On teaching economics as “a Way of Thinking” by telling your students good stories

By Dr. David M. Hart,[1]
Director of Liberty Fund’s Online Library of Liberty Project <oll.libertyfund.org>

An After Dinner Talk to High School Econ Teachers
Tucson, Arizona (20 mins formal talk plus Q&A)

Monday evening, August 28, 2017
Revised: 24 Aug. 2017

Contact details:

Documents available online:


I want to thank David Schmidtz for this opportunity to meet with and talk to you tonight.

There are many things I might say to you tonight about how you could go about teaching free market economics to your students.

You obviously have more experience than I do in teaching in the classroom at high school - the economic “coal face” as it were. I have considerable experience in teaching history at the college level:

  • teaching intro European history to large freshman classes at university (300+ students)
  • as well as teaching courses to much smaller classes at upper and honours level, such as courses on the history of ideas (the Enlightenment, and on the art, literature, and film inspired by war)
  • and on film and history

I also lecture to groups around the world about my activities with LF’s OLL website and my translating and editing work at LF, such as

  • the Bastiat Society,
  • econ. departments at colleges, and
  • meetings of Students for Liberty, etc.

I want to draw from my experience and humbly suggest to you (who are involved I think in the hardest kind of teaching there is) a few things which you might want to consider adopting/using in your own teaching - modified of course to suit your particular circumstances and constraints.

The Problems we face as Educators

In my experience I think we as educators face at least three significant problems:

  1. the problem of motivation - how do we get our students to love/get a passion for our subject (like the passion we have)

  2. the need to impart essential knowledge of both fact/practice and theory (or as the Germans would say “Praxis und Theorie”) - both for its own sake and in order to satisfy the needs of the curriculum

  3. This has to be achieved within the tight (economic) constraints imposed on you by class size, the kinds of students you have, the time available in the academic year, and the demands of the curriculum.

These are topics we can get into later in the Q&A if you wish.

What I want to do here tonight is to step back a little and talk about a couple of very general matters, namely teaching “Economics as a Way of Thinking” and how we might use the telling of “Economic Stories” to achieve this.

The Meaning of the Title of My Talk: “Economics as a Way of Thinking” and Teaching Economics by Telling Stories

Economics as a Way of Thinking

This phrase is taken from the title of one of the great teachers of economics Paul Heyne (1931–2000), whom I had the pleasure of meeting and working with at IHS Summer Seminars, who taught economics at the University of Washington, Seattle for 25 years, and wrote one of the great economic textbooks of all time The Economic Way of Thinking (1st ed. 1973). His goal was not necessarily to teach his students a lot of technical data and rigorous theory (but he did this indirectly) but to teach them “how to think like an economist,” how to understand economic problems, and how to understand the world as an economist would.

NOTE: As an aside, after having read his book I immediately thought of writing my own textbook on “History as a Way of Thinking” because historians also have a unique way of looking at and understanding the world. Historians for example, always ask themselves how did what happened in the past affect what we see around us today; what influence have individuals, institutions, ideas, and processes had; to what extent have relatively recent events influenced us versus much deeper, long term events; and so on.

What Heyne did brilliantly was to distill the teaching of economics into half a dozen or so key concepts which students would need in order to make sense of what he termed “commercial society” (or “market society” as we might say today). By this term, borrowed from Adam Smith’s Wealth of Nations, he meant “a society in which everyone lives by exchanging and everyone is consequently a merchant (or I would say ”a trader“; and Bastiat would szay everybody is ”both a producer and a consumer“).” Note that he is not dividing society into “capitalists” and “workers” (like Marxists and socialists do) or “producers” and “consumers”. He is being far more general than that. He is saying that everybody is a “trader” or “merchant” of some kind, even if it is only being a “trader in one’s own labour” or one’s own ideas. Furthermore, he argues correctly in my view that the theoretical principles which explain the behaviour of traders and the outcomes of their trades with each other are universal “human truths”.

I don’t have time here to discuss these key ideas in any detail but I have listed them in a handout (and we all know we can’t have a classroom discussion without a handout) and supplemented Heynes’ with some of my own favourites. I would strongly suggest that a good teaching practice would be list them on a poster or placard and prominently display this in the classroom - a kind of “Ten Commandments” of economic principles for those of you who are religiously inclined (as was Paul Heyne who was a trained theologian - so he knew all about “catechisms”). You could then constantly refer to them as you teach your classes.

