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Posts from the ‘Economic & Financial Education’ Category

Bridging the Gap Between Academia and the Workplace

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Education literature suggests that the nature of a student’s participation in workplace activities has a major impact on the knowledge that student acquires.

At AIER, we believe the classroom walls should be both transparent and permeable to the rigors and requirements of the workplace. Therefore, classroom learning needs to support an internship experience and vice versa, facilitating the integration of new college graduates into the labor force.

Two years ago, we held a pilot program for our applied economic research internship program. This past fall, we continued this program in conjunction with two academic institutions, the University of Sioux Falls and Missouri University of Science and Technology. We brought economists from AIER into the classroom, and brought the university professors and their students into the workplace. This exchange of staff occurred figuratively, of course. The course was “remote” and our interaction occurred across several meetings over WebEx and frequent communication using e-mail.

During the semester, 20 students worked in four teams on a project about employment trends in various industries, and the relationship of those trends to the business cycles. Students were supervised by research fellow Patrick Coate and me.

During the January 2017 intersession, 12 out of 20 students will be coming to AIER’s campus in western Massachusetts to continue their immersion in economic research. These students are from the University of Sioux Falls.

This kind of collaborative arrangement between academic institutions and practitioners represents an innovative approach to bridge the gap between undergraduate economic education and the professional world. It engages students in topical economic research and walks them through the research process, substantiating the theoretical base they had established in prior courses. This exposure helps undergraduates broaden their knowledge, and gain marketable skills and practical experience. This helps them become more successful participants in the global workforce.

This program supports AIER’s mission, raises our national profile as an innovator, and cultivates the connections for future collaborative engagements. If you want your class to be a part of this program next year, please contact me.

Picture: AIER in winter. Photo by Bruce Gore.

Teaching High School Students About Unemployment

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How would you use a sampling distribution to measure unemployment? Students at Lee Middle and High School, in Lee, Massachusetts, recently learned this lesson with some help from the American Institute for Economic Research.

Teachers who participated in AIER’s Teach-the-Teachers Initiative are field testing their lesson ideas. On January 28, we visited Lee to observe the AP Statistics class taught by Thomas McCormack. Prior to our visit, Mr. McCormack assigned each of his 20 students a labor force status (for instance, a retiree, a full-time student, a laid-off person). In addition, each student was given a randomly generated list of 10 of their classmates. This was an attempt to replicate the Bureau of Labor Statistics’ monthly survey when they use random digit dialing. Thus, each student had a sample of 10 students and was told to record the labor force status of each student in their sample. Then each student calculated the unemployment rate for their sample by dividing the number of unemployed by the number of people in the labor force, which is the sum of employed and unemployed. So each student obtained one number to represent the unemployment rate for their sample.

During the class period each student came up to the white board and put their unemployment rate statistic on a number line. As a whole, the class created a dot plot of 20 unemployment rates. Of course, each of the 20 unemployment rates was different, and represented a distribution of unemployment rates in 20 possible samples. This is exactly the definition of the sampling distribution! It was visual, it was understandable to the students, and it was cool!

Mr. McCormack then posed the question: “We have only one true number of the unemployment rate in this population, but we have all these dots here…. Why do you think that is?” The students discussed the concepts of a “range,” a “mean,” and a “standard deviation.” The teacher went on to describe the normal distribution and its properties.

IMG_1021 Based on the sampling distribution of the unemployment rate depicted on the board (in this class we had rates that were as low as 17% and as high as 57%), students predicted the unemployment rate for the whole population and then compared this prediction with the actual unemployment rate defined by the teacher for this activity. This helped them to see that, even though there was one true unemployment rate for the population (33%), individual samples can vary quite a bit. The class discussed the reasons for the “errors” and proposed ways to minimize them, such as using a larger sample, for example.

This creative lesson required students to actively engage with the concepts of an unemployment rate and a sampling distribution. In addition to employing the inquiry-based method, it allowed the infusion of economic concepts into a statistics class, promoting an interdisciplinary approach to teaching and learning. All of these things are important for building college- and career-readiness skills among high school students. We are happy that our program helped Mr. McCormack to create such a stimulating lesson.

We are offering three workshops for teachers during the Summer 2016. Visit our Web site to learn more and to register for the program: https://www.aier.org/teach-teachers.

