What does this imply? Imagine the cost of your average weekly grocery list increasing from €100 to €150 within a month, and €225 in the next month. In extreme periods of hyperinflation, prices rise exponentially, sometimes doubling within a week or even a day. What causes hyperinflation? Almost all hyperinflations occurred in times of war, conflict, or severe economic turmoil, in conjunction with government budget deficits being financed by currency creation. In those instances, the need for continued government spending is large, but there is a situation of declining real tax revenue. Being unwilling or often unable to increase borrowing, governments started printing money to cover expenses. When the money supply expands while output remains constant, there is more money available in the economy to spend on the same number of goods. As expected from the quantity theory of money, this causes the value of money to fall and prices to increase. In addition, the velocity of money increases as people prefer to spend their money immediately rather than hold on to depreciating cash. As prices rise exponentially, things become more expensive, including for the government. If in such a situation the government continues printing even more money instead of tightening monetary policy, inflation will continue to rise, creating a snowball effect. As wages fail to keep up with this surge in prices, and cash or savings deposited in banks decrease in real value, consumers’ purchasing power falls rapidly. In response, people start hoarding essential goods in anticipation of further price increases, thereby causing supply shortages and further spiraling price increases that can get out of control. How to address hyperinflation? Expectations play a major role in perpetuating price spurts during bouts of hyperinflation. To end this spiral of exponentially increasing prices, it is necessary to break the public’s expectation that price increases will continue and restore confidence in the country’s currency and economy. This requires a tightening of monetary policy and a credible commitment by the government to reverse the factors that caused rapid inflation and currency devaluation in the first place. Measures that have been successful in the past include the institution of an independent central bank, fundamental fiscal policy regime changes, and the establishment of a credible exchange rate stabilization mechanism. A common accompanying measure is currency redenomination. This is the process of changing the nominal value of banknotes and coins in circulation, often simply by reducing digits (eliminating extra zeroes). This may go in line with a change in the currency name. While the process is mainly symbolic and does not affect the currency’s real value, it can have a psychological impact on the population, if citizens trust that the new currency will be more stable in value and will not be overprinted. Another option is currency substitution. In this case, the country officially abandons the local currency in favor of the exclusive use of another country’s currency, usually the US dollar. This practice is known as full dollarization. It often follows processes of partial dollarization, where citizens themselves start substituting domestic currency with foreign currency to make transactions and allocate savings. Good to know While hyperinflations are rare, they have occurred in more than a few countries throughout history – including Germany (1920s), Greece (1944), China (1948-49), Hungary (1945-1946), Argentina (1989-1990), Yugoslavia (1994), Zimbabwe (2000s), and Venezuela (2016-2021), for example. Below we provide two historic and two recent examples. Two historic examples of hyperinflation Germany 1920s Germany saw a period of hyperinflation during the Weimar Republic, between 1921 and 1923, which was closely linked to the consequences of World War I. Unlike France, which implemented its first income tax to cover war expenses, Germany decided to fund the war entirely by borrowing. The government believed that it would be able to pay off the debt by winning the war and imposing war reparations. This strategy failed as Germany lost the war, which left the new Weimar Republic with massive war debts that it could not afford. The debt problem was exacerbated by the Republic printing money without any economic resources to back it, as the country had suspended the gold standard (the convertibility of its currency to gold). Hyperinflation began from January 1920, when the monthly inflation rate hit 57 percent. By 1923, it had reached a level where prices were doubling every two days. In November 1923, the monthly inflation rate stood at about 29,500 percent. The Reichsbank responded by introducing a new currency: 1 trillion old Marks were exchanged for 1 Rentenmark, such that 4.2 Rentenmarks were worth 1 US dollar, exactly the same rate the Mark had in 1914. Hungary 1945-1946 Between 1945 and 1946, Hungary experienced the worst episode of hyperinflation ever recorded, which had its origins in the consequences of World War II. In 1944 the country became a battleground between Russia and Germany, which destroyed or damaged most of the country’s industrial capacity. Due to the substantive fall in production capacity, prices started to rise. With no tax base to rely upon, the Hungarian government decided to stimulate the economy by printing money and injecting it into the economy through various channels, including low interest rate loans. At its peak, the monthly inflation rate increased from 28 million percent in June 1946 to an unthinkable 12,952 trillion percent in July 1946. At this point, the daily inflation rate exceeded 200%, with prices doubling every 15 hours, making normal economic calculations impossible and transactions using money extremely difficult to execute. Despite its severity, the reforms of August 1946 were successful. The reform package included a range of stabilization measures. Specifically, a new currency was introduced, an article guaranteeing independence of the central bank was reestablished, reserve requirements for commercial banks were imposed, the tax system was reformed, and public sector employment was reduced. Two recent examples of hyperinflation Zimbabwe 2000s Zimbabwe suffered an economic crisis in the early 2000s. The economy entered into decline in 1999. Agricultural production had been falling due to droughts and processes of land reform, accompanied by rising government debt and withdrawals of development aid over land seizures. In the face of shrinking revenues and rising debt obligations, the government responded by printing more money. Inflation started to surge in 2001 in response to serious food shortages. After the first peak in 2003, the government managed to keep inflation in check during 2004 and 2005, following a reduction in money supply. However, rates started to escalate in 2006. In 2008, Zimbabwe’s annual inflation rate exceeded 231 million percent. At its highest point, prices doubled every few days. The Economic Times newspaper noted on June 13, 2008, that “a loaf of bread now costs what 12 new cars did a decade ago,” and “a small pack of locally produced coffee beans costs just short of 1 billion Zimbabwe dollars. A decade ago, that sum would have bought 60 new cars.” To slow inflation, the government enforced price controls between 2007 and 2008. Producers were obliged, sometimes under police force, to sell their goods and services at government-mandated prices. Given that producers were incurring losses at the established sales prices, this resulted in significant output cuts and shortages in supply – with many goods being unavailable in stores, while being traded at much higher prices on the black market. Groceries and food items were sometimes accepted as barter for rent, and some commodities, such as gasoline, were exclusively traded in US dollars or South African rand. The period of hyperinflation ended in 2009, when Zimbabwe abandoned its currency and adopted the US dollar, opting for full dollarization. Venezuela 2016-2021 Venezuela recently came out of a four-year cycle of hyperinflation. By 2014, Venezuela’s economy and public budget had become increasingly dependent on oil exports, accounting for 90 percent of the country’s total export earnings. When the global oil price dropped, foreign demand for the Venezuelan bolívar fell, reducing the currency’s value and driving up the cost of imported goods. In face of shrinking government revenues, the government responded by printing more money. The situation worsened as the oil price continued to fall, and other factors reduced Venezuela’s oil output. Venezuela first declared a state of emergency in 2016, when the annual inflation rate hit the 800 percent mark. During 2017 the inflation rate remained in a similar range, but then inflation spiraled out of control in 2018, reaching 130,000 percent. Seeing their currency’s value plummet, Venezuelans started to convert their savings into US dollars, which further lowered the value of the bolívar. In the face of exchange controls, which had been in place since 2002 to avoid declines in the official value of the bolívar against the US dollar, the black market price for US dollars went up. In 2019, the government relaxed economic controls, and started to reduce government spending. As a result, the annual inflation rate declined to about 9,500 percent in 2019, 3,000 percent in 2020, and just below 700 percent in 2021. In January 2022, monthly inflation had been below 50 percent for 12 months, which officially ended the state of hyperinflation. Nonetheless, Venezuela still displays one of the highest inflation rates worldwide. While the bolívar is still the official currency, the US dollar is used in more than 60 percent of all transactions.
Hyperinflation describes very high and rapidly accelerating inflation. Following a widely accepted definition developed by American economics professor Philip Cagan in 1956, hyperinflation begins when monthly inflation rises by more than 50 percent.
Macroeconomics and Monetary Economics (JEL E)
The leader might emerge in a market because of its size, reputation, innovative capacity, or because it simply started operating first. The leader will generally be better known and more recognized by customers, and is therefore better placed to decide first which quantity to sell. The follower(s) then decide(s) on their output after observing the leader's production choice. The Stackelberg leadership model was developed in 1934 by the German economist Heinrich Freiherr von Stackelberg in his book “Market Structure and Equilibrium” (Marktform und Gleichgewicht). The assumptions in the Stackelberg model are mostly the same as in the Cournot model, with the important exception that firms make their production quantity decisions sequentially. These assumptions are as follows: There is a fixed number of firms in the market and firms have market power. This means that each firm's production-decision affects the market price. All firms produce a homogenous good, and are subject to the same demand and cost functions. In other words, there is no product differentiation. This means that the goods produced by any firm are completely identical in the eyes of the consumers (they are perfect substitutes). Firms compete in terms of the quantities that they produce. That is, they compete for market share. This is the key difference compared to Bertrand competition, in which firms compete in prices. Firms decide sequentially on the output they produce, which means we have a model consisting of two distinct periods. In the first period, the leader chooses its production quantity. This decision cannot be changed after. In the second period, the follower firm(s) choose(s) their output after observing the quantity chosen by the leader. This is the key difference when compared to Cournot competition, in which the production decisions by all firms are taken simultaneously. Each firm acts strategically on the assumption that its competitor(s) will not change their output, and decides its own production quantity so as to maximize its profit given its competitors’ output. Firms do not cooperate. The Stackelberg-Nash Equilibrium To derive the Stackelberg-Nash equilibrium, we will focus on the example of a duopoly. That is, there are only two firms in the market. We will assume that firm 1 (leader) and firm 2 (follower) both produce the same good at the same production cost c1 = c2 = c. We further assume that both firms face the same linear demand function given by: p(Q) = a - bQ where a > 0 and b > 0. The total market quantity is the sum of production by the leader (q1) and the follower (q2), which is Q = q1 + q2. We can substitute this expression for Q in the following equations. Firm 1's total revenue is then given by the market price p(Q) times the quantity produced: \begin{equation*} r_1=p(Q)q_1=(a-b(q_1+q_2))q_1 \quad \text{(analogous for firm 2)}, \end{equation*} and Firm 1's total profits are calculated as the difference between revenue and production costs: \begin{equation*} \pi_1= p(Q)q_1-cq_1=(a-b(q_1+q_2)-c)q_1 \quad \text{(analogous for firm 2)}. \end{equation*} From here we will assume a > c, which is a necessary condition such that positive profits can be realized. Each firm chooses the production quantity that maximizes its profits, taking the quantity produced by other firms in the market into consideration. To find the Nash equilibrium of this sequential game, we need to use backward induction. That is, we first solve the optimization problem for the follower in the second period, and with this information determine the optimal choice by the leader in the first period. In the second period, Firm 2 (follower) chooses q2, taking the quantity produced by the leader in the first period into consideration. So, to derive the optimal output, we need to find the quantity q2 that maximizes the profit function for Firm 2, taking q1 as given. For Firm 2, the problem is thus similar to the Cournot model: \begin{align*} \max_{q_2} \{\pi(q_2) &=(a-b(q_1+q_2)-c)q_2\} \\ \frac{\partial \pi(q_2)}{\partial q_2} &= a-bq_1-2bq_2-c = 0 \quad | \quad \text{solve for q2} \\ q_2^* &= R_2(q_1)= \frac{a-bq_1-c}{2b} \quad \text{= Cournot's reaction function}. \end{align*} As in the Cournot Model, the equation R2(q1) is the best response function of Firm 2 to any quantity produced by Firm 1. In the 1st period, Firm 1 (leader) chooses q1, with the understanding that Firm 2 will react to this choice in the second period according to its reaction function R2(q1). To calculate the optimal quantity produced by Firm 1, we thus insert the optimal response of Firm 2 into Firm 1's profit function in place of q2 and then take the first derivative: \begin{align*} \max_{q_1} \{\pi(q_1) &=(a-b(q_1+R_2(q_1))-c)q_1=aq_1-bq_1^2-bq_1R_2(q_1)-cq_1\} \\ & \quad \text{Note: Use the product rule to differentiate $-bq_1R_2(q_1)$} \\ \frac{\partial \pi(q_1)}{\partial q_1} &= a-2bq_1-bR_2(q_1)-bq_1R_2'(q1)-c = 0 \quad | \quad \text{insert $R_2$ and $R_2'$} \\ & \Leftrightarrow a-2bq_1-b\left[\frac{a-bq_1-c}{2b}\right]+bq_1\frac{1}{2}-c = 0 \quad | \quad \text{solve for q1} \\ & \Leftrightarrow a-2bq_1-\frac{a}{2}+\frac{bq_1}{2}+\frac{c}{2}+\frac{bq_1}{2}-c=0 \\ & \Leftrightarrow \left[\frac{a-c}{2}\right]-bq_1=0 \\ & \Leftrightarrow q_1^*= \frac{a-c}{2b} > \frac{a-c}{3b} = q_{Cournot}^*. \end{align*} Given the quantity produced by the leader, q1*, we can then calculate the output produced by the follower: \begin{align*} q_2^* &= \frac{a-bq_1^*-c}{2b} = \left[\frac{a-c}{2b}\right]-q_1^*\frac{1}{2} \quad | \quad \text{insert $q_1^*$} \\ \Leftrightarrow q_2^* &= \left[\frac{a-c}{2b}\right]-\frac{1}{2}\left[\frac{a-c}{2b}\right] \\ \Leftrightarrow q_2^* &= \frac{a-c}{4b} < \frac{a-c}{3b} = q_{Cournot}^*. \end{align*} Thus, in the Stackelberg-Nash equilibrium, the leader produces a larger quantity and the follower produces a smaller quantity than the same firms would have produced in the Cournot-Nash equilibrium. The figure below illustrates the difference in quantities produced in a Stackelberg or Cournot oligopoly (imperfect competition) or monopolistic market (firm 1 is the only firm in the market), where q1S > q1C and q2S < q2C: Figure 1: Stackelberg equilibrium compared to Cournot equilibrium Calculating the total quantity and the market price, given q1* and q2*, we see that Stackelberg's sequential game leads to a more competitive equilibrium -- characterized by a larger total output and lower price level -- than Cournot's simultaneous game: \begin{align*} Q^* &= q_1^* + q_2^* = \frac{a-c}{2b} + \frac{a-c}{4b} = \frac{3}{4} \left[\frac{a-c}{b}\right] > \frac{2}{3} \left[\frac{a-c}{b}\right] = Q_{Cournot}^* \\ p^* &= a - bQ^*= a - \frac{3}{4}(a-c) = \frac{a+3c}{4} < \frac{a+2c}{3} = p_{Cournot}^*. \end{align*} The Stackelberg leader takes into account that higher output causes the follower to produce less, but also that higher output depresses the price level. In this particular scenario, with a linear demand function and identical costs, the two effects happen to cancel exactly and in this case we end up with a solution where the Stackelberg leader produces the monopoly quantity (although due to the depressed price level, receives less than monopoly profits). If we were to insert the production quantities and price level into the profit functions, we would find that the Stackelberg leader has higher profits, and the Stackelberg follower lower profits, than the same firms in the Cournot model. This extra profit that the leader has compared to the follower is due to them making a production decision first, which means the follower must accept the leader’s output as given and produce a smaller output for itself. This is called a first mover advantage. In the figure below, areas 1 + 2 illustrate the welfare gain in the Stackelberg model compared to Cournot model, while area 3 illustrates the remaining deadweight loss compared to a situation of perfect competition. Importantly, the Stackelberg equilibrium is only more efficient than the Cournot equilibrium if firms are symmetric; that is, if both firms have the same production cost. If the leader were to have higher production costs and thus be less efficient than the follower, then the Cournot equilibrium would be preferable from a welfare perspective, since the Stackelberg's sequential model would give an advantage to the less efficient firm with higher costs. Figure 2: Stackelberg competition surplus compared to Cournot competition and perfect competition Good to know Actual markets may exhibit Stackelberg-type competition when, for example, sequential market entry or R&D races put one firm in a better market position than its competitors. Let’s examine Microsoft in the 1990s as an example of this. Consider the market for operating systems that we use to interact with our computers. Microsoft was the leader in the operating system market in the 1990s, eventually commanding over 90% of market share with their popular Windows OS. Because of this market position, software applications generally needed to be compatible with Microsoft’s operating system. Microsoft’s production decisions overshadowed any following firms, who had to account for the massive market share that Microsoft had (or, devise a plan to capture some of that market share for themselves) when making production decisions. Eventually Apple computers became popular as well, and the Apple DOS took some market share from Microsoft’s Windows operating systems. Of course, in real life people generally have a strong preference between using a Mac or a PC. This is where the example differs from the Stackelberg model we’ve talked about in this article, since operating systems are not identical in the eyes of consumers. Although the products are similar, in reality there will almost always be some product and price differentiation that causes market dynamics to diverge from the stylized model.
