How do you teach the Ukraine war in economics?

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How do you teach the Ukraine war in economics?

https://doi.org/10.21203/rs.3.rs-3554268/v1

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The Ukraine war is currently the most important economic issue, which attracted students’ interest. How do you teach the Ukraine war in economics? This study is a teaching report of my economics lecture at the National Institute of Technology Toyama College in 2022. Some topics on the theme “the Ukraine war and the Japanese economy” were taken for exercise and assignment. In the spring term, for example, some topics include economic comparisons among Ukraine, Russia, and Japan (population, gross domestic product, industrial structure, growth rate, inflation rate, etc.), price decrease and increase, price ceiling for Russian oil, and “The Economic Consequences of the Peace” by J. M. Keynes. Moreover, in the autumn term, the topics are 12 economic shocks of the Ukraine war, the macroeconomic effect of export and import regulation on the Japanese economy, and the macroeconomic effects of an increase in oil price and yen depreciation. My students tried these exercises and were given homework about these topics.

Macroeconomics

Ukraine

Russia

price increase

price ceiling

The Economic Consequences of the Peace

macroeconomic effects of the war

In April 2022, the Ukraine war which began on 24 February 2022 by the Russian invasion of Ukraine topped the list of economic issues, which attracted students’ interest. Even in introductory economics, one cannot help but deal with the issue[1]. In my class of economics for first-year university students, I set up several topics and take exercises and assignments on the theme “Ukraine war and the Japanese economy.” This study reports my class practices in the academic year 2022[2].

The topics in the spring term of 2022 are the following: economic comparisons among Ukraine, Russia, and Japan (population, gross domestic product (GDP), industrial structure, growth rate, etc.), price decrease and increase, ceiling price for Russian oil, and “The Economic Consequences of the Peace” by Keynes [2]. Then, the topics in the autumn term are economic shocks of the Ukraine war, regulation of exports and imports, macroeconomic effects of an increase in oil price, the effect of yen depreciation, and expectation of the real GDP and GDP deflator in 2022.

In April 2022, we conducted a questionnaire survey for 160 students (Nihon University, University of Marketing and Distribution Sciences, the National Institute of Technology Toyama College, and Toyama Dental Academy). We asked, “What economic issue are you most interested in?” A text mining analysis was performed for the question. Figure 1 shows the result. The number one issue is Ukraine, followed by yen depreciation, price hikes, increase in prices, Russia, and crude oil prices. Sizes of words in the figure1 reflect the scores: Ukraine（ウクライナ）99.38, yen depreciation（円安）83.06, price increase（値上げ）39.49, price hikes（物価上昇）23.87, Russi（ロシア）22.38, crude oil prices（原油価格）20.18.

Fig.1 Word cloud of “What economic issue are you most interested in?” Source: User local text mining (https://textmining.userlocal.jp/)

[1] Poast [5] describes the economics of war for students.

[2] This study is an expended English version of Niisato [4] which treats only my lecture in the spring term of 2022.

I have a lecture in economics (microeconomics in the spring term and macroeconomics in the autumn term) at the National Institute of Technology Toyama College[3]. The textbook for this course is Mankiw [3][4]. In the classroom, students do group work (four people per group). Then, to touch on real economic issues, they read newspapers for approximately 15 minutes and pick up the titles of the news that interest them. Some practices and exercises are done through group work.

In the spring term, from April to August, I took the following topics on the theme “the Ukraine war and the Japanese economy.” The aim is to confirm the basic economic knowledge about Ukraine, Russia, and Japan and to take some applications of economics. I gave the exercises and assignments as follows.

(a) Search for the population, GDP, and GDP per capita of the three countries.

(b) What are the commodities that have recently decreased in price? What are the commodities that have recently increased in price? Any considered reasons from the demand and supply side?

(d) What are the basic economic statistics in the three countries?

(e) Read the news on the price ceiling for Russian oil (Nikkei newspaper dated Jane 28, 2022).

