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When the Classroom Mimics Reality:

A Simulation in International Trade and Relations


Brian Peterson, Ph.D.
Associate Professor of Economics
Department of Economics
Manchester College
North Manchester, Indiana 46962
BJPeterson@manchester.edu
260.982.5205 (voice)
260.982.5043 (fax)

and

Suzanne Wallace, Ph.D.


Associate Professor of Economics
Department of Economics, Accounting,
and Business Management
Central College
Pella, Iowa 50219
WallaceS@central.edu
641.628.5318 (voice)
641.628.5375 (fax)

Abstract

Students participate in an international trade simulation in which they are “born” into a country and must
produce and sell goods to survive. Countries, ranging in economic power from the United States and
Japan to Ethiopia and Somalia, are endowed with a level of raw materials commensurate with their
national income, and must produce at a level sufficient to maintain both their population and
environmental quality. As a result of this interaction, students discover that there is a reason why poor
nations remain poor, and why international relations are so problematic. Students also see firsthand the
economic effects of the production process, such as the declining use of labor and increased use of capital
in producing a country’s output.

The authors thank Rich Glendening, Diane Monaco, participants at the 2002 ASSA meetings poster session on teaching
techniques, participants at the 1999 Southern Economic Association meetings, and participants at the 1999 IPFW Conference on
the Scholarship of Teaching. All remaining errors are the responsibility of the authors.
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When the Classroom Mimics Reality:


A Simulation in International Trade and Relations

Introduction

Economics teachers have often been criticized for utilizing a "chalk-and-talk" method of

instruction. In an era of innovative teaching techniques being utilized in other social science

disciplines, economics has historically been taught using a standard lecture format. In fact,

Becker (1997) suggests that the reason so many economists did nothing to alter teaching styles

was because they did not have to; enrollments in economics increased during the 1980s and there

was no immediate need to adjust style to attract students. However, economists no longer have

the luxury of using only one means of instruction. It is necessary to catch up to their

counterparts in other social sciences.

This is not to say that some economists do not utilize non-lecture means of instruction.

One need only peruse the voluminous literature on auction market experiments, voluntary

contributions mechanisms as a means of public good provision, and a variety of other economics

games and experiments to see that there is more than one way to instruct students in economic

theory. These games place students directly into economic situations and force them to make

economic decisions, and at the same time teach them about economic theory. This type of

instruction has the distinct advantage in that students can be instructed not only in mainstream

economic theory, but also in market failure where applicable. This is more difficult to do on the

blackboard, and is not as easily understood by students when compared with their ability to

actually "experience" the economics being taught to them.

This simulation in international trade fits into this literature in that students are placed in

a situation in which they must make economic decisions in a global market, and is innovative in
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that the results of this simulation are cross-disciplinary in nature. This experiment helps to open

the eyes of a number of students regarding the ability - or inability - of countries to improve the

lifestyles of their inhabitants. Further, students reported experiencing feelings of nationalism and

discrimination toward other countries, engaged in crime (and therefore national defense) against

other countries, and demonstrated that they would rather produce using capital resources rather

than labor resources.

Overview of the Simulation

The ultimate goal of the game is to maximize national wealth by producing geometric

shapes for sale in a global market 1 . At the start of the game, students are "born" into countries

that are endowed with some level of capital resources. Countries in the simulation can be

designated as Tier I, Tier II or Tier III nations. Tier I nations are prosperous; they possess low

populations and a high level of capital resources, and would include nations such as the United

States and Japan. Tier II nations are slightly "developed," and possess higher populations than

Tier I nations, but fewer capital resources. Tier II nations would include countries such as Brazil

or Mexico. Finally, Tier III nations would be considered poor; these are the "developing" or

"newly emerging" nations described in the economics literature. These countries have the

highest populations and the fewest capital resources, and would include countries such as

Ethiopia and Somalia.

All nations are endowed at the beginning of the game with some amount of capital

indicative of its level of development 2 . For example, a country such as the United States would

possess sharpened pencils, paper, rulers, scissors, compass, and a significant amount of money

with which to produce its geometric shapes, while a country such as Ethiopia would possess

1
The full set of instructions is contained in Appendix 1.
2
A list of potential countries, and their respective endowments, is given in Appendix 2.
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some paper and perhaps a broken pencil. Further, all countries are endowed with an initial

amount of environmental quality (tokens distributed to each country). Additional resources can

be purchased during the course of the simulation, or can be acquired through other, more

creative, means.