Pictures: First picture shows the role-playing cards being used by students to guess the actual unemployment rate after they saw the sampling distribution on the board, which is shown on the second picture.

 

Big Ideas in Macroeconomics

IMG_1826During the summer, I came across a book that described macroeconomic foundations, models, and frameworks in a simple way. I was so intrigued by the clarity of the explanations that I wrote a book review, which just got published in The American Economist. The book by Kartik Athreya is called “Big Ideas in Macroeconomics: A Nontechnical View”, published by the MIT Press in 2013.

In a nontechnical manner, with great attention to the details of the big picture, the author showcases major macroeconomic models, describes the logic of them, and talks to the reader about their successes and failures in explaining real world problems. The book will be valuable to those with a casual interest in economics, undergraduate and graduate students, and seasoned academics and practitioners alike.

The author shows the irony of the criticism that macroeconomic models cannot accommodate real world concerns. For example, in the last chapter he addresses the causes of the recent financial crisis and the limitations of macroeconomic theory in predicting it. Athreya analyzes the components of the 2007-2008 crisis, and highlights several problems facing policymakers before, during, and after any crisis. Most importantly, the author addresses criticisms of the profession for its inability to foresee the Great Recession and hasten the slow recovery. He assures the reader that “a sensible shift of priorities toward understanding the role of household finance (e.g., mortgage and student loans) and financial contracting between firms (e.g., repos) as sources of macroeconomic fluctuations” is already underway.

It struck me that AIER could have been listed here as a source of reliable information on personal finance, retirement, and general economic literacy. While academia is slowly catching up with the informational demands of the Main Street, the Institute produces objective insights and useful information that has helped people successfully pursue their economic and financial goals for more than eighty years.

When finished reading, I could not stop thinking that there are synergies between the style of this book and the style of AIER’s publications. AIER strives to produce research that is easy to understand and use in daily life. As we continue on this path, our readers will be well equipped with actionable approaches to financial and economic issues that they face every day.

I am happy that my book review got published so more people will know about this interesting book.

Photo: Natalia Smirnova with the issue of The American Economist in her AIER office.

Learning Economics with Movie Tickets and Babysitting

Drew Field test 2-cropTeachers who went through the AIER Teach-the-Teachers Initiative continue to dazzle us with creativity and innovative practices in their classrooms.

On September 9, 2015, we observed two American History II lessons taught by Drew Gibson at Mount Greylock Regional School in Williamstown, Mass. The purpose of the lessons was defined by the teacher as “discovering the story behind economic data and charts.”

Mr. Gibson (shown in the picture) used data on babysitting wages per hour, and movie ticket prices from 1945 through 2000, to make an interesting point about supply, demand, and price. The data was taken from Virtual Economics published by the Council for Economic Education.

The students computed the average annual rate of increase for both values, and graphed the relationship between Read more

AIER’s Educational Programs Applauded

IMG_0540Two of AIER’s economic education programs received enthusiastic interest at the American Economic Association’s Conference on Teaching and Research in Economic Education that was held on May 27-29 in Minneapolis.

We presented two papers, the first of which showcased AIER’s Money School program. This program supports survivors of domestic and sexual violence, giving them the knowledge, confidence, and connections to handle their own finances.

The feedback for this paper, presented by AIER Senior Research Analyst Nicole Kreisberg, was quite positive. People who attended this session said that they were impressed with the scope of the work, and its unique nature, including serving rural residents. They suggested various ways to improve the program, and encouraged expanding it to a wider, even national audience.

The second paper reported on the results of the first class of the Teach-the-Teachers Initiative. This AIER program gives high school teachers the tools to improve the way they teach economics.

I reported that the program is unique in two ways. First, we encourage the use of economic concepts across various disciplines, such as Spanish, algebra and history, as well as in special education, to name just a few. This approach serves teachers well, because Common Core standards stipulate the development of critical thinking and analytical skills in students in all fields of study. The discipline of economics is well suited for developing those critical thinking and analytical skills.

Second, we ask teachers to field test the lesson idea generated during their stay at AIER in their home classrooms. We then follow up and visit their schools to observe the effectiveness of the lessons. The follow-up process is special and is rarely being done by other programs.

