October 11, 2003

Getting Incentives Right

Thrasymachos: "So how did the course go?"

Diotima: "Very well for a summer school course, except for one thing."

Thrasymachos: "What?"

Diotima: "They knew no economics. To try to teach the international trade and exchange rate side of international relations to people who have no idea that David Ricardo or John Maynard Keynes ever lived was a real trial."

Thrasymachos: "Ah."

Diotima: "Why don't they know any economics?"

Thrasymachos: "Well, they have to take Introductory Economics, Intermediate Micro, and Intermediate Macro for the major to graduate, but..."


Thrasymachos: "It's a capped, restricted major. They have to maintain a B+ average in courses that count for the major in order to get admitted."

Diotima: "And?"

Thrasymachos: "A lot of them worry--those who are not confident of their quantitative reasoning skills worry--that they'll pull a C in an economics course, and that that will kill their chance of ever getting into the major. So they wait until their senior year to take Introductory Economics, and then crowd the other two courses into the spring semester."

Diotima: "But!"

Thrasymachos: "You are about to say that these Economics courses are foundational 'tools' courses? That the whole point of including them in the major requirements is so that people can use economics tools later on? That postponing the courses until the senior year makes no academic sense?"

Diotima: "That it leaves me to teach a bunch of people a course that *presupposes* knowledge of economics when they have no knowledge of it."

Thrasymachos: "But look at it from their side: if they don't get into the major, what good would some knowledge of economics be?"

Diotima: "But this is insane!"

Thrasymachos: "No. It is simply that the bureaucratic requirement of fitting the number of students in the major to the exiguous teaching staff paid for by our underfunded budget collides with the intellectual logic of the academic program, and the bureaucratic requirement wins."

Diotima: "But there is a flaw somewhere."

Thrasymachos: "Definitely. And we're trying to fix it: the new major requirement will be a better-than-B- average in Introductory Economics and in World History. Rather than give people incentives to avoid taking foundational courses early, we are forcing them to do so. Your successors teaching your course will have an easier time."

Diotima: "And how long did it take you as Major Chair to realize that there was this flaw in the major admissions procedure?"

Thrasymachos: "No comment."

Diotima: "And why do we have capped--restricted--majors in the first place? Why doesn't the Chancellor make it a priority to hire the teaching staff so that every Berkeley student can major in whatever they want? Indeed, why not hire the teaching staff so that big courses are offered in multiple sections and are not oversubscribed?"

Thrasymachos: "No comment."

Posted by DeLong at October 11, 2003 01:05 PM | TrackBack


Will we eventually be able to buy your dialogues(sp?) in bookform? Itīs a wonderful way of giving food for thought.

Thanx, Brad!

Posted by: Michael Greinecker on October 11, 2003 02:37 PM

I recently compared staff:student ratios of UCD (sorry) and my current uni. UCD was slightly better at 1:2.-a bit. Mine was worse.

Why is this ratio such that each student needs a half staff to provide for their needs?

Oh, yes - you addressed that already: no comment.


Posted by: Dano on October 11, 2003 04:26 PM

Because it takes a hell of alot of people to make a world class research university run. Libraries, laboratories, lavatories, they all take people to manage, organize and clean. These are peripheral to the actual education mission of a teaching institution but are central to the research mission.

A central undergrad critique of the Berkeley experience is that education is shunted aside for research aims, if this is a valid critique is a whole other question.

Posted by: Sean Chen on October 11, 2003 06:07 PM

Ah, well is the mission of a state university to prepare 2x more economists than are needed by the state?

To put it in another context, should everyone who wants to go to medical school have a slot.

What are the missions of a private university?

Posted by: Joshua Halpern on October 11, 2003 07:25 PM

That presuposes that University administrators have all the incentives and the knowledge to figure out better than the students themselves what major they want. Sounds awfully un-American to me. The USSR was the system that most succesfully engineered the majors it thought it needed most, and the rest is history as they say.

