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International handbook on teaching and learning economicsexample, Lamym, 2007), because there are many potential ways of looking at an open- ended problem, and many potential analytical tools that could be used to fix it. Instead, use narrower problems whose solution requires students to use the analytical tools of interest; or, at least, tightly manage the class discussion so that you can “steer” it towards the tools of interest.Inefficiency Implies OpportunityThe first element of a problem-solving pedagogy is to show students how to use the tra-ditional tools of economic analysis to identify problems. To do this, turn the traditional focus of economics on its head. Instead of trying to fix inefficiencies by changing public policy, teach students to view inefficiency as an opportunity for business to make money.Economics is valuable to business students because it gives them the tools to spot inefficiency, in other words, an asset in a lower-valued use. Business views each under- employed asset as a potential wealth-creating transaction, and the art of business is to identify these transactions and find ways to profitably consummate them. Making money is simple in principle, find an under-employed asset, buy it, and then sell it to someone who places a higher value on it.In practice, it is rarely that simple, particularly when the inefficiency occurs within a larger organization. Companies can be thought of as collections of transactions, from buying raw materials like capital and labor to selling finished goods and services. In a successful company, these transactions move assets to higher-valued uses and thus make money for the company. But this is not always the case. Some organizational designs encourage profitable decision-making; but others do not. A poorly designed company will consummate unprofitable transactions or fail to consummate profitable ones. The next section takes up the problem of goal alignment within an organization: how to make sure that employees have enough information to make good decisions, and the incentive to do so.Organizational DesignTo solve business problems in a simple, linear way, distill each problem down to a bad decision, and then proceed in two steps: show students how to figure out what is wrong (why was the bad decision made?); and then show them how to fix it. Both steps require that you understand how people are likely to behave in different circumstances, and this motivates the use of economics. The rational actor paradigm not only helps students figure out why people behave the way they do, but also shows them how to motivate them to change.If you assume that people act rationally, optimally and self-interestedly, then mistakes have only one of two causes: either people lack the information necessary to make good decisions; or they lack the incentiveto do so. This immediately suggests a problem- solving algorithm: start by asking three questions to diagnose the cause of the problem.