(f) Use Excel to make some graphics about the economic growth rate, inflation rate, and per capita GDP of the three countries during the period of 2010–2022. Moreover, write a short essay using Word.

(g) Read Keynes’ “The Economic Consequences of the Peace,” no.1, with a video of J.M. Keynes[5].

In topic (a), students use a smartphone to search for the population and GDP of the three countries and put those values into a worksheet table. Then, they use the smartphone’s calculator to obtain the GDP per capita and the multiplier. In the assignment (homework), the data are entered into Excel, and tables and graphs are created.

In topic (b), students consider the reasons for prices falling and rising from the viewpoint of microeconomics and the effects of the Ukraine war.

In topic (c), they access the World Economy Database (https://ecodb.net) to obtain data on the industrial structure of the three countries.

In topics (d) and (f), first, they access the basic country database of the World Economy Database (https://ecodb.net) and obtain some figures of GDP, imports, and exports. They then create some tables and graphs using Excel. Second, they write their short essay using Word, mentioning their own graphs.

In topic (g), I explained “The Economic Consequences of the Peace” in 1919 and economic problems after the war. This book was published by J.M.Keynes in opposition to Germany’s reparations in the Treaty of Versailles of World War I. Moreover, the video of “Keynes and Keynesianism” with Japanese subtitles was watched for 15 minutes (from the start to the appearance of Hitler and the beginning of World War II).

I conducted a questionnaire survey on the above topics to the students. Figure 2 shows the results of the questionnaire: Which of the above topics did you find most interesting or useful? Check three of the seven letters. A total of 29 students responded.

Fig.2 Three topics that students find interesting or useful.

Students highly appreciated topics (b), (e), (a), and (c). Some comments should be added to the results. Topic (a) is basic and easy for students, and topic (b) is a daily problem. Every student noted the price of the commodity he or she wants to buy.

Students are more familiar with topic (c) because they heard the news: Ukraine is famous for wheat in the first industry, and Russia is famous for oil and natural gas in the second industry. Topic (e) is timely news, which just a week ago, they learned price ceiling in my lecture.

Topics (d) and (f) are difficult for students who have not learned Excel adequately. Topic (g) is historical and difficult to understand for students. My explanation was not sufficient.

[3] My class is composed of students in three departments, namely, maritime technology, electronics and computer engineering, and international business, totaling to 57 students.

[4] He states that the main reasons for the fluctuation in the government debt–GDP ratio are the wars, from the viewpoint of history (p.406). He analyzed the macroeconomic effect of pessimistic waves from a war burst (p.472). In addition, mentioned that the five times expansion of government expenditure during World War II extended the output two times, increased the prices by 20%, and declined the employment rate from 17% in 1937 to 1% in 1944 (p.478).

[5] BBC and Open University [1].

In the autumn term, from October to February, I took the following topics:

(h) Keynes’ “The Economic Consequences of the Peace,” no. 2.

(i) The 12 economic shocks of the Ukraine war and the impacts on the Japanese economy.

(j) Regulation of exports to Russia and a macroeconomic effect on the Japanese economy.

(k) Regulation of imports from Russia and a macroeconomic effect.

(l) Price increase in oil, natural gas, and wheat and a macroeconomic effect.

(m) Shock of yen depreciation and a macroeconomic effect.

(n) Expectation of GDP and GDP deflator in 2022, accounting for Ukraine shocks.

In topic (h), I again spend a lot of time talking about Keynes’s life and his book. Then, I let the students watch the video. I sometimes used Keynes’ video as an introduction of microeconomics. In this time, I emphasized that J. M. Keynes was an economist who discussed the current economic issues and that he created the foundation of Macroeconomics. They wrote short essays as a homework assignment. They gave me good reports.