The Key Concepts/Ideas of Economics

Human Action (individual)

  1. the principle of human action: all individuals evaluate, choose, and act in order to achieve their ends (whatever these may be)
  2. the value individuals place on the things they desire, and the costs and benefits they expect to get from them are subjective
  3. individuals respond to incentives/disincentives, that is the expected benefits and costs to themselves
  4. the things we value are scarce (including time and information)
  5. scarcity makes economizing necessary
  6. economizing means making trade-offs
  7. the concept of opportunity cost - buying something means you don’t buy something else
  8. cost to whom? when? and where? - cost is always at the margin, at that position in time and space where the decision maker currently stands

Human Interaction (social)

  1. principle of human interaction: humans interact with other in a myriad of ways, individual (one-on-one interactions) and social/institutional (many-to-many)
  2. institutions matter: they create or embody incentives and disincentives which favour or discourage economic activity; allow cooperation and organisation for large-scale projects; protect property rights and contracts; dispute resolution
  3. productivity is increased by means of the division of labour
  4. prices of goods and services (changing relative prices) transmit information which producers, buyers, and sellers need in order to make economic decisions about what and where to produce
  5. freely determined prices allow the coordination of economic activity on a large scale because prices provide both the information and the incentives without which coordination could not occur
  6. the economic coordination of suppliers and demanders allows for a multiplicity of diverse and incommensurable projects to be undertaken
  7. both parties to a voluntary trade benefit because of their different individual preferences and valuation of the things exchanged
  8. the seen and the unseen: the idea that there are always immediate and obvious consequences of economic activity (what Bastiat called “the seen”) as well as longer term, indirect or less visible consequences which “good economists” should expect to be there (what FB called “the unseen”)
  9. government interventions in the economy often have unintended consequences
  10. politicians and bureaucrats also have goals and preferences which they pursue/attempt to achieve (public choice) by political means - they also work within institutions with certain constraints and incentives which affect their behaviour
    Heyne concludes by stating that “Our goal should be to provide students with a few tools that they can use to think more clearly and correctly about the complex interactions that make up a commercial society.” We want our students to graduate from our class having some familiarity with and understanding of these key ideas which I have listed above.

These are also available from my website <davidmhart.com/liberty> along with other material.

Teaching Economics by Telling “Plausible” and “Witty” Stories

But how best to do this? That is the question.

The great economic historian Deidre McCloskey wrote a book on The Rhetoric of Economics (1985) in which she tells other economists that they are not as “scientific” as they think they are, that they in fact use a variety of quite traditional “rhetorical devices” to persuade their readers of the truth claims of their arguments. Among these rhetorical devices, many borrowed from the physical sciences to enhance their credibility, are things like graphs (supply and demand curves), tables of economic data, mathematical models and equations, as well as discursive arguments (although the latter has been largely replaced in the modern discipline by mathematical models).

Plausible Economic Stories - Paul Heyne

The rhetorical device Paul Heyne preferred to use was what he called “plausible stories” to demonstrate to his students the essence of economic arguments in a given complex and contested economic and political circumstance. As he notes:

In order to reach agreement on such important social and political questions, we have to go beyond arid definitions and sweeping dogmatisms to something much more difficult: the telling of plausible stories.[2]

The plausible stories he told his students were what I would call “thought experiments” or “what if …?” stories in which he would take a real world example (perhaps based on newspaper accounts) such as the aftermath of a hurricane (think Hurricane Katrina) and ask them to think about the economic consequences of that event, so getting the students to put themselves in the shoes of the survivors. Windows are broken, the power is cut, there is a shortage of food and gasoline. What should they do? What happens to the price of ice (since refrigerators no longer work), to the price of plywood to cover the broken windows, and the price of gas. And then to compare the results of the market being left free to raise prices, or the government in imposing price controls. These stories are an effective way to make economic ideas understandable to students since they are based on real life events with which the students are familiar (one hopes!).

Witty Economic Stories - Frédéric Bastiat

Another kind of economic story telling was perfected by the 19th century French political economist Frédéric Bastiat whose “economic sophisms” (see the book you have been given of LF’s new translation of his collected ES) are examples of the most brilliant economic journalism and popularisation ever written.[3] I think these are some of the best ways to engage your students in thinking about economic problems because they are funny, clever, and based upon very deep understanding of economic theory/principles. Who would have imagined that economics could be funny? But it can be, and FB makes it so.

