Instructors have long sought effective ways of using technology in their economics courses.  Internet access is a valuable source of information [Vachris 1998]. Using computers for symbolic processing (Boyd 1998) with technological advances allows more rapid calculations that were previously done by hand. Third, many "black box" applications have appeared (Judge 1990b), applications that let students just press "enter" or "next" keys and move through prescribed steps.

 In recent years, spreadsheets have come to the fore. These are used in quantitative economics [Judge 1990a, Judge 1996, Murray 1998, and Whigham 1998 among others for statistics; and McDonald 1995 for linear programming]. Increasingly, they are also used in theory courses [Adams and Kroch 1989, Cahill and Kosicki 1998, and Goddard et al. 1995]. Spreadsheets provide a better understanding of the model than either looking at static graphs or moving through a "black box" application, since at any point the user can look at a cell to see what formula is there and puzzle out why. They allow simulations so issues can be addressed interactively. While learning more about the course content, the students develop their skills with Excel. Finally, an instructor can easily tailor a set of spreadsheets to an individual class's need.

Increasingly these advantages are gained at a relatively low cost. Many students and instructors already have access to Excel and have gained at least some proficiency in its use. Even so, Clark and Hegii [1999] report that only about one tenth of economics instructors use spreadsheets. One reason for this limited use is that developing functioning spreadsheets and the materials to guide students in their use involves considerable time and effort. This barrier will be eroded as more sophisticated and accessible spreadsheet applications become available. This paper describes one such application, the use of spreadsheets to illustrate how specialization and trade increase income. This application is part of a larger effort to incorporate similar applications into the teaching of international economics.

We are increasingly incorporating Excel spreadsheets into our courses for reasons identified by Goddard et al. [1995] and sketched above. This paper provides an overview of a project by the authors aimed at making Excel spreadsheets a central part of an undergraduate course in international economics. It briefly reviews the history of our endeavor and our plans for the course. Then it provides a more in-depth look at one of the modules that will underlie both instruction and students’ exercises.

We introduced spreadsheets into an international economics course in the form of an extra-credit workbook together with an accompanying set of exercises. We gave students both the workbook and the exercises as an extra-credit homework problem. We introduced the students to the workbook for about half an hour, gave them two weeks to do the problem set, were available for individual consultations during the two weeks, and graded the results. Most of the students turned in the assignment.

We asked for oral feedback on the Excel workbook after they received their extra-credit assignments. The feedback was generally positive with few complaints on the insufficient description of the workbook itself and of what the assignment was. Moreover, we asked the students during the last week of the semester (as part of the course evaluation analysis) to write a sentence or two about what they thought of the Excel exercises. Almost all indicated that the exercises were helpful. The written comments included: "they [the Excel exercises] provide visual backup to the instruction given in class", "it [the exercise] is a very useful and excellent method of applying what is taught," and "it is a very useful study tool."

    The students’ performance on these exercises and their favorable comments regarding them encouraged us to proceed to a much more full-fledged integration of spreadsheets. To date, we have sketched workbooks for all of the chapters of Krugman and Obstfeld (2000) that we cover in the course. Before offering the course again, we will develop exercise sheets to accompany the workbooks. Also, we expect to offer an international economics course in our MBA program and, given MBA students’ affinity for spreadsheets, we expect to make them an even more central component of the course than in the undergraduate course.
 

Among the most important models in economics is that of comparative advantage. This section describes our workbook that develops this model. If you wish to view the exercise sheet that our students are also provided, click here.  (Both the workbook and the exercise set shown here have been modified slightly since they were used in the class. We incorporated students’ comments and made other, mostly cosmetic changes. Thus, the students’ favorable comments are directed at a set of material that we believe is inferior to that currently available.) How you can obtain a copy of the workbook is explained below.

The workbook begins by reviewing material that students have seen before: the standard bowed-out production possibilities curve (PPC). Students are shown a PPC (with user-specified endpoints) and the accompanying data. They can use this worksheet to refresh their memory of and facility with the concept of opportunity cost. The next worksheet replicates the first PPC and adds a second one so that students can see how changing the shape of the curve affects opportunity cost.

