Are economics graduates fit for purpose?

Diane Coyle, 22 February 2012

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One of the consequences of the financial and economic crisis since 2008 has been a re-evaluation of economics itself by at least some of its practitioners. This includes looking again at the teaching of economics in universities, the subject of a recent conference supported by the Government Economic Service, the Bank of England, and the Royal Economic Society.1 As a speaker in the opening session of the conference noted: “The crisis was a large intellectual failure. We all got it largely wrong and have been using the wrong intellectual apparatus.”

The question of whether the teaching of economics in universities needs reform is linked to the underlying question about the intellectual status of economics itself, post-crisis. A number of speakers noted that there had been huge progress in recent decades in some areas of economics, such as auction theory, or development economics, for instance. But there was also a degree of consensus among participants that economists need to acknowledge the limitations of what has been the standard paradigm in the subject for 50 years. Ideally, we now need to combine a greater modesty about the state of knowledge, an insistence on dogged empirical work to the highest scientific standards, and a new eclecticism about what explanation is needed to understand economic phenomena.

One speaker said: “We have an unreasonably strong prior that only one kind of model is acceptable.” He added that, in reality, there was true Knightian uncertainty about the status of different underlying models of behaviour, and there is no alternative now to the slow process of exposing the empirical status of the assumptions and conclusions of the models we are using.

While modesty and eclecticism found general favour, there was less agreement about the extent to which both the practice and teaching of macroeconomics needs to change. Some speakers felt existing approaches could be sensibly supplemented with some recent economic history, including discussion of the Taylor Rule policy reaction function, and with some enrichments such as heterogeneous agents. At the other extreme, some participants argued that the standard macroeconomic framework of analysis has been proven redundant by the crisis. These participants emphasised instead two chasms in the knowledge of recent graduates: institutional knowledge of finance, money, and banking and the ability to analyse the role of these institutions in the economy; and network models similar to those used widely in some other disciplines such as epidemiology and evolutionary biology (see, for example, Haldane and May 2011).

Employers taking part agreed, however, that economics graduates have a narrower range of skills than they need in their work. Even those working as professional economists in the financial markets, consultancy, or the public sector lacked important skills, although in general their technical ability was good, according to employers. The ability to communicate well topped the list of missing skills, followed by an appreciation of the wider context in which graduates are applying their economic knowledge.

A surprising number of the employers present suggested the need for teaching more economic history; and also a focus on the international context rather than just national economic data; and a better practical grasp of quantitative methods including collecting and understanding data (as opposed to more sophisticated econometric techniques). A preliminary assessment of a survey conducted among employees in the Government Economic Service has confirmed these are important areas in undergraduate preparation. For example, the preparation of briefing material for non-experts was described as the most important task, by some distance, of these public sector economists. The survey may now be extended to private sector economists through the Society of Business Economists.

However, there was also sympathy among the academics present for providing a broader context in economics courses, as indeed there was in a selection of essays by academics (mainly in the US) written for advance circulation to participants ahead of the conference.2 Academics were cautious, however, about suggesting adding more to the curriculum without clarity about what could be removed. There was a discussion about the barriers to change within the university sector. Among the barriers cited were:

  • The fact that the curriculum is already full, and that students have to spend a good deal of time applying for internships, as well as for jobs, at the end of their studies.
  • The resistance of students to having to use their initiative rather than being spoon-fed material to get them through exams, and the likelihood that course and teaching innovations would result in negative ratings in the National Student Survey.
  • Competition between universities taking the form of an arms race to teach more and more technical material, resulting in the selection of only the most mathematically-able sixth formers.
  • An unwillingness on the part of universities to provide a pathway for non-mathematical students who are nevertheless interested in economics, and too little variety in undergraduate courses; the related – and incorrect – presumption that most economics graduates will work as economists.
  • The narrow selection of journals included in the Research Assessment Exercise/Research Excellence Framework, resulting in a supply of teachers in universities whose interests and expertise fall into a relatively narrow range of subjects and approaches. For example, it was said there are not enough people in UK universities who could teach economic history courses at present.
  • The need to use standard textbooks which all conform to the same approach, as large US publishers are unwilling to risk an alternative – yet most economists would regard the majority of the highly conventional material in most of these basic textbooks as over-simplified at best, or actually incorrect.

This debate about the content of the university curriculum comes at a time of growing interest in the study of economics among secondary school students in the UK. The number of A-Level students has grown by more than 50% since 2006 (Riley 2011). Teachers of sixth-form economics attending the conference pleaded for the inclusion in universities’ courses of important areas of economics they are now teaching in schools, including behavioural economics; money and banking; fast-growing economies; simulations and experimental techniques; economic history; and new technologies and network models. They also argued that university teachers need to make greater use of the internet as a medium for teaching, and other pedagogical innovations, saying that schools have become significantly better than universities in terms of active learning3.

A working group involving academics, employers including the Government Economic Service, the Royal Economic Society, and the Economics Network will be considering practical measures to respond to this plea, and ensure that the economics profession does not waste this crisis. It would be a sad irony if the teaching of economics at universities cannot evolve at exactly the point at which the intellectual and empirical advances in economics in the past 20–30 years are proving so fruitful (Coyle 2012).

References

Coyle, Diane (2012), “Do economic crises reflect crises in economics?”, Keynote address, 'Rethinking Economics' conference, Stiftverband für die Deutsche Wissenschaft/Handelsblatt, Frankfurt am Main, 23 January.

Haldane, Andrew and Robert May (2011), “Systemic Risk in Banking Eco-systems”, Nature, 469:351-355.

Riley, Jim (2011), “A Level Economics continues to grow”, tutor2u.net.


1 Held at the Bank of England on 7 February 2012.
2 Available as a read-only Word file: http://www.enlightenmenteconomics.com/assets/EconomicsConferenceRO.docx
3 There is a growing amount of innovative teaching readily material available online – see for example http://www.economicsnetwork.ac.uk/ and http://www.tutor2u.net/blog/index.php/economics

Topics: Education, Frontiers of economic research, Global crisis
Tags: economics graduates, education

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