Book review: Economics for Dummies

Since I recently read Econometrics for Dummies (which I reviewed here), it seemed fitting that I follow up with Economics for Dummies, by Sean Flynn. I read the second edition (published in 2011), but I see that there is a third edition now (published in 2019). While my impression was that the econometrics book would be a good companion to a 'traditional' textbook on econometrics, Economics for Dummies is very much a textbook treatment of microeconomics and macroeconomics, which would not be out of place as the required textbook for an undergraduate course in the principles of economics. While Flynn does a good job of keeping things light, as you might expect from a book in Wiley's 'Dummies' series, this is not really a 'pop economics' book.

That disappointed me a little, because I wasn't expecting to read a textbook. Having said that, Flynn does take a refreshing approach to some parts. I really liked the way that he builds up the demand curve from a starting point of marginal utility. I hadn't seen it done that way before. And there were several parts of the macroeconomics section, including a more complete circular flow of income that we often see in textbooks, and a surprisingly thorough discussion of Keynesian economics, that I appreciated. If I was teaching the macroeconomics section of my ECONS101 class, I would certainly be drawing on this book to assist with those aspects.

The book does have several surprising blind spots though. It covers asymmetric information and adverse selection, but never discusses the roles of signalling or screening as solutions to adverse selection problems. It also contains a few errors, including explaining that supply curves slope upwards because of increasing costs (it should be increasing marginal costs), and referring the government spending as part of monetary policy (it is part of fiscal policy). Possibly those bits got fixed up in the more recent edition. I sure hope so.

Overall, I wouldn't strongly recommend this book, but only because there are a generous number of economics principles textbooks around. This book, unfortunately, doesn't really stand out from the crowd. If you had to read it as a textbook, it would be fine, but I wouldn't prefer it over any of the other mainstream options.

This week in research #140

Here's what caught my eye in research over the past week (another quiet week, it seems):

• Higney et al. (open access) estimate the marginal value of bird song, using a choice experiment with a 'simulated soundscape'

Also new from the Waikato working papers series:

• Gibson, Boe-Gibson, and Scrimgeour use night-time lights to measure the urban expansion and contraction of urban areas in New Zealand, finding that rapid expansion is concentrated in commuter towns surrounding major cities and amenity-oriented settlements, while some smaller towns experience contraction associated with economic restructuring and changing locational advantages

John List on critical thinking and teaching economics

When it comes to buzzwords in education, critical thinking probably ranks at or near the very top. The problem is that not everyone agrees what critical thinking is, how students can be taught to think critically, or even whether critical thinking is something that can be explicitly taught at all (as opposed to being tacit knowledge). So, it can be instructive to see how other people, particularly top thinkers in your own discipline, conceptualise critical thinking, and how they propose training students to think critically.

So, I was glad I finally round time this week to read this 2022 article by John List (University of Chicago), published in the Journal of Economic Education (ungated earlier version here). He develops a 'Critical Thinking Hierarchy', and then describes how this can be applied to student learning.

List defines critical thinking as "individual skills that facilitate logical and informed decisions", and notes that:

In my own experiences, these skills can naturally be divided into two complementary pillars:

• Connecting the dots with empiricism: developing and assimilating empirical evidence and updating of one’s beliefs

• Connecting the dots with abstract thought: putting the puzzle together with conceptual reasoning; thought experiments

The hierarchy that List develops is then described in Figure 1 from the paper:

The hierarachy starts with modal thinking, characterised by various biases, preconceptions, and prejudices. It then moves to neophyte thinking, where the importance of thinking and empiricism begin to be recognised, but the execution isn't yet there. Adept thinking progresses to critical questioning, recognising blind spots, and understanding causation. Finally, great thinkers understand and correct for their own biases, and constantly re-examine their assumptions. An obvious question, though, is how a teacher moves their students up through the hierarchy. List advocates that teachers should encourage their students to 'slow think' (drawing inspiration from Daniel Kahneman's research, as outlined in his book Thinking, Fast and Slow). Specifically, List recommends that we teach students to apply six basic tenets:

1. state, explain, and clarify the question(s)

2. think through the question(s) from multiple points of view, expressing their own priors using logical thinking

3. gather, organize, assimilate information and data

4. identify assumptions, shortcomings, and implications of the data generation process

5. update priors, both their own priors and consider how other’s views might change

6. explain and apply what they learn, connecting what they just learned to other economic concepts, learnings from another course, and/or their everyday life

He then offers a set of necessary conditions through which those six basic tenets can be embedded to develop critical thinking (CT):

A. Early discussion of simple empirical tools; distinction between correlation and causation; and, provide examples throughout the course that distinguish causation and correlation

B. Theory of mind should be reinforced (I cannot think of a better place than game theory); briefly introduce psychological biases that prevent the student from becoming Adept

C. Because CT development is a social activity, both lab and field experiments should be used as pedagogical devices to promote CT...

D. Connect theory to empiricism and highlight potential shortcomings of both without undoing the major insights

Finally, the punchline is that this approach is part of the textbook that List co-authored with Daron Acemoglu and David Laibson. So, was the whole article an elaborate advertisement for the textbook? Perhaps, but I think there is a greater value in what List has shared. Right now, my colleagues and I are re-designing the economics curriculum at the University of Waikato from the ground up. We haven't explicitly embedded critical thinking in that design and yet, when I look at the four necessary conditions that List has proposed, and the two critical thinking skills that the article starts with, I can definitely see those in what we are developing. In particular, linking economic theory to empirical research and insights is already a particular strength of economics at Waikato.

