I did not expect that I would be writing this year’s letter to you and other students of economics against the backdrop of a war in Europe, a major energy crisis and very high levels of inflation. (I suspect the Minister for Finance had similar thought as he prepared yesterday’s Budget.) I thought my last two annual letters were written in unusual circumstances with the pandemic leading to the ‘closing down’ of economic activity and, last year, the lifting of restrictions leading to significant impacts on supply chains as economies ‘opened up’. But just as we hoped to see a return to something that resembled ‘normality’, our lives are being impacted by the horrific war in Ukraine, generating new economic shocks with uncertain consequences.
Of course some things have not changed. The world continues to undergo three significant transitions, namely the ageing of our societies, the changes to our climate and the digitilisation of our lives. And we are also seeing the ‘globalisation’ that we have become familiar with change shape, with an increased focus on trade in services (rather than in goods) and the restructuring of supply chains.
This mix of predictable transitions and unexpected shocks has made the work of an economist both particularly challenging and particularly interesting over the last couple of years. Economics offers a toolkit to help us understand the impact of such changes and how best to manage them. It is the “study of mankind in the ordinary business of life”, as Alfred Marshall wrote just over a century ago.
You and your fellow students may have different reasons for having chosen to study economics. I chose it mainly because I wanted to better understand the world and how to improve it. I graduated from studying economics to applying it in practice, in various government departments – across different countries – and now in the Central Bank. Looking back, a common thread in my professional life has been working in institutions that have been involved in public policy or, as I see it at least, looking for ways to increase the wellbeing of communities. (As it happens, the Central Bank’s founding legislation stated that our “constant and predominant aim shall be the welfare of the people as a whole.”)
I’ve learned a number of things along the way – so far at least: I’m still learning! – and, as you start the academic year, I thought I’d share some of them with you.
First, make sure you know what you’ve chosen to study. For me, economics is best understood in the way Alfred Marshall described it. Economics provides a disciplined way of thinking about “the ordinary business of life” but it is, as John Maynard Keynes wrote, “essentially a moral science and not a natural science”. In other words, it doesn’t provide the type of certainty you might associate with physics. Economics is ultimately a human science, full of actors who operate in complex ways and not according to straightforward and predictable scientific formulae.
Second, being “a moral science” means that economic analysis and its insights and recommendations are most effective when developed and applied in collaboration with other disciplines. It’s worth making the effort to understand, embrace and respect the perspectives that other disciplines – anthropology, biology or sociology for example – bring to thinking about, and solving, economic problems.
Third, economists have various tools and models to help them think in a disciplined way in order to understand and solve problems. Technology has led to significant improvements in that toolkit over the years but it’s important to avoid confusing the models developed to think systematically about economic problems with the reality being addressed. At the end of the day, conclusions need to be anchored in the real world, especially if they are to be turned into policy decisions.
Fourth, there is a rich history of – and diversity in – economic thought that is worth exploring. Read some of the old classics (and I mean as far back as Aristotle’s Politics) as well as more modern ones (Keynes’ General Theory, George Akerlof’s The Market for Lemons and many others). Incidentally, it’s also important that you understand arguments that you don’t agree with. As John Stuart Mill wrote, he “who knows only his own side of the case doesn’t know much about it. His reasons may be good, and no-one may have been able to refute them; but if he is equally unable to refute the reasons on the opposite side, and doesn’t even know what they are, he has no grounds for preferring either opinion”.
Fifth, I strongly encourage you to study economic history. It’ll help you understand how we arrived at today’s world. It’ll also show you that some of the world’s problems aren’t new; the better we understand the past, the greater the chance that we will learn from it. History may not repeat but it certainly teaches and we should observe, listen and learn its lessons.
Sixth, and finally, a practical but very important point. Learn to write well, which means writing clearly, simply and succinctly, however complicated the subject. It’s a great skill to have, especially if you’re planning to go into public policy work in a government department or providing analytical advice to a central bank governor! It’s also hard to do and takes time to learn but developing the ability to do it well is worth the effort.
At some point you’ll probably be asked the question “what is an economist?” (at least by your family and friends!). You could reply with Keynes’ famous description of the “master economist [as] mathematician, historian, statesman, philosopher [who] must understand symbols and speak in words”. I suggest you also think of an economist as a ‘weaver’, someone who brings together different strands of evidence and analytical frameworks and weaves them into baskets to carry forward public policy and find solutions to today’s and tomorrow’s challenges.
Economics is about the issues that affect the way we live, work and play in Ireland and around the world. I hope you enjoy studying the subject, whether you are in your first year or completing your PhD. Once you start thinking about a future career, don’t forget us at the Central Bank of Ireland. Our mission is to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy. It is a very fulfilling place to work.
The Central Bank’s Graduate Programme 2023 is now open for applications. Find out more about the progamme.