This note describes how Professor Froeb teaches the specific chapter material to his MBA classes. Each lecture has the same outline:
Review of last lecture’s main ideas, with a problem, if possible. Make them “solve” a business problem that illustrates the main idea from last lecture and then pull out the main themes of the class
Write down the main ideas you want to cover (usually 3-4 main points in a 60 minute lecture). Writing down the themes on the board will help you stay on track, as I tend to give up a lot of control to the students during class time. Before the class go over the chapter, and pick out 3 or 4 examples that you can use to illustrate the themes. Think of ways to use the examples to force students to participate. For example, in the “supply-demand” chapter, the three ideas I want to cover are (i) that markets have a product, geographic and time dimension, chosen to help answer the question that motivated the supply-demand analysis; (ii) you should be able to use supply-demand analysis to “explain” past movements in price and quantity. For example, the drop in price and increase in quantity of MP3 players sold in the US over the past five years can be explained by a increase in supply; and (iii) be able to use supply-demand analysis to “predict” future changes, like what would happen to the price and quantity of diesel engines sold in the US if the EPA mandated a change to high cost, low mileage but cleaner engines. I pose these kinds of questions in class and make the students answer them.
Be prepared for the students to lose interest. When this happens, show a video clip (YouTube or Stossel in the Classroom). Choose one or two videos in advance that speak to the themes of the chapter. Make sure to debrief the video to make sure the students understand the link to the chapter. Ask students to draw the link to the book.
For executive MBA classes, I reserve time for about an hour of student presentations of the group problems at the end of each chapter. Presentations (no more than 3 slides) should take 5-7 minutes with 5 minutes of discussion. You will hear some good stories from the exec MBA students. For the regular MBA’s, I ask them to prepared and answer to the one of the questions at the end of the chapter (e.g., be prepared to discuss a sunk or hidden-cost fallacy). If their experience is not rich enough to yield an answer, take one from the class blog http://managerialEcon.com instead.
I rarely use slides as they cause me to commit what I like to think of as “the fundamental error of teaching,” which is to try to cover the material regardless of whether it is sinking in. FORGET ABOUT COVERING THE MATERIAL. Instead, tell the stories and engage the students. If you find yourself worried about finishing on time, you are already committing this error. Instead slow down. Teaching a few things well is much better than trying to cover the material. The students can do this on their own.
I have found that there are several big decisions that affect how I teach. The first is how to engage the class. As I have gotten older, my teaching has evolved towards more engagement, i.e., from straight lecture to posing questions and calling on those who raise their hands; to posing questions and cold calling.
If you are lucky enough to get a question from a student, one thing I have learned is to NEVER answer a student’s question directly. Instead ask another student what they think the answer is. You can keep going until you get the right answer. If you want to “steer” the discussion in another direction pose a follow-on question to the student who originally asked the question.
I find value in cold calling. Students have rated my course the “most valuable” one in the core, but written comments indicate that there are a big group of students who really dislike cold calling. When I am particularly aggressive in cold calling and will not accept “I don’t know” for an answer, class can be intimidating for students. But ultimately they will appreciate that you are giving them tools to think on their feet. Cold calling encourages them to come to class prepared. Students seem to recognize its value, while simultaneously disliking it.
One of the best ways to engage the class is by posing in-class problem. I pose the question to the students, give them five minutes to do it; and then I ask them to turn to the person sitting next to them and explain the answer. I tell them that the two best ways to learn economics are doing problems and verbally explaining the answers to someone else. When enough time has elapsed and you want to move on, tell the students to “stop learning.”
Additional Anecdotes not in text
There is a tradeoff between repeating the anecdotes of the book in class and using new applications. The benefit of repetition is that it helps the weaker students. The cost is that the best students may become bored. Better students would benefit more from different applications. If you do not require students to read the material ahead of class, I would repeat the material in the book. If you do require students to come to class prepared and enforce the requirement with cold calling, I would use new anecdotes.
In telling the anecdote, I typically give students just enough information to recognize that there is a problem. For example, in the first chapter additional anecdote about John Jett and Kidder Peabody, describe Jett’s success, and ask if there is anything you be worried about if you were Jett’s boss. I play “20 questions” with the students where they have to ask me yes-or-no questions until they figure out what the problem is; and then I ask them how to fix it. Students will unconsciously begin using the rational actor paradigm. After you get the right answer, summarize the analysis for them to reinforce the benefits of using the rational actor paradigm to diagnose and solve problems: My own “spin” on how to use the rational actor paradigm is that any problem can be analyzed by asking three questions:
1. Who is making the bad decision;
2. Do they have enough information to make a good decision; and
3. The incentive to do so?
I tell students that incentives have two pieces, a performance evaluation scheme and a link between compensation and performance.
Answers to the questions will suggest solutions centered on:
1. Changing decision rights (letting someone else make the decision);
2. Changing the information flow; or
3. Changing incentives (performance evaluation+compensation).
I tell them that the art of business is figuring out the costs and benefits of each solution. I can teach them only to recognize the tradeoffs; they have to figure out which solution is most profitable by balancing the costs against the benefits.
Note that this is related to Michael Jensen’s famous 3-legged stool, popularized by Brickley, Smith, and Zimmerman in their textbook. I typically assign a shorter version of their approach (THIS IS HARD TO FIND, SO E MAIL ME IF YOU ARE HAVING TROUBLE, firstname.lastname@example.org) as outside reading James Brickley, Clifford Smith, Jerold Zimmerman, “The Economics of Organizations,” Journal of Financial Economics, Vol. 8:2 (Summer, 1995) pp. 19-31. The difference is that Brickley, et al. focus on (i) Decision rights, (ii) Performance evaluation, and (iii) Compensation schemes.