Saturday, September 03, 2005

Economists are Bad at Economics

The NY Times reports on a journal article on economics education in the US. It turns out that 78% of 200 professional economists at the 2005 AEA conference answered the following question incorrectly (I'll put the answer in the comments in case anyone wants to find out if they are better at economics than most professionals):
"You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50."
That is fucking astounding, but possibly even more telling is that
When they posed their original question to a large group of college students, the researchers found that exposure to introductory economics instruction was strikingly counterproductive. Among those who had taken a course in economics, only 7.4 percent answered correctly, compared with 17.2 percent of those who had never taken one.
The explanation for such performance, the article (which I can't be arsed reading beyond the abstract) suggests, is that courses are too mathematically rich and cover too wide a range of topics at the expense of really coming to understand anything at all.

I find studying economics here in New Zealand (1st year papers at Canterbury, 1st->3rd year papers at Otago) a lot more flexible than it sounds in the States. I don't plan on becoming a professional economist and am mainly interested in economics as a tool for understanding human behaviour, so it's been good that I've been able to avoid having to do any calculus.

There certainly does seem to be a trade-off between mathematical depth and intuitive understanding. The fact that US schools are opting for the former could reflect the scientific fetishism that seems to be quite prevalent in the social sciences there. American sociology, for example, is a lot more quantitative than elsewhere (not that I think that's necessarily a bad thing, but there's a trade-off). Perhaps it's the product of a more competitive education system: maths is harder, therefore better.

[via Marginal Revolution]
< ? kiwi blogs # >