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Teaching tertiary economics: The real and the ideal

Alan Duhs
The University of Queensland
Ross Guest
Griffith University
This paper addresses the teaching of economics and explores the gap between the real and the ideal in terms of both pedagogy and the incentive systems motivating staff. The authors report results of a survey of time allocation decisions by academic economists in Australian universities and provide a critique of the incentives that effectively constrain efforts to improve the quality of economics teaching. CEQ survey results consistently indicate that economics is poorly received by students in both Australia and the USA and that extant incentives incline academics to allocate marginal effort to research at the expense of teaching. Revision of the prevailing incentive structure is recommended.


This paper focuses on the quality of the teaching product delivered in tertiary economics, and on the institutionalised incentive systems which help determine that quality. Survey evidence from several sources suggests that those on the demand side of the teaching industry - students - are not always impressed with the quality of the teaching supplied. Course Experience Questionnaire (CEQ) results, for example, indicate widespread dissatisfaction on the part of recent economics graduates. On the supply side of the tertiary teaching industry there is counterpart survey evidence that academics are aware that they don't always teach as well as they could simply because there is limited personal incentive to do so (Duhs and Duhs, 1994). Becker and Watts (1999, p345) likewise note "at least some evidence" that American students are much less satisfied with the average level of instruction in economics than they are in most other subjects. Becker (1997, p1369) similarly noted that "Economics is one of the disciplines that is consistently at the bottom of both course and instructor effectiveness scales".

As far back as 1978 the American Economic Review (Hartman) addressed the question of "What do economics majors learn?" and decided that the answer was "not much". In a similar exercise Walstad and Allgood (1999, p354) concluded that college majors appear to learn little more than a control group not studying economics. Their results showed that many college seniors who have taken an economics course still show a lack of understanding of basic economics. An analogous exercise carried out in American Ivy League institutions (Colander and Klamer, 1987) likewise concluded that graduate students were sceptical of what they had learned in their economics courses and were in no doubt that knowledge of mathematics was much more a pre-requisite to success than knowledge of the real world and its institutions. Chicago graduates 'knew' that monetary policy worked and fiscal policy didn't, for example, while graduates at Yale and MIT tended to 'know' something quite different. What students 'knew' scientifically seemed not to be independent of the sociology of the profession.

In Australia, Course Experience Questionnaire (CEQ) results continue to indicate that economics graduates are not impressed by what they were taught or by how it was taught. The national average on the Good Teaching Scale for Australian Universities teaching economics was -6 in 1993 (with a standard deviation of 40), against a national mean of +6 taken across all fields of study. In the period 1993-98 the national average for economics was consistently negative and the economics average consistently fell behind the All Fields average. Results in research intensive Group of Eight Universities were generally less flattering still, ranging from -16.4 to -4.5 over that period. While there is some evidence of rising trends, economics continues to lag the All Fields scores.[1]

CEQ Results for Economics Graduates 1993-99:
Good Teaching Scale

G08 Universities
(average): Economics
National Average:
National Average:
All Fields
-6+6 (c)
Source: CEQ data supplied by Ms N. Milsom, UQ research section.
  1. At both ends of the period Economics national average was also behind the All Fields national average on both the Generic Competencies Scale and the Overall Satisfaction Scale. In 1998 the Group of Eight major research universities (GO8) universities similarly lagged behind the national average for economics on the Overall Satisfaction Index.
  2. CEQ data use unweighted averages. Standard deviations are commonly in the 30-40 range.
  3. Data for all graduates, not only bachelor's degree graduates.

On the good teaching scale, 1998 CEQ data (p55) placed economics as one of the 10 lowest disciplines. Given this evident gap between the real and the ideal, a central question is whether the root of the problem lies in matters of pedagogy or in the way in which incentive systems are presently institutionalised. While the economics literature stresses incentive, the large and influential staff development literature - apparently more successful in influencing Australian university policy and funding - tends to stress matters of pedagogy. Economists in particular will relate to Adam Smith's observation that

"The dons of Oxford, [Smith says] grossly neglect their duties of instruction. Does [Smith] preach to each don a moral reform, seeking a pledge of diligence and good sense? Smith would have considered such a remedy to be silly: a teacher is intelligently pursuing his interest, which is 'to live as much at ease as he can because his income is independent of his efforts. A system of remuneration based upon effort and achievement, not a weekly sermon, would bring about the changes Smith wishes." (Adam Smith, quoted in George Stigler, 1982).
Staff developers on the other hand write that "While there is no evidence that increasing extrinsic incentives and sanctions makes staff teach better, there is distinct evidence that it may make them teach worse" (Ramsden, 1992). Prosser and Trigwell (1999) likewise attach no significance to staff incentives. One question in the Guest and Duhs survey (2000) was therefore designed to test reaction to the Ramsden claim that paying academics to teach better may crowd-out intrinsic satisfaction and paradoxically cause them to teach worse. Economics staff rejected that prospect as "quite unlikely".

