AN EXPERIMENT IN THE TEACHING OF ECONOMICS TO SCIENCE GRADUATES RUTH E. SHALLCROSS The Institute of Paper Chemistry, Appleton, Wisconsin
INA N alumni clinic in 1944, graduates of The Institute of Paper Chemistry stated that their terhnical training had been adequate for their positions of responsibility i,n the paper industry, but they felt that they would have been better prepared had they received some training in solving economic problems. Paper mill employers who have hired Institute graduates likewise recommended that some economics be included in the Institute's curriculum. For three years the Institute has been experimenting to determine how much and what kind of economics to teach students who had obtained the B.A. or B.S. degree in chemistry or chemical engineering without so much, in some cases, as an elementary course in economics. Agreement is general that the scientist or the technologist needs "the addition of economics as a major item in his kit of tools," but little agreement is found as to the minimum that can be justly included in an already overcrowded curriculum. In addition to intensive work in the various fields of chemistry and pulp and paper technology the Ph.D. graduate from the Institute must pass courses in physics, engineering, wood technology, microbiology, water and trade waste treatment, and statistics; also the student is held responsible for German, report writing, bibliography, and patent searches. To make room for another totally new and relatively unknown subject in the three years' work (the fourth year of graduate study is devoted entirely to the doctoral dissertation) seemed a t first impossible. And the field of economics is tremendous. What would be the minimum amount that would be worth while and what methods of teaching would be most effective? Answers to this question were sought in academic circles and in industry. The American Economic Association's Committee on Undergraduate Teaching of Economicsadvised giving an elementary undergradnate course in economics. The Committee's subcommittee on the study of economics in relation to education in the professions referred to the undergraduate work a t Lehigh University and a t the Massachusetts Institute of Technology, both of which require in the undergraduate curriculum a basic elementary course in economics, and both encourage electives in more advanced economics. M. I. T.'s graduate students may elect economics as a major or a minor interest or may elect to stay completely in other fields without further economic training. The suggestion was made that the use of materials in econometrics or the slanting of economics toward mathematirn and engineering might
prove beneficial to our students. Elementary economics textbooks were suggested in which many worth while examples of economic principles are given in t,he field of engineering, no.one of which alone met the Institute's particular requirements, although a numher of them were recommended for reading. For those scientists going into industrial positions an elementary course in economics is desirable but not enough. To be alert to the problems confronting the modern industrial executive-a role which an Institute graduate might sometime hope to play-courses in basic principles, economic theory,accounting,corporatestructure and finance, business management, labor and personnel problems, industrial relations, money and banking, public finance, international economics, and marketing, all are important. In otherwords, to the Institute graduate we would be saying, in effect, "Go ahead now, after you have completed your doctorate in chemistry and papermaking, and do Ph.D. work in economics." This ideal, of course, is completely out of the question. The Institute is a school of paper technology. Its training in economics must always be an adjunct to the physical sciences. Therefore, it can never compete with undergraduate, let alone gradu8t.e. training in economics or with any of the accredited schools of business administration. The practical goal would be close to a cross between M. I. T.'s course in "economics and engineering" and a course in "busines~ and engineering administration." But whatever the Institute attempted would have to be tailor-made by the Institute's own st&. There was no pattern in the academic world which could be followed. In the earlier days of the Institute it was the custom for the staff members responsible for coordinating the academic program on the pulp and papermaking processes and their principles to incorporate very elementary economic considerations into some of the technical problems given to the students. When an economist was added to the teaching staff this phase of the work was expanded into a larger, more integrated technical and economic problem, with the economist responsible for teaching the necessary economic principles and techniques involved. By focusing the teaching of economics on a practical technical problem in the paper industry the Institute students were given a unique opportunity to consider technics1 and economic aspects coordinately and to reconcile a,ud integrate the factors of importance in both fields. Thus, the pattern was set and a method was evolved which has shown some degree of effectiveness. Through the interest aroused
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by tutorial guidance (possible because of the relatively small class) and the practical application of economics to the field in which they are particularly concerned, it is believed that the student will be encouraged to conh u e , through self education, an interest in the subject. The results the first year were fairly good. The students were mature, having held responsible positions during the war, and they were aware of their need for some help in making economic analyses. The secondyear results were not so good. That class had more students in it who had detailed research minds and who seemed frustrated and disinterested in working with ever-changing economic factors. To some, the conclusion undoubtedly was reached that a career in scientific research was more to be desired than onein management, where decisions must constantly be made on the basis of many unstable factors, any one of which could alt,er quite suddenly the actual outcome. To hope to be correct in one's appraisal of future economic conditions most of the time was a goal not very appealing to some who felt secure when working with relatively unchanging physical phenomena. But others in the class were challenged by the economic problem and handled complex economic data with nearly as much ease as material in a chemical problem. Some few showed more aptitude in handling the economic problem than in the solution of some of their technical ones. Thus, the course proved to have value in self analysis in helping the students to determine their occupational goals, as well as to acquaint them with