The use of newspaper articles in economics is relatively well documented (e.g. Becker, 1998). Many instructors like to use newsclips because they portray the complexity of business and political situations and the role of economic theory in unravelling that complexity. Case studies and, by implication, newsclips allow teachers to manipulate data, investigate hypotheses, deal with uncertainty and complexity and, ultimately, come to a decision. Many introductory textbooks complement the more formal exposition of theories and concepts with newsclips that show the applicability of theory to practice. However, less is known and written about the actual use of newspaper articles in the teaching room and its pedagogical value. The work of Becker (1998) is, therefore, something of an exception. He discusses his experience in using newsclips to motivate students’ analysis and to help them to learn quantitative skills. The next subsections intend to address these issues, but before this is done we present a short taxonomy of newsclips.
The term ‘newsclip’ should be interpreted as news that has a cited source. In particular, we refer to articles published in business newspapers and magazines or in the financial pages of daily newspapers. Bredon (1999) identifies four main ways in which the news is used in teaching economics:
The use of newspaper articles in your teaching will mainly require the use of focused and case study newsclips.
In the lecture you should use focused newsclips, since the information provided to the students needs to be clear, simple and straight to the point. In many cases, articles contain additional information that is not directly relevant in the context of the topics that the lecture intends to address. This ‘noise’ in the article can create confusion and take attention away from the relevant issues. Without careful selection the danger is that newsclips simply end up confusing and discouraging students.
Top Tip: Use focused newsclips in the lecture. Clear, simple and short newsclips attract students’ attention and help them focus on the topic under investigation.
Make sure to select newsclips that contain (technical) terminology that is part of the economic theory discussed in the lecture. This will make students aware that the issues discussed in class are not abstract concepts, but are readily applied in the business context.
The lecture could then be structured as follows. At the beginning of the lecture, show the article to the students to introduce the lecture topic and to highlight the main points of discussion. Read the article with the students and emphasise the main issues emerging from the article. In this way you will be able to create the context for the delivery of the lecture. The students’ attention is captured, interest is stimulated, issues are raised and general knowledge is conveyed. Conclude the reading of the article by posing questions concerning the actions, decisions and strategies of the economic agents portrayed in the article. This helps to focus the issues under investigation and suggests the lines along which the lecture will be articulated.
Top Tip: Show the article at the beginning of the lecture and use it to create a context for the analysis of the theory.
Thus, the case study provides a motivation to learn theory because the students begin to understand that unless they have some further knowledge, they will not be able to deal with the issues raised in the newsclip. Learning theory is no longer a dry and passive affair, but an active exercise aimed at solving problems. The ground for the development of the theory is then prepared.
The lecture should then develop along traditional lines where the main theoretical concepts are developed and explained. However, in your explanation you should continuously refer to the article’s content and always attempt to place the theory within the context of the article. This helps the students to put theory into context: knowledge is conveyed while comprehension is supported and application is shown. Throughout your explanation, you should gradually answer the questions that were posed at the beginning of the lecture. This allows students to understand how theory can be applied to address a specific issue.
Top Tip: The use of two overhead projectors displaying the article and the theoretical concepts simultaneously and side by side would help in cross-referencing theory with practice.
At the end of the lecture, you should summarise the main issues developed in the lecture and you should show the case again to the students. This helps them to fix basic concepts in their mind and, more importantly, students can develop a first understanding of how analysis can be carried out. The delivery of the lecture through the use of the case study generally helps students to develop the ‘lower’ skill levels of knowledge, comprehension and application. The development of the ‘higher’-order skills of analysis, synthesis and evaluation is then carried out through the seminar activities. However, before proceeding with an analysis of seminar activities, an example can help illustrate how the approach is used in the lecture of a second-year economics module.
Business Economics is a second-year module that deals with the economics of business organisation, market structure and strategic behaviour. Students are introduced to an economic analysis of issues such as the horizontal and vertical boundaries of the firm, strategic interaction in oligopolistic markets and competitive advantage. Within the analysis of the vertical boundaries of the firm, one of the topics dealt with in the module is the hold-up problem. Figure 1 presents the article that was used in the lecture.