Time allocation models

In this context it is important to ask how academic staff actually allocate their time. In an American study Singell et al (1994) find that time allocation decisions reflect both personal and institutional attributes. While faculty attributes tend to reinforce an institution's mission, they find that the incentive structures of a university play a key role in time allocation decisions and accordingly that institutions can change their mission. A practical problem in this context however relates to the measurement of teaching quality since increasing rewards for teaching relative to research will increase teaching output only if there is an accurate system of measuring teaching quality (Becker). Steps to reduce uncertainty in the measurement of teaching quality are therefore a prerequisite to inducing improved teaching quality in response to modified incentives.

Guest and Duhs (2000) extend the Singell et al study by surveying economics staff in Australian universities. They find that perceived incentive systems have an impact on time allocation in that

  1. non-tenured staff tend to spend more discretionary time on research than tenured respondents do; research is perceived to be more important in earning tenure

  2. senior staff tend to reduce discretionary time spent on teaching as a means of "financing" time for administrative duties; research is preserved rather than teaching time

  3. in terms of conference participation, those who receive no pecuniary support even when presenting a paper allocate about 10% less discretionary time to research

  4. extant intra-departmental pecuniary incentives for research and teaching activities are small - averaging about $200 to $900 in the case of teaching and about $400 to $3000 for research - and have a relatively slight effect on individual time allocation decisions. The intra-departmental teaching/research reward ratio is nonetheless significantly lower in Australian Sandstone and Redbrick universities which is where the percentage of discretionary time allocated to teaching is lowest. In fact academics at the Sandstone and Redbrick universities were found to spend 10 % less time on teaching and 10% more on research than academics in the dozen new universities that consist mainly of former colleges of advanced education. This fact may help explain why good teaching scores in the GO8 universities are worse than the national average.

  5. 26% of economics staff indicated that they believed they would receive no reward at all if they significantly improved their teaching. While 11% said they might be promoted only 0.4% indicated they might expect a pay rise. In an earlier Australian survey Duhs and Duhs (1994) found that 70% of academic staff found teaching incentives to be insufficient to induce significantly greater effort.

  6. No evidence was found of a gender difference in the response to these incentive issues.
Elsewhere in the economics literature there is evidence that publication rates are positively related to academic salaries (Ransom, 1993), and that teaching loads are significant explanators of research output (Fox and Milbourne, 1999). For Australian economics staff Fox and Milbourne find that a 10% increase in teaching hours may reduce research output by as much as 20% (using as the measure of research output internationally refereed publications). In short, there is evidence that teaching effort is an expensive activity in terms of research output, which in turn is an important determinant of income. Milgrom and Roberts (1992) add to this the important point that most employees produce more than one output, and where one of those outputs is more readily measured and rewarded than another, quality standards in the other line of output may fall both absolutely and relatively. In the academic case, research is the more readily measured output, and teaching standards - being less well measured and rewarded - are consequently likely to fall.

Attempts to improve teaching quality must confront these facts.


Whatever their relationship to incentive issues there are a number of pedagogical issues commonly raised in the context of the tertiary teaching of economics. First-year courses in particular are often criticised as being "too encyclopaedic" and over concerned with formalism at the expense of application (Heyne, 1995; Siegfried and Round 1994; Siegfried, 1991). The common format of low cost, large scale lectures coupled with low cost multiple choice assessment is overdone at the expense of teaching students "to think like economists" - which is also what worried both Harberger and the US Kreuger Commission on graduate economics education (Duhs, 1994, p7).

Only about 1 in 1000 Economic Principles students goes on to do a PhD (Salemi and Siegfried, 1999, p355) and economics courses have not necessarily been well designed for the relevant horses (Becker,1997, p1359). As staff developers stress, the approaches students take to learning are related to the approaches staff take to teaching (Prosser and Trigwell, 1999, p159). "Deep learning" is more likely to be achieved when staff stress motivation and real world applicability of theoretical tools, perhaps by working backwards from contemporary examples to find what theory is necessary to analyse the issue. Cost curves, for example, can be presented in an immediately practical way, by asking students to write a contract to privatise a jail, just as exchange rate theory can be addressed by simulated exchange market games. Herb Simon (1986, p23) goes further and objects that "the [foundations] text books are a scandal. I think to expose young impressionable minds to this scholastic exercise as though it said something about the real world , is a scandal... I don't know of any other science that purports to be talking about real world phenomena, where statements are regularly made that are blatantly contrary to fact."

