Psyching up the Stock Market: Using the Harkness Method to Explain Behavioral Economics

Students can discuss the stock market and economics by using the Harkness method.

By Jonathan Civitella

Psyching up the Stock Market: Using the Harkness Method to Explain Behavioral Economics

During my years of teaching I have explored many different methods of instruction; and although I’m not ready to subscribe to one specific school of thought, I am a strong proponent of using the Harkness method when it comes to teaching students in the upper grades/advanced classes. I think it’s important to prepare students for the style of class they can expect at the college level, and to help develop their skills in discourse; and in my opinion, there is no better way to do this than gathering around the Harkness Table to share and discuss.

The Harkness School of Thought

For those unfamiliar with the Harkness Philosophy, it is a discussion-based instructional method developed at Phillips Exeter Academy in New Hampshire in which the teacher’s primary function is that of facilitator/observer and students engage in discussion while seated around a table.

The following lesson is intended to show how the Harkness Method is a great way to develop cognitive skills and to engage in deeper exploration of a specific topic. In this case, the focus is on behavioral economics and the Stock Market Crash of 1929.

An Introduction to Behavioral Economics

After spending several class periods examining the causes of the Stock Market Crash of 1929, I ask students to write down what, in their opinion, was the number one factor for the crash (e.g., speculation). I also ask them to think about our current economic problems and identify the main cause for that as well.

Next, I use a presentation I created with Prezi to briefly go over possible answers. After touching upon the usual suspects- foreign markets, the media, Wall Street, etc.- I bring up the idea of a how a person’s behavior effects the economy. In the rest of the presentation, I explain the nuances of behavioral economics by showing a short video from Duke University and author Dan Ariely, and define key terms. The presentation ends with a focus on two ideas, greed and fear. I ask several questions which are the impetus for class discussions.

For example, Einstein said that there are three great forces that rule the world, “stupidity, fear and greed.” How did those three forces affect the crash of 1929? How do they affect today’s financial problems?

Class Discussion and Activity

After an introduction to behavioral economics, students engage in what will hopefully be a high-level discussion regarding certain aspects of behavior as it relates to economics. If time permits, you can show pictures of specific objects (e.g., sneakers, televisions, etc. ) and ask students to describe the object's value. This activity is great when discussing the idea of value and how it’s perceived.

To close the lesson, I summarize the ideas that have been shared in the presentation and student discussions, and remind students that even though we were examining something that happened nearly eighty years ago, we're still dealing with the same problem: the economy (what drives it/slows it down). I remind students that the blueprint used for the Crash of 1929 is very similar to the one being used for our most recent financial crises (e.g., Flash Crash of 2010, Subprime Mortgage Crisis of 2007); and in all likelihood will be the blueprint for future crises. What follows are more economics lesson plans.