Teach Economics: The Importance of Teaching Students to "Think Like an Economist" with Professor Justin Wolfers
In this episode of Teach Economics, Justin Wolfers, professor of public policy and economics at the University of Michigan, talks to Scott Wolla, economic education officer at the Federal Reserve Bank of St. Louis, about how he found economics, why he loves teaching economics, and why it’s important to help students “think like an economist.”
This 35-minute podcast was released Dec. 5, 2023, as a part of the Teach Economics podcast channel from the Federal Reserve Bank of St. Louis.
Justin Wolfers: Economics is everywhere. The principles that we’re teaching you will be relevant whether you become a hairdresser, a Ph.D. economist... nursing, teaching, whatever.
You make economic decisions every day of your life, and I’m here to help.
Scott Wolla: Welcome to the Teach Economics podcast from the St. Louis Fed. I’m Scott Wolla. Like many of you, I have a deep passion for bringing economics into the classroom. On each episode of this show, you’ll hear from thought leaders, innovators and high-profile economic educators about trends in economic education and why it’s important to teach economics. Our hope is that each of these conversations will leave you inspired by how even a little econ ed can make a huge difference in the lives of your students. And you’d be hard-pressed to find a greater advocate for making economics accessible than Dr. Justin Wolfers.
Wolfers: Seeing the underlying economic forces, the costs and the benefits, the opportunity costs, the marginal decisions and the interconnectedness and being able to make sense out of chaos, that’s our superpower.
Wolla: Justin Wolfers holds a Ph.D. in economics from Harvard, and he’s currently professor of public policy and economics at the University of Michigan, but none of these accomplishments were part of his original career plan.
Wolfers: I wanted to become a professional gambler, and I had an apprenticeship with a bookie, and I got fired after my first week and thought, “Oh, that didn’t work. Maybe I’ll go to college.”
Wolla: That turned out to be a good investment. Justin Wolfers has held teaching assignments at Penn, Princeton and Stanford. He’s written textbooks, and the list of accomplishments just keeps going.
Wolfers: There is nothing that will ever replace your first course in economics. It, for me, opened my eyes. It started a love affair.
Wolla: On this episode, we’ll hear how Justin Wolfers found his way to economics and why he keeps teaching intro classes and the need to diversify the field. And while he says crunching numbers isn’t necessarily what’s at the heart of economics, understanding why it’s so valuable will require a little math.
Wolfers: Can we do math on this podcast, Scott?
Wolla: Sure. Go for it. From the St. Louis Fed, this is Teach Economics.
Andrea Caceres-Santamaria: Hi, I’m Andrea Caceres-Santamaria, an economic education specialist at the St. Louis Fed. If you’re an educator, we know finding creative ways to engage your students can be a challenge. That’s why we created Page One Economics. Each issue provides a short overview of a timely topic that offers students an opportunity to learn economics while using close reading strategies. You can find Page One Economics at stlouisfed.org under Resources for Teachers and Students. And while you’re there, be sure to subscribe to our newsletter.
Okay, let’s get back to the show.
Wolla: As I mentioned earlier, Justin Wolfers is a very busy guy. From cohosting a podcast called Think Like An Economist with his partner Betsey Stevenson to his role with the National Bureau of Economic Research, he is tirelessly working to make economics both accessible and impactful. But where did this passion come from?
Wolfers: 1988, Mr. Dunkley at James Ruse High School in Sydney, Australia, taught me my first ever economics class, and for the first time ever I found something both interesting and easy. In 1989, Australia had what was our equivalent of the Volcker disinflation, a large recession that crushed inflation. The prime minister at the time said it was the recession we had to have. And one of the things I had to learn from my high school economics, equivalent of AP economics over here, was “What are the latest economic numbers?” Well, every month they’d change, but they kept creeping up 6, 7, 7.5, 8. One of the things my stepfather taught me was those weren’t numbers, those were stories, and those were families, and they were people whose dignity they were drawing into question, whose self-worth, whose self-image, whose role as members of the community, whose pride, whose income, whose ability to get by was falling by the wayside.