Stackelberg competition describes an oligopoly market model based on a non-cooperative strategic game where one firm (the “leader”) moves first and decides how much to produce, while all other firms (the “followers”) decide how much to produce afterwards. This sequential structure is the main difference to Cournot’s model, where firms decide simultaneously on the quantities they produce.
Teaching Economics with Real-World Context
Today’s students share a collective angst, an anxiety about the future—and rightfully so: worried about getting a job, worried what the planet will look like when they are ready to settle down and raise a family, and even angry that they had nothing to do with climate change; it was not of their doing, but placed on their laps - a negative externality if you will - only to unravel and become their responsibility. Students (and the public) look to economics and the economics profession for help and guidance. Probably at no time in recent history have we had a greater ethical obligation to educate our students within a context of hope and aspiration so that all can successfully (and sustainably) provision for themselves and for others. Based on our collective years of teaching, as well riding the waves of pluralism, sustainability, and rethinking economics, we offer the following suggestions for would-be teachers of economics and, of course, veteran teachers as well. 1. Align Course Content with Current Issues We need not become messengers of doom and gloom; instead, emphasize the role of education in giving students the ability to think and to solve problems. And, most importantly, let’s instill students with a sense of optimism and empowerment (for a helpful resource, see Boyd and Reardon 2020). Construct the course so it aligns with the big issues of the day, and today there is no bigger issue than climate change, and how we can live our lives sustainability (A helpful guide is the UN 17 SDGs; also see Reardon et al. 2018, and Reardon 2021). Doing so will make the course more thematic and interesting to students, while still covering core topics, but grounded in the context of the 21st century. And it will shed light on other pressing problems such as inequality, migration, species depletion, technological change, and even the coronavirus itself, all of which are interrelated with climate change. Our goal is to educate and not to proselytize. Not all economists think alike, and this is something we should celebrate. But we must teach our students to communicate their results and thoughts clearly. The world needs graduates who can be critical thinkers, who can listen, engage in dialogue, and respect and work with others with whom they disagree. 2. Teach Multidisciplinary Thinking and Cooperation Once the course is re-structured to align with the big issues of the day, i.e., climate change and sustainability, pluralism automatically follows: “It is absolutely impossible to discuss sustainability from one perspective. It is absolutely impossible to discuss sustainability without discussing justice, ethics, and power. And it is absolutely impossible to discuss justice and power without developing the skills to listen and dialogue. It simply cannot be done. Start teaching the UN 17 SDGs [with its emphasis on sustainability], and pluralism with its myriad benefits becomes inevitable. Thus, recognizing and incorporating sustainability is a game changer” (Reardon 2021, p. 294). Pluralism, like sustainability (and democracy and freedom) is a complex and multi-faceted concept. A simple, working definition is a willingness to listen, engage, and dialogue with different and often opposing views. This is necessary because pandemics and climate change do not respect well-established intellectual silos nor international borders. Workable solutions are not the prerogative of one discipline as if only one discipline has the answer. Does pluralism mean that every issue must be taught from every possible school of thought? And that every instructor should master every ideology? Absolutely not. At the individual level, pluralism is a modus operandi, in which one humbly accepts what one does not know, works with others to understand their point of view, listens, and dialogues with others. This is something that every instructor can and should do; and is probably the best thing with the most far-reaching benefits that a professor can instill in his/her students. For even more credibility, invite guest lecturers from politics and sociology. While most of the social sciences are still ensconced in silo-based teaching and research, students (and society) would most benefit from our disciplines pooling together—generating positive externalities if you will. 3. Be Realistic by Discussing Societal Power and Model Efficacy Speaking of power, don’t ignore it. Students see it every day in their relationships with landlords/landladies, in their summer jobs and internships, in their colleges and universities, and sometimes in their own family and relationships. Power in any economy is central and ubiquitous, and must become intrinsic to the economics curricula. To ignore it in one’s teaching is to lose credibility with students. The preponderant lesson from Jared Diamond’s Collapse is that elites and vested interests have universally used their power to thwart and parry necessary reforms which would have benefitted all. In today’s economy, what are the contexts in which power takes place, and how can the existence of power be mapped, understood, and incorporated into the economics curricula? Here students and faculty alike can benefit from an active perusal of the history of economic thought. Not only does it showcase how economic thinkers were well-focused on the issues of their day, but how various configurations of power either promoted or thwarted the adoption of various ideas. Use models that are realistic and empirically based. Every discipline uses models, but economics (especially neoclassical) is notorious for using models that are overly deductive and anti-historical, or lacking in empirical validity. If we want to teach our students how to be critical thinkers, we must roll up our sleeves, so to speak, and get our hands dirty. Data, evidence, and discussions of how the foundational models of economics have outdated assumptions (but can be modified to incorporate new learning) will gain you credibility and teach your students to test everything. After all, this is what they should be doing when they graduate into the real world. 4. Don’t be Discouraged by Having to Work Within the System Now wait a minute, you might say: I accepted a tenure track position and am expected to teach standard economics; I will be evaluated by my colleagues and our department will assess students. So what? Yes, we are all constricted by working within the current system, but that doesn’t give one a license to do nothing. Teach our students to listen, dialogue, and work with others—much-needed skills that are in short supply not just in economics, but throughout society. Isn’t this what good teaching is all about? Have we become so inured to the drudgery of teaching the bread-and-butter issues that we forget what it means to be a good teacher? It doesn’t matter if the course is online or face-to-face (although after two years of virtual teaching, students welcome the chance to be back in the classroom); learning is a unique and exciting opportunity. Working with students, getting to know them individually, and teaching them to listen and dialogue with others, in a spirit of humbleness, will ripple and multiply throughout society. Teaching economics is an honorable profession. We have an ethical obligation to educate our students and to teach them how to think critically, and how best to live and provision in a world that is becoming increasingly warmer. Let’s make it happen. The above article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook References: Boyd, Graham and Reardon, Jack (2020) Rebuild the Economy, Leadership, and You: A Toolkit for Builders of a Better World, Evolutesix, London. Diamond, Jared (2005) 'How Societies Choose to Fail or Succeed,' Penguin, New York. Reardon, Jack (2021) 'Improving Pluralism in Economics Education,' in Hermann, Arturo and Mouatt, Simon (Eds.) Contemporary Issues in Heterodox Economics: Implications for Theory and Policy Action, Routledge: London, pp. 282- 298. Reardon, Jack, Madi, Maria and Cato, Molly Scott (2018) Introducing a New Economics: Pluralist, Sustainable, and Progressive, Pluto Press, London.
The following article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook While every generation claims its problems are the most formidable and pressing in the annals of humankind, our generation certainly has a strong case: a global pandemic that has already taken five million lives, and a world seemingly headed toward catastrophe, unable to keep global temperatures from rising and thus contain climate change.
