The middle fortnight in December is a frenzied time when thousands of sharp, eager and able high school seniors from around the world make their way to Cambridge for their university admission interviews. My scholarly friend did not miss the cue to ask if there were any credible takers at all this year for the dismal science! In the event, there was an embarrassment of riches among economics candidates. But my friend had an excellent point. What kinds of students commit themselves in times such as these to the study of economics
For well over two decades now, through the golden years of finance, economics was the subject of choice for bright students who wanted to transmute themselves into investment bankers. Clever and hard-working, they mastered theory, techniques, empirics and even the intellectually imperious spirit of the subject during their university years but could not wait to parachute into the financial district and astronomical compensation packages. It was enough to make many of their teachers despair, and to turn not a few, envious!
But this year is different. Aspirants to the art of economics are just as clever and persevering, but are more thoughtful. For one, there is the Freakonomics effect. Some high school students who have dipped into analytical economic arguments written up in the style of popular science by Levitt and Dubner, and also by Tim Hartford, have found it really cool that economists are never at a loss when offering at least partial explanations for almost anything under the sun, including love and sex! It is empowering at that crucial age to feel that ingenuity can help bring a small set of principles to bear on any issue and illuminate key forces that drive the process. This is of course a cause for despondency among other social scientists who feel that insight which comes without deep and costly groundwork on the specifics of particular situations is cheap and worse, fatal. Be that as it may, Dubner, Levitt and Hartford have helped to attract very talented students to economics in the last couple of years.
But the vein is richer this year; there is a definite move away from mere cleverness. There is a more genuine interest in learning about how the fragile edifice of the economy really works. There is more enthusiasm for understanding econ-omic institutions, economic psychology and even economic history. There is a clearer sense of vocation, knowing that a malfunctioning economy can destroy millions of everyday lives. To paraphrase Robert Lucas, the noted economics Nobel Prize winner: The consequences for human welfare in questions (relating to sound functioning of the economy) are staggering. Once one starts to think about them, it is hard to think of anything else.
The world is going to need exceptional economists. A simple metaphor that I used to explain to my friend the challenge that economists face goes as follows: think of a rich ecology in which evolution is speeded upa world in which new species form in a matter of weeks rather than over millions of years. In the rich network of interconnections in this system there will be numerous, unmeasured, direct and indirect, cause and effect links between things. There will be many feedback loops simultaneously working through and producing complex dynamics. The task is to get a grip on problems that arise and possible solutions to them in a similar system, and to do this in real time. There is going to (have to) be a huge creative renaissance in economics.
The great depression spawned economists of the highest calibre. A great example was Paul Samuelson, who died this month at the age of 94. He was born into economics in 1932 (he was 17) thanks to the first great recession. Mathematical modelling of economic phenomena is what Samuelson is known for, but he was of course a most insightful and successful policy advisor, alert to imperfections of markets and the need for their regulation. The resurgent John Maynard Keynes too was driven to economics impelled by a recession: his very first economics research paper, published exactly one hundred years ago, was on the effect of the recent global economic downturn on India.
The author teaches economics at Judge Business School, University of Cambridge, and is a fellow of Corpus Christi College