During each simulation "year", which lasts approximately 10 minutes, countries must

produce to survive. Each country produces geometric shapes with its available resources and

attempts to sell their output to the bank. The bank, upon deciding that the goods produced pass a

quality inspection, will purchase the goods from the country at the current market price for that

particular shape.

Within this market structure, though, lays the main difficulty of the simulation. Each

country must produce a subsistence level per capita each year. If this level of subsistence is not

reached, starvation ensues, and their population begins to die. Further, production is harmful to

the environment. For increasing levels of production each year, countries must have increasing

numbers of environmental quality tokens in their possession. If this requirement is not met each

year, portions of their populations begin to die from the pollution created.

Those supervising the simulation include the "Game God", the Chief Economist,

Bankers, and Power Brokers. The Game God oversees the entire simulation. This individual's

role is to serve as judge of disputes and ensure that all production and environmental quality

requirements are met. The Game God also can cause hurricanes to strike coastal nations, civil

wars to strike sub-Saharan regions, and other similar actions, and it is the responsibility of the

affected country to accept its fate and respond. The Chief Economist serves as overseer of the

global market. This individual adjusts prices based on relative surpluses or shortages of goods

produced and resources sold in the market. The Bankers are the purchasers of the output
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produced by the countries. They decide on the level of quality of the good produced, and have

the right to reject any good that does not conform to standards set previously3 . Finally, the

Power Brokers sell capital resources to countries for additional production, and purchase these

resources back from nations for 1/2 the retail price. Both the Power Brokers and Bankers

communicate with the Chief Economist so that this person can adjust prices in the resource

markets to eliminate any surplus or shortage.

Countries also have the ability to purchase additional labor. Individuals who "die" as a

result of a nation's not meeting its production or environmental quality quotas or as a result of an

action instigated by the Game God enter an itinerant labor pool. Once in this pool, individuals

can only reenter the game by being "purchased" by countries for use in production. The Chief

Economist regulates the price of labor and units of labor from the itinerant labor pool can be

purchased from the Power Brokers.

General Results

At the beginning of a simulation run recently, a student from the Tier III nation of

Ethiopia asked the Game God, "How can we sell any goods if we don't have scissors in which to

cut the shapes? The shapes must have sharp edges, and without scissors we won't be able to

produce anything worth selling." The Game God responded, "Overcome your limitations. Do

what you have to do. Be creative." That student stared at the Game God, and walked off,

obviously thinking that she had been set up to fail. At the end of the simulation, she understood

what the Game God had said and why she had been placed in that situation. It is precisely how

students respond that is important in this game.

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Sizes and dimensions of the geometric shapes are given on poster board around the simulation room for students to
see, but students are not allowed to trace the objects from the poster board.
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While this simulation ga me can be run with either large groups (250 participants or more)

or small groups (as little as 40), many of the outcomes are the same. Students realize that it is

not easy to succeed if they face adversity from the very beginning. As a result, there are several

specific behaviors that arise as a result of this simulation, regardless of the size of the simulation.

Nationalism

Interestingly, countries that purchase labor to increase production during the simulation

tend to purchase labor that had entered the labor pool as a result of a death from that particular

country. For example, if citizens of Somalia died as a result of a civil war imposed by the Game

God, Somalia would only purchase former Somalian labor, even if there were additional workers

in the itinerant labor pool. Participants were very obvious about this demonstration of

nationalism, but did not consciously attribute it to a sense of nationalism until it was discussed

after the simulation. However, this action goes beyond simply buying back their friends; rather,

this association with national identity includes even those individuals who did not know each

other prior to the simulation and had been members of a community for only a short time.

Increasing Capital Intensity of Production

In the United States and in the rest of the developed world, manufacturing has become

more and more capital intensive, focusing more on automation, and less on labor as an input to

production. Following this trend, as countries become more prosperous in the simulation, labor

tended not to be purchased for production. Instead, countries purchased capital resources from

the Power Brokers and made do with the ir current population levels. In fact, the only way that

some countries were induced to purchase additional labor was if the Game God endowed the

itinerant workers with additional skills (ruler, compass, paper, etc.). This is directly analogous to

the focus on skilled labor in production over and above unskilled labor. Further, it is logical to
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assume that some countries only purchased labor to avail themselves of the capital the laborer

brought with him/her.

Discrimination, and Group Success or No Success

As a general rule, poor nations appealed to other nations for assistance, either for

additional resources or for assistance in production. In contrast, richer nations avoided such

practices as a general rule, and in fact tried to exploit the needs of poorer nations. For example,

in one instance a Tier I nation tried to sell a much smaller piece of paper to a Tier III nation for a

price higher than would have been charged by a Power Broker for a proportionally sized piece

(i.e., sell them a 1/4 sheet for the effective price of a 1/2 sheet).

