Opp cost and Agnes Monica

Wecome to the class, I hope we’ll have fun this semester. Your syllabus and all that is on my web. You’re welcome to disagree with me in anything. Keep those damn hand phones silent during my class, or you talk outside. You can cheat during your homework or exam, but make sure you outsmart me, because I will catch you and boy, the punishment, is no fun, I guarantee you. I don’t care with attendance, it’s you who’ll miss, not me. Questions, comments, objections? No? Let’s do the first quizz...

That’s how I usually start my classes. I give first quizz in the first day, to “test the water”. I need to get the feel of who are in the room and what’s the variation within. Here’s an example question. It’s about the “opportunity cost”, the backbone concept of economics. It’s a version of Ferraro-Taylor test for economists, reported in their shocking paper (here is Bob Frank’s column about it in the NYTimes, and here is Tyler Cowen’s posting on it). Applying this quiz to three classes in different levels, I confirmed the Ferraro-Taylor’s result: the concept of opportunity cost is one of the most difficult concepts for students. In my undergraduate intermediate micro class (thus, students who have passed introductory micro), only 5 out of 38 students got it right (2 of which with wrong reasons) – about 13 percent. Idem ditto in the graduate level.

What went wrong? Introductory courses are vital. Failure to explain and understand opportunity costs and other key concepts (marginal-approach, comparative advantage, zero profit, the role of incentive, the role of price, the role of expectation, and the difference between economic cost and accounting cost) is one of the reasons why we see so many fallacies in economic analysis and reasoning. Be it in academic papers or especially in newspapers and media.

I was told by wise people, when you talk, use your audience "language". That's why I use Peterpan and Radja in the quizz given to sophomores and juniors. (For graduate levels it’s way more complicated: “Who the he** is Radja?” Try the Beatles, but some youngsters in the back fall asleep).

So far, I find it easier not to use textbook examples to the students. Instead, I use examples they like, or at least are familiar with. (Did I tell you how I managed to make them understand the concept of marginal rate of substitution using somay and teh botol, with no math?). Whenever I find interesting article with economics innuendo in it, I keep it for illustration in class.

And I just found another one today in an article in the Jakarta Post (sorry, it's not a permanent link, just google up). It features an interview with a teenage star (I assume a college students magnet she is, no?). She is nineteen, energetic, ambitious, and most importantly, she gives examples of economics – rightly and wrongly. There’s a true application of opportunity cost (“I love studying. It’s just something weird of me. If my career weren’t this big, I’d probably study all the time”). Incorrect case of comparative advantage (“I have to do my best in everything I do. And hopefully the result is the best, too"). A good starter for understanding tradeoff and marginal rate of substitution (“I want everything to be at the first level, meanwhile, I know that my body can’t cope with that”) or interior versus corner solution (“We should not just listen to pop or dangdut but also listen to jazz, blues, pop-rock”). And, a kicker really: “I want to be at a point where my idealism and the market can walk the same path”.

She'd make a good econ major.