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Understanding Students’ Misunderstanding in Economics
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March 2003
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UNDERSTANDING STUDENTS' MISUNDERSTANDING IN ECONOMICS
Tommy Tang School of Economics and Finance Queensland University of Technology Brisbane
Many academics, including economics educators. are sceptical about the role of educational research. which they believe is often divorced from their day-te-day teaching practice. If economic education research is to have an impacteD teaching practices, it should be empirical and contextualised, i.e. buiIton sound knowledge of student learning products derived from experiential data in particular contexts. The present study is an attempt in this direction and aims to investigate how commencing students in economics understand the fundamental economic concept of 'allocative efficiency'.
1. INTRODUCTION Whal is the mosl worthwhile knowledge Ihal our economics majors should learn? In response to this question, Hansen (Hansen, i990; Hansen, 2000) proposed a list of five proficiencies: (I) Gaining access to existing knowledge, (2 Displaying command of existing knowledge, (3) Displaying ability to draw out existing knowledge, (4) Vlilising existing knowledge to explore economic issues, and (5) Creating new knowledge by identifying economic problems and formulating a research study. The first three profidencies in the list represent acquisition and reproduction of knowledge, and the iast two focus on knowledge transfer and creation. Do our economics graduates possess the higher order Ihinking and analylicai abilities? The Reserve Bank and other prospective employers in Australia are asked in a survey (AVCC, 1992) to describe the desirable qualities of honours economics students they are seeking. These include: 'wide general ability', 'to make decisions on the basis of partial information' (p.3l). They also add Ihat: 'the person who wanls to do research only but who cannot link Iheory wilh real world issues' is unsuitable." (p.3l)
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The A vee document later reports that 'It is the perception of some employers that universities seldom teach students to make these connections, that courses are out-of-date and not relevant to the issues of the decade, and that universities should teach more interesting economics with immediate policy relevance.' (p.32) This suggests that in the eyes of employers our economics majors do not possess the higher order abilities to function effectively in real world work situations. Consistent with these observations, in two separate studies, Australian undergraduate economics students (Siegfried and Round, 1994), and American undergraduate and graduate economics students (Hansen, 2000) identify the inability to apply and transfer learning from the academic to the real life contexts as the weakest area in their learning, and these students want more context and realistic applications added into theories to 'illuminate' their practical values. This concern is echoed by economics educators and researchers, who in a number of research studies carried out in Europe and Asia, found that the formal knowledge acquired in the academic context tends to become inert in real life (Voss, Blais el al., 1986; Marton, 1988; Dahlgren, 1997; Pong 1999; Walstad, 2000). For example, students who have passed Economics I, still believe it is the inherent value residing in a product that determines its price (Dahlgren, 1997). This leads economics educators to question the effectiveness of current methods of economics instruction: "While most student can achieve success on traditional criteria such as passing tests and examinations, the question remains as to how many of them are able to engage with the material they are studying ..." (Parry and Reynoldsen, 2001). In anotherstudy comparing the use ofanalytical skills and economics knowledge in the solving of economics problems, Voss and his colleagues (Voss, Blais et al., 1986) found that students with formal training in introductory economics (the novice) and those without (the naIve), demonstrated similar economics knowledge and informal reasoning skills. The novice performed better than the naIve only on questions involving the use of technical knowledge. In the case of non-technical economic issues that provided opportunities for the novice to demonstrate economic knowledge acquired in formal training, no such knowledge transfer took place, and their answers were not qualitatively superior to the naIve. This led the authors to conclude that: ..... (I)nstruction in introductory economics courses is oriented toward learn ing the subject matter ofeconomics requisite to majoring in economics rather than learning about the intricacies of economic operations found in everyday life." (p295)
Students might amass sufficient basic economic knowledge to perform technical analysis in examinations in an academic context, but fail to employ it, and often lapse into lay misconceptions to interpret and explain economic phenomena in real life. A gap exists between what an economics student learns at university and the economic way of thinking in the real world.
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2. OBJECTIVE OF THE STUDY The brief review of literature above suggests that, to these economics students, the academic world in which they learn is separate from the real world in which they function. The learning in the academic world has little impact on their thinking in the other. Iflearning is about developing new ways of understanding the real world, it is most important to investigate the barriers to students' conceptual development to build up that link. In student learning research, students are found to possess multiple conceptions of a concept, and they can shift from one conception to another in different contexts to explain a phenomenon (Pong, 1999). This leads educational researchers to propose that learning, as a process of conceptual development, is not a simple process of taking in a new conception, and replacing the old conception with the new one. By implication, effective teaching is more than transmission of knowledge from the teacher to students. To facilitate conceptual development, the teacher therefore needs to identify students' prior understanding and misconceptions about a topic and deal with them explicitly to help students see for themselves inconsistency and contradiction arising out of them. Only then can the student appreciate the link between the academic world and the real world and that the two are, indeed, the same world. Diagnostic assessment provides such important feedback about learning - what misconceptions students possess, what rangeoflearning approaches our teaching entails. Therefore ,diagnostic assessment. is an integral part of teaching. The objective ofthis study is to carry out such a diagnosis ofleaming outcomes by investigating how commencing students in economics understand the fundamental economic concept of' allocative efficiency' . What prompted this investigation was the observation, when marking examination scripts, that serious misunderstandings about this fundamental concept repeatedly arose. Moreover, some interesting patterns emerged from students' answers, which suggested that these misunderstandings were far from irregular, and that students understood the concept in distinct but related ways. As a result, it was decided to carry out a more detailed analysis of the examination scripts to map their misunderstandings and find out how and why students dev.elop them. In the process, it is hoped that this analysis will provide valuable information that will enable us to improve teaching and learning of the topic in future. 3. THEDATA Introductory economics is offered at Queensland University ofTechnology (QUT) as two units (Economics I and 2). The course is organised in such a way that both microeconomics and macroeconomics are taught in Economics 1, and dealt with in greater depth in Economics 2.In this study, we analysed students' written responses to one question in the Economics 2 final examination in semester 2,1999. In the examination, students are required to answer 30 multiple-choice questions (30%), two structured short-answer questions (40%) and one essay question (30%). The question ofinterest to this study is one ofthe two structured questions (Appendix I). The question is about a competitive poultry market, which has been taken over by one firm. In part (a) of the question, students were asked to locate the equilibrium
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price and output in the competitive market before the takeover, and in part (b), to explain if this equilibrium output also represents the allocatively efficient output. This is followed by parts (c) and (d), which focus on the impact of the takeover on the equilibrium price, output, consumer and producer surpluses in the monopolised market. In part (e), students are asked to explain whether or not equilibrium and allocative efficiency are the same or different concepts, based on their previous answers. The raw data are written answers to parts (b) and (e), taken from the first 90 examination scripts in alphabetical order according to students' surnames. Their responses in other parts of the question were utilised only when clarification was needed.
