Student Essay Competition 2008: Edoardo's essay

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What makes the best learning experience for you in economics?

Edoardo Gallo, Nuffield College, Oxford
Commended in the Economics Network's student essay competition 2008.

The lecturer steps in the room, pulls out her USB stick, and uploads the powerpoint with the lecture notes. First slide: title of the module and subtitle of today's topic. Second slide: outline of the lecture. Third slide: literature review. Fourth slide: first theorem. Fifth, sixth, seventh and eighth slides: proof of the first theorem. Iterate the last two steps a few times. Second to last slide: bullet-point list of main points covered. Last slide: outline of tomorrow's topic. This is, in a nutshell, the structure of a typical economics lecture. It is no coincidence if the reading made it sound boring: it is. But it does not have to be this way.

The first lecture of the "Auctions" module in the first year of my MPhil was rather different. Forget the powerpoint and the outline of the lectures, we started by playing the "birthday auction." Each student received a sheet with instructions on how to compute the value of her prize, which depended on her date of birth. Afterwards, each one of us had to write on a piece of paper her bid in an all-pay closed auction: it was a completely new challenge, I remember trying to use the game theory I had learnt to figure out the best strategy to maximise a real monetary payoff. At that time, I roughly knew what an auction was, but I completely ignored the major role it played in recent economic research and it was a real discovery to see that I could apply my game theoretic knowledge to attempt to solve such a concrete problem.

But the fun was not over yet. The lecturer continued by running an ascending "birthday" auction, I remember the thrill of bidding until the point when the prize overcame my value. I was not thinking of game theory or strategy anymore, my last call was very close to my value and much higher than what I wrote on the sheet of paper. When the lecturer unveiled the results of the previous closed auction, everyone was stunned: the values and the prizes at stake were exactly the same, but the outcomes of the auctions had nothing in common! The winner of the closed auction had a lower value than many others and won almost &163;15 with a bid of less than &163;5, while the winner of the ascending auction was the person with the highest value and ended up with a net gain of a few dimes. Questions started popping up in my head: why did I and the winners bid differently with the same set-up of prizes and values? Why was I thinking strategically in the all-pay auction, but not in the open one? Is the format of the auction such a strong determinant of the final outcome?

"Economics is very similar to physics: it investigates why the social world surrounding us behaves the way it does by using the same tool of mathematics."

I remember thinking I would obtain all the answers by the end of the lecture, I did not. We continued "playing" until the end, and new questions kept coming up. That afternoon and that evening I did things I rarely do. I went to the online lecture notes for the next days to learn the material in advance to find some of the answers. I spent time thinking of my bidding strategy in the various "games" and how I would change it retrospectively. At dinner I discussed and compared my thoughts with my coursemates. I was going through a very different learning process: it did not start on chapter 1 of the standard textbook, but in my head.

The second lecture was closer to the conventional format, but my attitude was very different. When the "first-theorem-slide" came up, I was on the edge of my seat. The revenue equivalence theorem stated that the outcome of the auctions of the previous day should have been the same! As the lecturer was explaining the proof, I was pondering on every assumption to figure out whether one did not hold in the "birthday" auctions. Throughout the module it was much easier, engaging and stimulating to learn the abstract material because I was constantly linking it to my personal experiences and thoughts during the first lecture.

Auctions is not the only topic where this type of interactive learning can be very effective, I actually believe that it can be applied to almost any area of economics. For instance, many students perceive game theory to be a very abstract mathematical construct, with very little relation with reality. It does not have to be that way, and, in fact, the subject did not even originate with that aim. The motivation that led von Neumann and Morgenstern to write "Theory of Games and Economic Behavior," the masterpiece which laid the foundations of game theory, was actually a very ludic one: they wanted to build a tool to analyse the game of poker! An introductory game theory course that is motivated by having students matched in pairs to play the prisoner's dilemma or the battle of the sexes games is much more engaging than one introduced by a 2x2 matrix with made-up numbers.

My undergraduate degree was in Physics, and what really motivated me in my studies was the constant feeling of discovering why the physical world surrounding me was the way it was. One of the most unforgettable courses was on lagrangian mechanics: every lecture started with a 10-15 minutes experimental demonstration which vividly clarified how the ensuing technical material was relevant to understanding reality. Economics is very similar to physics: it investigates why the social world surrounding us behaves the way it does by using the same tool of mathematics. Unfortunately, economics is rarely taught like physics, but more and more like math: the tool becomes the subject. Interactive learning can be a very effective way to engage students in economics and stimulate them to apply economic thinking to understand a very broad range of issues in the real world.

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