I was really fortunate. My high school teacher in senior year, Mr. Lees, Ray Lees—Good day, Ray—really gave me the chance to dig into these issues, and he treated me like a grownup. I wanted to learn more about economics, and he told me how to go do it, and from there I have just been—So I was born an economist during a period of high and rising unemployment that was entirely unnecessary and the result of a policy mistake. Australia is a country of 20 million. That doesn’t sound like a lot. Or at the time 20, now 30. It doesn’t sound like a lot to an American, but when the unemployment rate goes up by a percentage point, you can still see the tens and hundreds of thousands of families whose lives are completely altered, and so the nobility of our calling I think was always obvious. And from there I was.
I’ll tell you a funny aside. I finished high school. I wasn’t going to go to college. This will not surprise you at all. I’m a bit of a smartass. I wanted to become a professional gambler, and I had an apprenticeship with a bookie, and I got fired after my first week and thought, “Oh, that didn’t work. Maybe I’ll go to college.” And from there I’ve been blessed by amazing teachers and incredible mentors, many of whom I’ve had the chance to go back and thank. But to your listeners, who I understand are economics educators, I was one of your students, and I want to know what it—I want you to know what a difference you made in my life.
Wolla: Justin, I’m really interested in that whole aspect of you discovering economics through a high school teacher. There is some discomfort in our profession among professional economists about the teaching of economics in high school. Do you want to speak a little bit about your thoughts about the value of teaching economics at the K-12 level or at the high school level?
Wolfers: On the one hand I’m an evangelist. I love our field, and I love the ability to see further that it gave me, the ability to see more clearly, the ability to live a richer, better life, and I think all of those are skills that I want to bring to everyone in the world. Not everyone’s going to turn up at university, and so this is our first chance to touch them, and I believe we can help them live better, richer, fuller lives. That’s the case “for.” The case “against”: I think there’s two versions of it. One is the snooty, high-falutin’ economist who says, “What we do is hard. You could never teach a 17-year-old the subtlety of my professional ways,” to which I just say, “Get off your high horse.” A lot of economics is easy. The problem is a lot of economists make it hard. Our job as educators should be to make it easy.
The other critique is, I think, a fair critique, which is, in any workplace, workers who are given insufficient tools, insufficient training, who have insufficient background aren’t going to live up to their best potential. I was taught by Ray Lees, who loved economics, who would read about it in the newspaper, who would use his income to buy textbooks and learn more, but that’s not the story of every teacher. I was struck when I became a professor that the university would pay for me to buy books, and I immediately thought, “I wonder how big the budget is for teachers to buy books,” and I’ve been appalled to hear that the answer is zero.
Wolfers: And too often economics is an afterthought. You know, the old story is the gym teacher is pressed into service, and there are, I’m sure, great gym teachers doing that, but there are people who are pressed into service without the love and without the background, and so we as a profession I think ought to be supporting these people, holding them up, giving you the tools that you need to be amazing because you can be. I want to come back to what I said before. Economics isn’t hard. Economists make it look that way. Let’s make it look easy instead.
Wolla: I think that’s great advice. In fact, you know, one thing I’ve been impressed about in your situation is you do teach Econ 101. You’ve won numerous teaching awards. I’m sure with your tenure and your stature it would be easy for you to get out of teaching the introductory courses, but I do know that you love it. So my question is what’s the draw for you? Why do you prefer to teach those introductory courses?
Wolfers: I’ll give you two answers. One is about them, and the other is about me. The answer about them is I get to touch their lives in extraordinary ways. There is nothing that will ever replace your first course in economics. It, for me, opened my eyes. It started a love affair. It’s not going to do that for everyone, but it is going to help them decide whether they should rent a house or buy, whether they should lock in a long-term mortgage or a floating rate, whether they should take on more education. For Betsey and I, it helped us decide how many kids to have. It should help you decide whether taking on student debt is a good idea. These are really big decisions, and I get to—at the end of any given class, I get to say, “Do you know what? I just showed you...”
Here is a fun fact. A college degree, a typical person with a college degree over the course of their lives will outearn their high school classmate who didn’t go to college by at least a million dollars.
Wolla: Wow, that’s great.
Wolfers: And for econ majors, guess what? It’s more. And so what’s amazing is—Let’s try to do some math here. Can we do math on this podcast, Scott?
Wolla: Sure. Go for it.