3.1 Data analysis Stage one of data analysis involved reading all written answers several times, focusing on students' interpretation of allocative efficiency to uncover similarities and differences in the meaning they attached to the concept. A number of distinct meanings of the concept were identified. Written statements signifying the same meaning were pooled together. Each statement was then compared with others in the same pool, and contrasted with the statements in other pools. The purpose ofthis exercise was to unambiguously delimit the meaning and structure of each conceptualisation of the concept. This process resulted in six non-overlapping descriptive categories. These categories. that emerged from the raw data, constitute the outcome space of students' conceptualisation of the concept. Appendix 2 diagrammatically presents the outcome space, which highlights the different critical aspects students focused on in their conceptualisations, and the relation of each critical aspect to the others.' In the second stage of categorisation, the categories were taken back to the raw data, and students' written statements were classified according to which of these six categories they belong. This classification process was conducted independently by two lecturers, with substantial experience in the teaching of introductory economics. Their classifications were then compared, and differences of opinion discussed. After discussion, of all the statements considered, a total of 126 statements were identically categorised by the two researchers (an agreement rate of 88%). The results to be discussed in this paper are based on these successfully categorised statements. The validity and generalisability of the six categories is essentially based upon a sense of completeness in the understanding of students' perceptions of the phenomenon and, in part, is demonstrated by the extent of interjudge agreement. It must be pointed out that when analysing and interpreting the scripts, the esearchers
tried as far as possible to 'bracket' their pre-conceptions about the possible interpretations of the concept. The six conceptions identified in this study were not imposed by the researchers, nor obtained from any theoretical model, rather they emerged from the raw data. The schematic representatipn of the outcome space in Appendix 2 was developed after completion of analysis and classification of data.
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4, RESULTS The meanings and structures of student conceptualisations of allocative efficiency and the causes of misconceptions are discussed below, Notice that although the concept of 'allocative efficiency' is only taught and learned in the academic context, the students have had previous encounters with the terms 'allocation' and 'efficiency' in their everyday life. Therefore, the misconceptions identified could be a result oftheir lay interpretations ofthe terms as well as the way the concept has been taught and learned.
5. THE SIX STUDENT CONCEPTIONS OF ALLOCATIVE EFFICIENCY Category 1: A Consumer Perspective This is not a fully expressed conception in the data. Fragments of this conception appear in students' answers where students distort the textbook definition of 'social welfare' by equating it with their everyday notion of' social welfare' as 'consumer welfare', That is, 'consumer welfare' and 'social welfare' are erroneously taken as equivalent. According to this conception, market efficiency is determined from the perspective of consumers; i.e. the market is efficient, or the resource is efficiently allocated, when consumer welfare is maximised. Example: ' ... Allocative efficiency ... does happen in a PC [perfectly competitive} market. The equilibrium ..,also indicates efficiency. Consumers are getting a max surplus at Qe [equilibrium output] ....' (AJC) Category 2: A Profit Perspective This conception has its focus on the profit of the firm. From a profit perspective, ifthe firm can utilise its resources 'efficiently', then it can maximise its profit, and the firm is therefore said to have achieved allocative efficiency. The lay notion of 'efficiency' in running a business (to utilise its resources to maximise its profit) is evident in this conceptualisation of 'allocative efficiency'. Example: , ...Allocative efficiency refers to whether any resources are wasted and can be moved into other areas to make a greater profit. ... As in the case of the monopolist poultry farmer ,all the available resources were being maximised and could not have been used more efficiently elsewhere to make a greater profit. ".' (AB2) Category 3: A Cost Perspective Here the focus is still on the firm, but now it is the firm's average cost of production that is focused upon, To students holding this conception, allocative efficiency is achieved if the firm can efficiently utilise its resources to minimise average production cost. In the data, this is a commonly held misconception. It represents a one-sided view (the cost side of production) of the concept, without considering the other side (the value) of production. This conception also represents the mirror
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image of the consumer perspective discussed earlier, which considers only the value side of production. Example: 'No, [equilibrium and allocative efficiency are1different concepts because equilibrium is where Sand D is equal and allocative efficiency is where inputs are used in a technologically efficient way to give the lowest cost, but in monopoly there is always resource wastage of some degree.' (RSC) Category 4: A Distribution Perspective
In the case of the previous two conceptions, allocative efficiency is conceptualised in various ways to describe the 'efficiency' of the firm. In this instance, the focus has shifted from the firm to the market. According to a distribution perspective, the market is efficient if it is equitable, which occurs when the social surplus of
production is equally shared between producers and consumers. Like the consumer perspective, it originates from a strongly held view about welfare economics by these students (i.e. what constitutes a fair market outcome), and is a normative conceptualisation of a positive economic concept. Example: 'Yes. In a perfectly competitive industry, this is the allocatively efficient output. Producers charge the price, Pe ... see at Qe [where] consumer and producer surplus is also shared equally.' (IRD) Category 5: An Equilibrium Perspective Here a different aspect of the market is focused upon - the equality of demand and supply. From an equilibrium perspective, efficiency is understood as the function of the price mechanism to clear the market, reSUlting in neither shortages nor surpluses. The textbook analysis is: In a competitive market, at the level of output where demand and supply intersect, the market is in equilibrium; at this level of
output, allocative efficiency also occurs since net social welfare is maximised, not because the market is cleared. However,students holding the equilibrium perspective incorrectly take the equality of demand and supply as the condition for equilibrium and allocative efficiency, without conceptually differentiating the two concepts. This mistake arises from students' fixation on the demand/supply cross (discussed in the competitive model) as the ideal market outcome in their analysis of other market structures. Example: 'Yes, the equilibrium output is the allocative efficiency output. This is because there is not surplus and no sholtage due to the demand for poultry and supply of poultry being exactly the same at the equilibrium point.' (PRC) Category 6: A Social Surplus Perspective
Economists define allocative efficiency as a market outcome where the net social welfare (or social surplus) of production is maximised. Analytically, this occurs at the output level where marginal social cost equals marginal social benefit. At any other level ofoutput, there will be a reduction of social surplus (or deadweight loss).
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This conception, like the last two conceptions, focuses on the relation between production and consumption. But it is a different aspect of this relation (viz. the maximisation of social surplus) that is focused on here. This conception is illustrated in the following example: 'In a perfectly competitive market equilibrium output is the allocatively efficient output. This is because in a perfectly competitive market, Dm Marginal Benefit, 8m = Marginal Revenue. In this market, consumer and producer surplus is maximised and there is no deadweight loss.' (LB)
=
6, STRUCTURAL AND MEANING ASPECT OF THE LEARNING OUTCOME SPACE Table I below summarises the structures and meanings of the six categories and causes ofmisconceptions. (N in the table denotes the number ofoccurrences ofeach conception that were agreed upon by the two independent judges,)
TABLE 1 STRUCTURES AND MEANINGS OF THE SIX CONCEPTUALISAnONS Structures of conceptualisations
Meanings of conceptualisations
Causes of misconceptions
N
Focusing on consumer welfare (Consumer Perspective)
Maximisation of consumer welfare
Equating the concept of 'social welfare' with 'consumer welfare'.
5
Focusing on producer's profit (Profit Perspective)
Maximisation of firm's profit
15 Lay conception of 'efficiency' as 'efficiency of the firm in making profit'.
Focusing on cost of production' (Cost Perspective)
Minimisation of ATC
Lay concept of 'efficiency' as 'technical efficiency' .
30
Focusing on welfare distribution (Equity Perspecti've)
Equal distribution of social surplus of production
Distorting concept of 'efficiency' with the notion of 'equality' or 'equity' .
