Arnold Kling  

What an Economics Major Should Take

Consumer Protection... Forward prices and oil...

My youngest daughter (who is not an economics major, but is likely to take more courses in econ) was concerned that a course in environmental economics would be too squishy. I assured her that this ought to be a rigorous course that teaches important basic economic principles.

This got me to thinking about what might be a good set of, say, eight courses for an economics major.

1. Introductory micro
2. Intermediate micro
3. Environmental and resource economics (public goods, social cost, Prisoner's Dilemma, Coase, Hotelling, and economics of the global warming issue)
4. Finance (basic terminology, efficient markets hypothesis, portfolio separation theorem, Modigliani-Miller, futures and options)
5. Economic history (early history of trade; the industrial revolution; the Great Depression)
6. Economic methods--theory (probability and statistics, regression)
7. Economic methods--applied (natural experiments; uses and abuses of econometrics; uses and abuses of survey research)
8. Institutional economics, public choice, and economic development

I would skip some of the usual courses, such as industrial organization, international trade or labor economics. And you will notice something else--no macro, even at an introductory level.

With the eight courses listed above, a student would come out with a good mix of technical knowledge, institutional knowledge, and practical knowledge. You would have a basis to make informed investment decisions, an understanding of what accounts for differences in the standard of living (keeping in mind that we do not know all we would like about this issue), and an ability to think critically about empirical studies.

For students intending to apply for Ph.D programs, I would add macro and international trade to the list. I still think of macro as a history of thought course. International trade also would be recommended for someone headed toward a Ph.D, because trade theory uses mathematical modeling in a way that you will find it used in graduate school.

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CATEGORIES: Economic Education

COMMENTS (13 to date)
Nyle Kardatzke writes:

I don't see money and banking as sub-headings in your list. You probably view these as part of macro, but they seem very basic to understanding the economic world.

Would you elaborate on your reasons for leaving macro out?

aj writes:

Great list for undergrads. But your recommendations for grad school are off. The truth is -- for those planning a Phd at a top school -- what you want is all math all the time. Micro through grad micro, math through real analysis plus topology, advanced econometrics and probability as much as you can stand. Macro is borderline, and won't really help -- just something you can tick off the list of standard requirements. All the other courses are great for learning about econ, but for grad school the truth is, unless you're plugged in (e.g. working for and publishing with a bigshot at Chicago or MIT)your odds of being accepted decline the less math you have, especially if you're not from a top 5 program with nearly a 4.0 and an 800 on the GRE.

I've seen tons of smart kids who would have gotten in 25 years ago get rejected by the top 30 Phd programs for lack of very advanced math or less than perfect scores. It's not impossible, but these days it's more of crapshoot.

shayne writes:

What authors/texts would be your recommendations for #2 Intermediate Micro and #6 & 7 Economic Methods?

John writes:

My undergrad International Finance was more like Intermediate Macro, but actually about as much math as Intro Macro. My MA class in International Trade got about as complex as solving Munder-Fleming with Cramer's Rule, but nothing that challenging. I personally think that it is more important to take a class on Game Theory than Environmental and Resource. If you know game theory than those topics come pretty easy. I don't think my school offered an undergraduate course on "Institutional, public choice, and economic development," but that would probably be good. I like finance and think that a couple of courses in business help make an Econ student more marketable if they want to go to the work force. Diversify your human capital exposure a little.

I think aj makes a good, yet unfortunate point. Math and stat are too important for admission committees in top PHD programs. A much greater emphasis than it would take to be a good economist.

bird writes:

Institutional economics and public choice are not offered at an undergraduate level in most economics departments. You have to go to the political science department for that.

aj writes:

John is of course right that the trend is unfortunate. The top schools will say, we want people who are both creative and mathematically uber-rigorous. The reality is that the middle Phd grads -- especially the non-Americans -- end up writing boring, technical theses and are sacrificed on the altar of superstar production. The upside is that second tier programs can pick up bright, even brilliant and creative people that slip through the very odd elite school filter. Unless they defect even farther afield -- usually to political science departments or law school. But we need to be clear about the harsh reality of the world we live in -- even the median BS in Math (let alone your typical BA Econ) from a large state university or liberal arts college is insufficiently hardcore for a top-ranked Phd program in Econ today. Perhaps the majority of Phd students in strong programs today are foreign grads with MA level work in mathematics and economics.

dearieme writes:

What bits of economics were taught to the schmucks who have got us into our current economic pickle? Rape and Pillage 101? Turning a Blind Eye, for Beginners.