Building Your Career in Economics: From Study Choices to the Economics Job Market
Economists work in a variety of industries including business, health, government, and education, and their role mostly involves research and providing reports and recommendations based on data collection, analysis, and interpretation. In the United States, local and federal government agencies are the largest employers of economics graduates. It is essential that students plan their education based on where they are interested in entering the workforce. Although it is possible to gain an entry-level position with a bachelor’s degree, a master’s degree or a PhD are typically required to work as an economist for the government or in academia. In the competitive economics jobs market, it is important for students of economics to consider their career choices early. 1. Choosing a Concentration When pursuing a degree in economics, students can choose various concentrations: business economics, corporate finance, quantitative economics and econometrics just to mention a few. Students who graduate with a concentration in finance can find employment at large banks and government organizations as a consulting, financial, credit, risk, or valuation analyst; or a databank administrator, trader and more. A concentration in business economics, on the other hand, offers versatility which translates to a wide range of employment opportunities such as entrepreneurship or marketing in any sector such as finance, manufacturing, services and government. Concentrations in quantitative economics and econometrics can lead to jobs that require expertise in economic modeling, forecasting and evaluation. Students who choose this major usually continue to graduate studies and find employment in academia or as data scientists, risk model analysts, market researchers, consultants or investment bankers. The ability for economists to analyze data using mathematical and statistical methods is in high demand and short supply, which puts economists with strong analytical and quantitative skills at an advantage when seeking employment. Regardless of the concentration chosen and the level of the degree pursued, there are some steps students can take to build a foundation for a successful career as an economist. 2. Skills for Undergraduates Undergraduate students should focus on developing and demonstrating technical and soft skills such as the ability to communicate effectively. A good analyst must also be able to explain their work. Hard skills, including quantitative analysis, are also very important. Any economist would recommend undergraduate students to take at least one econometrics course to demonstrate quantitative and data skills. It’s also a good idea to pair economic courses with some computer or data science courses for a well-rounded background. Researching a preferred industry or role and tailoring your academic path with a goal in mind will also improve your appeal when seeking a job. Networking is critical as it allows you to garner real-world knowledge of the skills required and job opportunities available in your career path by meeting professionals who work in your industry of interest. Many recent generations of college graduates are already at ease with technology and social media and can put that expertise to work by using platforms such as LinkedIn to streamline their job search and application process. 3. Skills for Graduate Students While graduate students should hone their technical and soft skills, they should be more mindful of demonstrating solid hard skills through their research work, especially quantitative skills that are in high demand in both the private and public sector and in academia. Economics graduate students should seek out internship opportunities, study abroad if they can, and identify service-learning opportunities. Internships and corporate partnerships offer students real-world insight into the professional world and can consolidate and enrich their graduate research work. As interns, graduate students should focus on developing leadership and communication skills and seek mentorship from colleagues with more experience. Professional networking can really jumpstart a career both in the professional world and academia. Joining professional organizations, such as the American Economic Association (AEA) in the United States or the European Economic Association (EEA) in Europe, can provide opportunities to meet fellow economists to read, write, and review research papers, while also making contact with professionals in a specific career field or even learning of available job opportunities. Professional networking associations and academic institutions often host conferences, gatherings and workshops that provide excellent casual networking opportunities. Services like INOMICS are a great place to find conferences and events like these. 4. Find out about Employment Opportunities Opportunities that can benefit undergraduate and graduate students are available through their university, such as corporate partnerships and college fairs. Corporate partnerships are a partnership between a university and a private or public company, and allow students hands-on experience in certain fields and roles. Career fairs allow companies that are seeking new employees to meet a pool of economics graduates in one place. The students are often able to make a first impression with the representatives of a company in a setting that is more informational than a job interview. Informational interviews are another way to make contact with professionals that work in a specific career field or company. The purpose of an informational interview is to have an informal conversation and learn more about a company or a career without actively seeking a job. It requires preparation and some amount of research, and can lead to learning more about career paths you may not have known existed while also learning what it would be like to work for a specific company. The first step is to identify a professional to interview; help in this process can come from family, friends, university alumni or even LinkedIn and then make first contact and request a meeting. Preparation before the meeting is fundamental to the success of an informational interview as this is a unique opportunity to prepare and ask questions about the career field and the company and also seek advice, present a resume and make a good first impression. An informational interview can remain just that and end with a note of thanks or can be the foundation to building a professional relation with the interviewee that can lead to job opportunities (Knight, 2016). 5. Research the Economics Job Market There are several places to find economics jobs. INOMICS is a great place to start, with opportunities around the world offered at all career levels, from PhD and entry-level industry to tenured professor positions. Updated on a daily basis, INOMICS is a strong example of a real-time economics job market. The European Economic Society (EEA), together with the Royal Economic Society (RES), and the Spanish Economic Society (SEA), have created the European Job Market (EJME) to match promising economists with European research institutions and universities. The AEA also hosts academic job listings for economists, as well as the annual job market scramble for recent PhDs. Successful job seekers in economics and any other field are ultimately proactive individuals who do their homework. They are go-getters who research the industry and the career positions. Most of all, they pursue opportunities to build a strong network of professional contacts that can provide insider knowledge of the industry and roles of interest and bring future job leads or offers. The good news is that the U.S. Bureau of Labor Statistics estimated a 13% projected growth of economics jobs in the next decade (Bureau of Labor Statistics, 2021), making economics one of the most promising fields of study. So look out for jobs you could imagine working in, think about which classes will help you get those skills, and fret not. You’re on a good path. The above article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook Sources: Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Economists at https://www.bls.gov/ooh/life-physical-and-social-science/economists.htm.
Chiara Yates, professor of economics at Southern New Hampshire University, offers advice to aspiring economists navigating their studies and the early stages of their career. The following article first appeared in the INOMICS Handbook 2022. Download the INOMICS Handbook
World, Business, & Financial News Apps 1. The Economist App Store / Google Play This app from The Economist magazine focuses on news and analysis for economics topics from around the world. It offers a selection of free articles from The Economist, plus reports on current affairs, science, technology, and other news. You can save articles to read later and share articles over social media. If you’re a regular reader of The Economist, then this app is a must-have. 2. Yahoo Finance App Store / Google Play One of the most popular finance apps is Yahoo Finance, which you can use to track the stocks that you are interested in and get real-time information on the stock market. There is also a section for finance news which has all the headlines you need to read to stay updated about the current economy. The app is mostly aimed at investors, but with all this information it’s also helpful for economists (particularly those in the finance industry) who want to stay informed. 3. Castbox App Store / Google Play A great way to keep up with the latest news and discussions in economics is to listen to podcasts. Podcasts like Marketplace, Planet Money, or Bloomberg Taking Stock are great ways to learn about current events with an economics angle, and you can listen to them while you are exercising or pottering around the house. Castbox is a free and easy to use podcast app. 4. Bloomberg App Store / Google Play Another very popular finance app like Yahoo Finance is Bloomberg. This app has sections for business and finance news, market data, and portfolio tracking. The news section is also outstanding and offers analyses and opinion pieces as well. Economic Databases 5. FRED App Store / Google Play Another fantastic place to find economic data, the Federal Reserve Economic Database (FRED) app contains “nearly 810,000 economic data series from 108 regional, national, and international sources”. These data series include a myriad of economic indicators and variables, like interest rates, prices, international trade volume, etc. over time. The app is perfect for economists, financial industry professionals, academics, and anyone else interested in economic data. 6. IMF App Store / Google Play Simply titled “IMF”, the International Monetary Fund’s app contains news, press releases, podcasts, and other insights. It also contains a huge amount of economic data. One of the coolest features is the app’s Data Visualizations tool; with it, users can easily visualize color-coded maps, charts and graphs of worldwide economic data with the touch of a finger. The app also contains country-level data on a wide variety of statistics to dive deeper into specific regions. This is a great way to explore macro-level economic data in style. Calculators & Tools 7. PocketCAS lite for Mathematics App Store If you’re doing advanced calculations for your data analysis, then it’s useful to have a scientific calculation app on your phone. The PocketCAS app (for iOS only) has advanced features like creating 2D and 3D plots, performing calculus operations, algebra functions, and conversion of physical units. For advanced statistics users, this app is a must. 8. HiPER Scientific Calculator Google Play A free calculator option that can be used with Android, HiPER includes writing expressions as fractions, symbolic algebra, integral and derivative functionality, and up to 100 digits of significance and 9 digits of exponent. It can also detect repeating decimals. There is also a Pro version that is a paid upgrade option. 9. Oanda Currency Converter App Store / Google Play When you need to stay informed about fluctuations in world currencies, it helps to have all of the important information in one place. This is what the Oanda Currency Converter offers, letting you track daily rates for different currencies and including an option to add a percentage to rates to simulate the actual rate offered by banks and credit card companies.
In spite of all its distracting qualities, your phone is one of the most useful tools you’ve got, whether you’re studying or working in the field. It’s simply a question of how you use it. With this in mind, we have compiled a list of apps that are helpful for economists to have. They can help you find data, stay up to date, and crunch numbers on the go. INOMICS takes part in the Apple affiliate program. This article contains affiliate links, which means we may earn money through any qualifying purchases made after you click through. However, this is not a sponsored post.
Econometrics, Statistics and Quantitative Methods (JEL C)
Summer Schools and Courses – Top Searched Terms on Google
The increase in interest is clearly seen around the internet. Google searches for the phrase "Summer School" follow a similar trend to that on INOMICS, with the number of searches in April-June around three times higher than the monthly average in the winter months. The growth trend is almost identical for the search phrase "Economics Summer School". Interestingly, according to Google the countries in which this latter search term is most entered are Italy, India, the UK, the USA and Germany. The visitor stats on the INOMICS website are similar, although Turkey, Belgium, France, Russia, China and the Netherlands also represent important traffic sources for Summer School seekers. In order to reach the maximum possible candidates for your Summer School, we recommend the following top tips when uploading your course to INOMICS: Use a Concise Title – Use "Summer School" plus the main focus of your program for the title. If possible a key subject area can help attract interest, for example "Summer School on Health Economics". Add a logo – This highlights the announcement on INOMICS, and increases the likelihood of prominence on Google results. It also helps to hold the attention of page visitors. Get the timing right – As described above, March, April and May are the most popular times to look and apply for Summer Schools on INOMICS. Announcements should go online from late February, and ideally be placed six to eight weeks before the deadline (the maximum allowed on INOMICS is twelve). If your Announcement is online for two months or more, you may also consider booking a repost shortly before the deadline. Include application details – Add clear instructions how applicants can apply, as well as a concise program description. Presenting your program and the application process as well organized and straightforward can give your Summer School the edge over others. Include keywords – Using relevant popular search terms in the main body of your INOMICS announcement has a doubly positive effect. First, it increases the chance of an INOMICS user finding your Summer School using the website search. Second, it increases the chance that it will show up also in Google results. INOMICS is indexed daily by Google, and Announcements with a good range of keywords often appear very prominently.
How to Optimize Your Summer School Promotion on INOMICS With the festive period over, now is the season to find Summer Schools on INOMICS. Each year we see a marked increase between January and May in the number of visitors navigating on the INOMICS site to the "Summer Schools" sub-category.
The French polymath Antoine Augustin Cournot (1801–1877), after whom this economic model is named, illustrated this market situation using the example of two firms exploiting mineral water springs, each able to produce unlimited quantities at zero cost. According to the law of demand, there is an inverse relationship, or negative correlation, between quantity and price. That is, higher levels of production result in relatively lower prices, and vice versa. To maximize profits, each firm has to consider this trade-off between quantity and price, taking the expected market supply by its competitors into consideration. This constitutes a game strategic situation (see also game theory). In the Cournot-Nash equilibrium, each firm chooses the quantity that presents the ‘best response’ to the competitor's production quantity. Below we derive the Cournot equilibrium quantities and calculate the market price. We will see that Cournot competition leads to a more efficient market outcome than if there was only one firm in the market (monopoly). But, there is still an efficiency loss compared to the equilibrium under perfect competition. Model Assumptions Let's have a quick look at the main assumptions of the Cournot model: There is a fixed number of firms in the market and firms have market power. This means that each firm's production decision affects the market price. All firms produce a homogenous good. In other words, there is no product differentiation. This means that the goods produced by any firm are completely identical in the eyes of the consumers (they are perfect substitutes). Firms compete in terms of the quantities that they produce. That is, they compete for market share. This is the key difference to Bertrand competition, in which firms compete in prices. Each firm acts strategically on the assumption that its competitor(s) will choose the equilibrium quantity, and decides its own production quantity so as to maximize its profit. The production decisions by all firms are made simultaneously. This is the key difference to Stackelberg competition, in which the leader firm moves first and then the follower firms move sequentially. Firms do not cooperate. The Cournot-Nash equilibrium To derive the Cournot-Nash equilibrium, we will focus on the example of a duopoly. That is, there are only two firms in the market. We will assume that firms 1 and 2 both produce the same good at the same production cost c1 = c2 = c. We assume demand is a linear function given by p(Q) = a - bQ where a > 0 and b > 0. If one firm produces q1 and the other produces q2, then the total market quantity is Q = q1 + q2. So, we can substitute this expression for Q in the following equations. Firm 1's total revenue is then given by the market price times the quantity produced: \begin{equation*} r_1=pq_1=(a-b(q_1+q_2))q_1 \quad \text{(analogous for firm 2)}, \end{equation*} and firms 1's total profits are calculated as the difference between revenue and production costs: \begin{equation*} \pi_1= pq_1-cq_1=(a-c-b(q_1+q_2))q_1 \quad \text{(analogous for firm 2)}. \end{equation*} From here we will assume a > c, which is a necessary condition such that positive profits can be realized. Each firm then chooses the production quantity that maximizes its profits, taking the quantity produced by its competitor into consideration. So, to derive the optimal output, we need to find the quantity q1 that maximizes the profit function for firm 1, taking q2 as given. Analogously, we will do the same for firm 2. To find the optimum, we take the partial derivative of the profit function and set that equation equal to 0: \begin{align*} \max_{q_1} \{\pi(q_1) &=(a-c-b(q_1+q_2))q_1\} \\ \frac{\partial \pi(q_1)}{\partial q_1} &= a-c-2bq_1-bq_2 = 0 \quad | \quad \text{solve for q1} \\ q_1^* &= \frac{a-c-bq_2}{2b} \\ \text{and analogously} \quad q_2^* &= \frac{a-c-bq_1}{2b}. \end{align*} The equations q1*(q2) and q2*(q1) are called the best response functions. They tell us firm 1's optimal output for any quantity produced by firm 2, and firm 2's optimal output for any quantity produced by firm 1. In the Cournot-Nash equilibrium, both firms will give their best response to each other's actions. To derive the equilibrium, we thus insert the optimal response of firm 2 into firm 1’s equation to calculate its optimal quantity, and vice versa: \begin{align*} q_1 &= \frac{a-c-b\frac{a-c-bq_1}{2b}}{2b} \quad | \quad \text{solve for q1} \\ q_1^* &= \frac{a-c}{3b} \\ \text{and analogously} \quad q_2^* &= \frac{a-c}{3b} = q_1^*. \end{align*} This is the unique Nash equilibrium for the Cournot duopoly. Entering the optimal quantities into the demand function gives us the total quantity and the market price in the equilibrium: \begin{align*} Q^* &= q_1^* + q_2^* = \frac{2}{3} \left[\frac{a-c}{b}\right] \\ p^* &= a - bQ^*= a - \frac{2}{3}(a-c) = \frac{a+2c}{3}. \end{align*} Graphically, the equilibrium point E is where the best response curves q1*(q2) and q2*(q1) intersect. The figure also illustrates the quantities q1M and q2M that would have been produced if either firm 1 or firm 2 was the only one operating in the market; that is, if either firm had full monopoly power. Figure 1: Cournot-Nash Equilibrium We can also use the model solution derived above to compare the monopoly and Cournot duopoly situations. If we assume that firm 1 is the only producer, this implies q2 = 0 and thus: \begin{align*} q_1 &= \frac{a-c-bq_2}{2b} \quad | \quad q_2=0 \\ \Longrightarrow q_1^M &= \frac{a-c}{2b}=Q^M \\ \text{and} \quad p^M &= a - bQ^M= a - \frac{1}{2}(a-c) = \frac{a+c}{2}. \end{align*} From this we can conclude that in the duopolistic Cournot-Nash equilibrium, the total quantity of output produced is larger and the price is smaller than in the monopolistic market equilibrium: \begin{align*} Q^* &= \frac{2}{3} \left[\frac{a-c}{b}\right] > \frac{1}{2} \left[\frac{a-c}{b}\right]=Q^M \\ \text{and} \quad p^* &= \frac{a+2c}{3} < \frac{a+c}{2} = p^M \quad \text{if} \quad a>c. \end{align*} However, there is still a welfare loss compared to the market equilibrium under perfect competition. In a perfectly competitive market, price equals marginal cost and firms earn zero profits, thus pC = a - bQC = c. From this we can conclude that in the duopolistic Cournot-Nash equilibrium, the total quantity of output produced is lower and the price is higher than in the competitive market equilibrium: \begin{align*} Q^* &= \frac{2}{3} \left[\frac{a-c}{b}\right] < \frac{a-c}{b}=Q^C \\ \text{and} \quad p^* &= \frac{a+2c}{3} > c = p^C \quad \text{if} \quad a>c. \end{align*} In the figure below, which assumes that marginal costs are constant over all output ranges, we illustrate the market quantities and prices realized under a monopoly, a Cournot oligopoly, and perfect competition. The Cournot-Nash equilibrium will occur on a point between the monopoly and perfect competition solution. Areas 1 + 2 illustrate the welfare gain with Cournot competition compared to a monopolistic market, while area 3 illustrates the remaining deadweight loss compared to perfect competition. Antoine Cournot argued that by colluding and forming a cartel, the two firms in the market could move toward the monopoly solution. However, this is not a stable Nash-equilibrium, since both firms would find it beneficial to deviate (as the derivation of the best response functions above has shown). The deadweight loss will decrease as the number of firms competing in the market increases. If the number of firms in the Cournot oligopoly converges to infinity, the Cournot-Nash equilibrium converges to the market equilibrium under perfect competition. Figure 2: Deadweight loss from a Cournot oligopoly Good to Know The Organization of the Petroleum Exporting Countries (OPEC) is often mentioned as a good example of a Cournot oligopoly. Research has shown that the behavior of OPEC member countries is somewhere in between a non-cooperative Cournot oligopoly and a cartel. That is, while there is some cooperation, it can be optimal, especially for smaller OPEC producers (whose production has less potential to impact market prices), to follow more expansionary production policies. The study by Okullo and Reynès (2016) offers interesting insights in this regard.
