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Center for International Studies
Summer Teacher Institute
1. TEACHING ECONOMICS
2. A LENS THROUGH WHICH TO LOOK AT
THE WORLD
3. SIMON JOHNSON ARTICLE, THE QUIET
COUP
4. STUDENT ANALYSIS OF THE PRESENT
ECONOMIC CRISIS USING JOHNSON’S
FRAMEWORK AS A KALEIDOSCOPE
Origins of the Economics course at Lab
Original course:
practical economics
stock market
Hard lessons learned as an option trader:
size and leverage kills
managing risk more important than profit
understanding positions critical
Investing in markets:
Peter Lynch approach
No load index funds
How the AP course came to pass
Stepping into the breach
Renewal
Attributes of a good AP Economics class
Importance of easy to read, accessible texts
“Who feeds Paris?”
“Doggie birthday cake”
Let students do the learning:
Exeter Harkness Method
http://www.exeter.edu/admissions/147_harkness.as
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Inquiry approach—student-led learning
Attributes of good class, con’t.
Economic reasoning:
Cost/benefit reasoning
Opportunity costs
No free lunch
Outside lecturers:
Steve Levitt—story of Paul Feldman and
price elasticity
Elasticity Along a Demand Curve
6-6
Ed = ∞
$10
9
8
7
6
5
4
3
2
1
Price
Ed > 1
Elasticity declines along demand
curve as we move toward the
quantity axis
0
Ed = 1
Ed < 1
Ed = 0
1
2
3
4
5
6
7
8
9 10 Quantity
Elasticity and Total Revenue
6-7
Inelastic Demand
E<1
TR rises if price increases
$10
Price
8
TRG = $1 x 9 = $9
TRH = $2 x 8 = $16
6
Gained
revenue
4
H
2
G
C
A
0
1
2
Lost
revenue
B
3
4
5
6
7
8
9
Quantity
Elasticity and Total Revenue
6-8
$10
Price
8
6
4
Elastic Demand
E>1
K
J
C
A B
TRJ = $8 x 2 = $16
TRK = $9 x 1 = $9
Gained
revenue
Lost
revenue
2
0
TR falls if price increases.
1
2
3
4
5
6
7
8
9
Quantity
Attributes of a good class, con’t.
Alan Sanderson—Olympics make no
economic sense for Chicago
Graphs to explain ideas
Comparative Advantage and the
Combined PPC
2-10
Textiles
(in thousands of yards)
5 F
The combined PPC is the curve
connecting points F, H, and G.
4
The slope of the combined PPC is
determined by the country with
the lowest opportunity cost.
H
3
Pakistan
The combined PPC has the
same slope as Belgium’s PPC
from F to H and the same
slope as Pakistan’s from H to
G.
2
Belgium
1
G
1
2
3
4
Chocolate (in tons)
5
The Phillips Curve
1311
5
 Republicans favored
A
Inflation
4
3
2
B
1
0
4
5
6
7
Unemployment rate
contractionary policy that
meant high unemployment and
low inflation (point B).
 Democrats generally favored
expansionary policy that meant
low unemployment and high
inflation (point A).
17-12
Lorenz Curve for the U.S.
1929, 1970, and 2003
Cumulative percentage of income
100%
80
Line of absolute equality
60
1970
40
2003
1929
20
0
40
20
60
80
Cumulative percentage of population
100%
Attributes of a good class, con’t.
Changing with the Times: “freshman course won’t
be quite the same.”
More prominence to financial system
Consequences of leverage
Beyond monetary policy
The future is surprise
Attributes of a good class, con’t.
Challenge basic concepts:
the efficient theory of markets
behavioral economists
“incredible aberrations”
Attributes of a good class, con’t.
Using Current Events
Busy students don’t follow economic crisis
“Ducks become rabbits”
A lens through which to look at the world
Understanding events in history:
concatenations
kaleidoscopes
Simon Johnson article, The Quiet Coup
Article as a lens
Seen it all before
Banana Republic—”shockingly reminiscent”
Too much risk in good times…no one will lend
money in bad times
Johnson article as kaleidoscope
Some oligarchs must lose—not easy to accomplish:
41% of corporate profits
actively prevent reforms
money to campaigns
“cult of finance”
Problem is uncertainty—must respond with “speed and
overwhelming force”
“Policy by deal”
Unwilling to challenge financial system
Johnson’s Solution
Nationalize banks—no “velvet glove approach”
Break power of financial oligarchs:
revise anti-trust legislation
caps on executive compensation
greater transparency
competition
Limits to the analogy between emerging markets
and the U.S.
Emerging market governments quickly run out
of foreign currency when in crisis
United States can pay its debts in its own
currency
Student analyses and Johnson article
Has Obama Administration taken on financial
oligarchs?
1. Loren Kole: policy towards the banks
2. Amy Solomon: new financial regulations
3. Jennifer Glick: GM and Chrysler
4. Amelia Acosta-Pacelli: executive compensation
5. Danielle Kutasov: similarities between financial
crises in emerging markets and that affecting the United
States now
6. Sydney Small: health care system
Bibliography
Colander, David C. Microeconomics. 7th ed. Irwin:
McGraw-Hill, 2008.
Colander, David C. Macroeconomics. 7th ed. Irwin:
McGraw-Hill, 2008.
Levitt Steven D.; and Dubner Stephen J.
Freakonomics. New York: HarperCollins, 2005.
Manchester William. A World Lit Only by Fire. Boston:
Little, Brown and Company, 1992.
Mankiw Gregory N. “That Freshman Course Won’t Be
Quite the Same.” The New York Times. 24 May
2009.
Bibliography
Nocera Joe. “Poking Holes in a Theory on Markets.”
The New York Times. 6 June 2009
Wheelan Charles. naked economics, Undressing the
Dismal Science. New York: W.W. Norton &
Company.