To compensate for their low capital endowments, poorer nations banded together,

pooling their resources and producing output almost as a cartel rather than as individual nations.

Tier III nations decided that this was the only way to survive; individual self- interests could not

have been met in this game. For them to prosper as a nation, they had to bury their national pride

and share what they had with others in a similar situation.

Crime and Defense

In order to survive, some nations stole resources from each other or from the bankers or Power

Brokers. This activity involved not only poorer nations stealing from richer nations, but also

poor nations stealing from poor nations. On a more sociological level, the individuals engaging

in criminal activity tended to be poor males, fitting into a well-known demographic. If caught,

the Game God would punish nations, but typically these instances were not detected. As a result,

nations were forced to spend valuable labor time defending its resources from theft rather than

devoting that labor time toward increased production. In other words, the more a nation

produced and acquired more resources, the more resources they needed to expend to protect what
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they had. This inefficient behavior could possibly be remedied by more adequate third party

protection viz a viz. the Game God, but resources are simply not present to allow for that. As a

result, nations felt that they were being unfairly treated, since they had been robbed and there

was nothing that could be done about it.

Discussion and Conclusion

Jurgen Brauer (2000) summarizes the types of noncomputerized games played by economists in

the classroom, and commented, as did Fels (1993), that the focus of the paper was to show how

these games could fit into an overarching teaching strategy. In fact, more and more principles of

economics textbooks are including such noncomputerized games as an additional means of

instruction. The focus of this simulation would be appropriate in this overarching teaching

scheme as a demonstration of the limitations of modern markets in achieving income equality.

Further, this exercise, though couched in terms of international trade, is not really about

the economic theory behind various global resource or output markets. Rather, it is about the

interaction between rich and poor nations, and the difficulties experienced by some countries

with little or no ability to improve themselves. Students participating in this simulation have

come away with a richer understanding of what it means to be an underdog in modern

international markets, where the rich nations have all the advantages. They also find themselves

in the same types of behavior they see coming from nations on the television: nationalism,

discrimination, criminal activity, etc. They begin to process these activities in a new light; not

that they are necessarily correct behaviors, but they now have a new perspective on them.

This type of simulation is extremely useful in relating interdisciplinary topics, as well as

exposing students to various aspects of diversity. One author’s campus offers a First Year

Colloquium on interdisciplinary topics in which this simulation has proved useful, and was
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recently used during a national church conference seminar dealing with issues of activism and

globalization. Students come away from this simulation saying that they did not realize that it

was so difficult for poor nations to get ahead. A simulation like this acts as a springboard to

discussion of a wide variety of issues, but is presented in such a way that students are more

inclined to remember these lessons than if they were presented the same information on the

blackboard or on overhead.

Works Cited

Becker, William. 1997. "Teaching Economics to Undergraduates." Journal of Economic


Literature. XXXV (September): pp. 1347-1373.

Brauer, Jurgen and Greg Delemeester. 2000. "Games Economists Play: Non-Computerized
Classroom Games." Journal of Economic Education. 31, No. 4 (March): 406.

Fels, Rendig. 1993. "This Is What I Do, and I Like It." Journal of Economic Education. 24,
No. 4. (Fall): 335-351.
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Appendix 1

God’s Guide to the World


of International Trade and Global Competition

Introductions
Welcome to my world! Allow me to introduce you to my humble servants:

The Chief Economist: This person thinks s/he is next to God - and I am trying to change that!
Think of the chief economist as the principle of rationality in the world. S/he, with God’s help,
makes sure that all the production quotas are met, collects the environmental tokens, and alters
prices to reflect any changes in demand and supply in my world.

The Bankers: These people are overworked and underpaid. Don’t hassle them! Just line up
nicely like good little sheep and make your transactions. Sorry, there are no ATM’s in my
world. By the way, the bankers really like the Tier I nations so these countries can cut in line
and get immediate assistance.

The Power Brokers: The brokers will buy and sell almost anything if they can make a profit
doing so. Countries can purchase five types of resources from the power brokers:
Ø Capital goods: scissors, rulers, pencils, protractors, etc.
Ø Raw materials: sheets of paper.
Ø Health and education: red paper which doubles the value of the shapes you produce.
Ø Labor: additional workers from that ghostly itinerant labor pool.
Ø Research and development: cool and useful information (and resources) from God.
You can also sell your capital goods to the power brokers for one-half the listed purchase price.