The 12 shocks in topic (i) are as follows:

(1) Society for Worldwide Interbank Financial Telecommunication (SWIFT),

(2) Japanese regulation of exports to Russia,

(3) Japanese regulation of imports from Russia,

(4) Regulation of direct and indirect investment to Russia,

(5) World price increase in oil and natural gas,

(6) World price increase in wheat,

(7) Increase in fright and shipment costs,

(8) Yen depreciation and dollar appreciation,

(9) Ceiling price for Russian oil in June,

(10) The price ceiling was set at 60 US dollars in December,

(11) Economic support for Ukraine by the Japanese government,

(12) Japanese defense expense per GDP to be changed from 1% to 2%.

These shocks were picked by students after reading of newspaper for 15 minutes in every class. The order of shocks is the order in which they happened. As their homework, students check the news to write their short essays. The purpose of the topic is not that students discuss each other but that students share the knowledge of the facts and the current situation of the Ukraine war and the Japanese economy.

Topics (i) to (n) is an application of AS-AD analysis to the Japanese economy. I would like to show to students that simple AS-AD model can be applied to an analysis of the Japanese economy.

Topic (j) is an analysis of the effect of decreasing exports on the economy in the aggregate demand (AD) and aggregate supply (AS) model framework. A decrease in exports shifts the AD curve to the left[6]. Therefore, the output (real GDP) decreases, and the price (GDP deflator) decreases at the equilibrium.

Topic (k) is an analysis of the effect of decreasing imports in the aggregate demand and aggregate supply model. A decrease in imports, which increases net exports, shifts the AD curve to the right. Therefore, output increases, and price increases.

Fig.3 The effect of an increase in oil prices on the macroeconomy. Y is output (real GDP), and P is price (GDP deflator).

Topic (l) is an analysis of the oil price increase. In this case, the import quantity decreases, but the import value arises because it is a necessary good. Moreover, an increase in oil prices shifts the AD curve to the left[7]. From another aspect, as oil is an important material input in production, an increase in the oil price shifts the AS curve to the left. Therefore, output decreases, and price increases if the shift of the AS is greater than that of the AD, in which case the equilibrium moves from point A to B in Figure 3. If the shift of the AS is smaller than that of the AD, then output decreases, and price decreases, as shown at point C in Figure 3.

The yen-dollar exchange rate devaluated since March in 2022: around 115 yen per dollar in February,

almost 150 yen per dollar in December. This is not direct effect of the Ukraine war. It is mainly because the difference of policy interest rate between Japan and the US. The increase in the US interest rate was affected an increase of prices caused partly by the Ukraine war. The Japanese economy during the Ukraine war was strongly affected by the yen devaluation. Many students were greatly interested in the effects to the Japanese economy and tried to understand the complicated cases.

Topic (m) has a variety of cases in principle. A yen devaluation shifts the AS curve to the left because of an increase in import input price. On the one hand, it is not decided a priori if it shifts the AD curve to the right or the left. This case makes an increase in exports and makes a decrease in import demand in quantity. However, whether the value of the imports decreases or not depends on the share of necessities in imports. In the case of Japan, oil and wheat are important necessities, making an increase in imports. If an increase in exports is less than that in imports, maybe in the case of Japan, net exports decrease. Then, the AD curve moves to the left. The AS curve also moved to the left. The total effect is the same in Figure 3. If the left shift of the AS curve is greater than that of the AD curve, then output decreases, and price increases, like point B in Figure 3. If the left shift of the AS is smaller than that of the AD, then output and price decrease, like point C in Figure 3.

Fig.4 The effect of yen depreciation in the case of an increase in net exports. Y is output (real GDP), and P is price (GDP deflator).

In the case of an increase in net exports, if imports decrease or if the increase in imports is less than that in exports, the AD curve moves to the right[8]. The AS curve moves to the left. Figure 4 shows the total effect. If the right shift of the AD is greater than the left shift of the AS curve, then output and price increase, as shown at point B. If the right shift of the AD is smaller than the left shift of the AS, then output decreases and price increases, as shown at point C.