29
Focusing on market equilibrium (Equilibrium Perspective)
Clearing of the market
Distorting the concept of efficiency with the concept of 'equilibrium',
6
Focusing on social surplus of production (Social Surplus Perspective)
Maximisation of social surplus of production
(Textbook conception)
41
The range of categories obtained from this type of empirical study is known as the 'outcome space', which describes the variations in outcomes of learning. Focusing on the structural aspect, the outcomes of learning can be further distinguished according to whether the student focuses on one, or both sides of the process of exchange (Table 2.). The first three conceptions are results of student
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focus on only the consumer (category I) or producer (categories 2 and 3). The last three conceptions have their focuses on the relations between production and consumption, with categories 4 and 5 focusing on the wrong critical aspects ofthe market. Only the Social Surplus Perspective (category 6) has the correct focus. TABLE 2 STRUCTURAL ASPECT OF OUTCOME SPACE Categories
Structural Differences
(1) Consumer Perspective
Only one side of exchange considered.
(2) Profit Perspective (3) Cost Perspective
(4) Equity Perspective
Both sides of exchange considered; incorrect focusing.
(5) Equilibrium Perspective
(6) Social Surplus Perspective
Both sides of exchange considered; correct focusing.
In earlier studies of learning outcomes in economics, similar structural differences in the outcome space were observed. For example, in the study by Dahlgren (1997), the conception that the price of a commodity is determined by its inherent value or by its cost of production is an example of one-sided conceptualisation of the concept of price.
6.1 Multiple Conceptions by a Given Student Besides the six conceptualisations, a second crucial finding of this study is the existence ofmultiple conceptions,occurring in the case of20 students. These students can shift comfortably from one conception to another in their explanation. The shift can occur within the same answer (intra-contextual shift) or between answers to different parts of the question (inter-eontextual shift) (Pong, 1999). We illustrate these conception shifts below, and will discuss their implications in a later section. 6.2 Inter-contextual shift In the example below, the student (IRD) uses the Distribution Perspective ('surplus ... shared equally') of the concept in his answerto part (b),and spontaneously shifts to the Social Surplus Perspective ('existence of ... deadweight loss') in part (e). 'Yes. In a PC [i.e. perfectly competitive] industry, this [i.e. the equilibrium output] is the allocative efficiency output. Producers charge the price, Pe ... They sell at Qe. Consumer and producer surplus is also shared equally.' [Distribution Perspective] 'Equilibrium and allocative efficiency are definitely not the same concepts. As shown ... the monopoly is in equilibrium, i.e. MR=MC. However it is not allocative efficiency, as shown by the existence of a loss of welfare as dead weight loss.' [Social Surplus Perspective] (IRD)
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6.3 Intra-contextual shift In the fo\lowing example, the Equilibrium Perspective is manifest in part (b). But at the beginning of part (e), the student shifts to the Social Surplus Perspective (inter-contextual shift), then immediately shifts to the Cost Perspective, before fina\ly going back to the Equilibrium Perspective (intra-contextual shift). 'Yes it is the a\locative efficiency output ... in this graph supply produces exactly where Demand want supply to produce. Therefore efficiency S=D and MC=MR'. [Equilibrium Perspective] 'The equilibrium and a\locative efficiency are different concepts. Because in monopoly equilibrium, inefficiency exists (as mentioned above) due to MB > MC [Social Surplus Perspective] therefore the resources used is not employed efficiently and can be employed alternatively at a lower cost [Cost Perspective]. Therefore leads to inefficiency.in monopoly. It is also due to the fact that monopoly is not producing at capacity [Cost PersPective], it reduces qty produced to increase price. Therefore what is produced is below Demand. [Equilibrium Perspective]' (Ve) 7, DISCUSSION - UNDERSTANDING MISUNDERSTANDING This study expands our awareness of students' different ways of understanding an economic concept. By teasing out the meanings and structures of their conceptualisations, it enables us to better understand students' misconceptions from their perspective. Two examples will be discussed. Example 1: Self-contradiction? In the fo\lowing answer, what has puzzled the author most, was that the student drew two obviously self-contradictory conclusions in the same answer. 'Based on the above answers [in part (c) and (d)] it would indicate that equilibrium and a\locative efficiency are different concepts. As in the case of the monopolist poultry farmer ,all the available resources were being maximised and could not have been used more efficiently elsewhere to make a greater profit. However, the market was not in equilibrium as the market structure was not perfectly competitive where quantity demanded by consumers equals the quantity supplied by producers. As in this monopoly demands were not properly met, in effect, an inefficient a\location of resources was occurring. Yes allocative efficiency is the same as equilibrium.' At the beginning, he argues that equilibrium and a\locative efficiency are different concepts, but a few lines later, contradicts himself by saying that the two are in fact the same. When first reading it, we dismissed it as a nonsensical and difficult-to-understand statement. However, on further analysis, by following his shift in conceptions, both of his conclusions become more intelligible and begin to
make sense!
The initial conclusion is based on the Profit Perspective. Since the monopolist has maximised his profit, allocative efficiency is therefore achieved. (' As in the
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case of the monopolist poultry farmer, all the available resources were being maximised and could not have been used more efficiently elsewhere to make a greater profit.') However, the market; as seen by the student, is not in equilibrium, as monopoly output is less than competitive output (where D= S). ('The market was not in equilibrium as the market structure was not perfectly competitive where quantity demanded by consumers equals the quantity supplied by producers.') Therefore, the observation that the market is allocatively efficient but not in equilibrium leads him to conclude 'logically' that allocative efficiency and equilibrium are different concepts. But the moment he recognises that the competitive equilibrium output (i.e. where D = S) is not achieved in monopoly, he begins to shift to the Equilibrium Perspective, evidenced by his remark that 'in monopoly, demands were not properly met, in effect an inefficient allocation of resources was occurring'. Now, he discerns that competitive equilibrium is not realised in the monopolised market, and from the Equilibrium Perspective, the market is 'inefficient'. Thus, he comes to a second 'logical' conclusion that equilibrium and allocative efficiency are the same concept. Example 2: Concept Distortion In this example, we will discuss how some students distort the concept of deadweight loss (DWL). DWL is a key concept used to analyse non-optimal (or inefficient) allocation ofresources. The DWL in an imperfect market is graphically represented by the area (usually a triangle) bound by the marginal cost curve, marginal benefit curve and the equilibrium output, which represents a welfare loss to the society. In the examination, parts (c) and (d) of the question require students to describe the impacts of monopolisation in terms of consumer surplus, producer surplus and DWL. These two parts were, in general, well answered, indicating that the majority of students have acquired the concept of DWL, and have no difficulty in correctly identifying the DWL 'triangle' as an explanation of the allocative inefficiency of a monopoly. From this, one may be led to think that the students have properly understood the concept of DWL. However, students' written responses in part (e) reveal misinterpretations of the concept of DWL, reflecting their misconceptions of allocative efficiency. Three such misinterpretations of the concept of DWL are identified and illustrated below. DWL related to profit 'Because the [monopoly Jfirm controls the market,equilibrium and allocative efficiency are different. Even though profits might be made when MR=MC there is still the dead weight loss, and the producers aren't maximising profits.' (AB I) The student (ABI) understands DWL from the firm's angle: There is a deadweight loss to the firm since 'the producers aren't maximising profits'. His interpretation of DWL clearly implies the Profit Perspective.
