here is a little quote from David Friedman's Hidden Order:
Economics is that way of understanding behavior that starts from the assumption that individuals have objectives and tend to choose the correct way to achieve them

For those who followed this debate in cafesalemba, the last part of the quote describes what economists mean by "rationality".


  • I don't think people in the US have a better grasp on economics than Indonesian. I imagine everyone has an intuitive common sense grasp of economics, but they don't realise that it's "economics".

    Like how humans can pick up the basics of Newtonian physics by playing soccer :) Or like how beggars instinctively know that one of Porter's 5 forces is "barriers to entry" ;)

    BTW, I'm interested, are you not a left-leaning grown up now-a-days? I reckon Indonesia is full of examples of market failures that need government intervention :) [perhaps you were better at recognising that when you were a teenager ;)].

    By Blogger johnorford, at 11/04/2006 11:01:00 am  

  • public debate is hopeless:D

    i prefer there're indonesian economists doing serious research in microeconomics; more mathematical modeling instead of statistical modeling. that would be fun. :)

    By Anonymous roby, at 11/04/2006 02:35:00 pm  

  • "economics is that way of understanding behavior that starts from the assumption that individuals have objectives and tend to choose the correct way to achieve them"

    sure, but i think this would lead the students astray on what psychology and cognitive science are, and how they differ from economics =)

    a qualifier will help: economics is a third-person, collective science that deals with a bunch of individuals, whereas psych and cogsci are a first-person science, dealing with the experience of the individual. all three agree that individuals have objectives and tend to choose the correct ways to get them.

    By Anonymous tirta, at 11/04/2006 03:42:00 pm  

  • John,
    Here is my take on people's ability to intuit economic principles. I think 'practical economics' often leads to mistaken conclusions.

    A left-leaning grown-up? I think the ends remain the same, but before, I never really systematically thought about the means to it. Now is a little better.

    Need to have more rationality at all ends of the spectrum -- from basic research to policy. Hence, more on any spectrum is an improvement.

    But need to find that equilibrium where marginal cost = marginal benefit between basic science researchers and public intellectuals. ;-)

    Yes, I agree. Economics usually assumes individual behaviours and tries to explain aggregate behaviours based on that assumption.

    Your definition is interesting -- haven't really thought of it that way.

    By Blogger Arya, at 11/05/2006 12:07:00 am  

  • Most Indonesian understand economics as accounting and/or management. I guess this is why a lot of economics department in universities in Indonesia doesn't have economics major in it.

    By Anonymous Gendeng Pamungkas, at 11/16/2006 06:09:00 am  

  • Gendeng,
    You're right. That's very annoying, isn't it?

    By Blogger Arya, at 12/05/2006 05:18:00 pm  

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