‘The largest order ever taken to lengthen a luxury liner was revoked yesterday after the Italian owners of the Costa Classica pulled out of a deal, leaving 26,000 tonnes of steel (worth £51m) beached on the docks of the Mersey. The Cammel Laird shipyard … was told by Italian cruise operator Costa Crociere that it had postponed delivery of the ship because the work was behind schedule … union leaders and local MPs began a series of crisis meetings late on Thursday to salvage the contract to build and fit a 45-metre extension to the 56,000 tons Costa Classica, cutting it in half and inserting the new section in the middle… The Italian shipowner had applied for arbitration to find out whether they could postpone or even terminate the contract, arguing that the work was substantially behind schedule and efforts to resolve the dispute commercially had failed…’ (Guardian, 25 November 2000)
Figure 1 Article introducing the case
The article is shown at the beginning of the lecture and the main ‘elements’ characterising the business transaction are highlighted: bilateral bargaining, contractual negotiation, asset specificity, transaction costs. In essence, these are the core factors comprising up the hold-up problem. After reading the article, the following questions are posed to the students:
1. How many parties are involved in this transaction?
2. How can Costa Crociere back off if there is a legally binding contract regulating the business transaction?
3. Can Cammel Laird shipyard sell the ship-extension to somebody else?
4. What do you understand from the phrase ‘efforts to resolve the dispute commercially had failed’?
The lecture then develops around a detailed account of hold-up problem theory by continuously referring to the issues identified at the beginning of the lecture and to the article. At the end of the lecture, the main issues are summarised, the article is shown again and the link between theory and the case is demonstrated.
Lectures are usually complemented by seminars or tutorials that take place the week after the lecture. This subsection assumes that students are given a set of problems and tasks to prepare beforehand and suggests how seminar activities could be structured.
First, ask the students to solve simple abstract numerical problems whose solution requires the application of basic knowledge (i.e. formulae, expressions, etc.) acquired during the lecture and through the reading of the assigned material. It is helpful in this case to design your own problems rather than to use problems taken from textbooks (an example is provided at the end of this subsection). In this way you have better control of the gradual development of cognitive skills in students.
These problems could then be followed by a set of more complex problems in which students have to show an ability to analyse a specific economic situation or business decision and to produce a solution. These problems are specifically aimed at developing analytical skills, requiring students to break down information into simple components, establish links and produce a solution. In many cases it is possible to combine application and analysis in one single problem. A very simple example could be a problem that gives information about the fixed and variable costs of production of two alternative technologies and the output the firm expects to produce. The students can then be asked to set up the total and average cost functions. This task would require an ability to apply knowledge. The problem can then continue by asking which technology the firm should employ in production. This task requires students to use the results computed in the earlier parts of the problem to produce a solution by suggesting the most efficient technology.
The seminar could conclude with the investigation of a case study. It is suggested that you use a case studies newsclip drawn from leading business newspapers and magazine. The newsclip can be longer than that used in the lecture, even if brief and compact articles should be preferred. Long articles (usually more than 500 words long) can contain too much information that can make the students’ analysis difficult and put them off the case. Moreover, time constraints often make it unfeasible to deal with long and complex cases. The investigation of the case study aims to complete the educational taxonomy by inducing students to engage in the synthesis and evaluation of more complex information. Each case study should be accompanied by a set of questions that help students focus their attention on the issues that are relevant to the topic under discussion. It is important to include these questions because, particularly in the early stages of the module, students do not have a clear ability to distinguish important from peripheral information. By attending the lecture and experiencing the approach to case study analysis in the classroom, students should develop some understanding of how to deal with the article. However, in many cases their approach will still be rough and lack the necessary focus.
Top Tip: Complement the newspaper article with questions that help students approach the analysis in a structured and coherent manner.
With appropriate guidance and direction, the case study helps students to develop an ability to break down complex information into simple components: analysis is fostered. These simple components can then be linked together and cross-referenced to interpret the actions of economic agents and the strategies of businesses: synthesis is stimulated. This new information is then used critically to evaluate the business strategy against alternative strategies or some set objective: evaluation is triggered.
In the early part of the module, the students will find it difficult to approach case study discussion in a structured and rational way. Your role is to coach the discussion and guide the student through a logical and informative investigation. As students develop a better understanding of how to approach case study analysis, your role in the discussion will reduce and you will be required to intervene much less frequently. In later stages of the module, you can start supplying case studies that are not complemented by any question so that students have to show their analytical skills without the guidance of pre-set boundaries. Indeed, the students’ ability to engage in the case analysis without the ‘guidelines’ provided by the questions will reveal their actual development of higher-order skills.
