Sunday, September 13, 2009

Using Economics to Make Informed Decisions

Summary: Resources for informed economic discussion of normative topic.

Imagine a student asking you this question in your class, "Should the government nationalize health care?"

This hot topic will have students offering their opinion, what they have heard, and what their parents are saying. Students in your AP class will know what the politically correct answer "should" be too.

A course in economics gives students the tools to analyze a problem and draw reasonable conclusions from their analysis. In this post I will fill your toolbox with the tools to analyze health care as well as any problem in which market participants must make a choice.

Students should understand the difference between "normative" and "positive" economics. Students should also discuss the role of incentives in the market system. As an example of how to stimulate class discussion, ask the question, "How will a government run health care system change incentives in the health care sector?"

Students should understand the role of economic freedom and choice on GDP growth. The textbook, "From Plan to Market: Teaching Ideas for Social Studies, Economics, and Business Classes" ISBN 1-56183-495-5, Lesson 3 Political and Economic Freedoms presents students with the objectives of incentives in capital formation and saving. Specifically, this lesson address how the former Soviet Union allowed private property rights and market transactions to influence GDP growth. As a catalyst for discussion, have students list the benefits and costs of government run health care. In this activity, students can use the PACED decision making grid.

Students should be able to distinguish between public and private goods. An excellent resource to aid instruction is "Public vs. Private Goods" in the Advanced Placement Economics workbook by John Morton. Here students learn about goods with shared consumption and why the government will provide goods that the private market has no incentive to produce.

Finally, a teacher can lead a discussion on decision making. For example, what is the "best" way to make a decision. Is a public opinion vote the best way to distribute health care? Should the government use the "greatest good" principle? In other words, if nationalized health care provides the most good for the greatest number of citizens, then the action is "good" and should be provided by the government.

The resources mentioned above form a backbone for all decision making. Health care was chosen for its relevance and does not reflect the opinion of the Council for Economic Education or the author. If you have more resources that help hone rational decision making, please leave a comment.

About the Author: Mike Fladlien is an AP Economics teacher from Muscatine High School in Muscatine, IA. He is an author, and also publishes the Mikeroeconomics and iMacroeconomics VB blogs.


Post a Comment

Have thoughts about this post? Want to share your comments about Teaching AP Economics? This is your chance.