Britain's economics departments
Reviving the "golden age"
FROM Adam Smith to Alfred Marshall and John Maynard Keynes, Britain has nurtured some of the world’s most influential economic thinkers. Neither has it simply produced orthodox economic theorists: radicals such as Karl Marx and Friedrich Engels also worked in Britain for much of their careers. By the mid-twentieth century, British universities led the world in the development of new ideas. Economists across the world were captivated by the debates going on between academics at British university departments—mostly famously between the followers of Keynes at Cambridge University and those of Friedrich von Hayek at the London School of Economics (LSE). The 1950s and 1960s—when many of these debates were in full flight—are often still called the "golden age” in some of Britain's economics departments.
But in the last thirty years, the economics departments of British universities fallen behind their American competitors. Economists who are household names across the world are often more likely to be American than British these days. And according to some global league tables, their research is less well-regarded than in other subjects. On the Shanghai Jiaotang University and Tilburg University rankings, which put an emphasis on research quality, Britain’s top-ranked university, the LSE, is ranked at just 13th and 11th place respectively. Cambridge University currently appears as low as 28th place in the Tilburg University tables for economics, in spite of appearing at the top of some other league tables in subjects like mathematics and history. Although the methodology of such rankings are far from perfect (other international league tables paint a less dire picture), most British economists would agree that the “golden age” ended long ago.
So why have Britain’s economics departments, which used to lead to world in debates, declined so much in recent decades? The answer partly lies with the funding for British universities failing to keep up with American ones: they now simply have much more money than British ones do. This enables them to attract the best talent from Europe. While some top American universities pay their entry-level assistant professors over $120,000 a year (as well as generous benefits), Cambridge University can only afford to pay staff of the same grade around $60,000 a year. And extra funds for research costs tend to be more generous in America too. The shortage of funding for leave from teaching duties to concentrate on research also infuriates many British academics.
But money does not explain the entire difference—salary differentials also exist in other subjects that the best British universities excel at. Some blame the research interests of British academics becoming much more narrow in recent years—partly the consequence of journals in the United States, such as the American Economic Review, setting the world's research agenda. As a consequence, critics harp, top economics departments in Britain now focus too much on theory and econometrics, and not enough on cutting-edge empirical research. For instance, Cambridge University's prestigious Department of Applied Economics was closed in 2004, in spite of the high-quality research it had produced since it was founded in 1945. And other top departments now lack experts in mainstream areas such as empirical microeconomics and quantitative economic history. Instead, many of Britain's economics departments are fighting an arms race for talented econometricians with American competitors—but with much less cash. Unsurprisingly, it is a battle that they have not won.
The perception of comparative decline also extends to teaching too. Less research cash also means that there are fewer graduate students to teach undergraduates—leading to faculty time being overstretched. And the education they provide is much narrower these days than in the past. For instance, many courses in economic history and the history of economic thought have closed in recent years, limiting one way students can learn about the application of economic ideas in real-world situations. Some British economics students now go through their degrees without learning that David Ricardo developed the theory of comparative advantage, or the idea’s historic role in promoting free trade. One Cambridge University tutor reports being horrified when told by one of his third-year students that it was in fact Keynes who first came up with the idea. Similarly, employers of economists also say they are frustrated that current cohorts of graduates can perform complex econometric calculations, but cannot apply their theoretical knowledge to real-life economic problems.
However, there is no need to be too pessimistic about the fortunes of British academic economics. Change is already ongoing: the ability to charge higher undergraduate fees since 2012, for instance, has already enabled universities to spend more on their economic departments. The LSE and University College London now pay extra to poach top talent from other universities; teaching budgets have also become less tight in other institutions. And more money is coming from donors to fund research. Brevan Howard, a hedge fund with $40 billion in assets, has recently founded a new financial stability research centre at Imperial College, London. And in the last few years, four new research centres at Oxford and Cambridge Universities have been founded with money from Winton Capital Management, a hedge fund, and the Institute for New Economic Thinking, a think-tank set up by George Soros.
And as we pointed out in the print edition in November, British academics and their students has lead the way in rethinking how economics should be taught. A project led by Wendy Carlin, an economics professor at University College London, is developing a new curriculum putting an emphasis on real-world applications of economics, that will be offered to economics students later this year. And student groups across the country are advocating a change in a way economics is taught, such as the Post-Crash Economics Society in Manchester, Rethinking Economics in London and the Cambridge Society for Economic Pluralism at Cambridge University. Britain's economics departments may have gone into decline in the past, but the fighting spirit is there to do better in the future.