The next set of five worksheets addresses the classic Ricardian model with constant costs. This treatment begins with a single linear PPC. The user specifies its endpoints, and the spreadsheet returns the opportunity cost of each good in terms of the other. (While this sheet and some others have a certain "black-box" aspect, they offer an option not available in true black-box software: Students can be instructed to look at cells and discuss the logic involved in the formulas in them.) The second of the sheets introduces a second country and, based on user-provided values, shows how total production increases if comparative advantages are exploited. The third sheet displays the joint PPC for the two countries.

The preceding sheets illustrate the fact that comparative advantage provides the basis for increased output. With this as background, the next two sheets deal with how the gains are shared. One treatment is tabular, showing how a specific increase in output is shared given user-supplied information, including relative prices. The second, the final of the set of five sheets, shows the consumption possibilities curve (CPC) for each producer/trader given its production possibilities and the user-supplied relative prices.

After completing the illustration of the Ricardian constant-cost model, the workbook returns to the more general case of increasing costs. The user chooses a point on each producers PPC. The worksheet returns the opportunity cost of good X for each producer. It then shows how output of one good could be produced holding constant production of the other. In doing so, it demonstrates that opportunity costs are equalized between the producers. A second tabular sheet shows how the gains in output are shared, depending on the (user-supplied) relative prices.

A final pair of worksheets provide a graphical representation of the increasing-cost model. The first is a single PPC/CPC for each country. As above the user provides relative prices. The second worksheet provides more detail, showing the consumption possibilities that correspond to each of a set of points on the PPC.

Using spreadsheets in economics courses can enhance students’ learning experience. In the classroom, the spreadsheet can be a live counter part to overhead slides, allowing simulations and interactions, giving instructors the ability to develop "what if" scenarios during the class period. The spreadsheets used in class can be the basis for student exercises. Thus students learn by doing. They have an additional way to grasp the substance of the material being presented. At the same time, they add to their comfort and facility with spreadsheets. The latter is valuable because most people will use spreadsheets in their careers.

We are incorporating spreadsheets into our courses. In particular, a pilot project gives us reason to believe that students in international economics gain from using spreadsheets. Accordingly, we are developing a full set of workbooks based on Krugman and Obstfeld [2000]. One of these workbooks, discussed above, provides insights into the gains from trade.

This project is very much a work in progress. Accordingly, we welcome comments from those who use the workbook. Such dialog enhances the prospects that Clark and Hegii would arrive at more encouraging results should they repeat their survey in a decade.

Sources

Adams, G., and E. Kroch. 1989. The Computer in Teaching of Macroeconomics. Journal of Economic Education 20 (Summer): 269-80.

Boyd, D. W. 1998. On the Use of Symbolic Computation in Undergraduate Microeconomics Instruction. Journal of Economic Education 29 (Summer): 227-46.

Cahill, M. and G. Kosicki. 1999. New Uses for Spreadsheets in Intermediate Micro and Macro. Presented at the American Economic Association Meetings, New York City.

Clark, J. L. and C. E. Hegii. 1999. The Use of Computer Technology in Teaching Economics: A Survey of Southeastern Schools. Business Quest. URL: http:/www.westga.edu/~bquest/1999/cecn.html.

Goddard, J. A., P. J. Romilly, and M. Tavakoli. 1995. Macroeconomics and Information Technology Applications. Computers in Higher Education Economics Review 9 (1).

Judge, G. 1990a. Quantitative Analysis for Economics and Business Using Lotus 1-2-3, Hemel-Hempstead: Harvester Wheatsheaf.

Judge, G. 1990b. Spreadsheets: Flexible Tools for Data Analysis, Model Analysis and Problem Solving. In Information Technology for Social Scientists, ed. R. Welford. Shipley: European Research Press.

Judge, G. 1996. Student Created Spreadsheet Models for Teaching and Learning: An Initial Self-Evaluation of an Experimental Assignment. Computers in Higher Education Economics Review 10 (2).

Krugman, Paul R. and Maurice Obstfeld. 2000. International Economics: Theory and Practice, 5^th edition. New York: Harper Collins.

McDonald, Z. 1995. Teaching Linear Programming using Microsoft Excel Solver. Computers in Higher Education Economics Review 9 (3): 7-10.

Murray, M. 1998. Teaching in a Multimedia Computer Classroom: Lessons from an Econometric Course.

Vachris, M. A. 1998. Teaching Principles of Economics without "Chalk and Talk": The Experience of CNU Online.

Whigham, D. 1998. Quantitative Business Methods Using Excel. Computers in Higher Education Economics Review 12 (2).