Every year I attend a major economics conference to geek out with and learn from a significant collection of global economists. While just breathing the air at such an event can be inspiring, talking to people often leads to sheer terror about the future of our national and global economy. Last year’s event was no exception.
At one of the many receptions I attended, I was nibbling hors d’oeuvres & sipping a glass of wine surrounded at the table by young professionals. About half worked for government agencies and the other half were PhD Students. One of the PhD students, we’ll call him Frank, was getting ready to graduate from a prestigious university in a few months with a degree in Macroeconomics and Econometrics and move to a job at the Federal Reserve. Frank fancied himself an expert on inflation targets and monetary policy. Great, I had no reason to believe he was not as awesome as he said he was. By all appearances he seemed to me to be a bright and motivated young man.
Actually he did turn out to be pretty awesome, not for his knowledge, but for his personification of one of the problems we may be having with national economic policy. Feigning momentary interest in me, Frank asked what classes I taught at the university. I gave him the list, but he was particularly interested in discussing how I was teaching my undergraduate 200-level macroeconomics class & discussing basic macroeconomic theory. The reason why may shock you.
As it turns out, Frank was being required to student teach the same undergraduate macroeconomics class at prestigious university, but he had one problem, he had never taken an entry-level macroeconomics course and was having a difficult time grasping the concepts because they didn’t mesh well with what he was learning in his PhD program. Hear me, the man was getting a PhD in Macroeconomics, going to work for the Fed, and DIDN’T UNDERSTAND BASIC MACROECONOMIC THEORY AND PRINCIPLES. I’m talking about the basics of dealing with the performance, structure, behavior, and decision-making of national, regional, and global economies. Stuff that would really help him out at the Fed like GDP, unemployment rates, the price index, national income, output, consumption, unemployment, savings and investment and how they all tie together.
As a PhD student he did most of his work on inflation and how to use monetary policy to manipulate it, but had no breadth or depth of knowledge about how everything worked together in the macro economy. His undergraduate degree had been in another field of social science and prestigious university didn’t require basic macro and microeconomics courses to get into the PhD program.
He didn’t understand the “invisible hand”, the ability of markets to adjust, sunk costs, opportunity costs, the economic reasoning of marginal cost and marginal benefit, the role of individuals in an economy, or any of the natural economic forces. All he was being trained to do at prestigious university was be a puppet-master, responsible for managing the economy by pulling on policy strings.
This, my friends, is one reason U.S. economic policy stinks.
Dr. Holly A. Bell is a wanderer, ponderer, language learner and slaughterer, an optimistic pessimist writer of poetry and novels, and an interdisciplinary professor of Finance, Economics, and Business at the University of Alaska, living in the Mat-Su Valley. She does not live in, nor has she ever actually seen an igloo.