Tuesday, January 12, 2010

Where's The Economics?

Summary: Find the theory in this riddle.

Professor Denhart used to be an energetic and innovative teacher when he was hired at MBU. Professor Denhart would get to school early to prepare original lessons that developed higher level thinking skills in his students. He would make economic simulations that lead to discovery. His games on the economics of auctions was published. In addition, we would have after contract hours study groups in his home. All of his students loved him. After eight years, he became a tenured professor.

When he earned his tenure, Professor Denhart concentrated on his research. He relied on his old lessons and refused to work outside of class with students. Often, he would be unprepared for class and was impatient with his students. After he received tenure, Professor Denhart's behavior changed. What term would describe Professor Denhart's behavior?

Since his behavior changed after he received tenure, I would describe his behavior as a moral hazard. His teaching became marginal since he could not be fired. In AP Microeconomics, this might fall under the umbellra of market failure. Just like seatbelts might cause someone to drive more carelessly or diet pills might cause someone to eat more junk food, a moral hazard occurs when goals are misaligned.

What moral hazard examples do you use in your classes?

About the Author: Mike Fladlien is an AP Economics teacher from Muscatine High School in Muscatine, IA. He is an EconEdLink.org author blogging at Mikeroeconomics. Look for his ebook on Amazon soon.


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