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DWL related to equilibrium 'The output in (a) is also the allocatively efficient output since there is no loss to society. All consumer demand has been supplied and there is no shortage or wastage of output at this quantity.' (CC) In this case, the student interprets the deadweight loss ('loss to society') as a waste due to the existence of shortage or surplus (the student uses 'wastage' for surplus in his answer) of output. It is an interpretation from the Equilibrium Perspective. DWL related to cost ofproduction ' ... In monopoly even though the market (the firm) is in equilibrium, allneative efficiency is not achieved. It is not achieved because ofdeadweight loss ... because ofthe inefficient practises, an [sic] disincentive to economise., (HJe)
Here, the student holds a Cost Perspective and DWL is interpreted as resulting from the firm's 'inefficient practises' ,and 'disincentive toeconomise' and resulting in the firm producing at above the minimum average total cost. These two examples show that if the student has developed a misconception about a concept or a phenomenon, the student is capable ofselecting an interpretation (as in Example I) or,distorting other aspects ofthe phenomenon (as in Example 2) to make them compatible with their perspective. Therefore;to the student concerned, an explanation containing misconceptions can appear logical and coherent. As such, misconceptions can be resistant to change.
8, CONCLUSION: IMPLICATIONS FOR TEACHING AND ECONOMIC EDUCATION RESEARCH This study shows that a concept or phenomenon is capable of being understood in a limited number ofdistinct ways, and suggests causes ofstudent misunderstanding by 'putting ourselves in the frame of mind of the students' (Hounsell, 1997, p.242). The empirical data also reveal that the student can focus on several aspects of the phenomenon and, as a result, take on board multiple conceptions at the same time, and not be conscious ofany inconsistency. These students can comfortably shift between incompatible conceptions by selecting and distorting aspects of the phenomenon to fit with their framework (Svensson, 1989). It also illustrates why statements, self-
contradictory and inconsistent to a lecturer, may have their 'internal logic' for a student. This explains why misconceptions are difficult to change. When confronted with student misunderstanding, it is not uncommon for a )ecturerto say to a student: 'You jiIst don't understand it!' The message to emerge from this study is that, while it is not incorrect to say that they do not understand, educationally it is more important to realise that student understanding manifests itself in different ways, and viewed from students' perspectives, their arguments sometimes do 'make sense'. The essence of good teaching is not to brush aside students' incorrect conceptualisations of a concept, rendering them irrelevant, and tore-iterate the correct one in order to replace the misconceived ideas. Our analysis
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of student misunderstanding strongly suggests that the incorrectly focused aspect is important, in the sense that it provides us with a window to their minds, allowing us to better understand what aspect of the concept they focus on (structure of the concept), and their conceptualisation of the concept (meaning of the concept). In the process, knowledge gleaned from student misunderstanding can provide a starting point for the design of appropriate learning support to facilitate students' conceptual development. Elsewhere I have pointed out that much ofcurrent research effort on economics education utilised econometric modelling (Tang, 2001). Using the production function modelling technique, the researcher firstly selects the input factors that are believed to determine students' learning in economics. The inputs cbosen can be based on explicit psychological theory , or arbitrary (Becker and Walstad, 1987). The data on the input variables are usually obtained from student records and/or questionnaire surveys administered at the beginning of the course. The output data are usually their scores in examinations. Regression analysis is then carried out to determine the coefficients of the independent variables and their significance, followed by interpretation of those numbers. Once a statistically significant relationship is obtained, the phenomenon is said to be explained. Like the physical sciences, the established relationship has a generalised status, that is, it applies across universities or courses. However, these studies often provide inconsistent findings (Shanahan and Mciver, 1997) and have little orno impact on improvement of teaching in economics as evident by the attitudinal· inertia of economics educators (Siegfried, Saunders el al., 1996). As a result, a lot of academics, including economics educators, are sceptical about the role ofeducational research, which they believe is often divorced from their day-to-day teaching practice. Marton and Ramsden (1988) argue that it has a lot to do with the fact that many traditional educational research studies have been based on theoretical frameworks divorced from students' learning experience in context. SUbsequently, as research was conducted out of the aClUallearning environment, it asked the wrong questions by seeking general solutions to student learning problems that are necessarily contextualised. For example, is computerised-assisted learning better than teacher-centred learning? Is an activity-based teaching approach better than an expository teaching approach? Is group work more effective than individual work? Is small group teaChing better than large group teaching? Should note-taking skills be explicitly taught as a generic learning 'skill? These questions cannot be answered without referring to the contextual elements - what is being taught and assessed, how the students make sense of, and handle, the learning task. To conclude, economic education research, if it is to have impact on teaching practices, should be empirical and contextualised, i.e. built on sound knowledge of student learning products derived from experiential data. The present study is an attempt in this direction. ACKNOWLEDGEMENT I thank Bill Heath for his assistance with categorisation of the written statements, and his critical comments.
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APPENDIX I QUESTION 31 (ECONOMICS 2 FINAL EXAMINATION, SEMESTER 2 1999)
The poultry market is perfectly competitive. The diagram below shows the market demand (Dm)for and market supply (Sm) ofpoultry. Price ($)
Sm
Dm _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Output
(a) Copy the diagram on to your exam answer booklet, and in it indicate the equilibrium market price and output. (2 marks) (b) Is the equilibrium output in (a) also the allocative efficient output? Explain briefly. (2 marks)
Suppose all poultry farms were taken over by a firm and as a result this firm has become the SOLE producer ofpoultry meats. (c) Assuming no change in cost or demand conditions, derive the profit maximisation price and output of the firm on a separate diagram. Explain your answer. (3 marks) (d) Using the concepts of consumer and producer surplus, illustrate and explain the impacts of the takeover on the welfare of consumers, producers, and society as a whole. (3 marks) (e) Based on the above answers, would you say equilibrium and allocative efficiency are the same or different concepts? Explain. (3 marks) (I) Suggest one pricing strategy by which the firm can increase its profit and maximise net social welfare at the same time. Illustrate and explain your answer. (3 marks) TOTAL MARKS FOR THIS QUESTION = 16 MARKS
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APPENDIX 2 CRITICAL ASPECTS OF PRODUCTION AND EXCHANGE
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REFERENCES AVCC (1992), Academic Standards in Higher Education: Report ofthe Australian Vice-Chancellors' Committee: Report of the Academic Standards Panel, Economics, Canberra. Becker, W,E. and W. B. Walstad (1987), Econometric Modelling in Economic Education Research, Statistical methods in Economic Education Research, W.E. Becker and W .B, Walstad, Boston, Kluwer Nijhoff Publishing: 1-18. Dahlgren, L.a. (1997), Learning Conceptions and Outcomes. The Experience of Learning (second edition), N, Entwistle, Scottish Academic Press: 23-38. Hansen, W L. (1990), "What Knowledge Is Most Worth Knowing?" Uberal Education 76(4): 22-25. Hansen, W.L. (2000),"Expected Proficiencies for Undergraduate Economics Majors" , Keynote Speech, Scholarship of Teaching Economics Conference, July 13-14, 2000, University of Melbourne. Marton,F. (1 988),Describing and Improving Leaming, Learning Styles and Learning Strategies, R. R. Schmeck, New York, Plenum Press. Marton, F, and P, Ramsden (1988), What Does it Take to Improve Teaching? Improving Learning - New Perspectives, P.Ramsden, Kogan Page: 268-286. Parry, G. and C. Reynoldsen (2001), "Economics in the MBA Curriculum Encouraging Higher Level Engagement: an Update", Paper presented at the 30th Conference of Economists, Perth, Sept 23-26, 2001, Pong, W.Y. (1999), "The Dynamics of Awareness", Paper presented at 8th European Conference for Learning and Instruction August24-28, 1999,Goteborg University, Goteborg, Sweden. Shanahan, M.F., Christopher; Cowie, Judy; Round, David K.; and R.B. McIver, Steven (1997), "Beyond the 'Input-Output' Approach to Assessing Determinants of StUdent Performance in University Economics: Implications from Student Learning Centred Research", Australian Economic Papers, Special Issue: 1737. Siegfried, JJ. and D.K. Round (1994), "The Australian Undergraduate Economics Degree: Results from a survey of students", Economic Record, 70(209): 192-201, Siegfried, JJ., P, Saunders, et al. (1996), "Teaching Tools: How is Introductory Economics Taught in America?" Economic Inquiry, 34(1): 182-8. Svensson, L. (1989), "The Conception of Cases of Physical Motion", European Journal of Psychology of Education, 4(4): 529-545. Tang, T. (2001), "External versus Internal Research Methodology in Economics Education", Paper presented at the 30th Conference of Economists, Perth, Sept 23-26,2001. Voss,) ,F.,J.Blais, et al. (1986), "Informal Reasoning and Subject Matter Knowledge in the Solving of Economics Problems by Naive and Novice Individuals", Cognition and Instruction, 3(4): 269 - 302. Walstad, W .B. (2000), "Improving the Assessment ofStudent Learning in University Economics", Paper presented at the Scholarship of Teaching Economics Conference, July 13-14,2000, University of Melbourne.
