Are economics graduates fit for purpose? This is a hot topic in policy making circles. A year ago, the Bank of England hosted a day conference on the topic. Diane Coyle has edited the proceedings in a neat little book What’s The Use of Economics: Teaching the Dismal Science After the Crisis. There was a follow up at the Treasury last month. In the meantime, a distinguished committee of academics, government and business economists has been beavering away on the content of the economics curriculum.
The question is of far more than academic interest. As Coyle points out in her introduction, the narrowness of the mainstream approach means that economics itself must bear responsibility for the crisis. Macroeconomic theory failed spectacularly. Jean-Claude Trichet, then Governor of the European Central Bank, wrote in November 2010 that ‘As a policy-maker during the crisis, I found the available macro-models of limited help. In fact, I would go further: in the face of the crisis, we felt abandoned by conventional tools.’ Yet the pre-crisis theory still forms the core of what graduate economists are taught.
At the same time, there have been exciting developments in areas like behavioural economics, which offers a more realistic description of how people actually behave. The leading figure is Daniel Kahneman, and many will have read his recent best-seller. He was awarded the Nobel Prize in 2002, and his most important article was published as long ago as 1979. Yet I was told in all seriousness by the head of a leading economics department that they were ‘thinking’ of introducing a course in behavioural economics – in 2015!
My own recent experience suggests that the real question is whether many economics graduates are fit for anything at all. Economics students themselves are increasingly critical of the curriculum. I have recently spoken on this topic to two student economics societies. The first had to be rearranged from before Christmas, because the students had simply forgotten to book a room. This time all went well, but I had not quite finished my talk when a besuited man strode purposefully onto the stage and began setting up his own powerpoint slides. He was, he announced, about to lecture to 200 engineering students. The economists had indeed booked the hall, but not for long enough.
The second talk, in one of the North’s great cities, was even more eventful. The discussion was lively, with many of the questioners denouncing austerity policies and calling for more spending and bigger deficits. It had been a long day, and I was glad to arrive at the hotel which the students had booked, at 10.30pm in the pouring rain. But not only was there no trace of the booking, it was full. I went round the corner to a much more expensive one and sent the society the bill. They were very apologetic, but they could not pay. These dedicated opponents of austerity had run out of money.
As published in City AM on Wednesday 3rd April 2013