Video Case Study: Making Principles Lectures Fun and Memorable

Contact: Dr. G. Dirk Mateer
Department of Economics, Penn State University, USA
dmateer@psu.edu
Published January 2009 (video put online January-March 2007)

This note introduces two teaching techniques that can be deployed to teach economic principles. The first technique highlights the importance of incentives while the second demonstrates diminishing utility. In both cases, student volunteers are used to engage the audience.

Introductory Economics Lecture on Incentives

The purpose of this demonstration is to actively engage student participation while simultaneously illustrating a core introductory concept: incentives. In this activity I invite one student to come up in front of the class and get their name. I then ask the student to imagine that they are not in class, but instead that they are walking on a campus sidewalk. I then place small amounts of money on the ground in front of them. I start with $5 and ask them then to do whatever they would normally do if they observed some money on the ground.

Naturally, they pick it up. Many students immediately give the money right back to me - but I make them keep it. I then repeat the exercise with $1, a quarter, a dime, a nickel, and a penny until they decide not to pick up the money. Eventually, the student will stop but this sometimes requires throwing the penny outside the classroom to get them to realize that the cost is greater than then benefit. This leads to an interesting discussion about the time value of money and how the decreasing incentives eventually cause the student to alter their behavior.

Given the key role that incentives play in economic analysis this investment of a few minutes are well worth the instructor's time. Also, this process creates enormous good will for the instructor. If students understand that the instructor is approachable and that they might get a prize (in this case a little over $6.00) they become excited about participating in class. Students also enjoy seeing their classmates make decisions - the students easily place themselves into the role themselves and they therefore internalize the lesson better because they can: (1) recall the activity from class, (2) relate to the activity through personal experiences where they encountered lost money as well.

Eating Contests and Marginal Utility

Competitive eating contests provide an opportunity to discuss diminishing marginal utility in a fun setting. To bring the excitment of competitive eating into the classroom I divide the class into three sections. Each section chooses a contestant who agrees to eat an unhealthy food like Ho-Hos (cream-filled chocolate rolls) over a very short period of time.

Ordinarily when we think of diminishing marginal utility we expect the consumer to become satiated and utility to drop to near zero, or become negative, with additional consumption. To speed up the process the three contestants are given a box of ho-hos and three minutes to eat as many as possible. Each contestant then competes to win a small amount of extra credit for themselves and each person in their section. This two-tiered extra credit structure provides the right incentives for the contestants and audience to care. Contestants and the sections earn extra credit for each ho-ho eaten and also for finishing 1st or 2nd. With those two incentives in place contestants attempt to eat as much as possible in the allotted time and the audience has an incentive to root their contestant on to victory to gain the 1st or 2nd place bonus.

While everyone enjoys watching the competition it quickly becomes apparent that the contestant's initial enthusiasm disappears after just a couple of ho-hos. There is then an awkward moment when the audience realizes that the contestants are suffering. This is the hook.

By selecting contestants who want to participate, enjoy eating ho-hos, and have volunteered to participate, the usual assumption is that this is all fun and games. Most of the audience is unprepared for the moment when it is clear that the marginal utility has fallen rapidly and the contestants look pale or uncomfortable. This is the moment that I emphasize. I also point out that near the end of the activity the contestants seem to get a second wind and make a concerted effort at a big finish - in part because the audience roots them on. Marginal utility is non-linear in this case - high in the beginning, low in the middle, and higher again right near the end.

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