It's been nearly three years since the last update. After a year with OCBC in 2017, I returned to NUS to pursue my PhD in Economics, but that's for another day. So what made this post happen? A discussion on what is actually taught in undergraduate economics. Whether economics courses adequately prepare undergraduates to make "business decisions", whether politics and economics should be separated, and whether professors make accurate and efficient policy recommendations. My answers were "no", "yes and no", and "not necessarily". So when he commented "that's very dumb", I felt that it is my responsibility as a soon-to-be PhD candidate to defend the field.
I have penned down the reasons to the first question long ago, the economics programs in most parts of the world were designed to train research economists by providing a solid (I hope) foundation in economic theory, while business schools apply economics to finance and management science. Another way of saying this is economics programs aim to pique interest in economics in hope that some of these undergraduates continue on to graduate school (in Economics, duh) and business schools prepare undergraduates for corporate decision-making (and that's partly why business schools get a more prestigious reputation and a larger endowment). If everything from theory to applications in every area are taught in economics courses, then we might as well shut down business schools. This itself is a manifestation of economic theories: the optimal allocation of scarce resource and the specialization effect that arises from this division of labor. So no, I don't think economics undergraduate program adequately, but what I argue for is that economics training provides you the capacity to understand the reasons behind why certain decisions are made.
The separation of politics and economics is debatable, but I would argue along the lines of positive versus normative economics. If we want to analyze the economic consequence of decisions, then it is natural to distinguish various effects. For example, how does the market respond to government intervention (taxes, subsidies, welfare assistance, unemployment benefits, etc.). Here we are not asking which policy is better, we simply ask how people respond to a change in the policy. In these situations, it is natural to separate politics (unless we are talking specifically about political response) from economics. In similar fashion, most of positive economics should distinguish politics from economics. Along this line of argument, politics and economics should indeed be two distinct disciplines. However, when we are talking about normative economics, i.e. what is the "best" way to carry out an initiative or to respond to market changes, the distinction is no longer as clear. It depends on whether politics has significant influence on the issue in hand. A point that I concurred is how politics is sidelined in the field of international economics, where it is evident that political rivalry affects trade (U.S.-China trade war?) and political instability leads to flight of capital.
On whether economics professors make the right policy recommendation, I have to first ask, what is the right policy? Is it the policy that benefits the majority? Or is it the policy that benefits the worst-off group in the society? If you say we should adopt the majority rule, then is it morally sound to adopt a policy that benefits the top 60% income earners at the expense of bottom 40%? Or if the policy benefits all but benefits the top 60% income earners more than the bottom 40%, hence making the bottom 40% relatively worse-off? If you say worst-off group, then will this policy garner the support of the majority? Furthermore, policy impact is multidimensional, there could be a trade-off between tangible and intangible benefits (say, financial well-being, social reputation, dignity, etc.). The bottom line is, economics professors make recommendations based on economics, because that is their specialization. If you are talking about policy advocates, then its on economics and their political-moral alignment, and we enter a grey area. That is why (in democracies) we vote for a government that represents the preference of the majority, and then assemble a panel of policymakers from different backgrounds (politics, philosophy, psychology, economics, sociology) to design policies that benefits the people in multiple dimensions. Asking whether economics professors can make the "right" policy is like asking whether a Michelin-starred chef can make your favorite laksa or chicken rice (Gordon Ramsay didn't manage to please Singaporeans with his interpretation of laksa and chicken rice, by the way). It depends on whether the chef has the technical expertise, and on whether the way he does it coincides with the way you like it to be done.
Then it brings us to what is the academia for, if it doesn't give pragmatic conclusions. Lets look at the situation in which we hypothesize A and B both affect C because they look like they are correlated in the data. First, we need to understand that correlation does not imply causation. Empirical economists will spend years, if not decades, identifying the causality in different data sets, first getting rid of B and find the causal relation between A and C, then getting rid of A to find the causal relation between B and C. Years later, we may have either one of the following: 1) Both A and B have (independent or complementary) positive effect on C; or 2) A has a positive effect on C but B has a negative effect on C, it just happened to be the case that most of the time A has a stronger effect that leads to the joint positive effect on C. These two conclusions have different implications for policymakers (in the government). In the meantime, theoretical economists construct models that make predictions that are consistent with empirical evidence, constantly updating their models and testing them against the increasingly abundant empirical evidence. That is what economists in the academia actually do. If debating over a hundred "dumb" ideas, and through selection and rejection, gives a decent workable idea (may not even a brilliant one), then it is worth it. Behind every conclusion, it is the joint effort of hundreds or even thousands of economists over decades. At the very end of the supply chain of ideas, sits the policymakers who combine the conclusions from different fields (economics and others) to design fiscal policies, diplomatic policies, redistributive policies, and so on. These practitioners, who are paid much higher than academics on average, are the ones who should have been trained in interdisciplinary issues to design policies that fit social preferences. If they don't suit your taste, speak with your vote instead of discrediting the academia.
All in all, it is justifiable in most subfields of economics to separate politics and economics unless we are specifically talking about interdisciplinary issues, and it is expected that academics based their policy recommendations on their fields. It is the policymakers that should be interdisciplinarily-trained, and no it is not the job of economics program to train their undergraduate in interdisciplinary studies. That's why you do double majors or joint degrees if you want to enter the policy-making scene. It is truly unwise to call a discipline "dumb" because it doesn't train its undergraduates in other disciplines (right?), or "useless" because it doesn't provide pragmatic recommendations today. Peace out.
