The FT and the undergraduate economics curriculum

Another post in quick succession, brought on by realising that my Bristol train is too jiggly to do algebra or write code, which I am supposed to be doing right now.

This responds to a thoughtful and thought-provoking FT leader on how economics should be taught in the light of the financial crisis, tweeted (and I am guessing written) by Giles Wilkes yesterday. And follows another post I wrote a while ago about the putative course on panics and bubbles, that Manchester university wisely chose not to incorporate into its curriculum, offering instead my own sketch.

A few reactions.

First, the leader diagnoses the state of the profession, in failing to apprehend the impending crisis, from the content of undergraduate courses. I think that’s connecting dots a long way apart. Influential people in the profession comprise the very top, mostly US academics, and policymakers. Many of these now have PhDs. Many that came into economics PhD courses did so from other undergraduate disciplines. [And probably did better as a result, because of those disciplines higher maths content.] Others long since left their undergraduate courses, whatever they were, behind, with long practical on the job training in central banking, finance, and just getting stuff done. If there is a problem with undergraduate teaching, it’s that it struggles to reflect the depth of thinking at the academic frontier and the rich interplay between that frontier and the practical wisdom of policymakers. (Exactly what Wendy Carlin’s great new textbook attempts to redress). But one cannot put the crisis down to the content of undergraduate courses in some dim and distant past.

Second, the leader draws a contrast between the increasing mathematical elegance emphasised in economics, and the ugly, chaotic, timeless-ness reality of the real world. I don’t agree that this is a good contrast. For me, ugly reality demands more, harder maths, not less. The little interaction I’ve had with bio-informatics, evolutionary theory, engineering and physics would suggest to me that other disciplines reveal the same lesson too. Which leads me to an addendum : students on these other courses would snigger at the complaints economics students make about the maths they are put through, which are typically at a much lower level of difficulty than that demanded by these sciences.

Third, the leader mentions Rajan’s premonition of the crisis at Jackson Hole. Rajan, in my view, is as hard-core as they come with regard to the mathematical, microfounded rigour demanded of economics. Just take a look at his published papers, or the courses he taught. He was not the heterodox, informal sociological thinker dismissed by a maths-bound consensus. If one wanted to caricature the consensus he was battling, it was against i) policymaking based on ill-thought-through platitudes that markets are always good and self-correcting and ii) a segment of academia influential with central banks that had chosen to ignore mathematically tricky finance and, freed from that onerous task, chose to burrow ever deeper into the details of finance-absent optimal monetary policy questions.  [I have to admit I was in that camp].

Fourth, the leader encourages us to think that we should get more heterodox thought into undergraduate courses. A note of caution from me: most, but not all, of what I have encountered is not much better than pub talk, and, being so informally worked out does not yet amount to anything that could be judged a coherent alternative to the so-called ‘mainstream’. (Which I put in quotes to re-emphasise I point I made in my last blog on this, that the mainstream is itself incredibly diverse).

Fifth, a thought about the difficulties facing undergraduate economics course designers. One of which is that it caters for those who intend to take the subject further, for those who want to use it as a ticket into some other walk of life (and probably also for those who chose it by default or mistake but can’t change track). For those who intend to take the subject forwards to MSc and PhD level, then further, deepening their knowledge as a practitioner, commentator, or researcher, there is a lot to learn, and a lot of it is a hard slog best begun early. Material on the sociology and history of economic thought, on the wilder flowerings of dissident corners of the subject, political economy, can be and probably is devoured in the bath by most people bitten by the economics bug, and they won’t need more than the occasional ‘have a read of this’ from their tutors to do it. For those who use the econ course as a ticket to some other walk of life. I wonder how they would be served by a more informal and heterodox curriculum. Once you have covered the economics of regulation and competition; the debates about the causes of business cycles and how to avert them; the economics of banking and finance; empirical economic methods, is there any time for anything else? Many of the customers for economics undergraduate degrees are also highly quantitative: financial and business analysts; actuaries; management consultants. I suspect that a more informal and heterodox course would lose students who were headed in this direction. For others who are interested in political economy, to take them into a life in the media, or politics. Well, study political economy!

Sixth, points on incentives.

Note that by far the dominant factor in the academic labour market is publications. This is what determines promotion and/or job offer prospects, because this is what determines the departments’ rank in the Research Excellence Framework, which in turn is what determines important marginal funding for universities.  Continuous innovation and  change in the curriculum is hard to achieve when it is in most academics’ interests to labour most arduously at their own research. (Which is why efforts like those of Wendy Carlin, which are an externality to me and my peers, are so helpful).

Another incentives point: Although I have not been in the business long, it seems also to me that course content at the most introductory levels is dictated by hard-to-dislodge equilibria in the major textbook market. Core course content is decided by what the famous academics who chose to write a low-level textbook decided should be in those courses.   When looking to which course they will take, students know that what they perceive to be good courses elsewhere follow these textbooks, and expect their own university to follow suit. Jumping away from these norms is a business risk for departments worried about nurturing their brand.

A competing constraint is how universities recruit and retain their teaching staff. The economics undergraduate curriculum is being debated as though it were part of a national schools curriculum.  But it isn’t. Part of the attraction of teaching at this level is that you get the chance to choose what to teach and how to teach it, particularly in the later years of the undergraduate degree where it seems the market pressure from the leading textbooks is weakest.   There’s no mechanism for stamping uniformity on national course content, and even if there was, doing it would persuade many doing the teaching to do something else with their time instead.  If anyone forces me to teach heterodox macro, I will be off, for sure!