Tuesday, 5 June 2012

Are Economics PhDs Learning the Wrong Thing?

Loads of economics bashing going on. Brendan Greelay of BW in this article asks - Are Economics PhDs Learning the Wrong Thing? Some background first. There was an earlier article in BW which featured Yanis Varoufakis. Varoufakis was an econ professor at University of Athens who had said Greece economy was insolvent. So it should  default but remain in Eurozone.  He was threatened and quite Athens and joined UT Austin. A brain drain from Greece.

It so happens that Varoufakis had joined Athens Univ to revamp the econ department.
It was a hard decision. After training and teaching abroad, Varoufakis returned to Athens in 2000 to build a Ph.D. program to solve one of his profession’s problems: the excessive reliance on economic models that often failed to predict what happened in the real economy. His curriculum, which expected students to master the demanding math of models while learning the history and philosophy that debunked them, drew praise from prominent economists such as Axel Leijonhufvud at the University of California at Los Angeles and James Galbraith at the University of Texas at Austin. “I have a fair feel for his perspective and we are kindred spirits in some ways,” Galbraith writes in an e-mail. The program lured foreign Ph.D. candidates and brought Greek students home.

Seed money from the European Commission got Varoufakis started, and in 2005 a group of private trade unions offered the program €150,000 ($188,600) a year for student stipends and travel costs for visiting professors (salaries were paid by the university). In 2006, Varoufakis gave a talk in Athens predicting a financial crisis that would start in U.S. real estate, move through Wall Street, and on to Greece.

In 2010 the crisis hit home. Varoufakis says he got a phone call from his union contact: He had to stop inviting guests. Greece’s national pension fund, which collects union dues, had begun slashing disbursements to cover its liabilities. This left the doctoral program at the mercy of a state-run higher education system that has seen its budget cut by 23 percent since 2009.

Both non-funding and his call on Greece default forced him to quit.

The second article picks up from the first and looks at the Phd Econ programs in the world:
Last week Bloomberg Businessweek ran a short piece on Varoufakis, the former head of the economics PhD program at the University of Athens. Funding has run out for the program, and Varoufakis is now teaching in Austin, Tex. When it was thriving, however, the PhD program in Athens tried to train economists in a new way: It forced them to understand the math of economic modeling but also taught them philosophy and the history of economics.

Varoufakis wanted his students to understand what economic models couldn’t do. “One of the great problems that economics has as a discipline is that we have a tendency to mathematize our theories,” says Varoufakis, “Physicists have done wonders with this, but the problem is, the moment you try to mathematize an economic hypothesis, you end up with mathematical models that are highly indeterminate.” By “indeterminate,” he means that economic models can produce a range of answers. You can fix this by assuming one of two things to be true: Either everyone has the exact same motivations, or time doesn’t exist. “If you introduce both complexity and time in the same model,” says Varoufakis, “anything goes.”

Journals and universities prefer economists who can present something that looks like science. Economists who enter the financial sector find themselves committed to assumptions that make them lots of money. Abstract models inform concrete government policy. “My extreme worry,” says Varoufakis, “was that the young PhDs coming through the ranks worldwide were utterly illiterate.”


This q on PHD Program was posed to two heads of econ departements -Gene Grossman at Princeton and Harald Uhlig of Chicago. Grossman says there is no real for change as these things come and go with crisis. Though some Econs in Princeton like Alan Blinder are looking at altering their teaching material post-crisis.

However, Uhlig says let students decide which place works the best:
Harald Uhlig, chair of the economics department at the University of Chicago, another of the No. 1-rated economics graduate schools in the U.S., offers a kind of a model of his own. In an e-mail, he writes: “Above all, I do not believe in central planning. What is true in private markets is true in PhD education as well: It is good to see different places try different approaches, to let the PhD students decide where they want to be educated, and to let the marketplace for future scientists decide what works and what does not. I am sure that if the new PhD program in Athens is successful and produces the top young economics researchers of the next generation, many other PhD programs will take notice.”

TO this the author writes:
It’s not clear whether Uhlig already knew that the department in Athens is on its last legs, so we’ll take his e-mail at face value. It, too, contains an assumption: that the market for grants and hires at economics departments is driven by quality and value to the public alone.

From Occupy Econ 101 at Harvard to questioning Phd Programs in Economics. The impact of the crisis goes on..

I am not qualified to comment on Phd Programs. But one thing is for certain – in admissions, there is huge emphasis on your math abilities more than anything else. Nothing else seems to matter.


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