During the academic year we collected feedback from the participating teachers and their students after the lesson was taught. Both the students and the teachers reported that the goals for the lessons were identified clearly, and were achieved. The teachers reported that their understanding of the concepts improved, and the students responded that their teachers were knowledgeable about the topics introduced in class, and the class materials were interesting and easy to follow.

We are excited to get ready for the second class of Teach-the-Teachers on June 22-26, 2015. We also keep in touch with the 2014 alumni, several of whom will be coming back on June 27 to learn one additional topic and to exchange stories from the classroom.

Photo: Nicole Kreisberg of AIER presents her paper at the session “Measuring Impact of Various Approaches to Teaching Economics” on May 28, 2015.

AIER Participates in the Euro Challenge Competition

IMG_0367The Euro Challenge brings together high school students from around the country, and gives them a chance to think like an economist for the day, to “advise” policymakers about the Euro, and to propose solutions to current economic challenges. I had the privilege of judging the semi-finals this year, which were held in New York on April 30th.

The program was launched in 2005 by the Delegation of the European Union to the United States, in partnership with the Moody’s Foundation, and with the Federal Reserve Bank of New York serving as program advisor.

At the semi-finals, 25 teams from around the country made 15-minute presentations in which they were required to: (1) Describe the current economic situation in the Euro area; (2) Select one economic-related challenge confronting the Euro area as a whole, and pick one of the 18 member countries of the Euro area to illustrate that challenge; (3) Recommend a policy or policies for addressing the identified challenge in the selected country.

Panels of judges were assigned to assess five teams each, and select one that would advance to the final round. It was a hard task because all of the teams were thoroughly prepared, had clear understandings of economic challenges facing European Union member states, proposed feasible and fiscally responsible solutions to the economic challenges facing their selected country, and creatively delivered their presentations.

After deliberations, my panel of judges selected Naperville Central High School from Naperville, Illinois, to advance to the final round. In the afternoon, all the judges and all of the participants observed the final presentation of the five best teams. The overall winner of the Euro Challenge 2015 was Princeton High School, of Princeton, New Jersey.

As I learned from talking to students afterwards, the actual presentation that day was a culmination of a lot of preparatory work. They studied the economy of their selected country, and they reached out to the embassy and trade representative of that country in the U.S. to find out the challenges and the most current information that might not yet be covered in textbooks and other media. They collaborated, they divided tasks, and they delved into the data.

This kind of experiential learning and applied economic research is also at the heart of the AIER approach to internships, whether for high-school, undergraduate, or graduate students. As we found out at AIER, and as the Euro Challenge confirmed for me, active learning and teamwork are the best ways to entice the young generation of Americans to learn economics.

On the picture: the team from The High School for Math, Science and Engineering, New York City.

Building a Price Index, With Donuts and Mountain Dew

IMG_0742Students at Monument Mountain Regional High School are exploring a very interesting and creative twist on traditional economic indexing.

The Everyday Price Index, calculated each month by the American Institute for Economic Research, reflects price changes felt by Americans on a day-to-day basis, measuring the prices of those items that they buy frequently, such as food, utilities, fuel, and prescription drugs.

Students in Steve Estelle’s Financial Algebra class are going a step further, and creating a Student Price Index, focusing on goods and services that are most often purchased by high school students. Their teacher, Steve Estelle, attended AIER’s Teach-the-Teachers Initiative program in June 2014. He is now implementing the lesson he learned during the program.

First, students worked together to figure out which goods and services they buy at least once a week, and opted for a list that was a bit decadent, as you can see below. They decided in which stores in Great Barrington to record prices, and exactly which products to monitor, down to the size and packaging options of each brand.

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Item — Quantity — Location
1. Gasoline – 87 unleaded — 15 gallons —  Cumberland Farms, Main Street
2. Chips – Lay’s Potato Chips, Sour Cream, Family Size — 2 bags  — Cumberland Farms, Main Street
3. Donuts — Regular — 6 — Price Chopper
4. Bagels — Regular — 2 — Price Chopper
5. Arizona Iced Tea – 16 oz can — 5 —  Price Chopper
6. Soda – Mountain Dew — 1 liter — 2  — Price Chopper
7. Coffee – medium cup, regular — 3  — Price Chopper
8. Bacon, 1 pound pack — 1 — Price Chopper
9. Movie ticket  — 1 — Triplex Movie Theater
10. Lighter — BIC 1 — Mobile Gas Station, Main Street

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Over the next 10 weeks, they will be collecting price data from these four businesses, and they will use that information to create their Student Price Index, in much the same way AIER constructs the Everyday Price Index, showing the change in prices over time.