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UNDERSTANDING STUDENTS' MISUNDERSTANDING IN ECONOMICS
Tommy Tang School of Economics and Finance Queensland University of Technology Brisbane
Many academics, including economics educators. are sceptical about the role of educational research. which they believe is often divorced from their day-te-day teaching practice. If economic education research is to have an impacteD teaching practices, it should be empirical and contextualised, i.e. buiIton sound knowledge of student learning products derived from experiential data in particular contexts. The present study is an attempt in this direction and aims to investigate how commencing students in economics understand the fundamental economic concept of 'allocative efficiency'.
1. INTRODUCTION Whal is the mosl worthwhile knowledge Ihal our economics majors should learn? In response to this question, Hansen (Hansen, i990; Hansen, 2000) proposed a list of five proficiencies: (I) Gaining access to existing knowledge, (2 Displaying command of existing knowledge, (3) Displaying ability to draw out existing knowledge, (4) Vlilising existing knowledge to explore economic issues, and (5) Creating new knowledge by identifying economic problems and formulating a research study. The first three profidencies in the list represent acquisition and reproduction of knowledge, and the iast two focus on knowledge transfer and creation. Do our economics graduates possess the higher order Ihinking and analylicai abilities? The Reserve Bank and other prospective employers in Australia are asked in a survey (AVCC, 1992) to describe the desirable qualities of honours economics students they are seeking. These include: 'wide general ability', 'to make decisions on the basis of partial information' (p.3l). They also add Ihat: 'the person who wanls to do research only but who cannot link Iheory wilh real world issues' is unsuitable." (p.3l)
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The A vee document later reports that 'It is the perception of some employers that universities seldom teach students to make these connections, that courses are out-of-date and not relevant to the issues of the decade, and that universities should teach more interesting economics with immediate policy relevance.' (p.32) This suggests that in the eyes of employers our economics majors do not possess the higher order abilities to function effectively in real world work situations. Consistent with these observations, in two separate studies, Australian undergraduate economics students (Siegfried and Round, 1994), and American undergraduate and graduate economics students (Hansen, 2000) identify the inability to apply and transfer learning from the academic to the real life contexts as the weakest area in their learning, and these students want more context and realistic applications added into theories to 'illuminate' their practical values. This concern is echoed by economics educators and researchers, who in a number of research studies carried out in Europe and Asia, found that the formal knowledge acquired in the academic context tends to become inert in real life (Voss, Blais el al., 1986; Marton, 1988; Dahlgren, 1997; Pong 1999; Walstad, 2000). For example, students who have passed Economics I, still believe it is the inherent value residing in a product that determines its price (Dahlgren, 1997). This leads economics educators to question the effectiveness of current methods of economics instruction: "While most student can achieve success on traditional criteria such as passing tests and examinations, the question remains as to how many of them are able to engage with the material they are studying ..." (Parry and Reynoldsen, 2001). In anotherstudy comparing the use ofanalytical skills and economics knowledge in the solving of economics problems, Voss and his colleagues (Voss, Blais et al., 1986) found that students with formal training in introductory economics (the novice) and those without (the naIve), demonstrated similar economics knowledge and informal reasoning skills. The novice performed better than the naIve only on questions involving the use of technical knowledge. In the case of non-technical economic issues that provided opportunities for the novice to demonstrate economic knowledge acquired in formal training, no such knowledge transfer took place, and their answers were not qualitatively superior to the naIve. This led the authors to conclude that: ..... (I)nstruction in introductory economics courses is oriented toward learn ing the subject matter ofeconomics requisite to majoring in economics rather than learning about the intricacies of economic operations found in everyday life." (p295)
Students might amass sufficient basic economic knowledge to perform technical analysis in examinations in an academic context, but fail to employ it, and often lapse into lay misconceptions to interpret and explain economic phenomena in real life. A gap exists between what an economics student learns at university and the economic way of thinking in the real world.
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2. OBJECTIVE OF THE STUDY The brief review of literature above suggests that, to these economics students, the academic world in which they learn is separate from the real world in which they function. The learning in the academic world has little impact on their thinking in the other. Iflearning is about developing new ways of understanding the real world, it is most important to investigate the barriers to students' conceptual development to build up that link. In student learning research, students are found to possess multiple conceptions of a concept, and they can shift from one conception to another in different contexts to explain a phenomenon (Pong, 1999). This leads educational researchers to propose that learning, as a process of conceptual development, is not a simple process of taking in a new conception, and replacing the old conception with the new one. By implication, effective teaching is more than transmission of knowledge from the teacher to students. To facilitate conceptual development, the teacher therefore needs to identify students' prior understanding and misconceptions about a topic and deal with them explicitly to help students see for themselves inconsistency and contradiction arising out of them. Only then can the student appreciate the link between the academic world and the real world and that the two are, indeed, the same world. Diagnostic assessment provides such important feedback about learning - what misconceptions students possess, what rangeoflearning approaches our teaching entails. Therefore ,diagnostic assessment. is an integral part of teaching. The objective ofthis study is to carry out such a diagnosis ofleaming outcomes by investigating how commencing students in economics understand the fundamental economic concept of' allocative efficiency' . What prompted this investigation was the observation, when marking examination scripts, that serious misunderstandings about this fundamental concept repeatedly arose. Moreover, some interesting patterns emerged from students' answers, which suggested that these misunderstandings were far from irregular, and that students understood the concept in distinct but related ways. As a result, it was decided to carry out a more detailed analysis of the examination scripts to map their misunderstandings and find out how and why students dev.elop them. In the process, it is hoped that this analysis will provide valuable information that will enable us to improve teaching and learning of the topic in future. 3. THEDATA Introductory economics is offered at Queensland University ofTechnology (QUT) as two units (Economics I and 2). The course is organised in such a way that both microeconomics and macroeconomics are taught in Economics 1, and dealt with in greater depth in Economics 2.In this study, we analysed students' written responses to one question in the Economics 2 final examination in semester 2,1999. In the examination, students are required to answer 30 multiple-choice questions (30%), two structured short-answer questions (40%) and one essay question (30%). The question ofinterest to this study is one ofthe two structured questions (Appendix I). The question is about a competitive poultry market, which has been taken over by one firm. In part (a) of the question, students were asked to locate the equilibrium
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price and output in the competitive market before the takeover, and in part (b), to explain if this equilibrium output also represents the allocatively efficient output. This is followed by parts (c) and (d), which focus on the impact of the takeover on the equilibrium price, output, consumer and producer surpluses in the monopolised market. In part (e), students are asked to explain whether or not equilibrium and allocative efficiency are the same or different concepts, based on their previous answers. The raw data are written answers to parts (b) and (e), taken from the first 90 examination scripts in alphabetical order according to students' surnames. Their responses in other parts of the question were utilised only when clarification was needed.
