WHY STUDY ECONOMICS AT UNIVERSITY?

Her wrinkled, tired face turned to me:

No Roads; No Light

Where is the light at the end of the road?

No Income; No Food

Who am I to want food when my family starves from having no income?

No Hospitals; No Safety

When will it be safe enough to survive in our hospitals?

No Water; No Strength

Do I not need strength to lug water home from the town well?

No Education; No Future

What will the future of my offspring be when I leave them with no basic education?

No Leadership; No Inspiration

How can my children be inspired with no one to genuinely lead?

No Home; No Consideration

Why should I consider the consequences of my actions when I was left with no home?

How can you care? What can you do?

You are only one out of a 150 million others.

I can start by caring enough to want change,

I can start by admitting we have a major problem,

I can start by learning the accumulation and maintenance of wealth.

Mother!

For you, I learn about sustainable development.

For you, I learn the difference between money and wealth.

For you, I learn how I can generate income and growth using our very own resources.

For you, I learn the components needed for a free market,

For you, I learn about Public Goods and can tell you that you deserve access to healthcare, education, water and shelter.

For you, I stay up all night reading and applying the mechanisms that help boost Investment and Savings.

With this, I propose economic growth that will take you a step further towards that essential job you want.

For us, I do a degree that gives me the skill and passion to make our motherland prosperous.

For us, I work towards being the change we need

In a country filled with abundant natural, human, physical and mental resources such as Nigeria, extreme poverty still outweighs the abundance of wealth. Poverty as mentioned does not occur mainly from the lack of resources but from the unequal share of wealth amongst citizens of a proud nation like Nigeria. The wrinkled, tired woman mentioned in the poem represents the average mother in Nigeria who has no choice but to be strong and extremely hardworking to put food on the table and keep a roof over her family’s heads. Nigeria is the 5^th largest oil-producing country in the world and yet over 50% of its inhabitants lack basic water supply, affordable and efficient health services, roads, education and many other basic goods. Nigeria’s economic failure to develop is primarily attributed to its domestic market imperfections, economic inefficiencies, and social rigidities. Political corruption, a parasite social and bureaucratic structure, and the failure to make appropriate Investment in education, agriculture and other prerequisites for economic development restrain the nation.

As a Nigerian student lucky to be born in an averagely comfortable home, I was only made aware of the seriousness of Nigeria’s economic imperfections when as a teen my Father took me to a less developed area in the business capital city of Lagos [areas normally termed the Ghetto] called Ajegunle, and was shocked at the living conditions imposed on the less privileged. This made me aware that life was not all rosy and thus from that moment on, I made a pledge to myself and my fellow countrymen- to do my bit as a citizen of the country to help fully develop the country to a favourable standard. At this time, I was just about to enrol into the upper Secondary School level where I had made plans to take subjects that were intended for a career in creative writing or journalism, however after that experience, I started to read on politics and economics and thus found I had a higher interest in these topics; this made me take these subjects at school and ever since it has been my focus of study till now, and will definitely be for the next few years. The first half of the poem in literary terms depicts the thoughts and fears experienced by the average Nigerian parent on the future of their offspring; the second part is a form of revelation that shows that change can come from the littlest of things, meaning change happens not by thoughts alone but by actions; the third part of the poem substantiates this and shows how in my own way, I am working towards making that change.

Recently, the Centre for Economic Performance (CEP) celebrated its 21^st Birthday by holding a series of lectures at the London School of Economics and Political Science (LSE). The chief economist at the International Monetary Fund, Olivier Blanchard, gave the first lecture on the state of the world economy. Last Tuesday, the second lecture of the series was given by Professor John Van Reenen on the topic of restoring economic growth.

The Economics Network received an invitation to attend both lectures, and as a new guy on the job, I was appointed to go. However, being a second year student with a very busy schedule means I could only attend one of the lectures. Since I was doing economic growth as part of my macro course, I decided to go to the latter lecture.

I arrived in London quite late, but managed to quickly find my way to the lecture theatre in the LSE’s Old Building where the talk was held. The CEP has reserved a front row seat for me, so not only did I have the best view; I also managed to take many photos. There was a brief introduction of John Van Reenen by Stuart Corbridge before the lecture started.

John divided the lecture into three sections:
the problems we currently face, the sources of growth and the policies we need. He started by saying the beginning of the current recession was a lot worse than the Great Depression; however, the government has not made the same mistakes it did in the 20s. Bank capitalisation, loose monetary policy and stimulus packages instead of spending cuts and tax raises have resulted in a much faster recovery for the UK. He also stressed that accelerated budget cuts proposed by the current coalition government will harm the economy in both short and long terms.

The three main sources of growth identified by John in his lecture were: technological innovation, management practices and microeconomic structural reforms. The main accent was made on the link between productivity and management. John argues that productivity growth is what matters, not absolute growth of GDP. Increases in productivity will drive real wages and consumption up, which in turn can
facilitate distribution. He also made a very interesting point about happiness. Current economic theory focuses on maximising income and consumption, but John thinks that after a certain level, addition to growth will not lead to more happiness. In my opinion, this is definitely something economists could focus more on.

He went on to analyse productivity in the UK. According to the findings, the UK’s relative productivity has improved compared to France and Germany. However, there is still a big gap relative to the US. John argues that this is all down to management practices. His data shows that the US has very few badly managed firms, hence, it has high productivity. On the other hand, in developing countries where there are many family businesses, management is much worse. John thinks that competition in the labour market ultimately leads to better selection of managers, which has a great impact on how firms’ productivity.

So what can we do to restore growth? The lecture concludes that structural reforms and macro policies should do the trick. Things like competition policy, public sector planning and better human capital management at the low end (apprenticeship scheme) are going to improve productivity in the long run. Finally, John argues that the austerity measures proposed by the current government will affect long-term employment as private sector cannot speedily adjust to the fiscal shock.

Here are the links to the webcasts of the two lectures if you want more:

Lecture 1: The State of The World Economy (Olivier Blanchard)

Lecture 2: Restoring Growth (John Van Reenen)

About the CEP

The CEP is an interdisciplinary research centre at the LSE Research Laboratory. It was established by the Economic and Social Research Council (ESRC) in 1990 and is now one of the leading economic research groups in Europe. Its current Director is Professor John Van Reenen.

The CEP studies the determinants of economic performance at the level of the company, the nation and the global economy by focusing on the major links between globalisation, technology and institutions (above all the educational system and the labour market) and their impact on productivity, inequality, employment, stability and wellbeing. Its researches have affected numerous Labour policies, in particular the apprenticeship scheme.

Image copyright of K R Ranjith (flickr)

One of Economics’ strongest exports was the economist Adam Smith.

In his book “The Wealth of Nations” Smith made the seemingly paradoxical claim that if people follow their own self interest, this will have the remarkable effect of increasing the overall benefit to society. This seemingly simple principle unfortunately took Adam Smith 1,260 pages to say. (Unfortunately very few economists have ever learnt the art of being concise.)

Adam Smith has become synonymous with free market economics. However, people often forget this Scottish intellectual
was primarily a professor of moral philosophy at Glasgow University.

At any rate this contradictory yet accurate argument about the free market remains the centre of all major debates in economics.

Is unbridled free-market Capitalism really the best economic system?

Even the most ardent free market economist cannot ignore the fact capitalism creates inequality and if you just look around this inequality is painfully evident. Thus many economists came along to challenge the free market ideologies of Adam Smith.

This takes us to our next great economist- Karl Marx