Bill Conerly writes:

This is exactly the wrong way for an undergraduate to pick courses. Here's the best way:

Ask around to find out who are the most talented professors. Take whatever courses they are teaching. In grad school, I took a concentration in International Trade only because of Ed Tower's reputation, and it worked: I learned more in those two classes than in all of the four basic theory classes.

michael gordon writes:

1) Yes, a nice list Arnold -- as far as it goes. It doesn't go far enough though, and shows a powerful libertarian bias.


No courses in macro-economics whatsoever. It's as though we're back in the world of early neo-classical thought, augmented by recent (and often impressive) work in micro-economic theorizing.

Are we supposed to assume that all macro-economics is a hoax, perpetrated by Keynesian frauds . . . including a good half of the Nobel prize-winners in economics the last 40 years? And including Republican economists like Greg Mankiw as well?

2) Then, too, to return to microeconomics, you have nothing, it seems, that deals with the challenges to standard microeconomic assumptions about the rational behavior of key economic actors: business firms, workers, consumers, and investors. Those challenges, whether you like them or not, have been validated repeatedly in social-psychological laboratory settings . . . a far more reliable guide to theoretical soundness than statistical tools happen to be. In such settings, it's easier to control nearly all the variables of peoples' behavior. ("Nearly", not all of them, note: that's because the psychologists can't control for all the previous experiences and outlooks of the participating persons.) By contrast, statistical techniques run into far greater problems --- including data-bases, uses of qualitative variables (logistic regression is so permissively and even wildly used that it is largely suspect to more and more statistical experts), dummy variables (ditto), interaction variables (ditto, especially in logistic regression), and so on.

And so we get statistically validated theories that rest often on dubious data (especially macroeconomic: e.g., real vs nominal GDP growth: what is exactly the inflationary rate?), time-series that can be challenged, promiscuous use of various hard-to-quantify variables (including "proxies) and so on, but ... hey! validated at the 5.0% or lower level (or with a low error-term).

And so --- where in your syllabus is there room for 1) these challenges by social-psychologists, three of them now winning Nobel Prizes in economics, and 2) behavioral economics that actually observes how economic and social actors behave?

3) Institutional economics. You have written very perceptively in earlier posts on this site (and elsewhere) about Douglass North and other institutional theorists, but where does this key topic fit in except in economic history (maybe)?

4) Finally, except for behavioral economics, there is an almost ignorance in economics of good work done by other social scientists . . . on top of the social psychological studies that underpin "framing theory" as a challenge to rational-behavior assumptions. Relative deprivation. The key need for a hegemon to underpin a large vigorous regional or global system of open exchange (flows of goods, services, portfolio financial investments, multinationals, technologies). Challenges here and elsewhere to notions of Coasian bargaining that will automatically lead to such an open exchange system (relative vs. absolute gains etc). Nationalism, nation-pride, envy, resentments, aggressive drives as additional problems in international economics (and relations generally)

I could go on, but enough said. Meanwhile, the statistical techniques get more and more elaborate in economics, with the core assumptions about individual (and group) behavior taken for granted . . . no matter how much they may be at odds.

--- Michael Gordon, AKA, the buggy professor.

Curunir writes:

I wouldn't necessarily neglect the "usual courses" like IO or trade. They aren't particularly useful for grad school, sure. But this is a list for a general economics major, and while "Economics of Health" hasn't helped me in grad school (2nd year at a top 10 program), it could be useful for industry, potentially, if you were interested in health care.

And there's another point with regard to those classes; namely, they're really easy if you have a good grasp of intermediate micro. Back when I still thought law school was a possibility for me, I was loading up on "Economics of X" courses just to boost my GPA. If you're heading to grad programs that care a ton about your raw GPA (law for sure, medicine I believe, business I don't know about), then taking a few "squishy" econ courses could be just the ticket.

Also, you could just take them for fun. I can't say I got anything useful out of "Economics of Sports", but it was enjoyable, and I certainly haven't looked at the industry the same way since.

David Friedman writes:

"I still think of macro as a history of thought course."

The way I usually put it is that it is a tour of either a cemetery or a construction site. But that may be unfair, since it's not an area I have ever worked in.

I agree with the poster who suggested choosing professors rather than courses. And I would suggest that law and economics might be worth adding to your list, perhaps replacing environmental, since it covers many of the same issues.

The problem with math is that it all too often oversimplifies complexity -- and economies are highly complex systems. THe emphasis on math makes too many economists think they actually can control economies.

I would try to fit in, at least at the grad level, a course that contrasts economic thinking with philosophical thinking on economics. Too many people think that Marx was an economist -- or that Adam Smith was, for that matter.

Cecil B. writes:

Evening, can you guys explain the difference between Accounting principles, Political Science, and Economics. How many Economists pursue CPAs? Is working for a Hedge Funding institution better than Investment banking or a Financial Analysts? Any information will be appreciated. Thanks

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