About IEM Idea

Through a $443,000 grant from the Department of Education Fund for the Improvement of Post Secondary Education (FIPSE) the University of Iowa College of Business has designed the Iowa Electronic Markets Inter-Disciplinary Educational Alliance (IEM*IDEA). This project will enhance the economic literacy and political awareness of students at minority colleges, 4-year teaching colleges and community colleges across the US.

By working in partnership with 45 schools IEM*IDEA will give about 5,400 students access to the Iowa Electronic Markets (IEM) as a learning and research tool. The primary goal of IEM*IDEA is to give them a hands-on and interactive setting to learn about economics, which in turn will promote economic literacy. To that end the grant will fund $5.00 trading accounts for students at partner institutions. Through this experience we hope these students will pursue graduate degrees in Economics, Accounting, Finance and related disciplines.

Starting in 1998 the project will enroll 15 colleges annually for each of three years. Faculty from these schools will attend IEM*IDEA sponsored conferences where they will learn the history of the IEM, how to use the IEM,and how to integrate it into the classroom as a teaching and research tool with undergraduate students.

What is the IEM?

The faculty at the University of Iowa developed the IEM to be an Internet-based teaching and research tool. It allows students to invest real money ($5.00-$500.00) and to trade in a variety of contracts. You may be familiar with the best-known part of the IEM, the political markets. Here students can trade "shares" of political candidates or parties (the payoff depends on the election results). Students also have the opportunity to trade in contracts whose eventual payoff depends on a future event such as an economic indicator, a company's quarterly earnings, a corporation's stock price returns or a movie's box office receipts. You can find more information about these markets on the Internet at tippie.uiowa.edu/iem. Also, in the past eight years, many major media outlets such as the Wall Street Journal, the New York Times, CNN, CNBC, and the Washington Post have written articles about the IEM, and Merrill Lynch has featured the IEM in a series of newsletters to major investors.

Who uses the IEM?

Since its inception in 1988, over 100 universities throughout the world have enrolled in the IEM (mainly large research-oriented institutions such as Harvard, MIT, Michigan and Northwestern). Faculty members use the IEM in accounting, finance, macroeconomics, microeconomics, and political science courses across the country. While the actual application of the IEM will differ by discipline, there are two common elements that the IEM brings to each class to increase students' economic literacy.

First, the IEM is a forecasting tool. In each class, students can forecast the outcome of future events like an election outcome, an economic indicator or a movie's box office receipts. To make such a forecast, students have to learn about the economic relationships that determine the outcome. In a political science class for example, students must think about how economic factors (among others) can affect the mood of the electorate and how this, in turn, affects each candidate's election chances.

Second, the IEM is an incentive mechanism. Because they earn a real monetary reward by trading, students are more willing to learn, which helps them make better forecasts and more profitable trades. Instructors using the IEM have reported that its use leads to students actively following elections, reading about the campaign and economic events of the day, and coming to class eager to engage their teachers and classmates in discussions about the elections.

We are eager to have students use the IEM to learn about financial markets, politics and economics. We believe this program will increase the economic literacy of students who use it and it will help them make more informed decisions about the above issues.