Cournot competition describes an oligopoly market model in which two or more firms produce the same good and compete for market share. The competing firms decide simultaneously and independently of each other on the amount of output they will produce. The total quantity supplied by all firms then determines the market price. This is distinct from Bertrand competition, where firms compete in prices, or Stackelberg competition, where firms sequentially choose their production quantities.
JEL Codes have become the standard way to classify economics content. They can be used with papers, articles, dissertations, and even book reviews - essentially anything related to economics can be assigned a JEL Code. Although seldom taught by economics courses, the Codes are widely used by professional economists and are easy to understand. If you are a student of economics and you plan to read journals, conduct research, or study for a PhD, it pays to become familiar with the JEL classification system. There are twenty different JEL Codes. Each one contains many “sub-codes” as you drill down towards more and more specific topics. For example, JEL Code F is “International Economics”. One of the “sub-codes” under it is F6, “Economic Impacts of Globalization”. Going even further, we finally arrive at F680, which discusses the creation of policies that have been made to deal with the impacts of globalization. Top-level JEL Code Descriptions: A: General Economics and Teaching: covers general studies of economics, its relations to other disciplines, and the teaching of economics. B: History of Economic Thought, Methodology, and Heterodox Approaches: studies about schools of economic thought and methodologies used, including newer ones being developed. C: Mathematical and Quantitative Methods: includes studies about mathematical, econometric, and other quantitative methods, but not studies that merely use well-established quantitative methods. D: Microeconomics: contains many subcategories that include household behavior and family economics, market structure and pricing, general equilibrium and disequilibrium, welfare economics, select decision-making and behavioral economics topics, and more. E: Macroeconomics and Monetary Economics: studies about the performance of an economy, including output, prices, interest rates, employment, and the factors that determine them. Also includes studies on central banking and monetary policy. F: International Economics: includes trade, movement of factors of production, international finance, globalization, national security, international relations, and other topics. G: Financial Economics: contains studies about domestic and international markets for securities such as bonds, stocks, commodities, and futures, and other topics such as corporate finance and studies on financial institutions. H: Public Economics: microeconomics-focused public economics issues that include public goods, government, taxes and subsidies, the effects of fiscal policies on economic agents, and more. I: Health, Education, and Welfare: related to public economics, but focused on economic development and government policies on welfare, poverty, educational services, and healthcare. J: Labor and Demographic Economics: includes economic studies of marriage, family structure, and other demographic trends, gender economics, racial economics, wages and compensation structure, collective bargaining and unions, labor discrimination, labor contracts and standards, and more. K: Law and Economics: contains studies on property rights and contract enforcement, business laws and regulations, laws on labor, tax, bankruptcy, immigration, and more, and illegal activity such as bribery. L: Industrial Organization: includes topics on market structure, firm strategy and behavior, nonprofit organizations, antitrust policies, industrial regulation and policy, and more specific studies on specific industries like manufacturing or utilities. M: Business Administration and Business Economics; Marketing; Accounting; Personnel Economics: contains studies on business topics (including many that are not conducted by economists) on topics such as marketing, advertising, accounting, and personnel economics. N: Economic History: these studies analyze events in history or what happened over long periods of time, with particular emphasis on history before 1950. O: Economic Development, Innovation, Technological Change, and Growth: contains micro- and macro-economic studies on topics of economic development and growth, developing economies, technological change, innovation, and more. P: Economic Systems: studies capitalist, socialist, and other economic systems and their institutions. Q: Agricultural and Natural Resource Economics; Environmental and Ecological Economics: includes economic studies on agriculture, natural resources, energy, environment, and ecology. R: Urban, Rural, Regional, Real Estate, and Transportation Economics: studies on real estate, regional economics topics such as spatial distribution of economic activity, transportation networks, regional migration and government policies, and urban units like neighborhoods. Y: Miscellaneous Categories: contains useful information that doesn’t fit into one of the other categories, like introductory materials, data tables and graphs, book reviews, dissertations, and more. Z: Other Special Topics: includes sports economics, cultural economic studies, sociology topics, and the economics of tourism. A complete and interactive list of the Codes and all of their sub-disciplines can be found at the American Economics Association’s website. At INOMICS, we also use JEL Codes to classify our content. Why not check out the full list of Codes for something that interests you, and try searching INOMICS for related content?
JEL Codes are an economics classification system. They were developed by the Journal of Economic Literature to help economists identify what specific topic(s) a paper discusses. As such, the Codes can help people quickly search through economics content to find relevant information. They can also help people make sense of what topic a new paper is really focusing on, if the title is unclear.
In summary, your majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole. Throughout the subsequent decade, economists sought to repair the reputational damage to their profession. These experts in self-interest had recognized a need to restore public confidence in their work. Economists took it upon themselves to engage in public debate and entire economics curricula were redesigned. Many set out to broaden their horizons through interdisciplinary work with other scientists, something that had hitherto been less common in economics than other social sciences (see figure 1). However, despite these endeavors, general attitudes toward economists were little changed. In the United Kingdom, a majority of voters chose to leave the European Union, disregarding the broad consensus among economists that it was going to do them material harm. According to a YouGov poll taken in 2017, economists were among the least trusted of a selection of “experts”, with only politicians faring worse (see figure 2). In fact, a shortage of trust in economists is nothing particularly new. As far back as 1925, Frank Fetter wrote in the American Economic Review about the relationship between economists and the public, stating, Academic economists incur popular distrust because they are supposed to echo and reflect the opinions of the business world, while business distrusts them as dangerous radicals because they refuse to worship at the altar of Mammon. As with their lack of foresight prior to the financial crisis of 2008/09, few, if any, economists saw the coming of COVID-19. The economic impact of the pandemic is huge. Yet since its primary cause is biological, there has been less finger-pointing at economists this time round. On the contrary, the wide-ranging consequences of COVID-19 have presented a wealth of new opportunities for economists to demonstrate their value to the world. There has been a surge in demand for key skills in statistical analysis and forecasting as governments everywhere face stark choices, weighing the costs against the benefits of various policy alternatives. Economists have found their moment. The following table lists initiatives that have been taken in response to the pandemic by some of the major academic bodies and research repositories in economics. Along with papers about the general effects of the pandemic on economies, others focus more directly on the social and health effects of various lockdown policies. A key feature in many of these studies is the traditional and simple economic approach to problem-solving: the analysis of trade-offs and optimization within a world of ‘second-best’. The recent hive of activity among economists is not confined to academia. Indeed, there has been a more general realization across society that an understanding of statistics is critical to managing the crisis. The radical changes to daily life imposed by governments around the world have increased uncertainty and the demand to deal with it. Economists have been called upon to reassess markets under lockdown, advise governments on new monetary and fiscal measures to mitigate the economic fallout from COVID-19, and assist more directly in modelling and forecasting the epidemiology of the disease itself. One of my own areas of research, the voluntary sector and donor behavior, led to my being commissioned to perform analysis of the fundraising market on behalf of charities in the UK. My co-author Cathy Pharoah and I considered the impact of the pandemic both on the various income streams to charities as well as on the new demands for their services. We measured the interdependence between donor trends and economic growth over recent decades to project the future path of charitable donations based on current government forecasts of GDP, acknowledging very large differences between best and worst-case scenarios. In our research report we outline some key pointers for fundraisers to consider, to encourage them to think more as economists when planning their appeals and to focus on what is within their control while being prepared to adapt to new events as they occur. The US Bureau of Labor Statistics was already expecting higher job growth for economists than for other occupations over the coming decade (14% versus 4% growth, see here. Increased use of “big data” to aid pricing and advertising, in tandem with a more complex and competitive global economy, are cited as the main reasons for the predicted job growth. The coronavirus pandemic is only accelerating such developments. Economists are trained to analyze data and are equipped with tools that aid decision-making under uncertainty, be that at the individual, group or societal level. While economists may not have been classified among the ‘essential workers’ as the health crisis took hold, they are better positioned than most to show ways out of it and to think beyond. Economists also belong to the group of professionals who can do their job remotely. It may only be thanks to lockdown and social-distancing that the epidemiologists and public health scientists at the London School of Hygiene and Tropical Medicine have thus far escaped royal scrutiny on the lack of preventative measures for COVID-19. Having already suffered that fate when the previous crisis hit, economists now have a great chance to redeem themselves. Many of them are already capitalizing on it. The above article first appeared in the INOMICS Handbook 2021. Download the INOMICS Handbook References Fetter FA (1925) “The Economists and the Public”, The American Economic Review 15(1), 13-26. Fourcade M, E Ollion and Y Algan (2015) “The Superiority of Economists”, The Journal of Economic Perspectives 29(1), 89-113.
