Tuesday, January 10, 2006

Teaching Practical Stuff

I’ve been working on my Econ 101 course and this morning finished up the content survey on Stock Markets. My sense is that this particular module goes over quite well because it has a lot of info that students want. For example, they want an academic who doesn’t have a stake with them as a financial adviser to tell them that they can’t outperform the market on a consistent basis. And they want to understand why stock market prices change, whether there really are “bubbles” or if that is some psychological rationalization of a statistical artifact, and then want some nuts and bolts on things like how to read a stock quote. There is no question in my mind that the kids want to learn these things.

There is, however, a big question in my mind about whether my colleagues would think teaching this stuff is appropriate for such a class or if, instead, the students should be expected either to know this already or to learn it on their own. I really haven’t had such a conversation with Econ colleagues, but I’ve been through quite a few discussions on the analogous issue with respect to student computer skills, for example, in terms of making Web pages. There is a bit of a disconnect between the Computer Science faculty, who think we should be teaching the students stuff they really should have learned in K-12 and faculty elsewhere on campus, who themselves might not be so computer literate and who are exposed to some fraction of their student audience who are lacking in technical literacy. There is a lot of rhetoric under the umbrella – offering a course that is worthy of a U of I degree – and a strong feeling among the faculty that if the course is not worthy the students should take it at Parkland (the local Community College).

I’ve crossed that divide in my course but want to note it because teaching practical stuff is something out of the ordinary here. So there isn’t a lot of expertise to appeal to nor is there obvious best practice, at least as far as I’m aware. I should also say I’m far from an expert on personal finance and hence I don’t want to claim that my content survey is anything special in that regard. But I do want to make explicit some things I tried to do, in an effort to move toward what might be best practice with this type of material. What follows is an annotated list of my approach.

Philosophy – My approach is to assume that the students could sit down and learn this stuff on their own if they chose to do that. So what I’m trying to do is give them a focus and a reason for completing this module. (They get course credit for doing so.) Quite frequently, students will do required course work without ever asking why they are being expected to do that work.

Use Content Provided by the Feds – It turns out that The Securities and Exchange Commission has some really nice Web pages explaining how various stock market institutions work. Part of their role as watchdog and regulator is to educate the public, because the smarter the public is, the harder it is for the insiders to commit fraud. The SEC docs are written in a common sense style that is quite readable. This really is a good way to self-teach, but I doubt the students would stumble on these pages on their own, even if they were otherwise interested in the stock market and so did read a book on investment (as I recommended that they should).

Use Freely Available Online Tools for Nuts and Bolt Experience - I’ve got a link to the Nasdaq so the students can do their own stock lookup and learn to read the information that is provided. Of course, anybody who has done trading of financial assets will know this already. And this may seem a trivial point. But if a student hasn’t done this before, there likely is learning value for its own sake and it is relevant to the next point.

Tie the practical knowledge to the underlying theoretical issues – In this case one of the theoretical issues is to reconcile equilibrium trading with price variation over time. To do that, one first needs to provide evidence that prices do vary over time. Such evidence comes from the stock lookup. So that directly fits in with the rest of the economics I’m trying to teach.

Bring in expertise from famous academics – Eugene Fama’s name is mentioned explicitly as the father of the Efficient Market Hypothesis, and there is some discussion as to what that means. Other finance experts from academia are mentioned in linked article about why the efficient market hypothesis has to be modified to accommodate facts that are known about the stock market.

Provide some institutional detail that is meant as a stand alone – In this case there is a discussion of stock indices that almost certainly the students will have heard of already, so the module helps to expand their understanding, but there is nothing else in the entire course that depends on knowing about stock indices.

Don’t drill down too far – because this is a self-help topic that some of the students should be inherently interested in, expect those students to learn more on their own outside of the class setting. That’s ok. This module is only an introduction into the subject.

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