Opportunity Cost Of Education
ECONOMIC SCENE
The Opportunity Cost of Economics Education
By ROBERT H. FRANK
Published: September 1, 2005
SHORTLY after I began teaching, more than 30 years ago, three friends in different cities independently sent me the same New Yorker cartoon depicting a woman introducing a man to a friend at a party. "Mary, I'd like you to meet Marty
Thorndecker," she began. "He's an economist, but he's really very nice."
Forum: The Economy
Cartoons are data. That people find them amusing usually tells us something about reality. Curious about what drove responses to the economist cartoon, I began asking about the disappointed looks that appeared on people's faces when they first discovered
I was an economist. Invariably they mentioned …show more content…
For instance, the true economic cost of attending a concert - its "opportunity cost" - includes not just the explicit cost of the ticket but also the implicit value of other opportunities that must be forgone to attend the concert.
Virtually all economists consider opportunity cost a central concept. Yet a recent study by Paul J. Ferraro and Laura O. Taylor of Georgia State University suggests that most professional economists may not really understand it. At the 2005 annual meetings of the American Economic Association, the researchers asked almost 200 professional economists to answer this question:
"You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob
Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see
Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50."
The opportunity cost of seeing Clapton is the total value of everything you …show more content…
Yet only 21.6 percent of the professional
economists surveyed chose that answer, a smaller percentage than if they had chosen randomly. Some economists who answered incorrectly complained that if people could apply the cost-benefit principle, it did not really matter if they knew the precise definition of opportunity cost. So the researchers asked another group of economists to answer an alternative version of the question in which the last sentence was revised to read this way: "What is the smallest amount that seeing Clapton would have to be worth to you to make his concert the better choice?" Again, the correct answer is $10, and although this time a larger percentage got it right, a solid majority still chose incorrectly.
When they posed their original question to a large group of college students, the researchers found that exposure to introductory economics instruction was strikingly counterproductive. Among those who had taken a course in economics, only 7.4 percent answered correctly, compared with 17.2 percent of those who had never taken one.
Teaching students how to weigh costs and benefits intelligently should be one of
The Opportunity Cost of Economics Education
By ROBERT H. FRANK
Published: September 1, 2005
SHORTLY after I began teaching, more than 30 years ago, three friends in different cities independently sent me the same New Yorker cartoon depicting a woman introducing a man to a friend at a party. "Mary, I'd like you to meet Marty
Thorndecker," she began. "He's an economist, but he's really very nice."
Forum: The Economy
Cartoons are data. That people find them amusing usually tells us something about reality. Curious about what drove responses to the economist cartoon, I began asking about the disappointed looks that appeared on people's faces when they first discovered
I was an economist. Invariably they mentioned …show more content…
For instance, the true economic cost of attending a concert - its "opportunity cost" - includes not just the explicit cost of the ticket but also the implicit value of other opportunities that must be forgone to attend the concert.
Virtually all economists consider opportunity cost a central concept. Yet a recent study by Paul J. Ferraro and Laura O. Taylor of Georgia State University suggests that most professional economists may not really understand it. At the 2005 annual meetings of the American Economic Association, the researchers asked almost 200 professional economists to answer this question:
"You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob
Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see
Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50."
The opportunity cost of seeing Clapton is the total value of everything you …show more content…
Yet only 21.6 percent of the professional
economists surveyed chose that answer, a smaller percentage than if they had chosen randomly. Some economists who answered incorrectly complained that if people could apply the cost-benefit principle, it did not really matter if they knew the precise definition of opportunity cost. So the researchers asked another group of economists to answer an alternative version of the question in which the last sentence was revised to read this way: "What is the smallest amount that seeing Clapton would have to be worth to you to make his concert the better choice?" Again, the correct answer is $10, and although this time a larger percentage got it right, a solid majority still chose incorrectly.
When they posed their original question to a large group of college students, the researchers found that exposure to introductory economics instruction was strikingly counterproductive. Among those who had taken a course in economics, only 7.4 percent answered correctly, compared with 17.2 percent of those who had never taken one.
Teaching students how to weigh costs and benefits intelligently should be one of