GOD: I have been called capricious, annoying, and a divine pain. Of course, those who called
me such names are no longer around... The truth is that I bestow favors and mete out justice in
ways inscrutable to you ordinary humans. Do not question me. Just accept your fate. Perhaps
through hard work and my guidance you can transcend your human limitations.

The Laws of International Trade and Global Competition


1. Any trades or other arrangements made between countries are their own business.

2. All shapes must be of the exact size and must be cut with scissors and have clean, sharp
edges.

3. You may NOT trace the shapes on the diagrams.

4. Only the materials distributed for the game may be used.

5. Physical force may NOT be used during the game.

6. Don’t argue with the Game God!


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The Way of the World

The Basic Facts: You are a country that is either Tier 1 - rich and prosperous; Tier II - not too
well off, but somewhat “developed”; or Tier III - impoverished with little access to the modern
world’s wealth. You have an initial endowment in this world which reflects your starting wealth.
The endowment consists of:
Ø Labor - your population
Ø Capital - your tools of production: pencils, scissors, etc.
Ø Raw materials - sheets of paper
Ø Environmental quality - tokens which look a lot like pennies that cover environmental
cleanup costs
Ø Money - cash in the form of $1000 bills.

Time : You will live in my world for only 7 to 8 years. Each year lasts only about 10 of our
minutes, so it is a place of hard work and fast living.

How Life is Lived and Work is Worked: Each year you are to produce geometric paper shapes
using the resources you have. You can acquire additional resources through trade with other
countries, by purchasing them from the Power Brokers, or in whatever other ingenious ways you
discover.

You sell your paper shapes to the bank at the end of each year (or anytime during that year).
Quality control is important because the Bankers will reject any shapes that do not conform to
their specifications - and their decision is final. The Bankers will pay you in cash for the shapes.

You will need this cash to provide for the subsistence of your people (at $500 per person per
year). You may also use this cash to purchase additional capital, raw materials, labor, and
environmental tokens.

Production is hard on the environment, so you must compensate for the pollution damage with
environmental tokens. It takes one token to clean up the pollution from every $1000 worth of
shapes produced. You will be given 10 tokens at the start of each year. You can trade with other
countries to get additional tokens and/or you can buy more tokens from the Power Brokers. At
the end of each year, you must turn in any leftover tokens for which you will receive $500 each.

Now for the really important stuff - remember that at the end of every year you must:
1. Meet your production quota - by paying the Chief Economist $500 for each citizen of
your country. If you do not have enough money, then some of your people will starve,
and DIE!
2. Protect and/or clean up your environment - by giving the Chief Economist one
environmental token (penny) for each $1000 worth of shapes which you produced and
sold to the bank. If you do not have enough tokens, the pollution will be so toxic that
some of your people will DIE!
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If and when any of your citizens die, they are interred in a ghostly pool of itinerant laborers that
is overseen by the Power Brokers. They can be purchased and brought back to life by you or any
other country at the labor price set by the Chief Economist.

You should also know that, since I am God, I oversee all other happenings of nature. It is
possible that I could cause your country to experience a variety of events, from population
explosions to natural disasters. You will simply take what comes and trust in my wisdom. Your
goal is to amass wealth and win the game! The country with the most cash at the end of the last
round will be the winner.

Starting Output Prices

Small Triangle $500

Circle $500

Half-Moon with circle cut out $1,000

Large Triangle with Half-moon cut out $1,500

Parallelogram with Square cut out $1,500

Power Brokers’ Price List

Environmental Token $500

Pencil $3,000

White Paper (2 sheets) $3,000

Labor (per person) $4,000

Compass $5,000

Protractor $7,000

Pencil Sharpener $8,000

Red Paper (1 full sheet) $10,000

Ruler $10,000

Scissors $12,000
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Appendix 2
Basic Setup

Tier I Countries: United States


Australia
Japan
Germany
Switzerland
Population: 3 or 4 players
Endowment: Game Guide
Country ID
1 scissors
2 rulers
1 compass
1 protractor
3 sheets of white
paper
4 pencils
$10,000

Tier II Countries: Mexico


Russia
Turkey
Brazil
Israel
Egypt
South Africa
Botswana
Population: 5 or 6 players
Endowment: Game Guide
Country ID
1 scissors
1 ruler
9 sheets of white
paper
2 pencils
$4,000

Tier III Countries: Afghanistan


Bangladesh
Angola
Somalia
India
Ethiopia
Haiti
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Ghana
China
Nicaragua
Population: 7 or 8 players
Endowment: Game Guide
Country ID
4 sheets of white
paper
2 pencils (semi-
broken)
$2,000