This reminds me of a op-ed I read in the local newspaper of San Juan, PR (http://www.thesanjuanstar.com/). The conservative on duty was arguing against a project to forgive developing countries' debt in exchange for an equivalent -additional- commitment to educational spending, apparently at the university level (I am not positive about that).

This op-ed contributor deemed the idea unworthy because typically Latin-American universities graduated "too many" liberal arts type of majors and were thus outdated institutions. Nowhere in the piece was it even considered whether these Latin-American universities were in fact just responding to demand for that type of major from students. Strange from someone who was trying to cast himself as a market discipline advocate...

P.S. And by the way, a recent survey showed that economics majors earn a little more -on average, of course- than business major. This really surprised me, and I reread the rankings 2 more times...

Anyway, our Berkeley students are probably just being rational. The major that toped them was engineering degrees. But then again, not everyone is cut for that. And the other alternative that UC is forcing the rest of the students into actually offer presumably _worse_ job prospects than Economics. Well done! I will never cease to be amazed by the power of (institutional) politics...

That was my laissez-faire comment du jour :-)

Posted by: Jean-Philippe Stijns on October 11, 2003 08:43 PM

> Ah, well is the mission of a state university to prepare 2x
> more economists than are needed by the state?

Probably not. But it might well be the case that you need to train many more {economists, engineers, scientists, whatever} than you think you need to make sure you get enough *good* ones. Meanwhile, those who are called but not chosen do get the handy BA/BS credential that allows them to apply for jobs above the Wal*Mart clerk level.

That said, there are days when I wish we could replace the whole "major" system with one where at the end of the game what you get is a rating (perhaps based largely on GPA) that classifies you as Bright, Really Bright, Extremely Bright or 3-Sigma Bright, and the list of courses you took. This is based on the notion (that I've seen happen in practice) that Bright or Really Bright people can do whatever is expected of them in jobs that require skills they have taken courses in, while Extremely Bright and above people can do what the Bright can and often fake their way other things as well. Like grad school...

Posted by: Jonathan King on October 11, 2003 08:45 PM

What about kinda dull people? Do we get excluded from the whole rating system at Berkeley?

Personally, I'm a (beginning of 2nd year) math major planning on doing grad work in econ or something like that. Why did I choose econ? Because I found economics interesting, and enjoy thinking about it.

There's a joke that if you go into econ, you may be poor, but at least you'll know why. If I'm not poor, as (apparently) seems likely then so much the better, I suppose.

However, I had a roommate last year who also was going into economics (*everybody* is going into economics here at the University of Chicago. Or so it seems sometimes.). He is a very conservative Miami-based Cuban-American. His intent, apparently, is to go into economics for the money, so there are definitely some who do do it for the money.

Posted by: Julian Elson on October 11, 2003 09:43 PM

As a University of Chicago alum from not too many years ago, there are a ton of people who go into economics for the money, just as there are a ton who go into bio to go to med school. If you're at an institution like Chicago with such a great Econ department, why not try to use that reputation to make a little green afterwards? Most of them end up as traders, consultants, going to get their MBAs afterwards. And for the most part, it isn't too hard to go through the econ concentration, just have to pass the math and econometrics, and the rest is fairly easy.

Posted by: Trickster Paean on October 12, 2003 12:13 AM

At UT Austin, one could delay taking the foundation courses, Intermediate Micro and Macro, until the last semester. And I did. Not for GPA concerns, but because you simply could not get the classes you wanted. Always full, unless you lucked out in the random registration lottery. My second major was worse, and I ended up leaving the school before I could complete it. Even if you only needed one class, they would not squeeze you in.

I think the public should more clearly define what it is they think public universities should be, and fund them appropriately. (UT, by the way, is the largest landowner in Texas, oil wells and all, but lost a bunch of wealth in the bubble).

Posted by: andrew on October 12, 2003 04:35 AM


Any school worth its name has mandatory prerequisites for courses.

This is a non-issue for any but a third rate educational environment.

Posted by: Name on October 12, 2003 05:52 AM


Or is it to prepare economically literate citizens no matter what their future careers?