Wolfers: Okay. Let’s take a million bucks over four years. That’s a quarter of a million a year. So if you’re taking two semesters, that’s $125,000 per semester. If you’re taking four classes per semester, that’s $31,000 per semester. If I teach you for 31 classes, I’m making you a thousand dollars richer per class. Right? I just want your students to understand.
Wolla: Yeah. Yeah.
Wolfers: If you’ve got educators listening, take this to your students and explain to them that if they sit still for the next 60 to 90 minutes and listen to your pearls of wisdom, you’ll make them a thousand dollars richer. And then for the instructor, I teach 500 students. I get to create half a million dollars of value twice a week.
Wolla: That’s incredible.
Wolfers: No one ever gave me an opportunity like that before, and so that’s the story about them. Right? So it’s not just they earn a million dollars more. They also make better decisions every day of their lives on all of these big questions. The second thing is about me. I’ll tell you, like I could teach Ph.D. something or other, and it would be really hard. There’d be a lot of Greek letters. Do you know what’s harder? Making it simple. I think the intellectual challenge of what we do as an intellectual challenge for teaching is far greater than any other course. And like your listener I love a good challenge, so let’s get into it.
Wolla: So as you think about your students, if you could, like, emphasize two things that your students walk away from your class and retain—I know that they remember a lot more than that—but like if they could only carry two things away from your class, what would they be?
Wolfers: Right. I’m going to cheat. So the first is the way I teach is I boil all of economics as coming down to four core principles. This is why I say economics is easy. And the promise I make them is “If you learn these four principles, you will be able to pull apart any economic problem.” And I don’t just say that. I show them, which is when we do the theory of consumption or the theory of labor markets or the theory of exchange rates. I use the same four principles. Those four principles are the cost benefit principle (do something if the benefits exceed the costs), the opportunity cost principle (if you want to figure out the true cost of something, think about the next best alternative; ask “Or what?”), the marginal principle (whenever you try to make a quantity decision, instead of saying, “How much should I do?” say, “Should I do one more?”) and the interdependence principle, which is so much of what we do is interconnected in so many ways, and the economist’s secret power is to see those interdependencies.
So that’s my first answer. You see I snuck four answers in? The second answer—you said I get two—
Wolfers: ...is students learn that economics is not the stock market and it’s not GDP. It’s their lives. Economics is everywhere. The principles that we’re teaching you will be relevant whether you become a hairdresser, a Ph.D. economist, you go on to consulting, engineering, beauty school, nursing, teaching, whatever. You, you make economic decisions every day of your life, and I’m here to help.
Wolla: That’s great. So, it’s really about decision-making.
Wolfers: The atom is the foundation of physics. The decision is the foundation of economics.
Wolla: So, I’ve noticed in a lot of your work—so your podcast, Think Like An Economist podcast—in your textbook you have a strong emphasis on thinking like an economist. Can you explain what that means to think like an economist and then kind of sell it? Why is that important?
Wolfers: Yeah. So part of that comes about from my inability to describe what it is we economists do. Look, I’m going to tell you, in all of my years of education, I feel enormous gratitude to my economics teachers because they’ve transformed my life, but they have done so in ways I can’t quite articulate, so let me take an end run around the question, say what they have done is they’ve taught me to think like an economist. To the extent that I’ve ever been able to articulate it, it is thinking through those four core principles that I just mentioned. And so thinking like an economist means taking any situation—sitting at a wedding, walking past the stock market, seeing a hot dog vendor or seeing a queue for Taylor Swift tickets—and looking at that and seeing the underlying economic forces, the costs and the benefits, the opportunity costs, the marginal decisions and the interconnectedness and being able to make sense out of chaos. That’s our superpower, and that’s what it means to think like an economist.
Wolla: That’s actually really great. And, by the way, I love your podcast.
Wolfers: I love yours.
Wolla: So earlier we talked a little bit about your experience in high school, but I’m wondering about even earlier. In fact, one of the podcasts that I listened to as part of your series—and I think they did an NPR episode on this too—was about the Tooth Fairy.
Wolfers: Mm-hmm [affirmative].
Wolla: And I imagine that you have really great conversations with your kids about economics or economic thinking, you know, how the Tooth Fairy and inflation are related, so tell me a little bit about why it’s important to teach economics even earlier than high school. What are your thoughts about introducing concepts like, you know, opportunity costs and scarcity and tradeoffs, you know, even earlier than a high school class?