Arrow (2000) adds that economists tend to make exaggerated claims of precision when offering policy advice for fear that no one will listen otherwise, and there is a need for more candour in recognising the impact of ideology in the analysis and policy prescriptions. Extending Arrow's point, Amaryta Sen objects that modern economics "eschews deep normative analysis". Whereas departmental reviews tend to want to eliminate or minimise economic philosophy offerings, Sen, Arrow and others recognise that unsettling the apparently settled can be an effective way of arousing student interest. Indeed, anecdotal evidence suggests that students are turned off by what they often perceive to be an unquestioning approach to the memorisation of orthodox theory in courses which pay insufficient attention to the role of underlying assumptions and which do too little to draw out the limitations of that theory.

Explaining the relatively poor performance of economics in CEQ (SET) results

Time allocation models apply universally across all faculties. Something more is involved in explaining why economics in particular should consistently score below average in both the USA and Australia. Excessively theoretical courses in an overall program less directly related to vocation may provide much of the explanation, more especially if economics is offered in large, impersonal classes as initially tends to be the case in Australia. Moreover, economics classes are often bifurcated and CEQ results don't tell us whether economics majors are content while liberal arts students in the same courses remain unhappy.

Other factors may also be involved, however. Varoufakis (1998, Chapter 12) notes that the experimental economics literature suggests that economics may make people more selfish. At the least economics staff in universities may be more aware of, and responsive to, monetary incentives than academic staff in general - given that response to incentive is the core of their teaching. This possibility is supported by survey evidence (Blendon et al, 1997) which shows that public perceptions of economic issues do not coincide with those of professional economists. In terms of time allocation, the Guest and Duhs (2000) survey finds that economics staff apply some 36% of their discretionary time to teaching, or about 40%-45% of their total work time, as against 50.7% of time applied to teaching by academic staff in general (Duhs and Duhs, 1994). It may also be that the probability of allocating more time to teaching effort varies inversely with the probability of deriving salary supplements from consulting, and this could be a partial explanation of time allocation decisions. Moreover, there are additional incentive systems favouring research in some (GO8) economics departments, via an additional intra-departmental incentive in favour of "impact research" while remaining dismissive of the prospect of measuring and rewarding "impact teaching".

From the student point of view, economics graduates have entered a job market offering them full employment. In these circumstances many economics students may consider their degree courses to be merely a way station en route to the on-the-job learning which will be their real task once they know the orientation of the particular job they fall into. For them, minimum acceptable academic standards may become average standards. Particularly for them, the perception that some staff are not particularly interested in their teaching is likely to induce reciprocation in kind, as is implicit in the Prosser and Trigwell (1999) message that the way staff approach their teaching is associated with the way students approach their learning.

Measuring teaching quality

In investigating how economics departments evaluate teaching eg by student evaluation, peer evaluation, other (including relevant publications) Becker notes that peer review is used by only 37% of American economics departments at research universities and is in any case assigned only a low weighting. Student evaluation of teaching (SET) data are used almost exclusively not because they are better but because they are cheaper. Moreover, "studies repeatedly show that SET scores explain less than 50% in the variability in student learning and are not highly correlated with other measures of good teaching" (Becker and Watts, 1999, p348). Faculty dissatisfaction with student evaluations of teaching is understandable - given concerns about popularity contests and the manipulation of results by grading policy and the timing of the survey. On the other hand, as Milgrom and Roberts imply, non-evaluation of teaching quality while research is rewarded may lead to still greater problems.

Moreover, "economists must consider other outcome measures that directly affect both their students' persistence [and subject selection] and their own survival as academicians" (Becker, 1997, p1370). Becker further notes (p1363) that while "specific methods better than lecturing and writing on the chalkboard for teaching economics have not been identified with traditional test score comparisons between control and experimental groups, the problem may be with the validity of the tests. Likewise, "many educators continue to overlook the effect of incentives on measured student performance" (p1365) - insofar as students do not take as seriously measurement of their performance in tests which do not count for assessment.

Universities already give rewards for teaching excellence and so believe they can invest available measures with some reliability, and private universities in the USA reflect teaching reputation in individual pay rates. Promotion procedures in Australian universities now make some effort to allow submissions on teaching success to count for greater weight, but many individual teaching quality decisions will continue to be made outside the promotion procedure context. Serious institutionalised effort to improve product quality in what is a $4billion plus industry at least requires categorisation of ongoing individual performance over a period of years into above average, average or below average quality. SET scores, peer assessment, and research on teaching are all potential elements in this process.