3.1 Data analysis Stage one of data analysis involved reading all written answers several times, focusing on students' interpretation of allocative efficiency to uncover similarities and differences in the meaning they attached to the concept. A number of distinct meanings of the concept were identified. Written statements signifying the same meaning were pooled together. Each statement was then compared with others in the same pool, and contrasted with the statements in other pools. The purpose ofthis exercise was to unambiguously delimit the meaning and structure of each conceptualisation of the concept. This process resulted in six non-overlapping descriptive categories. These categories. that emerged from the raw data, constitute the outcome space of students' conceptualisation of the concept. Appendix 2 diagrammatically presents the outcome space, which highlights the different critical aspects students focused on in their conceptualisations, and the relation of each critical aspect to the others.' In the second stage of categorisation, the categories were taken back to the raw data, and students' written statements were classified according to which of these six categories they belong. This classification process was conducted independently by two lecturers, with substantial experience in the teaching of introductory economics. Their classifications were then compared, and differences of opinion discussed. After discussion, of all the statements considered, a total of 126 statements were identically categorised by the two researchers (an agreement rate of 88%). The results to be discussed in this paper are based on these successfully categorised statements. The validity and generalisability of the six categories is essentially based upon a sense of completeness in the understanding of students' perceptions of the phenomenon and, in part, is demonstrated by the extent of interjudge agreement. It must be pointed out that when analysing and interpreting the scripts, the esearchers
tried as far as possible to 'bracket' their pre-conceptions about the possible interpretations of the concept. The six conceptions identified in this study were not imposed by the researchers, nor obtained from any theoretical model, rather they emerged from the raw data. The schematic representatipn of the outcome space in Appendix 2 was developed after completion of analysis and classification of data.
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4, RESULTS The meanings and structures of student conceptualisations of allocative efficiency and the causes of misconceptions are discussed below, Notice that although the concept of 'allocative efficiency' is only taught and learned in the academic context, the students have had previous encounters with the terms 'allocation' and 'efficiency' in their everyday life. Therefore, the misconceptions identified could be a result oftheir lay interpretations ofthe terms as well as the way the concept has been taught and learned.
5. THE SIX STUDENT CONCEPTIONS OF ALLOCATIVE EFFICIENCY Category 1: A Consumer Perspective This is not a fully expressed conception in the data. Fragments of this conception appear in students' answers where students distort the textbook definition of 'social welfare' by equating it with their everyday notion of' social welfare' as 'consumer welfare', That is, 'consumer welfare' and 'social welfare' are erroneously taken as equivalent. According to this conception, market efficiency is determined from the perspective of consumers; i.e. the market is efficient, or the resource is efficiently allocated, when consumer welfare is maximised. Example: ' ... Allocative efficiency ... does happen in a PC [perfectly competitive} market. The equilibrium ..,also indicates efficiency. Consumers are getting a max surplus at Qe [equilibrium output] ....' (AJC) Category 2: A Profit Perspective This conception has its focus on the profit of the firm. From a profit perspective, ifthe firm can utilise its resources 'efficiently', then it can maximise its profit, and the firm is therefore said to have achieved allocative efficiency. The lay notion of 'efficiency' in running a business (to utilise its resources to maximise its profit) is evident in this conceptualisation of 'allocative efficiency'. Example: , ...Allocative efficiency refers to whether any resources are wasted and can be moved into other areas to make a greater profit. ... As in the case of the monopolist poultry farmer ,all the available resources were being maximised and could not have been used more efficiently elsewhere to make a greater profit. ".' (AB2) Category 3: A Cost Perspective Here the focus is still on the firm, but now it is the firm's average cost of production that is focused upon, To students holding this conception, allocative efficiency is achieved if the firm can efficiently utilise its resources to minimise average production cost. In the data, this is a commonly held misconception. It represents a one-sided view (the cost side of production) of the concept, without considering the other side (the value) of production. This conception also represents the mirror
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image of the consumer perspective discussed earlier, which considers only the value side of production. Example: 'No, [equilibrium and allocative efficiency are1different concepts because equilibrium is where Sand D is equal and allocative efficiency is where inputs are used in a technologically efficient way to give the lowest cost, but in monopoly there is always resource wastage of some degree.' (RSC) Category 4: A Distribution Perspective
In the case of the previous two conceptions, allocative efficiency is conceptualised in various ways to describe the 'efficiency' of the firm. In this instance, the focus has shifted from the firm to the market. According to a distribution perspective, the market is efficient if it is equitable, which occurs when the social surplus of
production is equally shared between producers and consumers. Like the consumer perspective, it originates from a strongly held view about welfare economics by these students (i.e. what constitutes a fair market outcome), and is a normative conceptualisation of a positive economic concept. Example: 'Yes. In a perfectly competitive industry, this is the allocatively efficient output. Producers charge the price, Pe ... see at Qe [where] consumer and producer surplus is also shared equally.' (IRD) Category 5: An Equilibrium Perspective Here a different aspect of the market is focused upon - the equality of demand and supply. From an equilibrium perspective, efficiency is understood as the function of the price mechanism to clear the market, reSUlting in neither shortages nor surpluses. The textbook analysis is: In a competitive market, at the level of output where demand and supply intersect, the market is in equilibrium; at this level of
output, allocative efficiency also occurs since net social welfare is maximised, not because the market is cleared. However,students holding the equilibrium perspective incorrectly take the equality of demand and supply as the condition for equilibrium and allocative efficiency, without conceptually differentiating the two concepts. This mistake arises from students' fixation on the demand/supply cross (discussed in the competitive model) as the ideal market outcome in their analysis of other market structures. Example: 'Yes, the equilibrium output is the allocative efficiency output. This is because there is not surplus and no sholtage due to the demand for poultry and supply of poultry being exactly the same at the equilibrium point.' (PRC) Category 6: A Social Surplus Perspective
Economists define allocative efficiency as a market outcome where the net social welfare (or social surplus) of production is maximised. Analytically, this occurs at the output level where marginal social cost equals marginal social benefit. At any other level ofoutput, there will be a reduction of social surplus (or deadweight loss).