Students’ preparation is important but not necessary. It is important and desirable because it will generate a speedy and livelier discussion of the case. It is not necessary because the length of the case usually allows a quick reading of the article and an almost immediate ability to engage in the discussion. At the end of each seminar, you can distribute additional case studies for students to analyse and provide a short written report. This would allow students to practise and to strengthen their skills. As discussed below, this additional activity could be managed with the help of a Virtual Learning Environment.
Students engage in each element of Bloom’s taxonomy through the range of activities in the case study. The development of the lower skills of knowledge, comprehension and application that started with the lecture is then complemented by the seminar activities that are specifically designed to push the students towards the higher skills of analysis, synthesis and application. This structured approach to learning, with the case study method at its centre, can be an effective method for developing higher-order skills in students. An example of case studies in seminar activities is given below. The assessment is the final part of the learning process. The next subsection explains how case studies can be used in various assessment methods to test the students’ cognitive skills.
The seminar activities that complement the hold-up lecture, discussed in the previous example, include first a numerical problem aimed at developing comprehension and application and at stimulating analysis. The problem in Figure 2 has been used in the past.
You are the owner of Engines Ltd, a company that specialises in the production of engines for motorbikes. You are approached by the managers of Aprilia, who are planning to produce a new motorbike that meets new higher government environment standards. They require you to produce a new engine whose emissions must be below the limits imposed by recently introduced anti-pollution legislation. After many discussions and project analysis, you work out that the production of the new engine will require an investment of I = £4 000 000 and that the average variable cost of production will be C = £200. After discussion with the Aprilia managers you agree to supply Q = 50 000 engines at a price of P*=£400 each. The managers of Engines Ltd know that by signing the contract with Aprilia they commit themselves to the production of a highly specialised product that they will only be able to sell to other motorbike manufacturers at a lower price of Pm = £250. Eventually the contract is signed and the investment is carried out.
Figure 2 Hold-up problem: a numerical example
The exercise is structured in such a way as to require the students to compute, step by step, the values of the main determinants of the hold-up problem. Thus, once questions 1–3 are solved, the student has all the necessary elements to understand whether the hold-up problem will emerge or not. When the problem is organised in this way, the student is helped to approach it in a structured and logic manner. A problem that included only questions 4 and 5 would require the student to do much more background thinking. This can be problematic, particularly in the early stages of the module, if the student has not fully developed an ability to use elementary information to deal with complex issues.
The seminar then continues with the analysis of two related short case study newsclips. The first article (Figure 3) describes a dispute between a British low-cost airline and the owners of the airport from which the airline mainly operates. The article is actually a quotation drawn from the airline’s website (http://www.easyjet.com/en/).
‘Stop Barclays increasing your air fares by £5! Barclays Bank now controls Luton Airport and wants to increase landing charges to easyJet customers at Luton by 300%, or about £5 per passenger, a significant percentage of easyJet airfares. John Prescott, the Secretary of State for the Environment, Transport and the Regions will decide SHORTLY whether Barclays should be allowed to get away with it. John Prescott has two options – either let Barclays charge whatever it likes, or ask special government appointed experts to decide how much easyJet and other airlines’ customers should pay for using Luton Airport.’
Figure 3 Quotation from airline website
The students were given some basic background information on how the airline industry operates and then were asked to identify within this particular case the main determinants of the hold-up problem. This task helps students develop a rational and structured approach to the analysis of information and the synthesis of relevant knowledge. The following are examples of questions asked in the seminar:
1. easyJet is a new airline. Explain the process that led it to choose Luton as its main hub.
2. What types of investment did easyJet carry out at Luton Airport?
3. Why is Luton Airport in a strong negotiating position with easyJet? Given the contractual dispute, why does easyJet not change hub?
Once the students were able to provide an informative and logical analysis of the case study, they were asked to provide an evaluation of the business dispute by suggesting, in particular, the strategies available to the airline. The main aim of this task is to reinforce in the students a clear understanding of the core element of the hold-up problem (i.e. asset specificity) and to evaluate alternative courses of action for a solution of the dispute. The students would first be asked to express their own thoughts and then they would be shown Figure 4, which reports the evolution of the dispute between the two business partners.
