A couple of weeks ago I had a most enjoyable morning meeting with the Lincoln Academy AP Macroeconomics class. The students’ comments and questions gave ample evidence of their intelligence and superior training (on the part of Ms. Duffy) as budding economists, many of whom indicated an interest in pursuing economics in college.
Both for the students, and for our regular readers, I thought it useful to digress for a moment from our miniseries on “middle-class economics” to offer some useful background material. To our every-week readers, this might serve as information to help interpret the media.
To the LA class, this might also serve as a list of employment opportunities in the field of economics.
Economic thoughts and dialog find their way into the media on a regular basis. Atypically, the writer of a media post is the actual source of the economic information offered. More commonly, the journalist, blogger, or social media friend is mirroring a filtered version of some original research from one of a few types of sources. This raises the question as to what sources of economic research cross our path? Further, which sources can we trust?
Economists who use their academic degrees in the actual field of economics find employment in one or more of the following categories of institutions. First up are the schools and universities, i.e., academia. I have many friends who have carved out an enjoyable life in the universities of the world.
What might be the bias of the universities? While each university might lean in one direction or another, generally, research originating in academia is well intentioned, but there is one catch. The job of a university professor is still characterized by the old adage “publish or perish.”
Often, as has been the case in the field of macroeconomics, the only type of research which is publishable, is that which is in cruelty in vogue.
Academia always needs the nouveau. In this respect they resemble the Athenians of Paul’s day who, “spent their time in nothing else, but either to tell, or to hear some new thing.” Thus, research is often limited to “what’s happening now.” We will come back to this point in a week.
The next place where we might unearth practicing economists is within the cracks and crevices of “think tanks.” These include the Hoover Institute at UCLA, the Cato Institute in Washington, the Roosevelt Institute in New York City, and so forth. Countless numbers have sprouted over the years.
Within the walls of these organizations, economists formulate ideas and crunch numbers most generally for a stated objective as outlined by the specific institution. For example, some think tanks have a goal of reducing the size of government. Others would like to expand the influence of trade unions. Some promote a clean environment. Others push for less regulation in energy exploration.
The list is almost endless. Yet each of these establishments needs economists to concoct the notions and cook the numbers. Need it be pointed out that information from these outfits may not be the type of research upon which to stake one’s savings, reputation, and good name?
The final group of organizations which employs economists, and from whom we receive much research is also our largest category. In fact, it is so vast as to easily be subcategorized into many parts, but I choose to include this group as one since they all share a common and important element.
This final assortment includes the governmental agencies such as the Bureau of Labor Statistics, the Fed, and the Bureau of Economic Analysis; quasi-governmental institutions such as the IMF, the U.N., the OECD, and the World Bank; trade organizations such as the International Energy Association in Paris; and the vast array of private sector corporations including large multinational concerns, as well as the banks and investment houses. Each of these employ flocks of economists.
This last group is about as diverse as one might imagine. So on what basis do I choose to lump all of those outfits into one colossal category? We sometimes hear in the press there are different schools of economic thought. What one person espouses is just one school of thought, just that school’s theory, but then there is another school of thought (and, by implication) of equal validity, which offers a contrary perspective.
As I have traveled the world, read countless economic papers from all types of sources, and visited numerous institutions, I have found only two broad schools of economic thought. The first attempts to prove a point. The second attempts to determine what is real.
The last group of institutions, whether it be the governmental, quasi-governmental, or private sector corporations, all fall into the category of attempting to determine what is real. For some, the desire to make money from economics motivates research. For others, the desire to improve the performance of the economy is the driving influence.
Objectives may differ, but an understanding of reality is required to meet those objectives. In fact, they all use essentially the same macroeconomic models for simulation and forecasting purposes.
Last April, the Fed, for the first time in history, actually opened up to the public their entire macro econometric model of the U.S. economy. If anyone would like to simulate it with his or her forecasted inputs, just go on line. It is open to the public.
Interestingly, the Fed’s model is the same type of aggregate demand based model used by Wall Street, the IMF, World Bank, OECD, and everyone else who wants to know what is real. Its roots go back to Solow, Samuelson, Hicks, Cobb, Douglas, and Keynes. The real surprise is that the Fed’s model does not conform to the latest academic fads. It runs along the lines of training I received as a grad student at Columbia three-and-a-half decades ago. (This was most gratifying to behold!)
So what is the take-away from all of this? To our LA students, economics is a great field of study with a vast array of job opportunities. Everyone needs a good economist, right?
For our more seasoned readers, this information may help sift through the media, separating the wheat from the chaff. Put bluntly, one can more often than not determine an economic story’s bunk-o-meter ranking by its source.
Next week we will see how this institutionalism has influenced middle-class economics.
(Marcus Hutchins, MA, M. Phil, Economics, Columbia University, NYC, is a former economist, treasury bond arbitrage trader and hedge fund manager. He retired to Southport in 1997 where he resides with his wife Andrea and his youngest daughter Abbey. He welcomes feedback at coastaleconomist@me.com.)
