Some of you out there might be wondering how to use a novel in an economics class. So what follows are some of my ideas of how you might use it in class beyond simply assigning it the book. I've divided the material up by chapter and provided a mix of ideas for classroom use, discussion questions and possible homework and exam questions.

You'll want to pick and choose among this material. Some of it will be too easy for some students and some will be too hard. So poke around and see what appeals to you.

Please email me at Russ@invisibleheart.com if you have any classroom techniques or questions that have proved useful to you. I would also be interested in seeing any work that students do related to the book.

Chapter One
Opening Day

The first chapter deals with three issues: energy supplies, the potentially degrading pursuit of wealth and the appeal of money that is left lying on the table.

Money on the Table

The money on the table experiment that Sam runs in Chapter One is one that I have done many times on the first day of class. I usually start with a small amount, a quarter or two and work my way up. By the second or third iteration students will be up and out of their seats waiting for the next round to start. I use it as an example of how profit opportunities motivate effort.

Question: How would this game change if I did this experiment every day? (The simplest answer is that people would get to class early in order to sit in the seats that are closer to the front. You put enough money on the table every day and people will sleep overnight or fight to get the good seats. In a market economy, consumer desires are like money on the table. They provoke firms to exert effort to get access to their spending. They spawn innovation.)

Question: How would the game change if I dropped the money in different places around the room. Would people treat me differently if people knew that I was prone to dropping money in their vicinity? Does this explain why people some wealthy people have an entourage of hangers-on who follow them around?

The Pursuit of Wealth

Exercise: Have your students read the Wordsworth poem. (You can find it here: Poet's Corner) and have them do what Laura Silver does with her students: paraphrase the meaning of the opening of the poem. Does immersion in the commercial world deaden our connection with the sublime? Wallace Stevens wrote extraordinary poetry while serving as an executive for an insurance company. Is he the exception that proves the rule? Or is there no rule at all?

Energy Supplies

Sam Gordon tells his students that as oil gets scarcer and scarcer, its price will rise and alternatives will become more attractive. Is this analysis correct? There are two parts to the analysis. The first is that people respond to incentives. Here's one resource on this issue for students to look at:

"Long-term Trends in Energy Prices," in Julian L. Simon, ed., The State of Humanity, Oxford: Blackwell Publishers, 1995, pp. 280-86.

Hausman presents data that shows how in the 19th century, wood became more expensive as a source of energy and Americans started using coal instead. This is consistent with Sam's story.

But despite the non-renewable nature of coal, the increase in coal usage, which should have depleted the fixed stock of coal supplies seemed to have little effect on its price. In fact, in the first half of the nineteenth century, US coal use surged yet price stayed roughly constant in real terms. Similarly, over much of the twentieth century, the price of gasoline, another non-renewable energy source, fell steadily.

How do we reconcile these facts? Just thinking about this question is good for students. Is the US too small a part of the world energy market to effect the price? Is the supply curve horizontal? Or is there a rising supply curve at a point in time that falls steadily with technological innovation that drives down extraction costs. There are a number of possible answers, but Julian Simon and others raise the possibility that it may not be a productive assumption to assume that the supply of coal and oil is fixed. So Sam may be right that we'll never use up all the oil in the world. But the reason may be not that it's inefficient to do so because of the cost, but because we've figured out ways to extract and use what's left so cheaply that what's left in the ground can essentially last forever. That may not turn out to be true, but it's interesting to think about and the data are not inconsistent with that hypothesis.

Chapter Three
Danger and Delight

This chapter is a discussion between Sam and Laura about how we as a society and as individuals should deal with risk.

When I teach this topic, I usually start out with a very benign example of risk, the risk of an airline losing my luggage.

What should be the risk of a lost bag at the airport? Should the risk be zero?

How much care do we want the airline to take in making sure our bags don't get lost? Should there be a mandated standard, or is it better that some airlines take more care than others?

Then I ask the students to consider the impact of a fine of $1 million dollars for losing a bag. What would happen to the number of lost bags? I presume it would go down. Is this a victory for travelers?

But economics suggests that the costs of reducing the risk to nearly zero of a lost bag would be very expensive. Ticket prices would go up and travel would presumably take longer. This possibility, that stricter penalties for lost bags could be bad for travelers, opens up the possibility that airlines could take TOO MUCH CARE in worrying about my luggage. This seems inconceivable to students and is one of the great contributions of the economic way of thinking.

A less benign example is the war against terrorism. We all understand (and Sam makes this point when he talks about car safety) that there is an easy way to reduce the danger from airline terrorism to zero and that is not to fly. Yet most of us continue to fly. Are we being irrational? Again, the economic way of thinking suggests that there is an optimal level of risk that is not zero.

Here are some additional discussion questions that take students into more controversial and provocative areas:

Should it be against the law to sell a dangerous product?

What is a dangerous product?

Should it be against the law to use or consume a dangerous product?

Should we have mandatory seat belts?

Airbags?

Is there a cost of mandatory safety devices for cars?

Should we ban smoking?

Should we have an FDA?

What is the cost of the FDA?

What should be our general philosophy toward risk--that the government should have the responsibility to protect us or that we should have the responsibility to protect ourselves? How would you decide between these two viewpoints?

Some exercises/homework for students

One thing that is useful for students is to get a feel for the long-run trends in safety and risk in America. Most people think the world is a more dangerous place than it was 100 years ago. Food additives, pollution, more cars and so on. Yet the world is in most dimensions dramatically safer than it was at any time in the past. Two easy measures of this are life expectancy and on-the-job injuries. So you might ask students to go look up life expectancy and job safety. Both have been steadily improving over the last 100 years.

The life expectancy numbers provide an interesting lesson in statistics. There are really two measures, general life expectancy and life expectancy after surviving the first year. The latter measure cleans out the dramatic improvements in infant mortality over the last century. But even those numbers show healthy gains.

The job safety numbers also have some interesting statistical lessons along with some economic ones. On the statistical side, part of the reason that there are fewer injuries/fatalities on the job is that the American work force has been transformed over the past century. A much smaller proportion of the work force is in the most dangerous sectors such as mining, manufacturing and farming. But even within those sectors, there has been dramatic improvement. Having students dig up those numbers, think about them and write about them is a great exercise.