The following article first appeared in the INOMICS Handbook 2021. Download the INOMICS Handbook On a visit to the London School of Economics in November 2008, the Queen asked her hosts why no one had seen the financial crisis coming. It took the professors nine months to come up with an excuse, put forth in a letter in July 2009:
A growing number of universities offer different career pathways into teaching roles, making it possible to pursue a career in academia tailored towards your specialism. This might be a traditional teaching and research role or a teaching and scholarship-focused role. For a research and teaching role, universities will often place a great weight on your published and ongoing research, your potential for producing world-leading research, and how well your research fits into the overall balance of the department. Institutions will also look at your statement of teaching philosophy. Though, in some institutions, research potential may be given more weight in decision making. However, for teaching-focused positions the balance of the role will be skewed towards teaching. So, institutions will be looking for evidence of your teaching philosophy and engagement in thinking about pedagogy, alongside your research. Some institutions will expect academics working in teaching and scholarship-related roles to continue with discipline-focused research, whereas others will place more emphasis on scholarship of teaching and learning, such as through evaluation and development of pedagogies. It is likely that a teaching-focused career will require you to engage with a higher teaching load than a traditional research and teaching role. In some institutions, teaching-focused academics may teach twice as many hours as “research and teaching” academics. Any application will need to be tailored to the role and institution to which you are applying. Be passionate about teaching and pedagogy! If you intend to start a teaching career in economics, it is important to have a passion for teaching and the ability to motivate and inspire students. Teaching with passion means bringing knowledge into the classroom with enthusiasm, creating interaction with students, and sharing your own interests and research, where relevant, for discussion. If you are passionate about education, a teaching career in economics can be highly rewarding. However, you will need to spend time on preparation and be wise enough to accept that you don’t know everything. At times, it could be tough, as you may be asked to teach material that will require you to familiarise yourself with a new topic that you have never come across before. You should also be aware that the breadth and depth of learning material is likely to vary as students advance their knowledge of the discipline in their degree (e.g., undergraduate versus postgraduate modules), and depending on the institutions you are working in. Furthermore, be aware that innovative pedagogy and engagement with appropriate technology may be more crucial than ever before. Over the past couple of years, education has seen a fundamental structural change in the different ways to support student teaching and learning. This has been brought into further focus by the COVID-19 pandemic. Blended learning and flipped classrooms are becoming increasingly normalised in the higher education environment, along with tools such as message boards and in-class learning aids. Alongside this, institutions are developing online course offerings. Thus, make sure you don’t forget to mention your innovative practices during an interview as, in the current times, this is very much what employers are looking for. Teaching-specific career pathways are relatively new across the sector, and whilst many institutions have teaching-focused roles, some of these may not be part of a career framework, limiting progression. However, in a growing number of institutions, teaching pathways can lead to a career ranging from teaching assistant to professor. Pathways to Professor The titles that individual institutions use for teaching roles can vary quite a lot across the sector. In some institutions, there may be a clear demarcation between traditional research and teaching “lecturers” and their teaching and scholarship equivalents (often using terms such as “teaching fellow”). But in others, this may be much less clear. We have tried to illustrate the equivalent levels throughout this article. Teaching Fellow/Assistant Many teaching-focused academics begin as a teaching assistant or teaching fellow. These roles are designed to support teaching, led by more senior academics within your department. For instance, they might include leading large- or small-group seminars, marking assignments and examinations, and helping to enhance the student experience. Alongside these tasks, you will normally be expected to continue your own personal and professional development, which may involve engaging with research, developing your own pedagogies and/or teaching innovations, and attending departmental and institutional seminars and national/international conferences. With this in mind, when writing your application and preparing for your interview, you may want to think about how you could help improve the student experience. Providing evidence of previous teaching experience in higher education could also help you succeed in getting the post. Assistant Professor (teaching-focused)/Senior Teaching Fellow/Lecturer (teaching focused) At Assistant Professor level, you are likely to begin to demonstrate leadership. You will usually be expected to lead individual modules, or you may be required to take a programme leadership role. In addition, you may be asked to engage in student pastoral care (such as personal tutoring) and lead on developing activities that aim to provide additional academic support for students, and engage collegiately within the wider institution. These activities may be focused on applicants (e.g., open days and widening participation events/initiatives), current students (e.g., work on the development of key study skills within the degree programme), or post-university activities (e.g., support for alumni relations). Alongside this, you will normally be expected to engage with scholarship, which may be discipline-related research, pedagogic research or other scholarly activities. The latter may include contributing to the identification of sources of funding and the process of applying for and securing funds for scholarly activities, as well as their dissemination. Evidence of teaching excellence is crucial for these types of posts. Thus, accreditation (such as a fellowship from Advance HE in the UK) would be very helpful. You might want to consider working towards this qualification as soon as you start your academic career in a teaching-focused role. Candidates should also demonstrate a good understanding of the wider student experience, particularly in relation to welfare, student support, study skills, internships, and employability. Associate Professor (teaching-focused) Moving onto the role of Associate Professor (teaching-focused), your role will likely become more concentrated on academic leadership through programme directorships, mentoring of peers and colleagues, and more general leadership within your academic department and the wider university. Engagement with external organisations within the discipline or other institutions is also likely to be valuable in these roles. This could involve joining a committee of a learned society, contributing towards quality assurance processes across the sector, serving as an external examiner, or engaging with an organisation such as the Economics Network. Among other teaching responsibilities, you may be required to engage more with curriculum design and planning learning activities to support the implementation of new modules/degree programmes. Similarly, as a course leader or equivalent, you may provide leadership in coordinating the work of others to ensure that courses are delivered effectively. You may also contribute to colleagues’ professional and career development, acting as personal mentor and providing advice. You should also have an in-depth understanding of your own specialism. A track record of publications in your area of expertise and/or pedagogic research would be desirable at this stage. You should show ability and major achievement in teaching, demonstrated by high quality instruction and a substantial teaching record. Professor (teaching-focused) Becoming a teaching-focused professor in economics involves demonstrating sustained impact, not just within your institution, but within the discipline more generally. Just as with traditional research and teaching roles, a teaching-focused professor will be expected to provide leadership both within the university and beyond, within the discipline. There is a wide variation in what your leadership role could look like. Some may take editorial roles with scholarly journals, others may have administrative leadership roles at their universities, and others may have leadership roles within the sector to shape economics teaching. Moreover, teaching-focused professors will build upon their scholarship, and may produce subject-specific or pedagogic research of international quality to inform research-led teaching practice. They may also work collaboratively and collegially on academic, pastoral and other administrative duties within their department. A career on a teaching pathway can be extremely rewarding. As you progress in your role, you may have the opportunity to shape university education of economics in your department and beyond. This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network here.
This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network here. When you enter the job market for teaching economics, the institutions that you are applying for may well have different characteristics. Therefore, you may need to tailor your application to the type of institution and the role specifications in the job advert.
Based on aggregating the total interest in offers publicized on INOMICS during the previous year (see methodology) winners were chosen across 7 different categories. In each category, we identify the Top 3 institutions as well as those in the Top 20, listed in no particular order. The awards (past awards) hope to acknowledge the universities, research centers, economics schools, banks, think tanks, and government and private institutions which listed their career and study opportunities on INOMICS in 2021, and were the most popular among our users. The full list of award winners can be found in the INOMICS Handbook 2022, alongside expert career advice from economics professors and a fascinating interview with economic historian Adam Tooze, who offers his wisdom on the economics landscape. Download the INOMICS Handbook for free. Top 3 Employers University of Copenhagen (Denmark) University of Cape Town (South Africa) Queen Mary University of London (United Kingdom) Top 3 Training Course Organizer Vrije Universiteit Amsterdam (The Netherlands) University of St.Gallen (Switzerland) Barcelona School of Economics (Spain) Top 3 Places to Do a Master's University of Luxembourg (Luxembourg) CERGE-EI (Czechia) University of Alicante (Spain) Top 3 Places to Do a PhD Graduate School of Economic & Social Sciences (GESS), University of Mannheim (Germany) University of Surrey (United Kingdom) University of Konstanz (Germany) Top 3 Conference Organizers Review of Socio-Economic Perspectives (RSEP) Ruhr Graduate School in Economics (RGS Econ) (Germany) Masters International Research and Development Center Top 3 Summer School Organizers University of Oxford (United Kingdom) Paris School of Economics (France) The University of Surrey (United Kingdom) Top 3 Scholarship Providers CEMFI (Spain) The Institute for Employment Research (IAB) (Germany) UniCredit Foundation See all winners in Handbook
Now in their sixth year, the INOMICS Awards remain unique in their celebration of institutions committed to the career development of economists worldwide.
The Value of Nature’s Services to Modern Economies
These factors of production from nature hold the core of all economies’ potential output, which therefore makes our economy dependent on the life-support systems of our planet. Even businesses seemingly removed from raw materials - like software-as-a-service companies - depend on power generated from natural sources. Yet, over the past few decades, economic theory has managed to fabricate the illusion that somehow we can get by without natural resources, or that they are insignificant to our modern world. We know that resources are finite, but apparently as a species we lack the feeling of urgency to realize their significance for the maintenance of our world and for the future generations that will follow us. National governments continue to focus on growing their economies, paying little heed to the consequences they may have on nature. The services provided to us by nature take four main forms, as first identified by the UN Millennium Ecosystem Assessment’s 2003 “Ecosystems and Human Well-being: A Framework for Assessment” report. They are called provisioning services, regulating services, cultural services, and support services. The value estimates for ecosystem services in the rest of this article are typically estimated by: the market value method, avoided damage cost method, replacement cost method, opportunity cost method, or by hedonic property models. These are some of the most prominent ecosystem valuation methods, but there are others as well. Provisioning Services Provisioning services are the ecosystem services provided to humans as products obtained directly from nature, such as: Food from plant, animal and microbe sources. Fuel, wood, and other sources of energy. Fiber, cotton, wool, hemp and silk. Genetic resources such as the genetic information used for biotechnology and animal and plant breeding. Ornamental resources such as shells, animal skins and flowers. Biochemicals, natural medicines and food additives. Fresh water from sources such as rivers. The value of every single provisioning service is enormous. In fact, each of these services comprises the core of some multi-million dollar industry, and when combined together, all of these industries make up a huge portion of most nations’ GDPs. In other words, these services make up an essential and irreplaceable part of the entire world economy. Here are some examples of provisioning services that contribute significantly to economic growth: In Switzerland, the pollination services provided by specific species of bees support the production of about 231 million dollars worth of agricultural sales per year (TEEB, 2010). Thus, pollination in this case is a provisioning service - allowing our crops to grow as normal. It is possible for natural services to fill more than one role; see the next section for how pollination can also be a regulating service. Honey production worldwide generates a value of approximately 8 billion dollars annually (Statista, 2020). Globally, more than 30 million people in coastal and island communities are entirely dependent on resources extracted from coral reefs as their main source of income, food, and livelihood (Wilkinson, 2004). Accordingly, losing natural resources that compose or support these industries would entail serious economic losses. On the other hand, the optimal, sustainable utilization of such natural assets could boost economic growth, driving nations to prosperity. Regulating Services Regulating services are the benefits provided by nature that moderate natural phenomena in order to improve the physical environment for specific human purposes. Regulating services include the processes of erosion, pollination, water purification, decomposition and flood control, disease prevention, carbon storage, and climate regulation. However, the economic values of most regulating services are not calculated in terms of monetary valuation, despite their importance. This is because regulating services are not traded or sold. However, regulating ecosystem services are extremely beneficial because they could reduce the impact of climate change as well as aid in agricultural production, along with many other valuable benefits. In fact, the total global value of regulating ecosystem services is estimated to be worth approximately US$29.085 trillion (Balasubramanian, 2019). More specific examples include: The regulating ecosystem services of the Tampere region in Finland amount to approximately 1 billion Euros in total, contributed annually (Tammi et al. 2017). For Tampere city (in Finland) alone, ecosystem services such as carbon sequestration have an estimated value of 31 million Euros, pollination amounts to about 9.9 million Euros, and nutrient retention generates a value of roughly 54 million Euros (Tammi et al. 2017). In this case, pollination is a regulating service since it helps to stabilize the city’s ecosystem. In the Netherlands, the economic value of air quality regulation services has been found to be worth approximately 2 million Euros (Remme et al. 2015). The economic value of climate regulation (which includes natural services such as carbon sequestration and others) in the Czech Republic is worth approximately 267.32 million dollars (Balasubramanian, 2019). Cultural Services Over the years, the natural world has continued to guide our cultural and social advancement by being a constant force present in our lives. Cultural services that nature provides include recreation and aesthetic and spiritual values of nature, such as: Ecotourism, outdoor sports and all other types of recreation. Therapeutics such as eco-therapy and social forestry. Spiritual, historical, or religious value that people derive from nature. Other cultural services include books, film, folklore, national symbols, advertising, different forms of art, etc. that nature supports, makes possible, or features in. Despite the fact that cultural services provided by nature are usually immaterial, the annual revenue flow from ecotourism (as an example) could amount to an estimated US$29 billion. Egypt, Kenya, and Cambodia, among other countries, have recently started implementing ecotourism projects. Similarly, the spiritual, historical, or religious value attached to natural environments or natural phenomena also entails significant economic value. There are many other economic growth opportunities that could be obtained through the utilization of nature's cultural services. For example, for countries rich in greenery and natural scenery, why not implement ecotherapy programs? With evidence of booming anxiety and depression, especially among younger generations, the opportunity to spend a vacation in a tranquil natural landscape may be an attractive opportunity for many. In many countries, ecotherapy has started to gain a foothold as a legitimate mental health treatment. Some of these programs include: The Song House (Ireland), The Ecotherapy Retreat (UK), and Go Into Nature (US), among many others. Support Services The natural world provides us with countless services, and sometimes we overlook the most fundamental of them. Ecosystems themselves couldn't be sustained without the consistency of underlying natural processes. These processes are known as supporting services, and they form the necessary core of the production of all other natural services. The provisioning, regulating, and cultural services discussed in this article themselves depend on support services. These include processes such as photosynthesis, nutrient cycling, soil formation, and habitat provision. These processes allow the Earth to sustain the most basic forms of life, and thus to support whole ecosystems, humans, and economies. Without supporting services, the natural world would break down and so provisional, regulating, and cultural services would cease to exist. Natural services are essential to the global economy’s functioning… It is estimated that these natural services contribute a total global value of around $145 trillion per year to human society (Costanza et al. 2014). This figure was constructed as an estimate of “...the support of sustainable human well-being that ecosystems provide…The value of ecosystem services is therefore the relative contribution of ecosystems to that goal.”1 Putting that contribution to human well-being into perspective, this is more than seven times the GDP of the United States, and is much larger than total global GDP. In other words, nature’s contribution to our lives is much more than our total economic output. To be clear, this is value that we freely receive from nature and don’t have to pay for. It underpins our economic system, but since we don’t pay for it, we don’t account for it in our GDP metric. Thus, markets and governments “ignore” the value provided and fail to protect them properly. Yet these are services - like the water cycle, or oxygen production - that we can’t live without. …but are being degraded and ignored, to our future detriment Many government policies and corporations seem to behave as if there is a clash of interests between preserving the natural world and their bottom line. This seems extremely irrational, as they neglect the possibility that environmental degradation could shut down their markets entirely and put our economies at risk. Already, due to unsustainable and exploitative growth, global warming is increasingly causing economic damage. Additionally, the world has been experiencing a rapid decline in hundreds of plant and animal species that contribute to our ecosystems. The absence of clear environmental policy goals, poor enforcement of existing regulation, corruption, and lack of institutional capacity are some of the main reasons that lead to ecosystem degradation. This process of degradation could be considered a negative externality that is not properly accounted for by our economies’ markets, as again metrics like GDP don’t include them. Perhaps our limited capacity to deal with the potentially disastrous consequences of environmental degradation is aggravated by the absence of sufficient information. Governments and the public need more knowledge about ecosystem functions, the benefits they generate for economies, and the value they represent in and of themselves. We don’t necessarily have to choose between protecting the environment and continuing our economic growth. Rather, we must choose to protect the environment to ensure our economic future. References: Costanza, R. et al. Changes in the global value of ecosystem services. Global Environmental Change 26: 152-158, doi:10.1016/j.gloenvcha.2014.04.002 (2014). TEEB, RECOMMENDATIONS OF. "Mainstreaming the Economics of Nature." (2010). Wilkinson, Clive. "Status of coral reefs of the world: summary of threats and remedial action." Coral reef conservation 13 (2006): 3-39. Tammi, Ilpo, Kaisa Mustajärvi, and Jussi Rasinmäki. "Integrating spatial valuation of ecosystem services into regional planning and development." Ecosystem Services 26 (2017): 329-344. Remme, Roy P., Bram Edens, Matthias Schröter, and Lars Hein. "Monetary accounting of ecosystem services: A test case for Limburg province, the Netherlands." Ecological Economics 112 (2015): 116-128. Balasubramanian, M. "Economic value of regulating ecosystem services: a comprehensive at the global level review." Environmental monitoring and assessment 191, no. 10 (2019): 1-27.