Topic (n) is an exercise of shifts in the AD and AS curves. Say that point A is the actual point in 2021. The real GAP is 540 trillion yen, and the GDP deflator is 101.7 in 2021. Students predicted the figures of real GDP and GDP deflator in 2022. Moreover, they wrote the equilibrium point with AD and AS curves in their figures. The prediction was a kind of quiz in January. On 14 February 2023, the actual figures for GDP in 2022 were announced by the government. According to the official, the annual real growth rate of GDP is 1.1%, and the increase rate of GDP deflator is 0.2%[9]. Students examined their predicted and actual values.

[6] We use the simplest macroeconomic relationship such as Y = C + I + G + (X−M). Then, the price level was fixed, so Y, that is, AD will move to the left on the horizontal lime, as (X−M) decreases.

[7] Real imports M=import price×import quantity/GDP deflator. The elasticity of necessary goods is less than 1. Therefore, an increase in oil price makes an increase in the import value, which shifts the AD curve to the left.

[8] We remember the simplest macroeconomic relationship such as Y = C + I + G + (X -M). Then, we assume the price level is fixed so that Y, that is, AD, will move to the right on the horizontal line, as (X -M) increases.

[9] Cabinet Office (14 February 2023), Quarterly Estimates of GDP for October–December 2022 (First Preliminary Estimates), https://www.esri.cao.go.jp/en/sna/data/sokuhou/files/2022/qe224/pdf/gaiyou2241_e.pdf. Accessed 15 February 2023.

We considered the economic effects of the shocks in the Ukraine war only for the Japanese economy. The Russian share in Japanese exports and imports is only 1.0% and 1.8%, respectively. Therefore, the direct effect is very small. The increase in the world price of oil and wheat owing to the Ukraine war gives great effects on the Japanese economy.

These effects vary from country to country. Ukraine, Russia, the US, the UK, and European, African, and other Asian countries might have other results. In the case of Ukraine, the AS curve moves to the left because the war destroys the capital equipment and infrastructure. The AD curve moves to the left because of diminishing consumption and investment demand. Therefore, it could be the case of point B in Fig. 3. The price increases, and the output greatly decreases. In the case of Russia, the AS curve slightly moves to the left. The AD curve moves to the right because of the increasing military expense despite the sanctions against Russia. The result could show points B or C in Fig. 4. The prices increase, and the output increases or decreases.

This study mentioned some samples of exercises for beginners in economics. It is not a study of Economics of the Ukraine war. My aim is that students understand the current economic issues and apply simple economic theories to them. Students have been much interested in real economic issues and problems. However, economic textbooks often start from principles and theories. Case studies in a textbook sometimes are out of date. We must start with the real current issues for beginners. Clear theories and simple applications will make economics attractive for beginners.

Competing interests There are no competing interests

BBC and Open University, Japanese subtitled by Nagamine A. Keynes and Keynesianism. DVD. Maruzen publisher; 2014. Originally, Master of Money Part1 J.M. Keynes. BBC; 2012.
Keynes J.M., translated in Japanese by Hayasaka, T. The Economic Consequences of the Peace: The collected writings of John Maynard Keynes Vol.2. Toyo-Keizai-Shinposya; 1977. Originally published, London : Macmillan; 1919.
Mankiw N.G. translated in Japanese by Adachi H, Ishikawa J, Ogawa E et al. Principle of Economics: Introductory. Japanese 3^rd edition. Toyo-Keizai-Shinposya; 2019. Originally, Principle of Economics, Eight edition; Cengage Learning; 2018.
Niisato Y. How do you teach the Ukraine war in Economics? J Eco Edu (Keizai-Kouiku). 2023; 42:51-55 (in Japanese).
Poast P. translated in Japanese by Yamagata H. The Economics of War. Basilico Ltd; 2007. Originally published by McGrow Hill;2006.

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How do you teach the Ukraine war in economics?

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Abstract

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1 Introduction

2 Topics in the spring term

3 Topics in the autumn term

4 Concluding remarks

Declarations

References

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