FB was a master of this form of writing and arguing but many of the stories are showing their age as they were written to address the economic issues of his day, namely France in the 1840s. What we need are modern versions which address the economic issues of our time and place, which use the technologies we now have at our our disposal (which obviously FB didn’t have). And I seriously suggest that this is something that you, as high school teachers of economics, might like to think about doing. An ideal for the classroom might be to have a mixture of classic “economic stories” from the past (by Adam Smith and Frédéric Bastiat)[4], or extracts from great literature that deals with economic matters,[5], and new ones which have been written for the present (a task for your students too, perhaps?).

I recommend you read the section of the Introduction to Bastiat’s Collected Works vol. 3 where I deal with Bastiat’s “Rhetoric of Liberty” and the various ways he constructed his economic stories. They included things like:

  • conversations, or “constructed” dialogues (some are even mini-plays), between individuals who represented different points of view.
  • stand-alone economic tales and fables often based on classics by La Fontaine or Molière
  • fictional letters and petitions to government officials and other documents (such as the “Petition of the Candlemakers”)
  • thought experiments involving Robinson Crusoe and Friday

One of the most satisfying moments you can experience as a teacher is to see the look on the faces of students as they hear you read out to them for the first time Bastiat’s “Petition of the Candlemakers” (which I have done many times in lectures) and they suddenly “get it” - the logical absurdity of a standard argument for tariffs to protect vested interests in a particular domestic industry, but with the “unfair” foreign competition coming from “the sun.”

I would also draw your attention to the deeply insightful (and quite original) stories about the economising efforts of Robinson Crusoe on the Island of Despair as he goes about trying to save enough food to enable him to take time off in order to build a fish hook or an axe in order to increase the productivity of his future labours in fishing or building a house. The full significance of Bastiat’s invention of what I call “Crusoe economics” would not be realised until Murray Rothbard, a leader of the revival of Austrian economics in the 1950s and 1960s, discovered Bastiat and used his ideas in his own reformulation of the basis of economics in his treatise Man, Economy, and State (1962).[6]

My favourite story by Bastiat is his justly famous chapter on “The Broken Window” in the last thing he wrote before he died of throat cancer, WSWNS (also in CW3). Anthony de Jasay thinks Bastiat discovered the idea of opportunity cost and this chapter is his most brilliant exposition of that idea. FB presents this key economic idea in the form of a story of a shopkeeper, Jacques Bonhomme (Joe Sixpack in modern parlance), whose hooligan son breaks his shop window. The story then turns to the problem of the economic consequences of such an act, a problem which resurfaces every time there is a “broken window” caused by Hurricane Katrina or tropical storm Sandy. Does the breaking of a window create new job opportunities (and hence economic benefits) for society (as Peter Morici of the University of Maryland and Paul Krugman of the NYT perennially argue) - this is what FB calls “the seen” consequences which anyone can see, especially “bad economists” - or is it a net loss for both the individuals involved (like Jacques Bonhomme who has to spend money he would rather have spent on buying a chicken for dinner than in fixing his window) and for society as a whole (there is destruction of property and a diversion of scarce resources towards less preferred economic activities). This latter is what may not be immediately “seen” by observers, hence it is “unseen” in Bastiat’s terminology. It is usually only seen by “good economists”.

The challenge we face is to create more of these “plausible” and “witty” stories to tell our students and that is something that you might have to supply (or find).


To think like a “good economist” is what we want our students to be able to do by instilling in them an understanding of a relatively small number of key economic insights or principles which, I argue, can be done, among other things, by telling them engaging, amusing, and insightful stories. I think we need to become much better story tellers.

Thank you.


