Sunday, 5 April 2015

Have we reached peak economist in Australasia?

Perhaps we have. Last month one of my colleagues pointed me to a depressing article from Agenda by John Lodewijks (University of New South Wales) and Tony Stokes (Australian Catholic University), entitled "Is academic economics withering in Australia?" (PDF). In the article, the authors discuss the increasingly sorry state of academic economics in Australian universities, with many closing or downsizing their economics departments:
The recent news reports that the La Trobe School of Economics is being forced to reduce its established positions from 28 to just 10 is the latest in a series of cutbacks being imposed on academic economists in Australia. At La Trobe the proposed cuts include three professorial positions and three Associate Professors. Its stand-alone economics degree will no longer be offered from 2015. The developments at La Trobe are a carbon copy of what happened at the University of Western Sydney starting in late 2012. Four Economics professors were made redundant, along with seven other staff, and their B.Ec. no longer admitted students from 2013.
These have been high-profile media events. Less well-known is the disappearance of Victoria University’s Department of Applied Economics, with staff scattered across Finance and International Business. A similar story of economics being subsumed within Business unfolded at the University of Newcastle, the University of New England, the University of Tasmania and James Cook University. Griffith University has reduced the number of offerings in Economics and there are reported upper-level enrolment concerns at ANU.
Something similar has been underway in New Zealand, including the recent downsizing and narrowing of focus at the University of Canterbury. What is behind this reduction in the size of academic economics departments across Australasia? Lodewijks and Stokes point first to perceptions of economics among the public:
It can be conjectured that the reported failure of economists to predict the global financial crisis might be one reason for the declining enrolment... Perhaps of greater importance is the negative way that economics is often portrayed in the media. Many commentators have heaped scorn on economists and economics... Very rarely do we see stories of the positive contribution that economics has made to public policy debate and overall economic prosperity in this country... The profession needs a whole new image as a vital contributor to business and policy debate.
This may well be true. Certainly, there's no shortage of complaints about economists in the media. Second, the authors also point to the way economics is taught at university level:
The often narrow content of economics instruction blocks students from wider backgrounds doing double-majors with economics in areas such as psychology, political science, sociology, anthropology and geography. 
and at high school level:
The BEA raised serious concerns regarding the low numbers of economics graduates going into teaching... Schools had little choice but employ teachers with one unit of economics (business economics) or no economics to teach economics to years 11 and 12 students... Another key issue associated with having school teachers with limited or no qualifications in economics is that they tend to favour the subjects in which they are qualified and may turn students away from studying economics. In addition, schools may not offer economics as a subject if they cannot get an economics teacher. All of this worsens the situation in schools and, subsequently, universities.
The lack of specialist economics teachers is definitely true at a lot of high schools, not just in Australia but in New Zealand as well. In many cases, accounting teachers are co-opted to teach the economics curriculum, or schools are choosing not to offer economics at all. I'm aware of a number of schools that have cut economics from their curriculum in recent years.

In a recent paper in New Zealand Economic Papers (I can't find an ungated version), Stephen Hickson (University of Canterbury) notes that the number of students studying economics at high school has fallen 31% between 2003 and 2012, while the number of students taking economics at university has declined 20% between 2008 and 2012. Hickson attributes the decrease in high school numbers to the gradual replacement of economics with 'business studies'. The decrease in university numbers probably relates to the reduction in the economics core in the commerce degrees at Canterbury and Auckland.

Is there something wrong with the way we teach economics though, that isn't attracting students? Lodewijks and Stokes think so:
The point, however, is that we have slanted our teaching to mimic our research focus and not to cater to the composition of the student body we now face. At least at the lower levels of undergraduate teaching we need to impart, and to let students apply, the basic skills and techniques that make economics so valuable as a policy science. At a macroeconomic level, we need policy simulations so that students can select different parameter values and themselves see what it does to macroeconomic targets and how shocks affect aggregate performance... Combined with this they need to be able to use basic quantitative techniques without always having to derive the theory behind them from first principles. At a microeconomic level it is the repeated application of a small set of basic principles relating to opportunity cost, decisions at the margin, price–quantity interactions, externalities, competitive dynamics and, particularly, cost–benefit analysis that is needed... It is these skills that set us apart and raise the employability of our average graduates. The other bells and whistles can be covered at higher levels and particularly during the Honours year. We should not be selfreplicating Ph.D. trained academics when we teach the bulk of students we encounter. I think we need to face the fact that a vast majority of our students are not going to do a Ph.D. but only complete an undergraduate degree with often just minimal exposure to economics.
Caroline Saunders (Lincoln University) said something similar in the latest issue of Asymmetric Information (PDF) - the newsletter of the New Zealand Association of Economists:
The trouble is we’re not very good at getting across what economics is about. We’ve been a bit complacent about teaching it because we had captured compulsory first years, so we focus on the techniques and the models, as opposed to what economics can do for you and the underlying pinning of economics. So when these business management courses come along, that are relatively easy, they tend to get more popular.
It's pretty clear to me that, in general as a discipline, we do a poor job of selling the value of economics to students and non-students. This is why our first-year core management (ECON100) paper at Waikato is specifically designed to focus on the intuition of economics and not the mathematics of economics. And also why our other first-year economics paper (ECON110) focuses on the applications of economics to a range of policy and social issues.

In spite of our efforts at first year, our number of economics majors at Waikato have been in decline - although this may be about to change, as our intermediate microeconomics class has recovered this year from an all-time low last year. We also have an extremely enthusiastic group of students involved in the new Economics Discussion Group that I set up last year.

As I have reported before, there are lots of reasons why students should be studying economics (see here or here or here). To add to that, Dutch website NRCQ reported last month that economists and econometricians are in high demand (in Dutch). There is nothing to suggest that the demand economics or analytical skills has fallen in Australasia recently. So if we believe our own supply-and-demand models, when the supply of graduate economics students is decreasing we should expect that the remaining graduates should be able to take advantage in the form of better job prospects and higher entry-level salaries. I know a number of Bachelors graduates who have secured jobs this year and last, that in recent years would have only gone to honours graduates. Reaching peak economist might be a temporary situation, and a good one for our forthcoming graduating classes.

[HT: Dan Marsh for the Lodewijks and Stokes article; Jacques Poot for the NRCQ article]

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