For as long as we can remember, Mother Nature has been serving mankind as our major root source of livelihood. From the land that provides the nutrients for our crops, to the stone for our roads and buildings, to the oil for transport in our globalized world, we rely on these natural resources to maintain our modern way of life.
Agricultural and Environmental Economics (JEL Q)
This theory was originally formulated by the Polish mathematician Nicolaus Copernicus in 1517, but the version most commonly known today was developed by the American economist Irving Fisher in 1911. It gained popularity in 1963 with the publication of Milton Friedman's and Anna Schwartz's influential book A Monetary History of the United States. Since then, it has become a cornerstone of the monetarist school of economics, which sees excessive expansions in the supply of money as the primary driver of rising prices and hence inflation. Fisher’s Equation of Exchange Fisher's Equation of Exchange is an identity that always holds true by definition. It essentially states that the quantity of money spent in an economy needs to equal the quantity of money used. This is expressed as: \begin{equation*} MV_T \equiv P_TT \end{equation*} where M = Quantity of money VT = Money velocity of all transactions (money turnover) PT = Price level of all transactions T = Total transactions in the economy. According to the QTM, in any given time period, total money expenditure is equal to the total value of goods traded in the economy. The volume of transactions T depends on the supply of goods and services to be exchanged. The greater the supply of goods in an economy, the larger the number of transactions and trade, and vice versa. An alternative formulation makes this relationship more explicit by introducing real output or gross domestic product (GDP) to the equation. This particular formulation of QTM is quite common and regularly taught to students of economics, so you may recognize it: \begin{equation*} MV \equiv PY \end{equation*} where M = Quantity of money V = Income velocity of money P = Price index (not price level) Y = Real output (GDP). In this equation, as with the price of a commodity, the value of money is determined by supply and demand factors. Under the assumption of full employment and full use of all resources, Y cannot be increased and is therefore assumed constant. Another central assumption is that the velocity of money V is considered fixed or externally determined. With V and Y being held constant, the QTM then states that prices P evolve proportionally to the money supply M. \begin{equation*} MV = PY \Longleftrightarrow P = V\frac{M}{Y} \end{equation*} That is, any change in M leads directly to a change in P, or in other words, an increase in the money supply causes inflation. It's worth noting that M itself can be broken up into at least two components. Monetary assets that are very liquid, such as cash, are considered part of "M1". Other monetary assets including savings deposits are part of "M2". These sub-categories of the money supply are more fully explained in our article on velocity. Cambridge Cash Balances Equation An alternative approach to the QTM, known as the Cash Balances Equation, was developed by a group of Cambridge economists - including Alfred Marshall, Arthur Cecil Pigou, and John Maynard Keynes, in the early 1900s. While Fisher's version focuses on money supply, the Cambridge approach focuses on money demand, identifying different uses of money which the Fisher approach did not address. The main argument reflected in the Cambridge version is that money acts not only as a medium of exchange but also as a store of wealth. That is, people want to hold money both to finance transactions (medium of exchange) and as a security against unforeseen needs (store of wealth). It is assumed that a person’s demand for cash balances is proportional to their income. This leads to the following equation: \begin{equation*} M_dV \equiv k(PY) \end{equation*} where Md = Money demand k = Proportion of nominal income (PY) that is demanded as cash-holding P = Price index Y = Real output (GDP) In equilibrium, money supply must equal money demand. That is: \begin{equation*} M_s = M_d = M \Longleftrightarrow M = kPY \text{ or } P = \frac{M}{kY} = \frac{1}{k}\frac{M}{Y} \end{equation*} We can see that this is a transformation of Fisher's equation, with k being the reciprocal of V. Assuming that Y is constant because of full employment and full resource use, and assuming that k is a behavioral constant, the conclusion is similar to Fisher’s version. That is, an increase or decline in the money supply leads to a proportional price change. Good to Know While the QTM in essence is accepted by most economists, disagreement exists about the extent to which each of the variables depends upon the others, and which variables can reasonably be assumed constant in the real world where conditions are dynamic in nature. Moreover, additional factors which influence the demand for money such as rate of interest, wealth, and expectations about future prices have not been sufficiently accounted for in this simple model. While both Fisher's and the Cambridge version assume that output Y is constant because of full employment, the implications change once allowing for unemployment. As later pointed out by Keynes in his General Theory, the chain of causation between changes in the quantity of money and in prices is not direct but indirect. In the first place, an expansion in the total quantity of money leads to a fall in the rate of interest and, in consequence, a rise in investment. If there are unemployed resources, this will lead to an expansion of production, increasing output, employment, and income. However, once full employment is reached, output will cease to respond and the effect will be exerted on prices, which rise in response. Adapting consumer behavior is another factor that challenges the assumptions of the QTM theory. For example, if consumers expect that prices will rise in the near future, and in response decide to hold less cash and increase spending to stock up on goods, this will reduce k or increase V respectively.
According to the quantity theory of money (often abbreviated QTM), the general price level of goods and services is proportional to the quantity of money in an economy.
The velocity of money gives an indication of whether consumers and businesses are saving or spending their money. It is influenced by a variety of factors, such as the frequency of transactions, trade volume, business conditions, prevailing price levels and expectation regarding future prices, and borrowing and lending policies. Being typically higher during periods of economic growth and lower during contractions and recessions, the velocity of money can be used as a measure of economic activity alongside other key economic indicators such as GDP, unemployment, and inflation. Calculating the velocity of circulation The velocity V of money measures the rate at which money is exchanged to purchase domestically-produced goods and services within a given period. Following Fisher's Equation of Exchange, V is calculated as the ratio of nominal GDP (output Y evaluated at current prices P) to money supply M: \begin{equation*} MV = PY \Longleftrightarrow V = \frac{PY}{M} \Longrightarrow V = \frac{GDP}{M} \end{equation*} While GDP is typically used as the numerator, gross national product (GNP) may also be used. In the denominator, two alternative measures for the average stock of money can be applied: M1 is the sum of currency, demand deposits, and other liquid deposits in circulation. It is typically used in shorter-term transactions of everyday consumption. When you buy something with cash or a card, you are using money from the M1 supply. M2 is a broader measure. It consists of M1 plus several assets that are less liquid but still easily convertible, such as savings deposits, money market securities, and other time deposits. Central banks closely follow the evolution of M2 as an indicator of money supply and future inflation. It is a common target of monetary policy. To give an example, imagine an economy with two agents: a farmer and a mechanic. Both have initial cash holdings of €50, for a total stock of money equal to €100. In one year, the farmer produces wheat worth €100. However, before being able to harvest, he calls the mechanic to repair his tractor, for which the mechanic charges €50. The farmer then collects the wheat and sells the full harvest to the mechanic. In this example, the money supply is €100 (since both the farmer and mechanic start with €50 each) and the nominal value of goods and services produced is €150 (€50 for mechanic services + €100 worth of wheat). The velocity of money is then calculated as 150/100 = 1.5. That is, each Euro in the economy changed hands from one agent to the other 1.5 times within the time period. Factors affecting the velocity of circulation According to the quantity theory of money, changes in the price level of an economy are explained by changes in the quantity of money in circulation, while keeping the number of transactions and the velocity of money constant. In this setting, an increase or decrease in the price level would occur solely due to an increase or decrease in the quantity of money. In reality, the velocity of money may change in reaction to a variety of factors, including but not limited to the following: Money supply: The velocity of money depends upon the supply of money in the economy. If prices are “sticky'' in the short term and output is fixed, then a reduction in the supply of money would lead to an increase in the velocity of money. Frequency of transaction: Generally, the velocity of money increases with the frequency of transaction. In a climate of favorable business conditions and expanding trade volume, the velocity of money will increase. Contrarily, it will decrease in a climate of reduced economic activity. Behavioral responses: The velocity of money also depends on people's behavioral responses. For example, if workers are paid at regular intervals, they will spend their income more freely, while uncertain payment schedules lead people to hold on to cash reserves. Moreover, if people expect prices to rise and the value of money to decline in the near future, the rate of circulation will increase as people prefer spending their money rather than holding on to it. Good to Know The figure below displays the quarterly velocity of the M2 money stock in the United States from the first quarter of 1990 to the first quarter of 2022. It can be seen that the steepest declines in the velocity of money generally coincided with periods of recession (the shaded regions in the graph) in the U.S., including the Great Recession between 2007 and 2009 and the economic shock of the COVID-19 pandemic and associated lockdown measures in early 2020.
The velocity of circulation is the frequency at which one unit of currency (i.e., a one-Euro coin) is exchanged in an economy within a given time period. If it is rising, then more transactions are taking place between individuals in an economy. It is also known as the velocity of money.
