Economic Development, Foreign Aid and Charity Applications

Alan Green, Stetson University,
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This exercise includes two applications: one on whether and how the U.S. should increase foreign aid, which aims to get students thinking about policies to support growth and development, and a second on charity, which challenges students to consider the economics of giving money, whether it is foreign aid from the government or a dollar to a beggar.

Context for Use

This activity is designed principles courses and will take 50-75 minutes. The activity starts with a readiness-assessment quiz on principles of economic growth and development, which is followed by two policy application exercises. The application exercises are related, but not sequential. Either could be used on their own if desired.


This activity is a team-based policy debate. Students are first asked to consider U.S. foreign aid, which they can propose to increase or decrease or to change its focus. Students should use the background material on economic growth to propose effective uses of it (or to argue against it). The second question asks them to consider the economics of charity: does it truly help people? If so, should it be given as cash, as a loan, or in kind? The application exercises each have five specific options. The topics are chosen and options are designed so that there is not an intended correct answer. Rather, students should be able to make an argument for any of the choices. Their task as a team is to discuss the issue and come to some consensus for the team choice. They are instructed to vote if they cannot come to consensus. The team discussion takes the first 15-20 minutes of the activity.
The instructor then facilitates a class discussion, which begins by having teams simultaneously reveal their choices (using large cards with letters). The teams are then called on in turn to defend their choices to the rest of the class. As they present, the instructor should look for sound economic reasoning. If they want to increase foreign aid, for instance, how will it be funded and where is the focus? If they argue against giving cash to the poor, what do they propose instead? Do loans offer better incentives or take advantage of those with high risk profiles? The presentations begin a class wide discussion on what the best policy should be. The instructor facilitates this discussion for 10-15 minutes, after which it culminates in class vote. Students vote individually for the class vote, but extra credit can be offered for any team whose choice wins a majority of the class vote (thus incentivizing effective argument and persuasion).

Expected Student Learning Outcomes

In this activity students will use economic models to support arguments pertaining to foreign aid and charity. They will engage in critical thinking about the direct and unintended consequences of both foreign aid and charity.

Information Given to Students

Student teams are given folders with both the quiz and application exercises.

Quiz - Economic Development (Microsoft Word 2007 (.docx) 18kB May14 18)
Application Exercises - Foreign Aid and Charity (Microsoft Word 2007 (.docx) 13kB May14 18)

Teaching Notes and Tips

This activity includes both a readiness-assessment quiz and application exercises. It can be completed in one class period or spread over two. The quiz is ten multiple choice questions on background material that has been previously covered in both readings and class lectures or activities. The background focus is on long run economic growth and development, particularly in poor countries. The quiz is posted online for individual completion before class and then given to each team to take again in class along with immediate feedback scratch cards.

In the application exercise students are given two policy questions in teams. Their task as a team is to try to form a consensus around one of the five options for each policy. The policy questions are designed so that there is no "right" answer; the goal is for students to see how economics can inform debates. The first question is a clear policy choice - what should the U.S. government do in terms of foreign aid. The second question is about broader principles of charitable giving. Students may not have strong opinions on the first question and be comfortable proposing modest increases in foreign aid. If so, they can be challenged on the second question as to the impact on behaviors from such aid or any form of charitable giving. The goal is for students to engage in debates informed by economic concepts; the instructor should circulate, listen to arguments and ask probing questions to get students to think critically. Teams sometimes settle on a choice fairly quickly; in that case the instructor should challenge their arguments by arguing for other options and asking the team if everyone is in agreement. If a team is against foreign aid, for instance, the instructor can point out the low ranking of the U.S. in terms of percentage of aid given and ask why so many countries give more. If a team wants to give in-kind gifts to the poor, the instructor can point out the likely efficiency loss from giving people something that is most likely not what they would invest in if they had the resources.

Once all teams have made their choices they should all report them simultaneously. This can be easily done by giving each team large letters (A through E) and having them all hold up the letter of their choice at the same time. The instructor should select one member from each team to briefly defend that team's choice to the class (random selection is good here; it is better if students do not know who is presenting until it is time to present so everyone has to prepare and be engaged in the discussion). These questions will hopefully elicit different responses from different teams, which the instructor can use to point out sound examples of economic reasoning even in divergent answers.

The instructor then leads a short class discussion on the topic, filling in or correcting flawed reasoning when necessary and also noting if there is a convergence to one or two options. It is also good then to consider why other options were eliminated. Did anyone propose "buy stuff" as a way to help the poor? Why or why not? The discussion culminates in a class-wide individual vote on each question. Students do not have to choose the same answer from their group for the individual vote; rather the individual vote allows them to express individual preferences that may differ from the group. If desired, additional incentives can be offered to any team whose policy choice secures a majority of class votes; a few extra credit points can motivate teams to build consensus and argue strongly for their preferred policy.


Quiz grades provide evidence of preparedness and general understanding. Exams using application type questions assess the students' ability to meet the learning goal for this activity.

References and Resources