This exercise will teach students a memorable lesson in how to build a price index, and expose them to the process of gathering price data, and the limitations of this process and these data.

This is another example of how AIER helps teach teachers to craft interesting and engaging lessons, applying text-book material to real-life situations in a fun and creative way.

Teaching Quantity Theory of Money, in Spanish Class

IMG_0726As a follow-up to the Summer 2014 Teach-the-Teachers Initiative (TTI), we continue to visit the participants’ classrooms and observe the implementation of lessons learned at AIER. On November 24, we observed a Spanish II class taught by Dan Bouvier, Foreign Language teacher, at the Monument Mountain High School in Great Barrington, MA. The class was conducted in Spanish.

The topic was – market price determination. Students were involved in a demonstration of how prices are set in the actual roadside market in Guatemala, or Ecuador, or Columbia, or Bolivia, or Peru. The lesson in laissez-faire involved various folk objects from Latin American countries (supplied by the teacher) to be traded by active bargaining (in Spanish) by students. The objects were baskets, knitted goods, blankets, masks, etc. The currency was the actual legal tender bills from the above mentioned countries (provided by the teacher). Students volunteered to be the seller or the buyer through different rounds of the game and the role-play was very engaging and at times funny.

Underneath the rowdy classroom interactions was an important lesson in economics. The students recorded prices of the goods on the board, and as the rounds progressed, they were able to experience and understand how an increase in money supply caused the prices of the goods to rise. Black board with prices
The discussion at the end of the lesson, still in Spanish, focused on factors that determine the price of a good in a market. Many reasons were named, such as the size, the material, and the utility of an object. However, students dug deeper and mentioned the state of the economy, the quantity of money, and the cultural differences as main factors of the market price determination. This discussion shows that interactive, hands-on activities in the classroom provide a welcome opportunity for learning.

This visit demonstrates that our Teach-the-Teachers Initiative is for more than just economics classes. It encourages teachers from various disciplines to bring creativity and non-standard approaches into their classroom and to disseminate economic and financial literacy information in an imaginative way.

Because the lesson was fun and loud and wild, students will definitely remember the main conclusion – too much money chasing the same amount of goods will raise the price level in the economy. Pretty powerful lesson!

Teaching Fiscal Policy in a High School Government Class

ed1As a follow-up to the Summer 2014 Teach-the-Teachers Initiative (TTI), we continue to visit the participants’ classrooms to observe the implementation of lessons learned at AIER. On October 30, I observed the Advanced Placement Government and Politics class at the Pomperaug High School in Southbury, Connecticut. The topic of the day was “Fiscal Policy”.

I have read lots of economic education literature that documents that the combination of discussion-based critical inquiry paired with the hands-on approach of simulation exercises improves class participation and students’ understanding. The day I spent observing a Pomperaug provides one more piece of evidence to this body of knowledge.

The discussion was seeded by the teacher who introduced the concepts of government expenditures, government revenues, debt and deficit and was followed by student inquiry about the details they did not understand. The main portion of the class was then spent by simulating the federal government budgeting process using the online portal (www.federalbudgetchallenge.org). Students worked individually, with occasional discussion about the unfamiliar terms with peers and the teacher.

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How Much Should I Save for Retirement?

ING’s advertising campaign suggests that workers need to save millions of dollars in order to retire comfortably. You know the ads, where people lug around target savings amounts, all upwards of $1 million. It seems like such a burden to achieve these numbers. But recent research by Dr. Marlena Lee of Dimensional Fund Advisors suggests that maybe the retirement hurdle isn’t so insurmountable.

Dr. Lee’s research suggests that low- and middle-income households that target a savings rate between 2 and 11 percent may actually save enough for retirement. This is encouraging news for workers that will be reliant on 401(k) balances in retirement.

Dr. Lee starts by defining a replacement rate: the percentage of gross pre-retirement income that is replaced in retirement. If you earned $50,000 per year before retirement, a $25,000 annual pension would represent a 50 percent replacement rate. Dr. Lee finds that in order to achieve replacement rates that maintain living standards through retirement, the average household needs to save about 11% per year during working years. But that savings rate varies by household income. Read more