How to research and publish in economics education
A recent article introduced a range of publications and conferences focused on teaching, assessment and pedagogy in both economics and more widely. This article may help motivate you to adopt a more innovative approach to teaching, and may also spark the desire to share your work in pedagogy. Just as with research in economics, there are a wide range of areas within pedagogy that you could focus research in, and the skills developed as an academic economist are often transferrable when thinking about teaching and learning more generally. In this article, we will discuss some of the key elements needed to publish research relating to economics education. 1. Develop teaching innovations A first step towards developing research in pedagogy might be to explore new teaching innovations. These don’t need to be radical innovations, but just need to be novel. For example, you might introduce a game within a principles of economics lecture to illustrate marginal productivity through active learning. A good understanding of what has been developed and evaluated previously is important here. Economics journals such as the International Review of Economics Education, the Journal of Economic Education and the Journal of Economic Teaching may provide you with inspiration. They can also help identify what has worked, and what has not. Some journals will publish work introducing an innovation, but for most journals it will also be important to evaluate the teaching innovation. 2. Evaluate economics teaching innovations Having introduced a new teaching innovation, it is usually important to evaluate the innovation. Economists have significant training in evaluation, and this can build upon the applied economics you have learned during your PhD, or earlier. The principal reason for evaluating the innovation may be to check that it is having the desired effect, and is not having any deleterious effect on student outcomes. Of course, the act of evaluating the innovation may also mean that you have the opportunity to share it, and your skills as an economist will be beneficial when evaluating the quantitative or qualitative impact of the study. If you are submitting an evaluation of a teaching innovation, editors in the review process will be looking to see that you have connected your research with the existing literature, and that the empirical evaluations are sound. For instance, if you claim the innovation is having a causal effect on grades, they will want to check that your identification strategy is sound. Similarly, they will want to check details such as that you have a suitable sample size to evaluate the effect, whether you are using the correct econometric tests, and whether your control group is sound as well. For publication, editors will usually be looking for research which will be of interest to the general readership. If your innovation is too niche, or is only applicable to a very small group of economics educators (e.g. if the innovation would only be relevant to the structures in your own institution), then editors may reject the research. However, you should also be careful not to claim too much. If there are limitations to your evaluation, you should make these clear to the reader. 3. Review the existing literature Of course, you don’t have to be developing brand new ideas yourself in order to carry out research and publish in the area of economics pedagogy. Often reviews of the existing literature, drawing upon evidence from a range of fields, can be very beneficial, and can be highly cited pieces of work. For example, Julien Picault’s recent paper “The economics instructor’s toolbox” provides an excellent overview of the development of pedagogies across economics. Many subjects can become stuck in silos when it comes to thinking about the best methods for education. Economics is a subject that, because of its nature - combining mathematical technicality, statistical tools, and the ability to explain and argue concepts - means that there are real benefits to drawing together evidence from a range of disciplines including both sciences such as mathematics and physics, and the humanities. 4. Develop new curricula Whilst “developing a new curriculum” may sound like a Herculean task, there is constant debate in a range of journals about what should go into an undergraduate economics curriculum. Economics is a constantly developing field, and as such, curricula also need to change over time. One area in which there is much work is developing the debates about what should go into curricula, including what is important and what should be left out. As higher education has become more market-based (particularly in the UK and US), the role of an undergraduate degree has been shifting as well. In many institutions, it is no longer seen as sufficient for a degree to merely teach students more about a subject, but other skills need to be embedded visibly within the curriculum. For example, employability skills are often seen as an important element to be embedded within courses. Research on embedding these skills could be based on empirical evidence of efficacy, or could involve qualitative studies about students’ wants and reactions to these innovations. 5. Innovative assessment The type and format of assessment is just as important as the pedagogies being used, and the curriculum being followed. All three should be constructively aligned. While closed-book exams do constitute a large proportion of assessment in economics, there are opportunities for evaluating and investigating these methods, many of which will follow a mixed-methods approach. If you are writing about an innovation in assessment, it’s important to think about what the assessment looks like and what its outcomes are. These can be in terms of the observed skills that students develop, or their progress in subsequent years of study. But it’s also important to note how the assessment ties in with the curriculum and teaching. On its own, an innovative assessment may be of interest, but it is unlikely to generate good outcomes for students unless appropriate changes are made to the pedagogy as well. At its most extreme, if you ask students to write a policy report (say) as the assessment for your unit, but all of the preparation is mathematical problem solving, it is unlikely that the assessment will gain good results. And, it will be unlikely that a journal would be interested in publishing your research! Summary If you are innovating in your teaching, or are reading widely about novel pedagogies, you can also add depth to your academic CV by writing for publication. However, as with your research in economics, for work to be published, it needs to be innovative, rigorous, and provide a wide interest to the readership! This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network here.
As you develop your career in higher education economics, you will likely be carrying out research within a field in economics. But you will also likely be involved in delivering and developing teaching within your department. As a result, you may be interested in developing and disseminating an understanding of what students should learn and how they learn.
Top YouTube Channels to Learn Econometrics and Economics
So, are you looking for resources to learn economics online? INOMICS has got you covered, whatever your reason. We’ve published various articles that aim to help our readers make the most of online resources already out there. Some of the most popular thus far have included free and paid for online courses in econometrics, lessons in mathematics and statistics, and a list of the best (in our humble opinion) economics podcasts. Continuing in this vein, we would now like to share with you a list of the best YouTube channels we could find, updated for 2022 and useful for any student of economics. For more online learning opportunities click here INOMICS We’re big readers here at INOMICS, but did you know that you can watch our content, too? Aimed at young economists, our Youtube channel’s fun, short, and informative videos help explain all those economics terms you should know, but often don't...Need a quick definition of the prisoner's dilemma? INOMICS has just the video for you. New Economic Thinking It’s important to question conventional understandings of economics, especially when they may uphold systems of oppression or hide ideological assumptions that need unpacking, debating and challenging. The Institute for New Economic Thinking’s channel does an excellent job of this, featuring regular interviews with economists at the front-line who are moving the discipline forward. Marginal Revolution University Marginal Revolution University believes that economics has the power to change the way you see the world. Their mission is to help you discover your inner economist, one video at a time. With full courses like the principles of micro and macroeconomics, mastering econometrics and series like everyday economics, checking out MRU really is a must for any budding economics student. <11an>limit:2;categories:jobs|courses|conferences|Professor;disciplines:Econometrics, Statistics and Quantitative Methods (JEL C)|General Economics (JEL A)</11an> EconplusDal Next up is EconplusDal. Frustrated by the lack of economics help available when studying economics himself, EconplusDal is trying to right that wrong. Now as a fully trained economics teacher, he makes videos especially for economics students to help them pass their exams. If you are an International Baccalaureate student or studying for an A Level exam in the UK, his specialized exam content makes this the channel for you. Jacob Clifford Meanwhile, if you’re a student in the United States Jacob Clifford has specialized exam content just for you. With over 500,000 subscribers, he's definitely doing something right. Khan Academy Khan Academy is a non-profit organization with the mission of providing a free, world-class education for anyone, anywhere. With over five million subscribers, they cover a lot more than just economics topics, but their economics content is really great. If you need to understand a particular theory, the chances are they’ve covered it. One Minute Economics All of One Minute Economics videos are lovingly animated and narrated by Andrei Polgar who has a passion for teaching people economics. No long introductions, or unnecessary fluff, Polgar gets straight to the point and therefore well worth a look. Economics Explained In the video essay genre, Economics Explained takes a wide-ranging look at a whole host of economics topics. They are particularly well-known for their deep dives on the economy of a particular country. It can be a fun break from all the lesson-style economics content available. Ben Lambert Ben Lambert's videos provide detailed commentaries on the main undergraduate and graduate courses most universities offer in economics. They are taught through a series of lectures given on an animated chalkboard. Watching his videos, you get an impression of exactly what an economics degree will be like - without having to pay the admission fee! Ashley Hodgson An associate professor of economics at St. Olaf College, Ashley Hodgson has been busy making lots of videos on her channel. Her favorite topics include behavioral economics, blockchain, health care, game theory and microeconomic theory. These videos are great for university level students! She also includes videos on fun and interesting behavioral economics topics, like love and kindness. The Economist First up, you really can’t go wrong with a quick follow of The Economist’s YouTube channel. Every Thursday they post a video that highlights the best of its reporting from its print and digital edition. This is also a good way to stay on top of current events relevant for economists. The Financial Times The Financial Times’ YouTube channel showcases some of the best of their journalism in visual form. With the stated aim to inform and inspire you, a quick follow can add color to the latest economics stories of the day. If this list still has not quenched your appetite for economics content, you can check out our own Economics Terms A-Z or our Blog to see what our economist contributors are writing about!
Online learning is not a novelty anymore. During the coronavirus pandemic and subsequent lockdown, many institutions were forced to invest in their online program offerings - or simply adjust their courses to be online-friendly. But sometimes it’s nice to learn without having to fully commit to a long program. Other times, learning from a different source can help new concepts make sense, or can refresh the memory.
Journals specialising in economics education 1. The Journal of Economic Education is one of the longest standing journals, dedicated to economics education. The journal is based in the United States, with articles from across the world, and provides original articles on teaching economics. In it, leading academics evaluate the latest teaching techniques, such as using technology or games to teach economics, and course programmes. 2. The International Review of Economics Education is a UK-based journal, with articles from across the world, providing a forum for high quality research in the areas of pedagogy, assessment, teaching methods and course structure. Recent issues delve into the use of technologies and new media to teach economics, as well as what we can learn from international economics education practices. 3. Journal of Economics Teaching is a journal focussed on the more practical elements of teaching. The articles are peer reviewed, but the aim of this journal is much more on providing ideas and case studies that others can adopt, with less of a focus on the evaluation of the innovations than the previous two journals. Of course, research in economics education is not confined to specialist journals. Applied economists are always interested in evaluating innovations, and there are often good papers focussed on education in economics subject journals, including the Journal of Economic Perspectives, the Journal of Labor Economics, the Journal of the European Economic Association and many more. Journals specialising in higher education pedagogy more generally The journals focusing on economics education are just a small subset of a much larger literature about pedagogy in higher education. A good educator will often have an appreciation of the debates, not just within the pedagogy of their own field, but more generally. 4. With the growth in online provision, particularly following the onset of the Covid-19 pandemic, understanding the challenges and opportunities for online teaching is increasingly important. The Internet and Higher Education is a highly ranked and cited journal, focussing on the challenges (and opportunities) of online teaching. 5. Similarly, Computers and Education examines the use of, and the evaluation of, digital technology within teaching. 6. Studies in Higher Education is an international, general interest journal, based in the UK. It looks at methods to measure and solve emerging issues within higher education. The journal welcomes contributions that seek to enhance understanding of higher education policy, institutional management and performance, teaching and learning, and the contribution of higher education to society and the economy. 7. Many institutions are engaged in reviews of assessment practice, so it is important to have a good appreciation of what makes good and effective assessment. A useful place to start is with Assessment & Evaluation in Higher Education, a journal that reports on all aspects of assessment in higher education. The goal is to improve understanding of assessment practices, and their contribution to student learning, satisfaction, and engagement with their course. 8. The British Educational Research Journal covers multiple disciplines as well as the higher education experience in the UK overall, particularly for minorities, and how this can be improved. The findings of the papers look to challenge assumptions of how we teach and assess, and aim to make the culture of British universities more inclusive. Conferences in economics education For a more interactive approach to economics education, there are a wide range of conferences that provide insights into the development of pedagogy, including Advance HE, and others. Similarly, several general interest economics conferences (such as the European Economic Association, Royal Economic Society and Scottish Economic Society conferences) often have sessions dedicated to economics education. However, there are also a growing number of dedicated conferences to attend either virtually or in person for the latest innovations in teaching. 1. Developments in Economics Education (DEE) – The Economics Network The Developments in Economics Education conference showcases the latest research, innovation, and best practice in economics teaching. This biennial event is Europe's leading conference on economics in higher education. 2. Conference on Teaching and Research in Economic Education (CTREE) – American Economic Association A three-day event, usually in person, with a mixture of panels, workshops, and presentations. Last year included sessions about teaching with experiments, using social media to have a broader reach, the benefits of group learning, and adapting for the pandemic. 3. TeachECONference - UCL Centre for Teaching and Learning Economics This is an annual virtual conference organised by UCL and Cornell University. It includes three days of panels, presentations, and networking mixers. Last year, they covered teaching in a pandemic, improving economists’ writing, new practices to teaching, and inspiring success for economics students. 4. International Conference on Economics Education and Training (ICEET) – World Academy A two-day conference dedicated to bringing together a significant number of diverse scholarly events for presentation within the conference programme. The London-based event provides great value to students, academics, and industry researchers too. 5. Chartered Association of Business Schools' LTSE Conference The Chartered Association of Business Schools' Learning, Teaching, and Student Experience conference is a two-day annual conference, with a more diverse group of presenters. It provides the opportunities to see how economics pedagogy research aligns with natural peers, such as management, accounting, finance, and business more generally. This article was produced in cooperation with the Economics Network, the largest and longest-established academic organisation devoted to improving the teaching and learning of economics in higher education. Learn more about the Economics Network.
As an academic economist, it is likely that you will be engaged in both research and teaching. As you develop your skills, it will be important to think about what makes good teaching, and how the discussion about pedagogy in economics education develops over time. Knowledge and appreciation of the debates in pedagogy may also be important as you apply for external certification, such as an Advance HE fellowship. You may even want to develop and write for publication about economics pedagogy. There are a range of journals and conferences for those interested in higher education pedagogy.