Wolfers: I’ll deal with the personal and then answer it, which is my kids are under no—my kids, who are the kids of two economists—poor, poor kids—are under no pressure to become economists.
Wolfers: That partly leads to my answer, which is I don’t think it’s necessarily important for us to teach capital E economics. If we walk in, march in and we say, “Why isn’t there an Econ 305 in the Third grade?” we’re probably not going to be met with a lot of sympathy.
Wolfers: The underlying idea is that before you decide to do something, you should ask, “What else could I do?” That’s the opportunity cost principle. Infinitely, broadly applicable. They’re applicable for anyone making any decision any time ever, which includes kids.
Wolla: Mm-hmm [affirmative].
Wolfers: They’re going to help you make better decisions. Here is a very simple one for your listeners. How many times have you walked out of a movie halfway? I’m going to guess the answer is zero—
Wolla: Mine is zero.
Wolfers: ...if you’re at all like me.
Wolfers: How many times have you sat through the first hour of a movie, realized it sucked, the next hour was going to be miserable, and done it anyway? A bunch of times, right? So it’s pretty clear that the best decision looking forward is to walk out of the movie. The 8 bucks you paid or 12 bucks these days for the movie ticket is a sunk cost. That is to say it’s not an opportunity cost. You don’t have that 12 bucks whether you stay or you go. You’re never seeing that 12 bucks again. The question is how do you use the next hour of your life? So I hope I’ve persuaded you maybe you should walk out of bad movies. Okay, that’s a simple application of economics.
Now let’s think about whether we make mistakes like this more often. How often do you stop a book halfway, stop reading a book halfway? If you’re 400 pages in, do you feel you really ought to read the last 300? Sometimes I do. And so that actually leads me to stop reading.
Let’s get personal. Have you ever been in a relationship where you’ve been with someone for four years and you’ve put a lot into the relationship but it’s not working? You know, like you want different things in the future, or they have got a bad temper, or you’ve got a bad temper. It’s kind of like the movie, isn’t it? And so the right answer is not to stick with it because you put so much into it but go and find the perfect match.
The point here, Scott, is all of these decisions can be better informed by learning how to think like an economist. Where precisely we put these ideas in the syllabus is, I think, a much more complicated question. But could your kids and my kids benefit from thinking this way? My answer is a strong yes.
Wolla: Yeah. I’ve got to say, you know, my kids suffer from the same situation in which, you know, they were going to school, elementary school, and saying things like “opportunity costs,” and sometimes their teacher is going to give them the cross eye like, “I have no idea what you’re talking about.” But I do believe that we should start earlier. In fact, we have a collection of children’s literature books that we’ve written lesson plans for, and they aren’t about economics—right?—but they draw out the decision—
Wolfers: Oh, but they are.
Wolfers: Yeah. Oh, but they are.
Wolfers: Scott, let me say the flipside of this. You said should kids listen to economists. Let me turn it around. So first thing I want to observe is kids actually kind of naturally think this way anyway because kids are smart. Another thing that’s really true is kids have a profound innate sense of fairness. Economists, we spend so much time thinking about it we get a little fuzzy. I sometimes wonder whether we should spend more time talking to kids about fairness and whether that might do a better job of informing how our profession talks about issues like inequality, racism, sexism, and so on.
Wolla: That’s a really great idea. I’m going to go home and ask my kids about that.
Wolla: We’re going to take a quick break, and when we come back, we’ll hear about what Justin Wolfers thinks are some of the biggest misconceptions his students bring into the classroom.
Michael Kaiman: I’m Mike Kaiman, an economic education specialist here at the St. Louis Fed. If you’re anything like me, this conversation has you feeling pretty excited about the idea of bringing more econ into your classroom. That’s why we created Page One Economics. Each issue covers a current economic topic explaining key concepts without the jargon. Each issue is aligned with national standards and includes an assessment that’s easy to use. You can find Page One Economics at stlouisfed.org under Resources for Teachers and Students. And while you’re at it, subscribe to our newsletter. Thanks for all that you do to enrich the lives of your students.
All right, let’s get back to this awesome conversation.
