What an Economics Major Should Take

Arnold Kling:

My youngest daughter (who is not an economics major, but is likely to take more courses in econ) was concerned that a course in environmental economics would be too squishy. I assured her that this ought to be a rigorous course that teaches important basic economic principles.

This got me to thinking about what might be a good set of, say, eight courses for an economics major.

1. Introductory micro
2. Intermediate micro
3. Environmental and resource economics (public goods, social cost, Prisoner's Dilemma, Coase, Hotelling, and economics of the global warming issue)
4. Finance (basic terminology, efficient markets hypothesis, portfolio separation theorem, Modigliani-Miller, futures and options)
5. Economic history (early history of trade; the industrial revolution; the Great Depression)
6. Economic methods--theory (probability and statistics, regression)
7. Economic methods--applied (natural experiments; uses and abuses of econometrics; uses and abuses of survey research)
8. Institutional economics, public choice, and economic development

I would skip some of the usual courses, such as industrial organization, international trade or labor economics. And you will notice something else--no macro, even at an introductory level.

With the eight courses listed above, a student would come out with a good mix of technical knowledge, institutional knowledge, and practical knowledge. You would have a basis to make informed investment decisions, an understanding of what accounts for differences in the standard of living (keeping in mind that we do not know all we would like about this issue), and an ability to think critically about empirical studies.

For students intending to apply for Ph.D programs, I would add macro and international trade to the list. I still think of macro as a history of thought course. International trade also would be recommended for someone headed toward a Ph.D, because trade theory uses mathematical modeling in a way that you will find it used in graduate school.

This list would give someone planning on getting a PhD a much better background than I had when I first started my PhD program. I never took an econ class as an undergrad and only had one introductory micro and one introductory macro class as part of my MBA program. I came in with a decent understanding of finance and some good quantitative skills from studying engineering as an undergrad.

During the first year of my PhD, I struggled a bit with learning some of the economic models and theories. I didn't have a problem so much with the quantitative aspects of them as much as I did with the abstract assumptions of many of the models. They just didn't seem to map well to the real world. Far less so than what I was used to in engineering. Unfortunately, I still feel that way about much of economics (particularly macro), but at least I've gotten more comfortable with the models and the methods along the way.

Having said that, I continue to think the basics of economics are extremely powerful and highly applicable. Outside of technical disciplines (such as engineering or computer science), I think economics is tough to beat as an undergraduate major. Not only does it provide you with a high starting salary coming out of college, but it just might make you happier too.

P.S. -- More on the problems with macroeconomics.