‘Both easyJet and Ryanair are facing severe cost pressures at their home airports. When easyJet opened services from Luton Airport, it negotiated a five-year deal where the airport earned just £1.60 per passenger plus a 62p handling charge. Luton wants £7.89 per passenger, and two weeks ago reached an interim deal where easyJet will pay a fee believed to be £5 to £6 per passenger.
easyJet insists that this will not lead to higher prices, but it is axing its Luton–Liverpool route, which started at £20 return. “It is just not commercially viable to offer services at that price”, says an easyJet spokeswoman. She says expansion plans at Luton are now on hold while it develops alternative hubs at Geneva, Amsterdam and Liverpool.’ (Guardian, 17 February 2001)
Figure 4 The evolution of the dispute
The article shows the short- and long-run strategies chosen by the airline. While in the short run it had to give into the airport’s requests, the long-run response is diversification and less asset specificity. By the end of the seminar, the students should have developed an ability to investigate similar cases, identify the presence of the hold-up problem and suggest solutions.
Newspaper articles can also be used in assessment. Here we discuss how they can be used in examinations, coursework and presentations. Other assessment strategies can be considered, but we focus on these because of their widespread use.
If students are assessed by examination, we suggest structuring the paper in four sequential sections aimed at assessing the development of cognitive skills. The higher-order cognitive abilities receive a greater weighting in the mark scheme. The first section should require students to answer short essay-type questions aimed at assessing their level of knowledge and comprehension. The second section should contain some abstract problems whose solution reveals the students’ ability to apply theory to practice. Questions aimed at testing the students’ ability to analyse alternative policies or strategies within the context of a fictional problem should feature in the third section. The case study should be included in the fourth section and students should be asked to deal with a set of questions aimed at testing their ability to synthesise and evaluate knowledge. A pass mark should be awarded to students who complete satisfactorily at least the first two sections and who, therefore, show at least some basic knowledge and comprehension. A first-class mark is awarded only upon a satisfactory completion of all four sections.
There are many advantages in structuring the exam paper in such a way. It would represent the ‘natural conclusion’ to a module whose activities are structured around the principles of the gradual development of cognitive skills and the use of case studies. It offers transparency for both students and lecturers, since the ability to deal with the various sections reveals the students’ actual level of knowledge. It also clarifies to students the amount of effort required to achieve desired results. Figure 5, from the exam paper for the first-year course Introduction to Macroeconomics, reflects this educational taxonomy.
Section A – Knowledge and Comprehension – Answer the following questions. (30 marks)
Section B – Application – Solve the following problems. (20 marks)
4. The following table lists a number of components of UK gross national product from both income and expenditure sides of the account for 1995 (figures are in £000s).
|Consumer expenditures||367,853||Taxes on expenditures||83,023|
|Net property income from abroad||328||Stock changes||–5,303|
|Government expenditures||121,899||Investment spending||95,442|
|Other factor incomes||1,665||Imports||140,415|
5. A typical family living in Sandy Island consumes only apple juice, bananas and cloth. Prices in the base year are £4 a litre for apple juice, £3 a kilogram for bananas and £5 a square metre for cloth. The typical family spends £40 on apple juice, £45 on bananas and £25 on cloth. In the current year, apple juice costs £3 a litre, bananas cost £4 a kilogram and cloth costs £7 a square metre.
6. The following expressions show the relationships between variables in the goods and money markets. Fill in the gaps (dotted lines) in these ‘chain relations’ and briefly explain their meaning.
Section C – Application and Analysis – Solve the following problem. (10 marks)
7. In a closed economy autonomous consumption is given by c0 = 200 and the marginal propensity to consume is c1 = 0.8. Investment, government spending and taxes are, respectively, =300, =300, =200.
Section D – Analysis and Synthesis – Solve one of the following problems. (10 marks)
8. Suppose that a closed economy is initially operating at Yn. Now suppose that the government increases spending in the economy so that G increases.
9. Suppose the domestic economy is initially experiencing a trade deficit. Further assume that government officials would like to eliminate the trade deficit. By using the goods market and the net export graphs, answer the following questions.
10. Suppose that the British government decides to adopt a fixed exchange regime so that the pound to euro exchange rate is fixed at a specific parity.
