How to Develop Data Literacy in Economics with FRED®: A Guide for Instructors

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Diego Mendez-Carbajo is a Senior Economic Education Specialist at the Federal Reserve Bank of St. Louis. This article is based on his presentation at the 2021 Economics Teaching Conference. These are his opinions and not those of his employer.

 

Over the last few decades, the professional practice of Economics has markedly increased the volume and impact of its data-focused work. Sometimes referred to as an “empirical turn,” the growing importance of economic data over mathematical theory is barely reflected in instructional classroom practices. Which are the foundational data literacy skills in Economics? How can instructors help students develop the data skills that will best position them for professional success?

Let’s start by defining the concept of economic data literacy. Next, we’ll describe several resources to embed data literacy in your teaching. We’ll show you an example you can easily use as a teaching template.

What Is Economic Data Literacy?

Economic data literacy can be defined as the combination of specific expected student competencies in Economics and the broad data literacy needs of the workforce. Even though the scholarly literature in Economics education identifies several specific data-related skills and the professional literature in library science emphasizes the value of generic information literacy skills, a narrow definition of economic data literacy is not currently available.

Data literacy in Economics is the combination of three sets of skills students can acquire through an undergraduate education:

  • Information literacy, as defined by the American Library Association, is a set of abilities requiring individuals to “recognize when information is needed and have the ability to locate, evaluate, and use effectively the needed information.”
  • Numeracy, as defined by the National Numeracy Network, includes the “ability to communicate at a substantial level about quantitative issues in everyday life.”
  • Economics, as defined by the American Economic Association, involves the use of “theoretical models or empirical data” to study a very broad range of social questions.

In this sense, a literate individual can effectively combine quantitative information and economic analysis to answer questions related to decision-making.

 

Teaching with FRED®

Since 1991, Economics instructors have been able to easily access, for free, a great wealth of quantitative information through Federal Reserve Economic Data (FRED). As the largest online aggregator of U.S. statistics—currently containing 816,000 individual data series from 107 different sources, the FRED® portal was visited by more than 8 million users in 2020. Multiple authors have documented its use for teaching Economics.

Here we describe several resources for teaching with FRED® produced by the Economic Education team at the Federal Reserve Bank of St. Louis, the home of FRED®.

 

Lesson Plans:

Listed in the Federal Reserve Bank of St. Louis economic education page, these self-contained resources provide instructors with fully articulated and ready-to-use educational interventions on a wide variety of topics. All lesson plans include a step-by-step description of the procedure for using the lesson plan in the classroom. To promote student engagement, the lesson plans prioritize small-group work and discussion over lecturing.

For example, the “Neighborhood Redlining and Homeownership” lesson plan describes a small-group activity where students evaluate FRED® data on home values and racial segregation to compare wealth accumulation across racial groups. Likewise, in the “Data Literacy: The Composition Effect” lesson plan, students use FRED® data to calculate and compare the unemployment rate for different racial and ethnic groups.

FRED® Interactive Modules:

Accessible through the Econ Lowdown portal, these online modules introduce students to the practice of active learning with economic data by embedding FRED® into hands-on, interactive instruction. Every FRED® Interactive module contains two different types of activities: a graph-building exercise and a graph-reading questionnaire.

The 12 modules currently available allow instructors to facilitate independent student learning on topics as varied as the difference between nominal and real wages and the reason why the 2007-2009 recession is sometimes called “the Great Recession.”

FRED® Blog Reading Question and Answers:

Accessible through the Econ Lowdown portal, these short reading assignments introduce students to economic data and their interpretation. Based on a curated selection of FRED® Blog posts, each of the 34 currently available modules include a four-question, multiple-choice quiz. The questions direct the students’ reading of each blog post toward developing information literacy, numeracy, and economic analysis skills. The online quiz is automatically graded, facilitating independent student work.

You can use these resources as pre-lecture introductions to topics ranging from labor markets to monetary policy tools. Alternatively, use them as post-lecture assignments to illustrate broad concepts in Economics such as income and wealth inequality.

 

How to Embed Economic Data Literacy in Your Teaching: An Example

Developing foundational data literacy skills among students starts by drawing their attention to data visualizations. This promotes the transfer of general information literacy skills to the task of interpreting quantitative information.

For example, in an introductory Economics course discussing labor markets, an instructor can lead a structured discussion about labor force participation rates of men and women with a disability around the following FRED® graph using the accompanying questions:

 

What is the source of the data on the disability status of workers?

Students can learn to distinguish between the U.S. Bureau of Labor Statistics—the source of the data, and FRED® at the Federal Reserve Bank of St. Louis—the organization that makes the data available to the public through its website. The proper acknowledgement of authorship is an information literacy skill directly transferrable to the domain of data literacy.

 

What are the units of the data?

Reading the vertical axis of the FRED® graph, the students can apply a combination of information literacy and numeracy skills to name the ratio between two numbers (i.e., the number of workers with a disability in the labor force and the number of workers in the labor force), multiplied by 100, as a percent. Identifying the units of the data as a percentage is a prerequisite to correctly interpret the information shown in the graph.

 

What do the lines in the graph show?

Applying foundational numeracy skills, the students can interpret percentages as proportions, rather than levels. As such, the lines in the graph show the fraction of the total labor force made up by either men or women with a disability. Moreover, the relative position of each line and their slopes inform the students about which population group with a disability has a proportionally larger presence in the labor force and whether that presence is increasing, decreasing, or remaining constant over time.

What information does the graph convey?

Combining information literacy, numeracy, and economic analysis skills, the students can translate the information presented in the graph into a concise statement describing the labor market. Knowing that the data are presented as percentages, noting that the relative number of both men and women with a disability in the labor force is almost identical, and observing their change over time, students can conclude that (1) between 2009 and 2020 the fraction of men and women with a disability in the labor force decreased and (2) there were no gendered differences in the labor force participation rates of workers with a disability.

 

Conclusion

The development of foundational data literacy skills among students does not require a dedicated academic course or a stand-alone course unit. The combined skills of information literacy, numeracy, and economic analysis are embedded in activities such as building and reading FRED® graphs.

Instructors can tap into resources for independent, online student learning as well as face-to-face small-size team learning by visiting the Tools for Teaching with FRED® webpage at the Federal Reserve Bank of St. Louis.

 

To learn more about teaching with FRED®, explore Diego Mendez-Carbajo’s presentation Using FRED Data to Address Diversity and Inclusion at the Cengage 2021 Economics Teaching Conference.