More veteran economists are starting to complain that newly minted economists don’t understand the history of finance and economics. Writing on the VOX website (a site for economists by economists), Kevin O’Rourke critiques the current system of training professional and academic economists. Himself a professor of economic history, he makes his best case for economic history:
The current economic and financial crisis has given rise to a vigorous debate about the state of economics, and the training which graduate and undergraduates economics students are receiving. Importantly, among those arguing most strongly for a change in the way that young economists are trained are the ultimate employers of these students, in both the private and the public sector. Employers are increasingly complaining that young economists don’t understand how the financial system actually works, and are ill-prepared to think about appropriate policies at a time of crisis.
O’Rourke goes on to quote economists from central banks to private sector that are complaining about the new crop of economics students at the undergraduate and graduate level. They don’t seem to have a full grasp of the even the recent crisis, much less the ones that happened generations ago.
The value of history cannot be understated. Everyone knows that people who don’t understand it are doomed to repeat it. Fed Chair Ben Bernanke can attest to this directly. He’s been a student of recessions and crises for his entire professional career. It’s why in the early days of the latest crisis, and even today, he’s not afraid to do what is needed to keep the financial system stable.
It’s scary to think that the newest generation of economists may not be studying this history. A quick glance at the curriculum for an Economics PhD at Harvard and MIT show that a history course is not required learning. Instead, the newest economists come out with a skillset that’s very helpful for doing the type of research an economist does today. Those skills are modeling, data gathering, and data mining. It’s essentially a glorified stab in the dark of a dataset that may not but all that representative of reality. But so long as your statistics look good, you’re gold.
Let’s hope this discussion continues in the academic community. It’s unacceptable that one of the academic professions responsible for the recession isn’t educating the next generation about the sins (and successes) of their elders.
Read: Why economics needs economic history (Vox)