The Economics of Labor and Leisure
Written by Lauren Smith
Want to scare an economics student? You only need two words: “Intermediate Microeconomics.” Widely renowned as the budding economist’s most difficult class, Intermediate Microeconomics blends foundational theories with curves and calculus to prepare students for sophisticated, real-world analysis. One of my classmates, economics major Kendra Donoghue, ’24, describes its reputation: “Upperclassmen warned me about mountains of material and difficult concepts.”
Class for the week began at 9 a.m. on a Monday, the prime time for students to be stressed and caffeinated. I picked up the daily review sheet from the table beside the door and noticed it was almost empty. There was only one entry typed under the Class Topics header: “Assumptions of Supply and Demand.” Usually, there were at least ten topics in that space, and the reduction seemed ominous. What were we going to study that was so complex, it couldn’t even be explained in words? It might as well have said: “Abandon hope, all ye who enter here.”
But I didn’t abandon hope. I took a sip of my tea, opened my notebook, and mentally prepared myself to learn. No matter how difficult it was, no matter how much work was required, battling and defeating Intermediate Microeconomics was my plan for the next 50 minutes.
Dr. Michael Clark arrived a few minutes later. He closed the projector screen, turned off the computer, and placed two sets of neon Post-It Notes and a Sharpie on the podium. On one side of the whiteboard, he wrote: “SELLERS.” On the other side, “BUYERS.”
“Welcome to the double auction game,” he announced. “Everyone who has an orange sticky note is a buyer. Everyone with a green note is a seller. The numbers written on your notes are how much you value the imaginary good we’re trading. Your task is to maximize your value. Buyers and sellers can both yell out bids, and if one accepts the other, I’ll record the transaction.”
The students discussed the game in low voices, but no one seemed ready to bid. So Dr. Clark added an incentive: “Whoever gets the most value might get some bonus points.”
“Twelve!” shouted a seller in the back. Buyers shook their heads.
“Three!” countered an optimistic buyer.
“I’ll take it!”
Dr. Clark wrote the winning price on the whiteboard.
“That’s it for round one,” he said. “Let’s see what price we get next time.”
After eight rounds, with winning prices varying from 5 to 7.5, Dr. Clark collected all the students’ sticky notes and taped them to the whiteboard in numerical order. They formed a familiar X-shaped pattern. The lines of supply and demand—that is, what sellers offered and what buyers got at various prices—met at a prevailing price of 6, which was exactly our average trading price.
When the graph was complete, Dr. Clark turned back to the class. “Some of you are wondering if supply and demand models hold up in the real world. Neat, straight lines on price and quantity axes might not seem to have anything to do with, say, the U.S. market for corn.” He was right; the students had been discussing the topic outside class. “But think about what we just did. With barely any rules, without any prior setup, without any information except your knowledge of how much you personally value the good in question, we were able to create a market that can be accurately modeled with supply and demand. Microeconomics makes some borderline unimaginable conclusions about how goods are efficiently allocated without an all-knowing central planner, but we don’t have to imagine it. It’s all reflected in the real world.”
He went on to explain the origin of the double auction game and how it contributed to the field of experimental economics. But for me, there was an even more foundational insight behind our green and orange graph. The lines showed our willingness and ability to trade Post-It Notes, but they were also proof that hard classes can still be the most enjoyable. Maybe the concept of Pareto efficiency doesn’t come naturally to the economics student, but it becomes exponentially more interesting when it’s applicable to the real world—and when you can boast to your classmates that you earned three more sticky notes than they did!
Kendra now describes the class as “both pleasant and manageable.” In short: It’s hard, but we have fun. It’s this balance that students at Hillsdale have come to love. There’s always something new to learn, whether that learning comes from a textbook, Moby Dick, or an experimental economics game. Most importantly, professors at Hillsdale have not forgotten what it’s like to be a student. They know that learning should never be tedious, and they know we thrive on interesting, real-world challenges—so that’s how they teach, and that’s how we learn.
Lauren Smith, ’25, is a prospective political economy major and French minor. Outside of starting arguments in philosophy class, she enjoys curling up on a bench outdoors (sun, rain, or snow) to write novels or articles for her blog, www.laurensmythbooks.com.
Published in September 2022