Wolla: One of the things I find so fascinating about Dr. Justin Wolfers is that despite all his accomplishments, he remains passionate about teaching an introductory course in economics. With such a large sample size of students who may have only briefly touched on economics in high school, I was curious. What are some of the most common misconceptions his students bring into the classroom?
Wolfers: The biggest misconception is that economics is about money, which it is but so much more. In fact, it’s such a misconception that I begin the first day of the first class with the first sentence being “Economics is not about money.” Immediately, all the undergraduate business students feel a little ripped off, and you can see the disappointment in their faces. And then I start talking about all of the ways in which the ideas of economics could inform other things, and so early on it has to be a little bit by analogy. You know, in the same way that economists know a lot about the labor market in which workers look for jobs, we also know a lot about the marriage market in which partners look for potential spouses. And they search, and they try to find the right person, and when they get the right person, they realize that they’re better off together than they are apart, but then they have this problem of figuring out who should get the fruits of our jointly productive efforts, and they fight. By the way, Scott, at this point I’ve lost track of whether I was talking about employers or spouses, but that’s sort of the point. So that really is the No. 1 misconception. Now, I also do want to recognize there are kids who are there who do want to learn about business, and so it’s an “all of the above” strategy. I want to show them the power of economics which includes the marketplace but is not confined to the marketplace.
Let me add one more thing. One of the most important issues facing economics is that we have become overly demographically narrow. The field looks a lot like me: middle-aged and white, overconfident and male. The economics of the widget factory of businesses was one that naturally appealed to our middle-class men who wanted to do what dad did, which is, as far as they’re aware, leave the house with a briefcase at 8 a.m. and come back home with a briefcase at 7 p.m. and open their laptop and respond to emails at 10 p.m. If we want to attract a broader group, which I deeply do, we need to show them that this is the economics of their lives, and their lives exist a broader group, not just in the widget factory, and so I think that’s one of the real strengths of this broader approach to thinking about economics.
Wolla: That’s great, something we think about a lot here at the St. Louis Fed as part of our Women in Economics outreach, and when you look across disciplines, the diversity problem in economics is even worse than, say, math or the sciences or business. So some of the excuses that we use sometimes that we attribute things to as the “why people aren’t studying econ,” they fall away when we compare to those other, you know, similar disciplines.
So I don’t know if you have specific thoughts on as a professor, someone who’s, you know, instructing students for their first econ class ever, like what strategies do you use to try to make sure that it’s diverse in its approach?
Wolfers: There are some very simple strategies, right? So let’s not teach about economics through the lens of mutual funds, wine collecting and golf. You might think I’m joking, but there are actually economic syllabi and textbooks that do that. There are some very simple things we can do. The characters don’t have to have names like Scott. They could have names like Angelina, Jamal. They could represent reality. But I think it’s far deeper than that, and this coheres with, I think, teaching to current generations of students. The most important person in the classroom is the person I’m talking to. It’s you, you the student; not the instructor, the student. So I use the word “you,” literally the word “you” as often as I can—if I can find ways to connecting to my student’s life, ways in which they’ll see the applicability of what they’re doing.
Let me say one place where I think this is really, really important. Often, when we assess our students, question 5 on the test will say, “At a widget factory, they produce 17 widgets.” What you’re saying to your student is “I, as an economics instructor, have just spent four weeks teaching you this material and still can’t think of a single real-world application of it that’s relevant to anyone’s life.” Instead, I would much rather say—and say we’re teaching the marginal principle—“You face a decision of how many years of education to get. How could we think about that together?” It’s one of the highest stakes decisions they’ll ever face. It’s one of the most consequential hours of teaching they’ll ever have if you can take that question on. And so this also coheres with a lot of pedagogy, research on pedagogy, which is students scaffold on what they know about the world. Let’s start there. Let’s meet them there. Let’s use it. And let’s along the way use our assessment as well as our lessons to show them the relevance of what we’re teaching them to their future lives.
Wolla: So I would love to be a student in your class. You know, it’s too bad University of Michigan is too far from St. Louis for me to jump in a car and just attend your class on a regular basis. It sounds like you are just a fantastic teacher. And if you could narrow down to like just a handful, like what do you love most about teaching? Because there are research opportunities out there, and you have a long and distinguished research record. You could find a job where you do nothing but do research. That would also benefit society, but what is it about teaching that draws you in?
