Economics is what economists do

Opening Session of the Integrated Master Programme, Department of Economics, University of Freiburg i. Br., Freiburg i. Br., 22 October 2004, 22.10.2004

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Drawing from personal experience at university, in government, in business and at a central bank, examples are given of what it means to be an economist. At university it means to teach and to research. In economics, as in other fields, success depends on publications, on selecting the right topics and placing them in refereed journals. When teaching, a professor should be able to take his students on a journey of learning that never ends.

When working for government, a different challenge arises. Politicians have a natural predisposi-tion to seek advice that is compatible with their political needs. Economists acting as civil ser-vants or as government advisers are quite naturally tempted to behave opportunistically. This will not pay since in the long term a serious loss of professional reputation is inevitable. Economists must not let themselves be carried away by a desire to please. The introduction of the euro serves as an example of how economists were able to fulfil the diverse expectations of politics and eco-nomics.

The challenges of working in business are exemplified by the story of a young economist entering a large multinational corporation. The complexity of a business organisation can be overwhelm-ing. Two conclusions can be drawn. The first is: the professional quality of the business econo-mist is important. But professional quality alone is not sufficient. Quality may easily be drowned by red tape. This leads to a second conclusion: every young economist confronted with bad man-agement has a choice. He can choose either ‘exit’ or ‘voice’. Both types of reactions can be fruit-ful. To speak up may pay because business corporations are living organisations that benefit from criticism.

As regards central banking, the nature of the challenge is different again. Often central banking is likened to an art. Economists have to excel professionally and, at the same time, they need to understand what drives the moods out in the markets. Economists have to understand the limits of their models in order to be able to identify the weakness of their results. They also have to un-derstand what is actually going on in the economy despite imperfect statistical data. Judgment is needed. – All in all, the real issue is not so much what an economist does as how she or he does it.