"You Gotta You Debits, You Gotta You Credits"

Today's online New York Times has a very revealing article titled "The Opportunity Costs of Economics Education". It comments on a recent study by Paul Ferraro and Laura Taylor of Georgia State University. They asked a simple question on opportunity cost to economics PhDs at a major academic conference. Most got it wrong. Here's the best part:

Unfortunately, however, most students seem to emerge from introductory economics courses without having learned even the most important basic principles. According to one recent study, their ability to answer simple economic questions several months after leaving the course is not measurably different from that of people who never took a principles course.

What explains such abysmal performance? One problem is the encyclopedic range typical of introductory courses. As the Nobel laureate George J. Stigler wrote more than 40 years ago, "The brief exposure to each of a vast array of techniques and problems leaves the student no basic economic logic with which to analyze the economic questions he will face as a citizen." (emphasis mine)

Click here for the whole thing.

I see the same problem in the way finance is taught. In the introductory finance course at many schools, they cover something on the order of 14-15 chapters in a semester. When you ask why, they invariably say, "We simply HAVE to cover (fill in the blanks)". So, the students end up racing through all these topics, and understand very little. If you ask them, "did you cover portfolio variance", they'll answer in the affirmative, but if you ask them to calculate the variance of a portfolio, they can't. Likewise for most topics. I know - in my upper division course, I have to spend the first couple of weeks reteaching the basics of time value (the most important concept in finance). But, after all, they did "cover" all the topics...

At my alma mater, they taught the same class in a way that totally spoiled me for the purpose of working at most other schools. In a rare (for academia) fit of common sense, they realized that you can teach a lot of topics poorly, or a few topics very well. So, they limited the introductory course to a few critical concepts (like time value of money, how to read financial statements, how to value a security, etc...), but completely beat these topics to death.

Father Guido Sarducci used to do a routine where he talked about "Sarducci University". It went something like this:

"In the typical college, you go to school for 4 years. You might spend a whole year studying a couple of accounting classes. After you're done, what do you remember - "you gotta you debits, you gotta you credits". At Sarducci University, we only teach the basics -- "you gotta you debits, you gotta you credits". So you can get all your coursework done in one year instead of four. We got a beautiful campus on the beach. You tell your parents that it takes 4 years - $10,000 per year. You give us $30,000, and you keep $10,000. This way, you can spend three years on the beach, and at the end, you'll still know "you gotta you debits, you gotta you credits"

While humorous, it gets across an important point. Pick what you want people to remember. Then spend more time on those points and drill them home, over and over. The students won't be exposed to as many concepts, but they'll know those few things very well.

It works for classes, and it works for any presentation. Don't try to cover too many points, but if you think it's important, drive it home (over and over).

Update: Truck and Barter and Marginal Revolution just weighed in on this topic. The comments following up on their posts are also worth reading.