  1. David Hart was born and raised in Sydney, Australia. He did his undergraduate work in modern European history and wrote an honours thesis on the radical Belgian/French free market economist Gustave de Molinari, whose book Evenings on Saint Lazarus Street (1849) he is currently editing for Liberty Fund. This was followed by a year studying at the University of Mainz studying German Imperialism, the origins of the First World War, and German classical liberal thought. Postgraduate degrees were completed in Modern European history at Stanford University (M.A.) where he also worked for the Institute for Humane Studies (when it was located at Menlo Park, California) and was founding editor of the Humane Studies Review: A Research and Study Guide; and a Ph.D. in history from King’s College, Cambridge on the work of two early 19th century French classical liberals, Charles Comte and Charles Dunoyer. He then taught for 15 years in the Department of History at the University of Adelaide in South Australia where he was awarded the University teaching prize.
    Since 2001 he has been the Director of the Online Library of Liberty Project at Liberty Fund in Indianapolis. The OLL has won several awards including a “Best of the Humanities on the Web” Award from the National Endowment for the Humanities, and was chosen by the Library of Congress for its Minerva website archival project. He is currently the Academic Editor of Liberty Fund’s translation project of the Collected Works of Frédéric Bastiat (in 6 vols.) and is also editing a translation of Molinari’s Evenings on Saint Lazarus Street: Discussions on Economic Laws and the Defence of Property (1849).
    David is also the co-editor of two collections of 19th century French classical liberal thought (with Robert Leroux of the University of Ottawa), one in English published by Routledge: French Liberalism in the 19th Century: An Anthology (Routledge studies in the history of economics, May 2012), and another in French called L’âge d’or du libéralisme français. Anthologie XIXe siècle (The Golden Age of French Liberalism: A 19th Century Anthology) (Paris: Editions Ellipses, 2014). He has also co-edited an anthology of texts about Classical Liberal Theories of Class Analysis (Palgrave, forthcoming late 2017). A paper comparing the popularization of economics of Bastiat and Antony de Jasay was published in The Independent Review (Summer, 2015): David M. Hart, “Broken Windows and House-Owning Dogs: The French Connection and the Popularization of Economics from Bastiat to Jasay,” (Summer 2015), vol. 20, no. 1, pp. 61–84.  ↩

  2. Paul Heyne, “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion, edited and with an Introduction by Geoffrey Brennan and A.M.C. Waterman (Indianapolis: Liberty Fund, 2008).CHAPTER 18: Teaching Economics by Telling Stories http://oll.libertyfund.org/titles/2228#lf1472_label_549  ↩

  3. On the history of the popularization of economics and Bastiat’s role in this, see my paper “‘Negative Railways, Turtle Soup, talking Pencils, and House owning Dogs’: “The French Connection” and the Popularization of Economics from Say to Jasay” (2014) http://davidmhart.com/liberty/Papers/Bastiat/BastiatAndJasay.html. A shortened version of this was published in a Symposium on the work of Antony de Jasay in The Independent Review (Summer, 2015): David M. Hart, “Broken Windows and House-Owning Dogs: The French Connection and the Popularization of Economics from Bastiat to Jasay,” (Summer 2015), vol. 20, no. 1, pp. 61–84.  ↩

  4. Adam Smith’s account of the pin factory in his discussion of the division of labour, and the worker’s woollen coat on the international division of labour; Lawrence Read’s “I, Pencil”.
    - Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith, edited with an Introduction, Notes, Marginal Summary and an Enlarged Index by Edwin Cannan (London: Methuen, 1904). Vol. 1. Book I, Chapter I: Of the Division of Labour http://oll.libertyfund.org/titles/237#lf0206-01_label_153.
    - woollen coat: Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith, edited with an Introduction, Notes, Marginal Summary and an Enlarged Index by Edwin Cannan (London: Methuen, 1904). Vol. 1, BOOK I: Of the Causes of Improvement in the productive Powers of Labour, and of the Order according to which its Produce is naturally distributed among the different Ranks of the People. CHAPTER I: OF THE DIVISION OF LABOUR http://oll.libertyfund.org/titles/237#Smith_0206-01_244
    - Leonard E. Read, I Pencil: My Family Tree as told to Leonard E. Reed (Irvington-on-Hudson, New York: Foundation for Economic Education, Inc., 1999). http://oll.libertyfund.org/titles/112.  ↩

  5. An excellent collection of extracts from literature which deals with economic matters is The Literary Book of Economics. Including Readings from Literature and Drama on Economic Concepts, Issues, and Themes. Edited, with Commentary, by Michael Watts (Wilmington, Delaware: ISI Books, 2003.)  ↩

  6. See the first 2 chapters of MES, “Fundamentals of Human Action” and “Direct Exchange” for MNR’s debt to FB for inventing “Crusoe economics.” See, Rothbard, Man, Economy and State: A Treatise on Economic Principles, with Power and Market: Government and the Economy. Second Edition. Scholar’s Edition (Auburn, Alabama: Ludwig von Mises Institute, 2009). Also see my paper on "“Literature IN Economics, and Economics AS Literature II: The Economics of Robinson Crusoe from Defoe to Rothbard by way of Bastiat” (2015) http://davidmhart.com/liberty/Papers/Bastiat/CrusoeEconomics/DMH_CrusoeEconomics.html.  ↩