Economics is No Longer the Dismal Science

I’m optimistic. Here’s why:

Has China’s GDP Already Surpassed the US GDP?

You’ll be hearing this a lot in the next few months:

It’s probable that the U.S. economy is no longer the world’s largest. New World Bank figures, notes economist Arvind Subramanian of the Peterson Institute, suggest that sometime in 2014 China will overtake the United States in gross domestic product — the production of goods and services.

But be careful to look for the measure the reporter is using. Samuelson doesn’t even bring up the idea of PPP until the fifth paragraph:

The technique used here (called “purchasing power parity”) compares the value of similar items in different countries in an effort to get a common baseline.

Even worse, he doesn’t point out that PPP is an adjustment to GDP at exchange rates. You can’t buy oil with PPP dollars. They aren’t real dollars. The fact that a haircut is “cheaper” in China is becoming less relevant as China becomes richer.

The irony in all this is that just as China’s GDP measured in PPP terms is surpassing the US GDP, this measure is becoming less relevant for comparison. Good reporters will be careful to explain the shortcomings of the measures they are using to compare the size of two massive and complex economies. Unfortunately, most of them won’t.

More Lectures, Please

Most students I know think lectures are of very limited value. They often express the idea–quite reasonable–that they could learn as much just by reading the material in the lecture carefully on their own, or reviewing the teacher’s Powerpoint presentation.

While sensible, this runs counter to all my (limited) experience as a lecturer. Students who regularly come to class do better. Maybe it’s just that non-attending students tend to lack the discipline to study on their own. My own personal experience agrees: as many times as I have sat through classes thinking, “I’m getting nothing out of this,” almost everything of significance I have learned has been through structured classroom instruction.

So I wasn’t surprised at this:

Do more lectures improve student performance? Yes, finds a new experimental study, but the authors interpret the effects as modest in size.  One group of students in introductory microeconomics got a lecture twice a week (what the authors call the “traditional” format), and the other group of students got a lecture only once a week. 

I know the study is looking at lecture frequency, not the effects of regular attendance. Still it seems to show the importance of this often-maligned and usually disliked teaching method.