The export of tertiary education services is now a major industry (Duhs and Duhs, 1997) and the University of Queensland, for one, has an ambitious plan to increase fee income from $29m in 1998 to $55m in 2003, which represents an 82% increase largely via the intake of international students (UQ 1999). Such change requires higher priority for teaching activities. As the West Report notes (1998, p8) we need an improved capacity to reward outstanding performance and if higher education is to equip an outward-looking, knowledge based economy, the importance of teaching must be recognised.


Disaffection with the teaching of economics remains a problem, more especially in research intensive universities. In turn this implies that extant incentive systems are flawed. If the real and the ideal are to come closer together in terms of teaching outcomes, changes are required in the way individual teachers are rewarded for performance. A prerequisite is to settle on some way(s) of measuring teaching quality.

There is evidence that research output is linked to salary, that teaching loads are linked to research output, that intra-departmental incentives further incline academics to allocate discretionary time away from teaching, and that the more willing measurement and reward of research implies a likely decrease in teaching quality as the "forgotten" academic output. A continuing stream of negative survey results suggest that whatever modification has been made to institutionalised incentive systems so far is not enough to elicit significantly increased teaching effort. Pedagogical improvements are no doubt possible, but the extent to which they are availed of will inevitably be moderated by the incentive structures in place. The essential conclusion of this paper is to agree with Ramsden et al (1994, p5) that "Changing the organisational environment is the single most important way in which university teaching can be improved" - while adding that the single most important organisational change which is required is the strengthening of individual incentive mechanisms to improve the rewards for teaching relative to research. More effort by economists is called for, if the gap that has hitherto existed between staff developers and economics is to be closed, to the benefit of teaching and learning.

So will it happen? Will effective steps be taken to reform incentive structures so as to give increased priority to teaching outcomes? One positive force is the increasing importance of student fees in departmental income, making departmental prosperity increasingly dependent on student satisfaction with teaching quality. Economics departments are presently amongst the most heavily dependent on fee income, yet amongst the worst CEQ performers.

The Australian university system remains subject to heavy governmental regulation however and present pressures - as evidenced in the recent Enterprise Bargaining round - focus on cost cutting rather than on teaching outcomes. Under present governmental policy universities are obliged to take some steps towards commercialising their operations while nonetheless not being at liberty to sell their outputs in a free market. Accordingly the goal of university administrations appears to be the attainment of more flexible workforces (with more short term contracts) (Chomsky, 2000), rather than more committed teachers. Willing concession to the importance of incentive structures appears to be made only in terms of group incentives or sanctions for departments, as in the prospective withholding of 5% of departmental revenue from those departments which don't "meet the criteria for teaching quality assessment". Such group incentives or sanctions in no way change individual incentives in favour of teaching, however (Becker, 1999). As noted by the 1998 Business/Higher Education Round Table, it must be recognised that all such reforms are made more difficult in Australia by the fact that "Australian Universities are generally funded at a level much lower than comparable institutions in comparable overseas countries...The Dearing Report found that British Universities (other than Oxbridge) have budgets approximately 25% higher than Australian counterparts".

Insofar as there is any serious intention of improving teaching outcomes, the real remains well removed from the ideal. Calls for improved teaching incentives and outcomes are but one call in a resource constrained system, and hard nosed commercialisation imperatives appear to be winning the battle. Our results suggest that one thing Australian economics students will learn - more quickly than either the federal government or university administrations - is that Adam Smith had a point when he concluded that teaching standards were unlikely to be significantly improved while individual staff members lacked any significant incentive to upgrade their teaching acts.


  1. We do not explore reasons for the secular improvement in CEQ scores in all fields of study, including economics, over the last few years. However possible explanations might include advances in information technology leading to improved perceptions of teaching quality; and the phenomenon of "grade inflation". The important point for this study is the consistently poor relative performance of economics.


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Contact details: Alan Duhs, University of Queensland
Phone (07) 3365 6574 Fax (07) 3365 7299 Email

Please cite as: Duhs, A. and Guest, R. (2001). Teaching tertiary economics: The real and the ideal. In L. Richardson and J. Lidstone (Eds), Flexible Learning for a Flexible Society, 220-227. Proceedings of ASET-HERDSA 2000 Conference, Toowoomba, Qld, 2-5 July 2000. ASET and HERDSA.

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