Economics 101 Students get firsthand lessons from financial crisis
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By PATRICK McARDLE Staff Writer - Published: October 19, 2008
Vermont college professors say the tough economic lessons of the past six weeks are fodder for scintillating discussions in the classroom.
Middlebury College professor of monetary economics Scott Pardee and his colleagues don't normally attract much attention, but these days they're getting rock star treatment. Their expertise is in high demand and they have hosted several well-attended presentations on the financial crisis.
"For the first time since I've been here, everyone recognizes me on the campus, not just students but other faculty members. People were coming up to me and saying they enjoyed the presentation or asking questions about the presentation. … The interest in Vermont has been almost overwhelming," Pardee said.
Castleton State College economics professor Judith Robinson said she too had noted a shift.
"This has been a boon for economics professors. Everyone wants to know what we have to say," she said.
Geoffrey Pigman, a political economist at Bennington College, is teaching a theory class this semester – the "Political fielding questions about the rescue plan proposed by Treasury Secretary Henry Paulson.
In the spring, Pigman will teach an advanced seminar called "Governing Firms and Financial Markets." That course asks questions about how do we as a society structure the way the markets function? What happens when they go wrong? How do we fix it?," he said.
Pigman said the course was inspired, in part by the Enron and WorldCom scandals, which he has nicknamed "Kleptogate."
"Now I'm thinking that before the coming spring, I may have to look hard at the whole content of the course. … There won't be a lot of writings on (the current economic crisis) yet so it should be a real challenge," he said.
Pigman also anticipates that interest in the course, which is usually at about half-capacity, will jump.
Professor Arthur Woolf, who teaches economics at the University of Vermont, said he spends about the first 10 minutes of his "Principles of Macroeconomics" course explaining the latest developments in the economy to students who are learning the basics.
The more advanced conversations take place in his class, "The Election and the Economy." Woolf expected the sub-prime mortgage problem would be part of the course, but discussion of the nation's economic straits occupies a bigger percentage of class time than he anticipated.
"I think the students are more interested in this than maybe any other subject I've taught. I believe that they sense that's what's happening right now is unprecedented, even though they're very young," he said.
Another UVM professor, James Gatti, who teaches at the school of business administration, said the economic crisis hadn't really changed his classes much this semester because his students tend to be business majors who already have a strong interest in following current events.
"We talk about it but we don't talk about it constantly. My students are already required to read the Wall Street Journal. … There's probably more discussion of current events than usual. When we get to the discussion about financial regulations, the news is going to be full of fresh and current examples for us to discuss," he said.
Robinson said her students, who tend to be new to economics, have launched lively discussions.
"I go into class and say, 'OK, I was planning to teach about thus and thus. But I'm not going to. How would you like to know why the stock market is acting like it is?' And I go from there," she said.
Pardee said he had "completely reshaped" the senior seminar he teaches in order to respond to the economic crisis. Six students have been assigned to give presentations on the housing market and guest speakers will include a member of the Federal Reserve Bank in Boston.
Pardee said in one exercise five students were given the assets of a bank on a spread sheet and three other students represented outside financial institutions that might be interested in buying assets if prices dropped low enough.
Students found that even when the Treasury Department came in to help, most of the mock-banks run by the five students failed because the value of their assets had dropped.
While Bennington College is renowned for its liberal arts programs, Pigman said recently he has seen more student interest in finance. Last year, Oppenheimer & Co., a New York City-based investment firm, allowed Bennington students to create fantasy investor portfolios based on its equity analysts' reports. Pigman said they will probably conduct a similar exercise this year, though he predicts the state of the market will lead to very different results.
Hugh Marble III, a finance professor at UVM, said he was one of the teachers who had not altered many of his lectures because of what's happening to the economy. Marble said there were so many things students needed to learn in his financial management courses that he didn't have much time to spare.
"There's always something dramatic going on in the news and there's a limit to how much time I can devote in class to that," he said.
However, Marble said students are getting a lesson in the importance of diversification that will likely serve them well.
"A lot of the messages we're seeing from this is not that (people promoting diversification of investments) were wrong but that they were being ignored or it was not seen as the 'next hot thing,'" he said. "So part of what happened is they got cast aside. The students are seeing that there are real consequences to ignoring the ideas and theories they're learning in class."
Joanne Pencak, an assistant professor of accounting at Castleton, said she has seen a few "silver linings" to the financial turmoil: For one, it makes great fodder for classroom discussion.
"The students are very engaged. They want to know how all this happened and how they can make it better," she said. Pencak said it's also possible that the meltdown on Wall Street will create opportunities for accounting majors who want to work in regulatory positions.
According to Pardee, the most profound change he has seen among Middlebury students has to do with their own futures: They are worried about their job prospects after graduation.
"Middlebury has close ties to some financial institutions and we've been able to place students in the past but those jobs have dried up. Some of our recent alums have lost jobs or there's uncertainty about their future," he said.
However, Pardee believes the liberal arts education students receive at Middlebury will allow them to "handle problems, dig into issues and deal with them."
Pencak said some of her students have more immediate worries.
"Some of the students are concerned that they might not be able to finish school because of the lack of available loans. I know two seniors who are very concerned about how they will pay for their next semester. They may have to take a semester off to work and save some money," she said.
The current turmoil may impact students' financial aid packages and affect their job prospects, but Marble doesn't think it will change the way finance and business are taught.
Robinson has a more pragmatic approach.
"It depends on how it turns out. At best, it may change the way we think about real estate, regulation, the role of banks. Everyone is talking about whether this means we need more regulation but I think that's the wrong question. We should be looking at what kind of regulation we need," she said.
Contact Patrick McArdle at patrick.mcardle@rutlandherald.com.
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