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This conception, like the last two conceptions, focuses on the relation between production and consumption. But it is a different aspect of this relation (viz. the maximisation of social surplus) that is focused on here. This conception is illustrated in the following example: 'In a perfectly competitive market equilibrium output is the allocatively efficient output. This is because in a perfectly competitive market, Dm Marginal Benefit, 8m = Marginal Revenue. In this market, consumer and producer surplus is maximised and there is no deadweight loss.' (LB)
=
6, STRUCTURAL AND MEANING ASPECT OF THE LEARNING OUTCOME SPACE Table I below summarises the structures and meanings of the six categories and causes ofmisconceptions. (N in the table denotes the number ofoccurrences ofeach conception that were agreed upon by the two independent judges,)
TABLE 1 STRUCTURES AND MEANINGS OF THE SIX CONCEPTUALISAnONS Structures of conceptualisations
Meanings of conceptualisations
Causes of misconceptions
N
Focusing on consumer welfare (Consumer Perspective)
Maximisation of consumer welfare
Equating the concept of 'social welfare' with 'consumer welfare'.
5
Focusing on producer's profit (Profit Perspective)
Maximisation of firm's profit
15 Lay conception of 'efficiency' as 'efficiency of the firm in making profit'.
Focusing on cost of production' (Cost Perspective)
Minimisation of ATC
Lay concept of 'efficiency' as 'technical efficiency' .
30
Focusing on welfare distribution (Equity Perspecti've)
Equal distribution of social surplus of production
Distorting concept of 'efficiency' with the notion of 'equality' or 'equity' .
29
Focusing on market equilibrium (Equilibrium Perspective)
Clearing of the market
Distorting the concept of efficiency with the concept of 'equilibrium',
6
Focusing on social surplus of production (Social Surplus Perspective)
Maximisation of social surplus of production
(Textbook conception)
41
The range of categories obtained from this type of empirical study is known as the 'outcome space', which describes the variations in outcomes of learning. Focusing on the structural aspect, the outcomes of learning can be further distinguished according to whether the student focuses on one, or both sides of the process of exchange (Table 2.). The first three conceptions are results of student
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focus on only the consumer (category I) or producer (categories 2 and 3). The last three conceptions have their focuses on the relations between production and consumption, with categories 4 and 5 focusing on the wrong critical aspects ofthe market. Only the Social Surplus Perspective (category 6) has the correct focus. TABLE 2 STRUCTURAL ASPECT OF OUTCOME SPACE Categories
Structural Differences
(1) Consumer Perspective
Only one side of exchange considered.
(2) Profit Perspective (3) Cost Perspective
(4) Equity Perspective
Both sides of exchange considered; incorrect focusing.
(5) Equilibrium Perspective
(6) Social Surplus Perspective
Both sides of exchange considered; correct focusing.
In earlier studies of learning outcomes in economics, similar structural differences in the outcome space were observed. For example, in the study by Dahlgren (1997), the conception that the price of a commodity is determined by its inherent value or by its cost of production is an example of one-sided conceptualisation of the concept of price.
6.1 Multiple Conceptions by a Given Student Besides the six conceptualisations, a second crucial finding of this study is the existence ofmultiple conceptions,occurring in the case of20 students. These students can shift comfortably from one conception to another in their explanation. The shift can occur within the same answer (intra-contextual shift) or between answers to different parts of the question (inter-eontextual shift) (Pong, 1999). We illustrate these conception shifts below, and will discuss their implications in a later section. 6.2 Inter-contextual shift In the example below, the student (IRD) uses the Distribution Perspective ('surplus ... shared equally') of the concept in his answerto part (b),and spontaneously shifts to the Social Surplus Perspective ('existence of ... deadweight loss') in part (e). 'Yes. In a PC [i.e. perfectly competitive] industry, this [i.e. the equilibrium output] is the allocative efficiency output. Producers charge the price, Pe ... They sell at Qe. Consumer and producer surplus is also shared equally.' [Distribution Perspective] 'Equilibrium and allocative efficiency are definitely not the same concepts. As shown ... the monopoly is in equilibrium, i.e. MR=MC. However it is not allocative efficiency, as shown by the existence of a loss of welfare as dead weight loss.' [Social Surplus Perspective] (IRD)
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6.3 Intra-contextual shift In the fo\lowing example, the Equilibrium Perspective is manifest in part (b). But at the beginning of part (e), the student shifts to the Social Surplus Perspective (inter-contextual shift), then immediately shifts to the Cost Perspective, before fina\ly going back to the Equilibrium Perspective (intra-contextual shift). 'Yes it is the a\locative efficiency output ... in this graph supply produces exactly where Demand want supply to produce. Therefore efficiency S=D and MC=MR'. [Equilibrium Perspective] 'The equilibrium and a\locative efficiency are different concepts. Because in monopoly equilibrium, inefficiency exists (as mentioned above) due to MB > MC [Social Surplus Perspective] therefore the resources used is not employed efficiently and can be employed alternatively at a lower cost [Cost Perspective]. Therefore leads to inefficiency.in monopoly. It is also due to the fact that monopoly is not producing at capacity [Cost PersPective], it reduces qty produced to increase price. Therefore what is produced is below Demand. [Equilibrium Perspective]' (Ve) 7, DISCUSSION - UNDERSTANDING MISUNDERSTANDING This study expands our awareness of students' different ways of understanding an economic concept. By teasing out the meanings and structures of their conceptualisations, it enables us to better understand students' misconceptions from their perspective. Two examples will be discussed. Example 1: Self-contradiction? In the fo\lowing answer, what has puzzled the author most, was that the student drew two obviously self-contradictory conclusions in the same answer. 'Based on the above answers [in part (c) and (d)] it would indicate that equilibrium and a\locative efficiency are different concepts. As in the case of the monopolist poultry farmer ,all the available resources were being maximised and could not have been used more efficiently elsewhere to make a greater profit. However, the market was not in equilibrium as the market structure was not perfectly competitive where quantity demanded by consumers equals the quantity supplied by producers. As in this monopoly demands were not properly met, in effect, an inefficient a\location of resources was occurring. Yes allocative efficiency is the same as equilibrium.' At the beginning, he argues that equilibrium and a\locative efficiency are different concepts, but a few lines later, contradicts himself by saying that the two are in fact the same. When first reading it, we dismissed it as a nonsensical and difficult-to-understand statement. However, on further analysis, by following his shift in conceptions, both of his conclusions become more intelligible and begin to
make sense!