Wolfers: Changing hearts and minds and changing lives. My teachers did that for me, and I am given the opportunity to do that to 500 kids a year, and what a wonderful joy. But then let me actually go a little further. Betsey and I wrote a textbook that’s now being used all around the country. There’s a famous expression from Paul Samuelson, arguably the greatest economist of the second half of the 20th Century—had to get past Keynes there—who said, “I don’t care who writes a country’s laws if I can write its textbooks.”
Look, here is the idea. If through a combination of talking to you, doing a podcast, writing a textbook, teaching, continuing to teach on TV and through the media I can touch the lives of a large number of people, it could be the case that in 20 years you go to Washington and you walk from congressional office to congressional office and you realize that 40% of congressional representatives, if they didn’t learn their economics directly from me, learned it from the milieu and the work that you and I and so many other educators are doing. Then that’s a real influence beyond just the individual students we touch.
Wolla: So I know that your passion for teaching and your outreach actually extends beyond the classroom. I know you’re a columnist for The New York Times. You have a large social media presence. You do some really cool short videos. In fact, I watched one recently in which you get in a big tub of ice, a cold plunge, to talk about inflation. In your effort you do a great job of not just like commenting on the economy, but you do a good job of explaining it, so tell me a little bit about why you spend the time thinking about kind of this outreach beyond the classroom.
Wolfers: So each of us—and I want to urge this view on your listeners—each of us is an ambassador for your field, and it’s a field that I love, and it’s a field that’s been very good to me, and so I want to be the best damn ambassador that I can be. Another is each of us—let’s use some economics here—in deciding on how to spend our time would, of course, rely on economic principles. I would come back to the question of comparative advantage, and the theory of comparative advantage says you should do the thing that you’re least worst at, and I’m least worst at teaching. Lots of people in my economics—Lots of my colleagues are much better at writing complicated Greek letters about complicated economics. I am somewhat better at turning Greek letters into English. So the theory of comparative advantage says that’s how I should spend my time, and I happen to believe in it. I believe at the micro level that each of the people we touch is going to make better choices. They’re going to be less likely to be ripped off. They’re going to marry better, educate better, have the right number of kids, know whether to rent or buy, and live better, richer, fuller lives. And then there’s that broader thing, which is in a world in which we’re not sure what is true anymore, we’re, you and I, your listeners and I, we’re in the business of truth, and there’s something pretty profound about that.
Wolla: As an educator, what experiences have been the most rewarding? So as you think back about your teaching career and those kind of golden nugget moments—you know, filter up to the top of your brain—what are those really nuggets that you really hold on to as far as the most rewarding parts of your career so far? I mean, you’ve got a long runway ahead of you too.
Wolfers: It’s a remarkably hard question, and I just want to say the greatest privilege of my life has been the time and effort that my teachers put into me. I’m not sure what I did to deserve any of it, and so if I can pay it forward, it seems like there may be some karmic resonance there.
Wolla: So we hope to have this kind of large audience of economic educators listening to this podcast, so what advice or what words would you have for your fellow economic educators?
Wolfers: Remember the joy because it is an amazing opportunity. It’s easy on those hard days to feel like it’s a grind. I know I teach 500 students, and when I mess up, they’re not very forgiving. I make it a point to get to—I cannot get to know all 500 personally. It’s logistically impossible. But I find that I make a point to get to know enough of them—so if I was teaching 30, it would be all of them—to get to know enough of them that I see the joys, that I see the struggles, and I see their innate goodness. When it’s 500 anonymous faces, it’s terrifying, but when I think about the folks I might have just had coffee with just before lecture and I think about their aspirations and what I can do to help them, and then I realize that’s what the rest of the lecture theater is like, it reminds me of what an immense privilege I’m being offered. And so on those days in which you find yourself feeling jaded—and you will—find a way to find the joy.
Wolla: You’ve been listening to our conversation with Dr. Justin Wolfers, professor of public policy and economics at the University of Michigan. He cohosts the excellent Think Like An Economist podcast with his partner and fellow economist, Betsey Stevenson. If you enjoyed this show, please subscribe on your favorite podcast app, and, of course, tell all your friends. I’m Scott Wolla, economic education officer at the St. Louis Fed. You’ve been listening to Teach Economics.
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