List wrote his article in 2021, and it was published in 2022, before the release of ChatGPT and the widespread adoption of large language models. It would be reasonable to ask whether generative AI would make a difference to what List proposes. I don't believe that it change the core of List's framework. In fact, it makes the framework more important and changes how we should implement it, because the thoughtful integration of generative AI into higher education may lead to greater opportunities for students to engage in intentional development of the critical thinking skills that List proposes. Think about the application of simple empirical skills. These are skills that students can learn to use alongside generative AI, if their interactions are intentionally designed to promote engagement and learning, rather than cognitive offloading. For example, students might use generative AI to collate data and test an empirical relationship, while thinking about how they might distinguish causation from correlation. A custom GPT would allow for limitation in the range of techniques that could be employed so that novice students don't get overwhelmed. Lab and field experiments can be integrated into classroom learning, and I know that both Steve Tucker and I do that in our classes already. Experiments can be incredibly powerful tools for promoting student learning.

Critical thinking may be an education buzzword, but that doesn't mean that it isn't important. I like List's metaphor of 'connecting the dots'. As generative AI continues to develop and becomes a more useful tool across a wider range of analytical and other activities, connecting the dots alone will not be enough.  Students will need to know which dots matter, whether they genuinely connect, and what conclusions the connected dots allow them to draw.

The impact of ransomware attacks on hospitals and patients

In May 2021, the Waikato District Health Board (DHB) was hit with a ransomware attack. It took some four weeks for clinical services to be restored, and in the meantime, surgeries were postponed, and patients and health staff were negatively impacted. Health services have been a common target of these ransomware attacks, and the consequences could be tragic. Fortunately, in the case of the Waikato DHB attack, there is no evidence of patients dying as a result.

That isn't always the case though. This recent article by Hannah Neprash, Claire McGlave, and Sayeh Nikpay (all University of Minnesota), published in the American Economic Journal: Economic Policy (ungated earlier version here) looks at the impact of ransomware attacks on hospitals in the US. They use Medicare administrative claims data, along with data from HackNotice and the Office for Civil Rights Breach Portal on ransomware attacks on hospitals. They find 74 attacks over the period from 2016 to 2021, affecting 160 hospitals.

Neprash et al. then look at the effect of the ransomware attack on hospital volume (separating emergency room, inpatient, and outpatient volume), and hospital revenue from Medicare, as well as patient mortality. They use a difference-in-differences analysis, which involves looking at the difference in each outcome variable between the time before and the time after the ransomware attack, for hospitals that were attacked, and those that were not. They identify control group hospitals (that weren't attacked) as those most similar to the affected hospitals in terms of non-profit status, health system membership, and quartile of Medicare admissions in the year prior to the attack. They also conduct an event study, which allows them to look at how the impact changes over time.

In their main analysis, Neprash et al. find that:

During the initial week of a ransomware attack, hospital volume falls by 17–24 percent in the ER, inpatient, and outpatient settings. Medicare revenue declines by 19–39 percent at ransomware-attacked hospitals. A full recovery to pre-attack volume and revenue occurs within two to three weeks on average. A back-of-the-envelope calculation suggests that the average ransomware attack reduces annual hospital revenue by roughly 1 percent.

These are quite substantial effects (and notice the recovery time is not dissimilar to the case of the Waikato DHB attack). What happens to the patients who are affected by their hospital being attacked? It turns out that many patients were redirected to nearby hospitals, although the extent of redirection differs by type of care, as when Neprash et al. look at the local hospital market rather than the individual hospital, they find that:

...nearby hospitals absorb displaced emergency department patient volume from attacked facilities, such that market-level emergency department volume does not change during attacks. Inpatient and outpatient hospital volume is partially absorbed by nearby hospitals, though not fully, resulting in a market-level volume decrease during the first week of a ransomware attack.

That also means the costs of a ransomware attack spill over to neighbouring hospitals, which have to absorb some of the displaced patients. What about patient outcomes? Here are the most serious impacts, as Neprash et al. find that:

...ransomware attacks increase in-hospital mortality for patients already admitted to ransomware-attacked hospitals when the attack begins, compared to patients whose admissions concluded in the five weeks prior. Our estimates suggest that ransomware attacks resulted in the deaths of between 69 and 76 Medicare patients—representing roughly 1 Medicare death per month due to ransomware over the course of our study period.

Notice the effects fall on patients who were already in hospital care at the time the attack started. Many of those patients may not be easily redirected to other hospitals, and so have little choice but to ‘ride out’ the attack in the affected hospital. Neprash et al. also find larger mortality impacts at smaller or independent hospitals, during particularly severe attacks, and among patients with complex care needs (such as patients in intensive care, or those with multiple chronic conditions). Neprash et al. don't offer much of a policy prescription in their discussion of their results, limiting themselves to recommending:

...a combination of policies designed to reduce the likelihood of any successful ransomware attacks (e.g., minimum cybersecurity standards for hospitals) and policies designed to reduce the severity of ransomware attacks when they do happen (e.g., incident planning requirements).

For me, the key takeaway from this research is that ransomware attacks are not just a cybersecurity issue, they are a health security issue. We can be thankful that the Waikato DHB attack avoided the much worse outcomes that US hospitals have experienced. The response nevertheless required serious efforts by IT professionals and imposed a heavy workload on health and administrative staff. We should treat these results as a warning that hospitals need to treat resilience to cyberattacks as part of their core patient-safety planning, rather than simply as an IT problem.