The initial conclusion is based on the Profit Perspective. Since the monopolist has maximised his profit, allocative efficiency is therefore achieved. (' As in the
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case of the monopolist poultry farmer, all the available resources were being maximised and could not have been used more efficiently elsewhere to make a greater profit.') However, the market; as seen by the student, is not in equilibrium, as monopoly output is less than competitive output (where D= S). ('The market was not in equilibrium as the market structure was not perfectly competitive where quantity demanded by consumers equals the quantity supplied by producers.') Therefore, the observation that the market is allocatively efficient but not in equilibrium leads him to conclude 'logically' that allocative efficiency and equilibrium are different concepts. But the moment he recognises that the competitive equilibrium output (i.e. where D = S) is not achieved in monopoly, he begins to shift to the Equilibrium Perspective, evidenced by his remark that 'in monopoly, demands were not properly met, in effect an inefficient allocation of resources was occurring'. Now, he discerns that competitive equilibrium is not realised in the monopolised market, and from the Equilibrium Perspective, the market is 'inefficient'. Thus, he comes to a second 'logical' conclusion that equilibrium and allocative efficiency are the same concept. Example 2: Concept Distortion In this example, we will discuss how some students distort the concept of deadweight loss (DWL). DWL is a key concept used to analyse non-optimal (or inefficient) allocation ofresources. The DWL in an imperfect market is graphically represented by the area (usually a triangle) bound by the marginal cost curve, marginal benefit curve and the equilibrium output, which represents a welfare loss to the society. In the examination, parts (c) and (d) of the question require students to describe the impacts of monopolisation in terms of consumer surplus, producer surplus and DWL. These two parts were, in general, well answered, indicating that the majority of students have acquired the concept of DWL, and have no difficulty in correctly identifying the DWL 'triangle' as an explanation of the allocative inefficiency of a monopoly. From this, one may be led to think that the students have properly understood the concept of DWL. However, students' written responses in part (e) reveal misinterpretations of the concept of DWL, reflecting their misconceptions of allocative efficiency. Three such misinterpretations of the concept of DWL are identified and illustrated below. DWL related to profit 'Because the [monopoly Jfirm controls the market,equilibrium and allocative efficiency are different. Even though profits might be made when MR=MC there is still the dead weight loss, and the producers aren't maximising profits.' (AB I) The student (ABI) understands DWL from the firm's angle: There is a deadweight loss to the firm since 'the producers aren't maximising profits'. His interpretation of DWL clearly implies the Profit Perspective.
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DWL related to equilibrium 'The output in (a) is also the allocatively efficient output since there is no loss to society. All consumer demand has been supplied and there is no shortage or wastage of output at this quantity.' (CC) In this case, the student interprets the deadweight loss ('loss to society') as a waste due to the existence of shortage or surplus (the student uses 'wastage' for surplus in his answer) of output. It is an interpretation from the Equilibrium Perspective. DWL related to cost ofproduction ' ... In monopoly even though the market (the firm) is in equilibrium, allneative efficiency is not achieved. It is not achieved because ofdeadweight loss ... because ofthe inefficient practises, an [sic] disincentive to economise., (HJe)
Here, the student holds a Cost Perspective and DWL is interpreted as resulting from the firm's 'inefficient practises' ,and 'disincentive toeconomise' and resulting in the firm producing at above the minimum average total cost. These two examples show that if the student has developed a misconception about a concept or a phenomenon, the student is capable ofselecting an interpretation (as in Example I) or,distorting other aspects ofthe phenomenon (as in Example 2) to make them compatible with their perspective. Therefore;to the student concerned, an explanation containing misconceptions can appear logical and coherent. As such, misconceptions can be resistant to change.
8, CONCLUSION: IMPLICATIONS FOR TEACHING AND ECONOMIC EDUCATION RESEARCH This study shows that a concept or phenomenon is capable of being understood in a limited number ofdistinct ways, and suggests causes ofstudent misunderstanding by 'putting ourselves in the frame of mind of the students' (Hounsell, 1997, p.242). The empirical data also reveal that the student can focus on several aspects of the phenomenon and, as a result, take on board multiple conceptions at the same time, and not be conscious ofany inconsistency. These students can comfortably shift between incompatible conceptions by selecting and distorting aspects of the phenomenon to fit with their framework (Svensson, 1989). It also illustrates why statements, self-
contradictory and inconsistent to a lecturer, may have their 'internal logic' for a student. This explains why misconceptions are difficult to change. When confronted with student misunderstanding, it is not uncommon for a )ecturerto say to a student: 'You jiIst don't understand it!' The message to emerge from this study is that, while it is not incorrect to say that they do not understand, educationally it is more important to realise that student understanding manifests itself in different ways, and viewed from students' perspectives, their arguments sometimes do 'make sense'. The essence of good teaching is not to brush aside students' incorrect conceptualisations of a concept, rendering them irrelevant, and tore-iterate the correct one in order to replace the misconceived ideas. Our analysis
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of student misunderstanding strongly suggests that the incorrectly focused aspect is important, in the sense that it provides us with a window to their minds, allowing us to better understand what aspect of the concept they focus on (structure of the concept), and their conceptualisation of the concept (meaning of the concept). In the process, knowledge gleaned from student misunderstanding can provide a starting point for the design of appropriate learning support to facilitate students' conceptual development. Elsewhere I have pointed out that much ofcurrent research effort on economics education utilised econometric modelling (Tang, 2001). Using the production function modelling technique, the researcher firstly selects the input factors that are believed to determine students' learning in economics. The inputs cbosen can be based on explicit psychological theory , or arbitrary (Becker and Walstad, 1987). The data on the input variables are usually obtained from student records and/or questionnaire surveys administered at the beginning of the course. The output data are usually their scores in examinations. Regression analysis is then carried out to determine the coefficients of the independent variables and their significance, followed by interpretation of those numbers. Once a statistically significant relationship is obtained, the phenomenon is said to be explained. Like the physical sciences, the established relationship has a generalised status, that is, it applies across universities or courses. However, these studies often provide inconsistent findings (Shanahan and Mciver, 1997) and have little orno impact on improvement of teaching in economics as evident by the attitudinal· inertia of economics educators (Siegfried, Saunders el al., 1996). As a result, a lot of academics, including economics educators, are sceptical about the role ofeducational research, which they believe is often divorced from their day-to-day teaching practice. Marton and Ramsden (1988) argue that it has a lot to do with the fact that many traditional educational research studies have been based on theoretical frameworks divorced from students' learning experience in context. SUbsequently, as research was conducted out of the aClUallearning environment, it asked the wrong questions by seeking general solutions to student learning problems that are necessarily contextualised. For example, is computerised-assisted learning better than teacher-centred learning? Is an activity-based teaching approach better than an expository teaching approach? Is group work more effective than individual work? Is small group teaChing better than large group teaching? Should note-taking skills be explicitly taught as a generic learning 'skill? These questions cannot be answered without referring to the contextual elements - what is being taught and assessed, how the students make sense of, and handle, the learning task. To conclude, economic education research, if it is to have impact on teaching practices, should be empirical and contextualised, i.e. built on sound knowledge of student learning products derived from experiential data. The present study is an attempt in this direction. ACKNOWLEDGEMENT I thank Bill Heath for his assistance with categorisation of the written statements, and his critical comments.
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APPENDIX I QUESTION 31 (ECONOMICS 2 FINAL EXAMINATION, SEMESTER 2 1999)
The poultry market is perfectly competitive. The diagram below shows the market demand (Dm)for and market supply (Sm) ofpoultry. Price ($)
Sm
Dm _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Output
(a) Copy the diagram on to your exam answer booklet, and in it indicate the equilibrium market price and output. (2 marks) (b) Is the equilibrium output in (a) also the allocative efficient output? Explain briefly. (2 marks)
Suppose all poultry farms were taken over by a firm and as a result this firm has become the SOLE producer ofpoultry meats. (c) Assuming no change in cost or demand conditions, derive the profit maximisation price and output of the firm on a separate diagram. Explain your answer. (3 marks) (d) Using the concepts of consumer and producer surplus, illustrate and explain the impacts of the takeover on the welfare of consumers, producers, and society as a whole. (3 marks) (e) Based on the above answers, would you say equilibrium and allocative efficiency are the same or different concepts? Explain. (3 marks) (I) Suggest one pricing strategy by which the firm can increase its profit and maximise net social welfare at the same time. Illustrate and explain your answer. (3 marks) TOTAL MARKS FOR THIS QUESTION = 16 MARKS
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