Section E – Synthesis and Evaluation – Comment on the following article. (30 marks)
‘Hopes that the UK manufacturing sector has stabilised received a further boost on Wednesday, with accelerating output and order books pushing a closely-watched survey to its highest level since December 1999.
Meanwhile, a Confederation of British Industry survey suggested the retail sector, which had been burgeoning while manufacturing slumped, appeared to be tempering itself.
The purchasing managers’ index (PMI), compiled by the Chartered Institute of Purchasing and Supply (Cips) and Reuters, rose from 50.6 in March to 53.4 last month. This was the third consecutive month that the index stayed above 50, the mark which signals growth.
Manufacturing demand rose at the fastest rate for almost two and a half years as companies reported an increased volume of new business from both domestic and foreign customers, Cips said.
Export orders rose for the second time in the past three months, and at the fastest pace for more than five years. Companies surveyed said business conditions were improving.
Although the survey added to hopes that the manufacturing sector is emerging from the months of recession, it is unlikely to change expectations that the Bank of England’s prime interest rate will remain at its 38-year low of 4 per cent until the second half of the year.
Cips said many companies thought a recovery in the US manufacturing sector had helped stimulate growth in much of Europe, with demand from the Middle and Far East, as well as Canada and the US, also up in April.
However, companies doing business with South American countries, particularly Argentina and Brazil, reported slower growth in export orders.
Seventy per cent of companies reported that sales were up in April, while 13 per cent said they were down. The plus 57 per cent balance was a significant improvement on the plus 31 per cent in March and was the highest individual monthly balance since August 1988.
… The three-month moving average, which smooths out month-to-month fluctuations, suggested sales were still slightly below the growth rates of last autumn, the CBI said.
Grocers reported the strongest annual growth since August 2001, while other retailers reported strong growth in sales of clothes, durable household goods, furniture, carpets, hardware, china and DIY products.
Last week, gross domestic product data released by the Office for National Statistics showed the UK economy stagnated for a second successive quarter in January to March, growing just 0.1 per cent in the quarter after zero growth in the quarter of 2001.
The annual rate of growth was down from 1.6 per cent in the fourth quarter of last year to 1 per cent – the lowest for almost 10 years.’ (Financial Times, 1 May 2002)
Comment on the above article and use the AD/AS model to explain the economic situation in the United Kingdom. Should the Bank of England intervene in the economy by changing the interest rate? Why? (Suggestion: before using the AD/AS model, use the aggregate demand relation to comment on the UK economy.)
Figure 5 Embedding the educational taxonomy in the exam paper
Students assessed by coursework should be given a case study newsclip and should be required to provide a detailed account of the events described in the article by resorting to economic theory. The analysis should break up the article into simple components. Relationships between economic agents, actions and outcomes should be established, and an evaluation of the problem should be provided.
It would be helpful to accompany the case study with specific questions that determine the boundaries within which students need to work. The questions should be similar to those used for the discussion of newsclips in seminars. In particular, it is important to set questions aimed at assessing the students’ development of cognitive skills. In this respect, a first question could, for example, simply ask the student to describe the economic theory that can help investigate the case study. The answer to this question would simply reflect the student’s level of knowledge and comprehension. The student can then be asked to provide an analysis of the article and to show how the theory applies to the specific case. Application and analysis would be tested. Further questions can ask the student to summarise the most important elements of the events described in the article and to provide an evaluation of the economic situation and suggestions for future actions. The students’ ability to deal with these questions would reveal their actual level of skill development and would consequently determine the grade they would be rewarded with.
Assessing students by presentation is not only an effective way of testing their level of understanding, but also helps them develop other transferable skills such as the ability to communicate to a particular audience, time management and organisational skills. The presentation might require the student to act, for example, as a business news reporter who has to analyse, present and evaluate a piece of economic news for a wider general audience. In this respect, the reports presented by the economics correspondents in programmes such as the BBC’s Newsnight provide an appropriate model. The student should be asked to provide a summary of the news, identify the main emerging issues and provide a critical evaluation of the implications for various agents in the economy.
There are some basic guidelines that you can follow in the search for the ‘ideal’ newsclip. The discussion so far has hinted at some of the properties of a good newsclip. The following is a list of attributes that are desirable in the articles you intend to use.
The use of a Virtual Learning Environment can be an effective support of case teaching.
There are some inevitable costs associated with the use of newsclips: