CALIFORNIA STATE UNIVERSITY, SACRAMENTO
Department of Economics

Economics 145                                                                                                                 Prof. Yang

Economics is an empirically oriented discipline. Therefore, an ability to initiate and carry out a meaningful empirical economic research, largely in terms of quantitative economic analysis, is an essential part of economic education. It is true that it takes a whole economic curriculum to fully develop this ability. In reality, it is usually expected that students learn various skills necessary to carry out the quantitative economic analysis by taking a quantitative methods course, which is invariably part of a core undergraduate economics curriculum. Unfortunately, the quantitative course in economics does not accomplish what is intended to do. Same conclusion was arrived in a recent survey article published in the 1991 issue of Journal of Economic Education. The survey was commissioned by the American Economic Associations to evaluate the current status of economic education in the United States.

The article states that the main goal of economic education is developing student’s capacity to "think like an economist". The article then reports that economics department offers a set of courses considered as ‘foundations". These foundation courses, which economics majors are required to take, consist of three sets of courses: introductory macro and micro economics, intermediate macro and micro economics, and quantitative methods. The curriculum for an economics major begins with a two-semester sequence in principles of macroeconomics and microeconomics. After the introductory courses, all economics majors take two intermediate theory courses (macroeconomics and microeconomics) and a course in basic quantitative methods. While authors of the survey article recognize variations in the emphasis and the sequence for subjects, they must have found the course contents of the two intermediate economic theory courses reasonably satisfactory. The only recommendation they offer for these intermediate theory courses is their emphasis on the relevance of such courses and call for the linking of theories and their empirical counterparts.

Regarding the quantitative methods course, however, they find the current status unsatisfactory. The report first correctly insists that economics is an empirically oriented discipline, and therefore its focus should be on explaining and testing our understanding of economic phenomena. What most economics department evidently do in a quantitative method course is to teach basically a second course in statistics with heavy emphasis on applied regression analysis. Unfortunately, varioius statistical concepts and tools of analysis are often taught without paying attention to a wide range of quantitative methods that are actually employed by economists. As a result, students often complete such course by simply memorizing statistical concepts and formulae wotj no indepth knowledge; and when they are required to use one of these quantitative methods to find anssers to real world problems, they are not able to do it.

Understnanding the current status of economic education in the area of the quantitative methods course, it is not surprising to find the following recommendation in the article:

We recommend that the quantitative methods course be reoriented from

tative methods employed by economists.

It is important to note that the knowledge and skills listed above and ‘wide range of quantitative methods employed by economists’ are essentially quantitative methods regularly used in carrying out applied economic analysis. Therefore, the survey article did a great service to make a case for teaching quantitative methods course basically as a quantitative methods for economic analysis.

At this point, it is important to be clear about, first, what it means "to think like an economist" and then about what are the specific quantitative methods employed by economists. economist? Thinking like an economist refers, first, to the way how economists approach and conceive the problem and also to the way how they employ various research skills to find solutions to the problem identified. What specific skills or methods do economists employ in carrying their work? Thinking like an economist, first, requires creative skills to identify key economic issues and problems. In order to carry out this task, economists spend their energy in compiling and reporting data relating to the "problem" identified. To help students learn skills of how to observe facts and trends in data, we need to teach various methods of data collection and compilation and presentation. This is one area where our economic education is wanting; we would do a great service to teach our students about various issues and problems pertaining to the measurement of economic and other variables. Measurement of CPI (WSJ, 12/5/96) and productivity measures (FRB St. Louis National Economic Trends, November 1996). Relating to data, teaching our students how to organize, work with and manipulate data for the purpose of analysis (data analysis techniques) in identifying interesting and troublesome trends in the data for economic and related fields.

After identifying the problem, economists then spend their energies to explain the interesting and puzzling phenomena, both theoretically and empirically. In their approach to find solutions to the problems, economists rely heavily on theoretical model of a relationship. The theoretical model is then used as a guide for their empirical analysis. What they attempt to do in the formulation of theory is to explain the linkages between and among key variables in the relationship(s). This often requires deductive logic together with a set of assumptions, usually in the context of a model.

Once model is formulated and its properties worked out, economists then again spend fair amount of their time in verifying the validity of the model by testing the hypothesis of the model. The formulation of model may be usually done either by originally developing it, modifying existing model to incorporate additional features to the model, or simply using the existing model. This empirical work by economists involves obtaining required data for the estimation and testing of hypothesis in their attempt to quantitatively analyze and evaluate the effects of any changes in the relationship, including policy changes. Therefore, ‘wide range of quantitative methods employed by economists’ cited in the recommendation of the survey article evidently refers to various quantitative research methods in economic analysis. They include knowledge on the measurement of variables, sources of data and data analysis, methods of estimation, and testing and interpretation of empirical results.

Do some economists specialize in one or another aspect of economic research and use necessary skills for these activities, while other economists focus on other aspect of the economic research, which usually require other skills? Like in any other field of study, there is specialization among economist’s task. As a results, some economists tend to specialize in one task, using a few and related skills more than others, while other economists tend to focus on other tasks which require different skills in their specialized tasks. However, it is fair to say that most economists, particularly those who carry out applied and quantitative economic research, employ virtually all of these skills all the time in carrying out their tasks.

How successful are we in teaching our students these skills which they will use in their work or in graduate study? Not very well. Obviously, it takes a whole economics curriculum plus English writing course to prepare our students in acquiring these skills. Ideally, course content to teach these skills are supposed to be covered in several quantitative methods courses in economics curriculum. They are mathematical economics, second course in statistics, research methods, and econometrics. Each of these courses has its own merit to be included in the curriculum for economics major; but unfortunately, each of these courses individually does not adequately prepare students to "think like an economist". It is fair to argue that various quantitative methods course in most undergraduate and even graduate programs at Masters level do not adequately prepare our students in successfully initiating and carrying out a meaningful applied and quantitative economic research.

While there are several reasons why our students in general do not acquire these necessary skills to carry out, two obvious reasons come to my mind. First, our approach to segment the economic discipline into subject matter groupings (courses) is partly responsible. As Ethridge(1995) correctly points out, the subject-matter groupings by course is necessitated by the need to complete the materials within one quarter or semester. We instructors vaguely hope that students somehow learned to bring together what they learned in various subject-matter course as they approach the end of their education. Whether their educational goal is to obtain Bachelors or Masters degree, we instructors hope that they have acquired these skills which economists use in their work to successfully initiate and carry out meaningful economic analysis. This is usually not the cased. Secondly, a more serious problem lies in the that depth of understanding students acquire in various subject-matter courses is so shallow. When they learn the subject-matter courses superficially, they will have great difficulty in applying the knowledge in finding solutions to the problem within the context of a particular application.

Given various limitations, what are the essential knowledge and skills we would expect our students to learn from one or two quantitative methods courses? They are: 1) basic concept of research and research procedures, which is typically covered in research methods course, 2) intellectual capacity to formulate and apply an appropriate theoretical framework (model) for specific problems and issues, which is to be learned from intermediate theory courses and from a few upper division electives- such as international economics, economic history, public finance, labor, economic development, and resource economics, 3) data collection and data analysis techniques, and 4) finally, some basic training in applied regression and time series analysis, specifically in estimation and testing of hypothesis, which is usually covered in the beginning econometric course.

It would be ideal for student to learn all of these knowledge and skills in the process of finding solutions to specific problems identified in the context of a live research project. This is a difficult task in light of the several problems noted earlier, namely course offerings by subject matter groups and shallow understanding of course content. But we can make substantial progress by redirecting and redesigning our quantitative methods course to teach these ‘wide range of quantitative methods employed by economists’, not as a second statistics course, but to offer a course tentatively entitled as "quantitative research methods for economic analysis".

With proper coverage of course content to cover various skills used by economists and teaching them in the context of carrying out meaningful research project by example, quantitative research methods for economic analysis would be an essential and integral part of a student’s intellectual development. This would be true for undergraduate students and for graduate students at Masters level. It is essential and integral, because students best understand the connections between theory, data, and quantitative methods in the process of carrying out live economic research project and analysis. Such a course needs to emphasize the integration of theories with empirical analysis. At the same time, the skills acquired from this type of quantitative research methods for economic analysis will serve the student after college, whether the student pursues a graduate degree or not. Research skills learned in the course of satisfying the requirements of research methods will be an asset because it provides research skills at their job. Recruiters from various government agencies and the private sectors seem to expect and demand increasingly for college graduates to master these practical research skills to carry out quantitative research in business and economics. Students seem to learn best research skills and techniques by actually getting involved in a research project. Many current research in economics and business on real-world problems may require complex and difficult modeling and rigorous empirical analysis. But in these days of computer technology, data processing is relatively easy to learn. Unfortunately most students in economics and business do not even learn such basic computer skills, like using spreadsheet program on personal computer.

There is a definite need to make undergraduate economic education more relevant and useful to understanding the issues we are confronting. One way of doing it is to teach our students how to approach the problem, organize and plan by raising relevant questions, and to find appropriate answers to questions raised, starting with relatively simple research problem. As students gain basic knowledge and learn research skills, we move on to more demanding problems. This can be done by emphasizing learning by doing of simple to more demanding research problem. Use of dry run in other fields of study is widely used. This method of learning is efficient in that it allows students to concentrate on learning the basics of conducting applied and quantitative economic research without burdening them with the details on the pitfalls and shortcomings of this simple research method. In fact, one of the most frustrating problems for beginning researchers in conducting quantitative research is to have all the background and mindset, while mindful of the shortcomings and pitfalls of what you are doing.

Precepts About Students

It is assumed that you are a serious student of economics or business or students in public policy who is motivated to learn various techniques of applied and quantitative research methods. For background, it is assumed that students have already completed both intermediate macro-economic and micro-economic theories and took at least one or more upper division subject-matter field courses and introductory statistics. It is also assumed that students possess basic computer skills in using spreadsheet programs, Excel and others. Working knowledge of Windows 95 & 96 or Windows NT would be useful.

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