SIEPR researchers examine exposure to racial diversity
They’ve taught through economic booms and busts, using their scholarship and policy experience to deliver lessons that explain how the economy and financial markets work.
Now, with a pandemic upending nearly every corner of life, Michael Boskin and John Shoven are about to debut “Introduction to Financial Decision-Making,” a class that has an added urgency neither of them expected when designing the syllabus.
“You cannot teach a personal finance course without talking about the stock market collapse, the impending deep recession and the personal financial, social, as well as health distress that will be going on in real time outside the course,” said Boskin, the Tully M. Friedman Professor of Economics.
Boskin’s longtime colleague, agreed.
“Coronavirus affects almost everything,” said Shoven, the Charles R. Schwab Professor of Economics, Emeritus. “It challenges our social safety net, our fiscal and monetary policy. It upsets people’s retirement plans, their labor market earnings — just about everything. It will be incorporated into the course.”
Even before the coronavirus pandemic spurred the university’s unprecedented, interim shift to holding all classes online, Boskin and Shoven’s inaugural spring course, Economics 43, had overtaken Econ 1 as the largest economics class at Stanford.
The class quickly hit its original capacity of 160 enrollees, drawing interest from far stretches of the university — from Stanford medical students to student researchers at the Hopkins Marine Station by the Monterey Bay.
Still, more students wanted in — and now with the sudden change to a virtual lecture hall, more have been allowed to sign up. Enrollment climbed to 221 a week before its April 6 launch.
Perhaps, part of the draw was the opportunity to learn from top economists whose expertise has guided policymakers and influenced federal reforms.
Boskin has chaired the President’s Council of Economic Advisors, led the influential Commission on the Consumer Price Index, and is a frequent advisor to government agencies and Congressional committees.
Shoven has helped shape tax policies and has been a consultant for the Federal Reserve Board, the CEA and U.S. Department of Treasury. Both men are senior fellows at the Stanford Institute for Economic Policy Research (SIEPR) and Hoover Institution. Boskin co-founded SIEPR, and Shoven was SIEPR’s director for 20 years.
Or, maybe the tantalizing course description was the clincher.
“The purpose of the class is for you to obtain greater comfort making the major financial decisions your life journey will require,” it stated. “We hope to help students avoid damaging mistakes in the decisions that will determine their financial flexibility and safeguard them against life’s uncertainties.”
To be sure, there’s more uncertainty ahead than ever.
Pre-pandemic, student debt was already at an all-time high. The housing market was out of reach for many. And the future of Social Security and retirement pensions was no longer a sure thing.
Lecturer Alex Gould, who joins Boskin and Shoven in teaching Econ 43, put it this way: “This course is really about how to manage uncertainty. We can’t tell students what to do, but we can help empower them to try to figure out what they ought to do.”
A long incubation
The idea for the course germinated in the 1970s. Boskin was Stanford’s director of undergraduate studies at the time and convinced Shoven, a fresh Yale PhD graduate, to start teaching financial economics at Stanford. The subfield that combined finance with economics was burgeoning, and Shoven was one of the economists pushing the realm.
Shoven’s introductory course on financial economics for juniors and seniors, Econ 140, has evolved over the years and since become a mainstay in the econ department. Gould and Shoven reworked the course in the late 1990s to focus on a mix of investments, corporate finance and financial markets. The class has been offered annually since, while another complementary econ course on public finance is taught by Boskin.
But students from decades ago had already expressed directly, and in surveys, their desire to learn more about the basics of personal financial decisions, Boskin recalled.
As years passed, in conversations with students during small group lunches, Boskin and Shoven said they would repeatedly hear similar requests from students. “I’d ask them, ‘What do your peers, especially those not majoring in economics, know about personal finance? And the best answer I got was ‘Nothing,’” Boskin said.
“For a long time, I thought that we should have some way to deal with that,” he said. “There are bits and pieces of that all over Stanford now – like the financial wellness class, ‘Mind over Money’ — but I thought maybe we needed a more formal undergraduate course that was widely available.”
Fast forward to autumn 2018. In a conversation in a round of golf with Charles R. Schwab, '59, founder of one of the nation's largest and most innovative financial services corporations and a longtime advocate for financial literacy and education, the idea of a widely available personal finance class at Stanford re-emerged. Boskin decided to commit after Schwab's encouragement and offer of support — as long as he could convince his close colleague, Shoven, to pilot the class with him and teach it for five years.
Shoven, who officially retired in 2019, agreed.
“I didn’t elect to teach anything this year, but I’m doing this,” Shoven said. “It’s valuable, and I’m excited about it.”
“I’ve had at least 1,000 alums tell me by now, saying they wish they had had a course like this, and maybe they would have avoided some financially damaging decisions like not signing up for their 401(K),” Boskin said.
As it turns out, the inaugural Econ 43 course has attracted a diverse student body — from freshmen on up to graduate students, many of whom are not economics majors.
They are in for a rollicking ride. They will learn right off the bat that everybody makes mistakes when it comes to finances, and dissect the reasons why. The markets are collectively smarter than any individual, and the returns from saving ain’t like before.
They’ll learn a bit of micro and macro — the underpinnings of which could help them make smarter personal decisions. They’ll learn how human psychology plays a role, and how and when debt is a friend or a foe, and so much more.
“It will take us teaching it a few times for us to make sure we're pitching the course at the right level and leaving enough avenues for people of different backgrounds to engage,” Boskin said. “Our hope is that it’ll be important and valuable to students.”
In addition, the switch to an all-online format is new territory for Boskin and Shoven — and will be especially challenging as their passion for teaching is grounded in the ease of in-person interactions, building relationships and mentorships.
“It is unfortunate to have this initial offering of Econ 43 online without students physically present,” Shoven said. “But it pales in comparison with the other challenges facing the country and the globe.”
The Econ 43 course does not have prerequisites and satisfies the university’s Social Inquiry WAYS requirement. It is slated to be offered each spring for five years.