The Reserve Bank is worried. The number of students wanting to study economics has been falling over the years, and it’s worried this will lead to a fall in the electorate’s economic literacy, which could end up worsening government policy.
And the Reserve, being by far our biggest single employer of economists, may be worried its choice of potential recruits will deteriorate.
An article by the Reserve’s Emma Chow, published last week, told us a truth the nation’s academic economists have often been loath to admit: the main recruiting sergeant for university economics degrees is high school economics.
Because it’s based so heavily on current affairs – “be sure you watch the treasurer delivering the budget speech on TV tonight, kids” – high school economics gives students the impression economics is interesting and important. Only after they’ve signed up at uni do they discover that, in the hands of a lecturer who’d rather be doing research, it can be deadly dull.
But the proportion of students studying economics at high school has fallen markedly since the early 1990s, mainly because of the introduction of business studies, a more descriptive course that requires much less intellectual effort for both students and teachers.
Now, however, Chow tells us that not only are fewer students studying economics at high school, few of those who do go on to a dedicated economics course at uni. Most prefer to major in commerce or finance.
The limitations of her data allow Chow to tell us little about why economics has become so unpopular. It certainly can’t be because the management of our economy has become so boringly smooth and uneventful.
But I think I know the biggest reason: the economists have lost the plot. Since not long after the end of World War II, academic economists have been engaged in an all-consuming quest to make their discipline more intellectually “rigorous” by making it more mathematical.
Their concepts of how the economy works must be expressed in algebraic equations, not diagrams of demand and supply curves nor – heaven forfend – mere words.
They must build ever-more “elegant” econometric models of the economy which could at last spit out reliable forecasts of where the economy was headed. Except they’ve proved just as unreliable as economists’ predictions have always been.
When some kid tells me proudly that they’ll be doing economics at uni, I warn them they’d better like maths. If they talk to a friend who’s already doing the uni course, they’re told the same thing. I reckon too many young people are getting the message that uni economics ain’t much fun.
It’s true that when you express propositions as equations, any logical faults in your reasoning are exposed. But this greater “rigor” comes with a big proviso: the reasoning is completely logical given the assumptions on which it’s based.
If your assumptions are hopelessly unrealistic, however, your fancy mathematics is logical but sadly astray. Whether your prediction came off the top or your head or from a model whose maths is beyond the comprehension of almost all of us, it’s still a case of garbage in, garbage out.
The remarkable thing is that the failure of mathematisation to improve the economists’ understanding of how the economy works has done nothing to dampen their enthusiasm for more maths.
Once, when I reminded a well-known academic economist of some finding of behavioural economics that contradicted the conventional model, he replied: “You maybe right, Ross, but unless you can get it into an equation, I’m not interested.”
Get it? The academics are now doing maths for its own sake. They stick with their stick-men model of the economy because anything more sophisticated can’t be mathematised. These days, you can’t work in a uni economics department unless you’re a whizz at maths. Nor can you get promoted.
Academic economics is becoming a branch of applied mathematics. It’s dominated by people who got where they are because they’re good at maths, not because they know a lot, or care a lot, about how the economy really works.
But if the Reserve Bank bosses are worried now, I have more bad news: the NSW Education Department’s draft revised economics syllabus shows the maths disease is spreading to high schools.
The syllabus – which would be little different from that for the Victorian Certificate of Education – is already absurdly overcrowded. You take a 17-year-old and, in two years, while they’re studying various other subjects, expect them to get their head around everything a professional economist understands about what their profession thinks it knows about the workings of the economy.
If they really did understand all that, why would they need to go to uni and learn it all again? But, to give high school economics greater rigor, the proposed new syllabus seeks to – you guessed it – make it more mathematical. It increases to about 35 the number of calculations a student is required to be able to perform.
Can you imagine how much students’ time that should be spent thinking about how it all hangs together would be devoted to memorising formulas and practising sums? Don’t think about how oligopolies work and why market power harms consumers, just learn to calculate the Herfindahl-Hirschman industry concentration index.
Or, how about using Laffer curves to calculate optimal tax rates? (I’m not making this up.) To make room for all these new calculations, the new syllabus would drop such minor matters the case study of the Chinese economy and the impacts of globalisation on the world.
Of course, the move to greater rigor would have its advantages. Much more of the exam would involve asking questions with answers that could be exactly right or wrong. This makes exam papers much easier and cheaper to mark. It could be done by a machine, not a teacher on overtime at the marking centre.
I reckon that if each state reformed their syllabus in this way, they’d end all the Reserve’s worries about the declining popularity of high school economics. Few if any kids would want to do the course. Problem solved.