economic prinriples and techniques. After attempting to determine why the second group of students, on the whole, did not do as well as the first group, the decision was made to separate the economic problem from the pulping problem, which is a part of the second-year curriculum. The economic problem was to be assigned in the third year of graduate study after the training in pulp and papermaking had been completed. Consequently, the decisions pertaining t o the solution of the economic problem could be based on a higher degree of technical knowledge; this third-year approach would more nearly represent that of men holding responsible posit,ions in industry. The economic problem chosen for 1948-49 was one of expanding a hypothetical book paper company in -Appleton, Wisconsin, under conditions in the real economy a t the time during which the students were working-that is, during a period of falling prices, a return to "normalcy" and keen competition in the industry as a whole, a buyers' market generally, and with labor costs still high and with inflationary monetary policies still in existence despite deflationary conditions in the commodity markets. The company had received an offer from a group of hypothetical publishers in Chicago and environs. (when the problem was first given, newsprint was still very scarce) t o take on contract 300 tons of newsprint if the mill would convert. The 12 third-year students worked in groups of t,wo, each group having slightly differing assumpt,ions with regard to raw materials, methods of pulping,
and the final product. The problem forced the students t o make a final decision as to whether expansion was or was not t o be recommended. The decision was based on the general commodity and money market situations and the probable influence of additional production on current competition in a particular paper field. The economic problem was introduced by way of a series of lectures and intensive reading assignments which condensed a normal undergraduate semester course in elementary economics into a few weeks. The lectures covered the nature of economic research; basic economic concepts including principles of value, production, income, and distribution;.types and problems of modern industrial organization; the cost-price structure and the role played by prices in allocating resources and in economic calculations generally; the nature and functions of money with stress on business and corporate finance; and the problem of planning in a company and in the economy generally-all, it must be said, superficially. The chief goal of the lectures was to define the special vocabulary or nomenclature of economics, to explain many of the yardsticks of business activity and the economy, and t o point out important sources and helpful texts. After that, they were left alone with their particular problem. The assignment took about seven months to complete; during that time visiting lecturers discussed economic planning, corporation finance, banking, accounting tools and nomenclature, and marketing (planned but not held this last year). Some group discussions were held on the general assumptions in the problem and there mere many individual consultations with various members of the faculty. During this same period the students were also required to show their ability in planning four or five research problems in technical fields, only a few of which, had any economic aspects. Thus, the economic. problem by no means occupied their entire attention during these months. In making the decision as t o whether or not t o expand, the students had to study a number of phenomena relating to, the industry and the ecowmy in general. The- answer was not based on conditions ,that were definite. This was shown in the aseumptions which formed the basis for the cost analyses and were reflected in the various.financial statements. The assumptions were shonm t,o be realistic ones in the period in which this year's students were working as, for example, price declines and a shorter working week mere assumed with raw material costs also declining but with labor rates staying the same or only slightly reduced. Some of the reports had as many as ten assumptions. The reports for the year 1948-49, which had to he substantiated orally before a faculty committee, indicated an extraordinary grasp of many economic considerations in the present economy that one might expect only from students doing graduate work in economics. There was, ifor example, a general recognition ofi the highly volatile situation in a declining commodity
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market-a psychological aspect that scientifically trained students might fail dismally to understand. There were the vital issues of whether or not equity financing was possible in the present money market,, and the longer-range problem of whether industry could depend upon equity capit,al in the future or would be forced to seek other sources of funds to guarantee growth. There were the distortions of large inventories in the past high price markets and the problem of their effect on working capital in t,he falling price market. There were the considerat,ions of the present understatements of depreciation reserves. These and others equally as vital were discussed not. as one might, expect from an amateur student scarcely aware of terminology but as one who understood their true importance. It was to be expected that students of chemistry and engineering would find break-even charts useful in their analysis of whether or not t o expand a paper company. And perhaps it was also to be expected, although deplored, that there mould be considerable affiity for the current fad of bi~siness-cyrlestudies which predict
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action on the basis of precise mathematical trend lines in a manner as definite as a chemist weighs a specimen on a sensitive balance. The amazement, perhaps, is that a good proportion of the scientifically trained students were able to see the limitations of applying precise mathematical tools to unpredictable and everchanging economic factors. Our experience seems to point t o the conclusion that the method of teaching economics evolved by the Institute over the last three years has more merit than any other for its own students and now needs only considerable perfecting to meet the needs expressed by the alumni. But it must not be forgotten that the goal of teaching economics a t The Institute of Paper Chemistry is not to train economists. The staff feels that, by the problem method, it is opening the minds of its students to economic considerations which may spell the success or failure of a technical process. The technically trained man who has an open mind toward economic considerations mill play a more efficient and cooperative role in the teamwork which industry must have if progress is to continue.
