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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.

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. The IEM is used to teach business, economics, and technology concepts in a hands-on interactive environment. 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 and business relationships that determine the outcome. In a political science class for example, students must think about how economic and business 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 business events of the day, and coming to class eager to engage their teachers and classmates in discussions about the elections and current events.

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