The insight gained from these studies is increasingly informing macroeconomic models of the labor market, inflation, industries, and how the economy works. However, historically macroeconomic models have been ad-hoc simulations of how the real economy works, aiming to describe these large-scale phenomena. This is one of the key differences between micro- and macroeconomics. The fundamentals of microeconomics are generally agreed upon by modern economists. The field is used to examine supply and demand in specific markets to find if they are perfectly competitive or not, describe how monopolies behave, determine socially optimal outcomes and what may prevent them, examine individuals’ optimal strategies in theory, outline costs and benefits of certain actions, and much more. Often in microeconomic models, certain assumptions are made to deliberately simplify reality so it can be studied. This produces a tractable mathematical model of human (or firm, or market) behavior, which is the bread and butter of many microeconomists' work. With a model’s help, they can perform hypothesis testing on ideas, just like a scientist would do in a field like physics. Then, it's possible to learn how to best allocate resources, restore market equilibrium, predict behavior, and more. But, that does not mean the field is already “solved”. Classic microeconomic assumptions usually include the idea that humans are fully rational, utility maximizing, and have perfect information to make optimal decisions. This “rational economic man” can be distilled into a formula of behavior, using math to build a model. Sadly, these classic assumptions are often not realistic. People almost never have perfect information. And, they have many subconscious biases that could prevent them from making an optimal choice. Moreover, sometimes people just make mistakes! If these assumptions are not realistic, where did they come from, and why were they widely used? The answer requires a very brief history lesson. First, Adam Smith’s classic Wealth of Nations was published in 1776. It introduced some key concepts, many of which became foundational to microeconomics. An example is the idea that individuals seeking their own self-interest allowed markets to function efficiently via the “invisible hand”. A century later, three important figures built on Smith’s and other’s work, leading to what we call the “Marginal Revolution”. These economists were William Jevons, Leon Walras, and Carl Menger. Their works introduced the concepts of general equilibrium and partial equilibrium, which are still taught today. (General equilibrium describes equilibrium theory in the entire economy, while partial equilibrium only deals with one market at a time). Then, Alfred Marshall built on their work with his Principles of Economics in 1890. This book was important because it introduced rigorous mathematics into economics and launched those methods into the mainstream. Soon after, Vilfredo Pareto (namesake of Pareto efficiency) made major contributions to consumer theory that led to the formation of welfare economics. The work of these economists rested on the assumptions that human behavior could be modeled with math and studied. This is where the key assumptions of rationality, perfect information, and utility maximization came in. Without them, the basic models of microeconomics wouldn’t be able to be written as equations. <11an>limit:2;categories:Jobs|Courses|Programs|Conferences;disciplines:Microeconomics (JEL M)</11an> However, these assumptions were never intended to completely describe reality. Even Alfred Marshall himself stated that economics was closer to meteorology than to other natural sciences, because human behavior is hard to predict. Part of the reason these assumptions proliferated is because they simplified the math. This was important as economists at the time had to do their quantitative work by hand, and complicated models become intractable very quickly. In the present era, technology has allowed economists to build and study more complicated models with computer algorithms and econometric software. Problems that could take earlier economists hours or days to solve might take us only a few minutes to do now. Thus, we have more ability and freedom to re-examine these classical assumptions, perhaps to replace them with better ones. That is exactly what newer sub-disciplines like behavioral economics are doing to the field. Economists are able to challenge some of those classic but outdated assumptions and try to update old models with new findings. These new insights and theories seek to improve our models so they better represent the real world. Thus, key areas of study and research for a modern microeconomist can vary. They include public economics, game theory, contract theory, behavioral economics, income inequality, industrial organization, and more. The common thread among these research areas is that they are grounded in the decision-making of individual economic agents. Further Reading Gregory Mankiw’s Principles of Economics is a lauded and well-known introduction into economics for new students. It’s a large book, but written in clear language with plenty of examples that paint a picture of economic concepts in action. It includes chapters on macroeconomic concepts too, but those build off of the microeconomics concepts that earlier chapters present. It makes a great introduction for any student curious about economics topics at a beginner-friendly level. Additionally, The Wealth of Nations is a famous work of economics literature; even laymen know the name and understand that it is somehow important. Adam Smith, through this book, established the foundations for economics as a discipline. He introduced several concepts that form the basis of microeconomics today, including theories of competition, prices, and people seeking their own self-interest. Smith's ideas are used as a guide even among those modern economists who reject some of the stringent mathematical modeling that microeconomics developed. However, the original work is quite dense and difficult for a modern reader. To get around this problem, the Adam Smith Institute’s Eamonn Butler has written a modern translation of Adam Smith’s writings, The Condensed Wealth of Nations. Any student of economics would benefit from the read. Good to Know Aspiring microeconomists will have to be familiar with the basics of economic theory, naturally. Microeconomics also makes heavy use of mathematical optimization problems, so an understanding of derivatives and basic calculus is necessary. Knowledge of statistics topics, particularly hypothesis testing, is also very useful. And, studying logic puzzles may help an aspiring student prepare for game theory and industrial organization topics. Also, employment opportunities for microeconomists are more similar to macroeconomists than one might think at first. Often, government agencies, think tanks, and research organizations will make use of both micro- and macroeconomists, as the skillsets are complementary but not interchangeable. A microeconomist might be needed to design a specific regulation or government policy, for instance, that a macroeconomist may be ill-suited for.
Microeconomics, one of the two main branches of economics, studies the choices made by individuals. This can be a consumer, a single business, or even a household. The decisions that these individuals make with their limited resources and time are modeled and used for a wide variety of real-world applications.
Compared to the more agreed-upon and orthodox microeconomics, there is more ongoing macroeconomic research and debate still shaping the discipline. While microeconomics focuses on the behaviors of individuals, households, or firms, macroeconomics is more concerned with topics like employment, international trade, and economic growth. Areas of study for a macroeconomist include: How can economic growth be stimulated? What drives inflation? How should the central bank set interest rates to help the economy recover? What factors cause unemployment and how can government policies improve the conditions of the labor market? Should we impose tariffs on foreign goods to protect domestic markets? Varying schools of macroeconomic thought have developed due to the extreme complexity of these questions. These schools are informal and are defined by groups of economists, each of whom share similar views about how the economy works. Some of the core ideas that often form the basis of a school include: how money affects the rest of the economy, whether markets are efficient, the rationality and efficiency of individuals, and whether intervention into markets is good or bad for society. Of course, this is a simplification, and there are other points that macroeconomists may disagree on. Some well-known schools of macroeconomic thought include: the neoclassical, monetarist, real business cycle theory, and New Keynesian schools. It’s worth noting that often newer schools of thought develop out of old ones. This can happen after a unique event in history surprises economists and challenges their thinking. Such an event - like the 2008 financial crisis - is usually unexpected. Economists may struggle to explain how it occurred. Afterwards, they will be forced to study why their predictions were wrong, or why their models couldn’t explain the event as it unfolded. This causes them to review their theories and possibly generate new ones. These new theories proliferate and cause existing schools of thought to grow and change, sometimes enough for us to give them a new name. For example, New Keynesian economists have built on the work of Keynesian economists, but updated their frameworks with the theory of rational expectations. This is why macroeconomics is so dynamic - the real world is constantly forcing economists to challenge their models and explain what is really happening! <11an>limit:2;categories:Jobs|Courses|Programs|Conferences;disciplines:Macroeconomics and Monetary Economics (JEL E)</11an> Further Reading As macroeconomics is dynamic and varied, so too are options for further exploration. INOMICS has published a list of recommended macroeconomics reads already, but there are more good finds out there, particularly for those interested in specific events. For instance, much ink has been spilled over the financial market collapse and Great Recession of 2008-2009. An example is Timothy Geithner’s Stress Test: Reflections on Financial Crises. Geithner was the Treasury Secretary of the United States during and after the 2008 financial market crash. His book is a memoir focusing around that event and the failures of himself and others involved, and paints a picture of how those circles of power operated. Another book that examines those circles of power is All the Devils Are Here: The Hidden History of the Financial Crisis by Bethany McLean and Joe Nocera. The book dives into the complicated relationships between the Federal Reserve, Wall Street, and the Treasury Department that allowed the crisis to occur in the first place. Good to Know Macroeconomics may appear less math-heavy and logical than the more orthodox microeconomics, since much of the latter relies on game theory and optimization problems. However, this is not entirely true. Good macroeconomic models rely on microeconomic foundations, and then build further. Or, they directly model the overall economy using quantitative models built on data. Aspiring macroeconomists will benefit from studies in areas such as advanced calculus and differential equations, as models like the dynamic stochastic general-equilibrium model (DSGE) rely on those techniques. Graphs are used often to help make sense of economic relationships alongside the math. Of course, a good understanding of introductory economics courses is also essential. So is a drive to discover the answers to difficult questions and understand the linkages between different parts of the economy. When the unexpected happens, and previous beliefs appear to be wrong- that is when the macroeconomist is most excited to get to work!
Macroeconomics is one of the two main branches of economics, the other being microeconomics. Macroeconomics is a vast field with many sub-disciplines that attempt to answer questions about how the world and the various markets within it work in the long run.
The INOMICS Questionnaire: Fratzscher vs Miguel
Marcel Fratzscher: What is your favorite place on earth? Edward Miguel: It may be a little cliche, but my favorite physical location is the Big Island of Hawaii, on the Kona side. It’s where my family (my wife and two kids) and I have traveled regularly over the past decade or so for our family holidays, so it’s a place that holds many of our favorite memories and warm feelings. It is also a stunning landscape -- with mountains, lava and black volcanic rock all set against the Pacific. I dream about it often! MF: Outside of economics, what occupation would you have if you could be absolutely anything? EM: I have always loved studying languages -- at different times, I’ve taken courses in or learned the alphabet for Arabic, Chinese, French, Korean, Polish, Portuguese, and Swahili, in addition to Spanish, which I speak fluently -- and also have an amateur interest in historical linguistics, including which languages are related to each other, and the historical processes that led to the expansions of particular peoples and cultures. This scholarly field has also been deeply influenced by new DNA evidence on genetic differences and similarities across populations. In another life, I would have loved to be a scholar working at the intersection of these issues. MF: What is the virtue you appreciate the most? EM: I appreciate creativity, both in research interactions and in daily life (although I’m not sure it’s considered a classical virtue...). I enjoy being with people who have new ideas, combine concepts or words in unexpected ways, and generally allow others to see the world in a different light. I think this is one of the reasons I have always been drawn to the world of scientific research. MF: Your all-time favorite figure in economics? EM: The economist I admire most is Ken Arrow. I only had the chance to meet him a few times -- early in my career at Berkeley, when he was already late in his -- but was impressed by his humanity, humor, honesty, and generosity. He was also an intellectual giant, laying out new paths for others to follow in micro theory, public economics, health economics, political economy, and on and on across subfields. MF: Your # 1 economics blog? EM: I am active on Econ Twitter (at handle @tedmiguel) although don’t regularly read particular blogs per se. I follow many economists (and political scientists) on Twitter, but a few that always inform -- and entertain -- are Chris Blattman, Dina Pomeranz, Ken Opalo, and Justin Wolfers. MF: Your ideal student? EM: It may be unexpected, but my ideal student is one who likes to disagree with me and challenge me during lecture. There is nothing that makes a large lecture hall perk up and pay attention than a lively discussion between me and a student! By speaking up, these students are providing a valuable public good for their classmates. MF: What should be done to address a gender bias in research in economics? EM: There are several aspects of this important issue, including the relative lack of research attention to issues that may be particularly important to many women, and also the persistent under-representation of women in the economics profession. On the latter, I have long felt that the aggressive -- even macho -- culture that characterizes some economics departments and conferences is partly to blame for pushing some women and members of other under-represented groups out of our field, which is a tremendous loss for scholarly progress. Systematic cultural change is needed within economics. MF: What is the most misguided research agenda in economics? EM: I’m not going to take the bait! In all seriousness, economics is a diverse field, and that is part of what I love so much about it: within our field, there are some folks who are basically statisticians or data scientists, others mainly historians, and others (like me) who are very issue focused (in my case on international economic development). At any given time, econ subfields may be moving in different directions but there is still a lot that connects economists of all stripes to each other. MF: What is the most promising current research field or issue in economics? EM: One of my favorite trends over the past decade or so is the revival of serious empirical macroeconomics. Not only have macroeconomists gotten access to more and better data, but many are utilizing the rigorous econometric tools developed in applied microeconomic fields -- like labor economics and development economics -- to make credible causal statements. This trend promises a real unification of the research methods used across economics subfields, which is exciting. It’s particularly important given the impact that macroeconomics research often has on economic policy making. MF: Where does economic research have the most influence on policy making? EM: Building on my previous point, I don’t think there’s any doubt that macroeconomists as a whole have traditionally had the most influence on policy, and are best represented at the highest levels of policymaking (think of past leaders of the US Federal Reserve). That said, things have been a bit different in 2020 during the COVID-19 pandemic, since many of the most hotly debated issues have been micro in nature -- i.e., behavioral economists have more to say (than macro folks) about how to get people to wear their masks in public. MF: On what issues should policy listen more to Economists? EM: This is a tough one, as there are many. At the moment, I feel that the gap between the public policy consensus and research is particularly large with respect to tax policy. There is a growing body of evidence regarding how tax reform -- particularly new approaches to taxing wealth and the incomes of high earners -- need not have adverse effects on aggregate economic growth. But it does not appear that these findings have been fully appreciated or absorbed across the political spectrum, especially here in the US. MF: What is your career advice to a young economics researcher? EM: Young economists are lucky to be entering our field at an exciting time -- the data science and big data revolutions continue to percolate through economics, allowing us to study topics that were off limits until recently. But in this environment, with so many choices -- what topic or topics should they choose? My advice is to focus on the issues that you believe matter most for people’s lives, that are truly important for society. You will never lack motivation if you work on an issue that really matters (to you). The above article first appeared in the INOMICS Handbook 2021, which you can download on our site. Header Image Credit: Provided by Marcel Fratscher / DIW / Edward Miguel. With kind permission.
Esteemed economist, Berkeley Professor, and friend of INOMICS, Edward Miguel generously took time out of his busy schedule to take part in the fourth INOMICS Handbook Questionnaire. Opposite him in his customary role of quizmaster was Professor Marcel Fratzscher, president of the DIW Berlin, and one of Germany’s leading voices in macroeconomics. Observing tradition, and as a nod to those involved, the encounter has been dubbed ‘Fratzscher v Miguel’. What took place was both in-depth and personal, the conversation ranging from the beauty of Hawaii and gender bias in economics, all the way to wealth taxes and COVID-19. For anyone connected to economics, especially those starting out, this one is not to be missed.