I have penned down the reasons to the first question long ago, the economics programs in most parts of the world were designed to train research economists by providing a solid (I hope) foundation in economic theory, while business schools apply economics to finance and management science. Another way of saying this is economics programs aim to pique interest in economics in hope that some of these undergraduates continue on to graduate school (in Economics, duh) and business schools prepare undergraduates for corporate decision-making (and that's partly why business schools get a more prestigious reputation and a larger endowment). If everything from theory to applications in every area are taught in economics courses, then we might as well shut down business schools. This itself is a manifestation of economic theories: the optimal allocation of scarce resource and the specialization effect that arises from this division of labor. So no, I don't think economics undergraduate program adequately, but what I argue for is that economics training provides you the capacity to understand the reasons behind why certain decisions are made.
The separation of politics and economics is debatable, but I would argue along the lines of positive versus normative economics. If we want to analyze the economic consequence of decisions, then it is natural to distinguish various effects. For example, how does the market respond to government intervention (taxes, subsidies, welfare assistance, unemployment benefits, etc.). Here we are not asking which policy is better, we simply ask how people respond to a change in the policy. In these situations, it is natural to separate politics (unless we are talking specifically about political response) from economics. In similar fashion, most of positive economics should distinguish politics from economics. Along this line of argument, politics and economics should indeed be two distinct disciplines. However, when we are talking about normative economics, i.e. what is the "best" way to carry out an initiative or to respond to market changes, the distinction is no longer as clear. It depends on whether politics has significant influence on the issue in hand. A point that I concurred is how politics is sidelined in the field of international economics, where it is evident that political rivalry affects trade (U.S.-China trade war?) and political instability leads to flight of capital.
On whether economics professors make the right policy recommendation, I have to first ask, what is the right policy? Is it the policy that benefits the majority? Or is it the policy that benefits the worst-off group in the society? If you say we should adopt the majority rule, then is it morally sound to adopt a policy that benefits the top 60% income earners at the expense of bottom 40%? Or if the policy benefits all but benefits the top 60% income earners more than the bottom 40%, hence making the bottom 40% relatively worse-off? If you say worst-off group, then will this policy garner the support of the majority? Furthermore, policy impact is multidimensional, there could be a trade-off between tangible and intangible benefits (say, financial well-being, social reputation, dignity, etc.). The bottom line is, economics professors make recommendations based on economics, because that is their specialization. If you are talking about policy advocates, then its on economics and their political-moral alignment, and we enter a grey area. That is why (in democracies) we vote for a government that represents the preference of the majority, and then assemble a panel of policymakers from different backgrounds (politics, philosophy, psychology, economics, sociology) to design policies that benefits the people in multiple dimensions. Asking whether economics professors can make the "right" policy is like asking whether a Michelin-starred chef can make your favorite laksa or chicken rice (Gordon Ramsay didn't manage to please Singaporeans with his interpretation of laksa and chicken rice, by the way). It depends on whether the chef has the technical expertise, and on whether the way he does it coincides with the way you like it to be done.
Then it brings us to what is the academia for, if it doesn't give pragmatic conclusions. Lets look at the situation in which we hypothesize A and B both affect C because they look like they are correlated in the data. First, we need to understand that correlation does not imply causation. Empirical economists will spend years, if not decades, identifying the causality in different data sets, first getting rid of B and find the causal relation between A and C, then getting rid of A to find the causal relation between B and C. Years later, we may have either one of the following: 1) Both A and B have (independent or complementary) positive effect on C; or 2) A has a positive effect on C but B has a negative effect on C, it just happened to be the case that most of the time A has a stronger effect that leads to the joint positive effect on C. These two conclusions have different implications for policymakers (in the government). In the meantime, theoretical economists construct models that make predictions that are consistent with empirical evidence, constantly updating their models and testing them against the increasingly abundant empirical evidence. That is what economists in the academia actually do. If debating over a hundred "dumb" ideas, and through selection and rejection, gives a decent workable idea (may not even a brilliant one), then it is worth it. Behind every conclusion, it is the joint effort of hundreds or even thousands of economists over decades. At the very end of the supply chain of ideas, sits the policymakers who combine the conclusions from different fields (economics and others) to design fiscal policies, diplomatic policies, redistributive policies, and so on. These practitioners, who are paid much higher than academics on average, are the ones who should have been trained in interdisciplinary issues to design policies that fit social preferences. If they don't suit your taste, speak with your vote instead of discrediting the academia.
All in all, it is justifiable in most subfields of economics to separate politics and economics unless we are specifically talking about interdisciplinary issues, and it is expected that academics based their policy recommendations on their fields. It is the policymakers that should be interdisciplinarily-trained, and no it is not the job of economics program to train their undergraduate in interdisciplinary studies. That's why you do double majors or joint degrees if you want to enter the policy-making scene. It is truly unwise to call a discipline "dumb" because it doesn't train its undergraduates in other disciplines (right?), or "useless" because it doesn't provide pragmatic recommendations today. Peace out.