Posted by: Chris on October 12, 2003 08:31 AM

I think I've read that most law school grads never work as lawyers per se. They work in various business and government environments where a law background is useful. In some cases it's just because they're not good enough as lawyers, but not neccessarily.

Posted by: Zizka on October 12, 2003 09:01 AM

I think I've read that most law school grads never work as lawyers per se. They work in various business and government environments where a law background is useful. In some cases it's just because they're not good enough as lawyers, but not neccessarily.

Posted by: Zizka on October 12, 2003 09:06 AM

I'm currently terrified that I won't get into the Econ department, but I'm going to Berkeley to develop skills for which I have less proclivity. Probably not surprising that a number of people tried to talk me into taking Econ 100A instead of 101A (more math).

Of course, I could bag the whole thing and take Anthro. The major isn't capped and after graduation the market will recieve me with open arms [snicker, snicker].

Posted by: Saam Barrager on October 12, 2003 10:30 AM

There are parallels here with the UK:

- we have free at the point of dispersal healthcare. This means we have to ration healthcare by waiting lists.

- we have free universities, but the result is that the universities have had to take on a lot of students and have much larger classes. Also professors are quitting by the drove and moving to America, because even US state colleges pay much more than academics receive here. A full professor at Cambridge makes about $75k US a year (cost of living is pretty comparable) vs. $100k+ he could make even in a US state college. And a full professor at Cambridge is like an endowed Chair in an American university in terms of prestige and pay. Most academics are 'Senior Lecturers' and get paid 40-40k (ie 45-60k US) pa.

By analogy, Berkeley is a state school, and it practises quantitative rationing, because it cannot practise price rationing. If it were a private school, it would raise tuition until it could afford to give every pupil the major he or she desired.

Given the budget crisis in California, I conclude that quality state education in California is either doomed, or the state schools in California will raise tuition to near private levels (a debate which is just being had in the UK, as the governmetn is trying to impose a tuition fee of up to $5k pa).

Posted by: JJ on October 12, 2003 10:49 AM

Ah, the Haas MBA program has the opposite problem. Afraid of MBA students becoming upset, they teach water downed econ courses.

Though calculus is a requirement of the program, Micro contains two weeks of deriving a price curve by walking through the limit definition of the derivative. 6 hours of courses instead of 3 minutes?

Macro discusses the ISLM curves only in literally handwaving arguments. Having taken macro nowhere else, I am certain without proof that instead of having to remember to sweep up and down when interest rises and left to right a simple explanation in terms of derivatives and maybe even the second derivative would be instructive.

Jeez, watching Andy Rose explain macro is like watching Lurch perform a Tai Chi exercise.

Posted by: anonymous on October 12, 2003 11:48 AM

Brad DeLong's dialog can be read two ways. The first is most reasonable, that students in a major need to take the introductory courses before the advanced ones. Deciding this is a responsiblity of the faculty, enforcing it a responsiblity of enrollment management, or whatever it is called at Berkeley. IMHO the faculty, including Brad, bears the responsiblity for allowing this situation to develop and the primary responsiblity for fixing it.

The other, is that students should be able to enroll in the major of their choice (tenable, perhaps not realistic) and that a state university has the obligation to provide enough staff and faculty to handle the enrollment. If you believe this to be true, get busy building and funding another few thousand medical schools. The good news, of course, is that the cost of medical care might fall. Hmm....

Posted by: Joshua Halpern on October 12, 2003 11:57 AM

As a student currently enrolled in the Cal econ. deptartment, the courses required for the major are challenging - BUT not impossible. Even going with the mathmatically intensive route, as Saam Barrager points out, if the students can't pull a B+ in them I wouldn't feel too comfortable handing them the reigns to state and federal policy. If it takes students till their fouth year to realize this, its unfortunate because they could have learned much more once they covered 'the basics'. And we are really only talking about the basics.

Posted by: anonymous on October 12, 2003 02:55 PM

It's worth noting that majoring in economics as an undergraduate should NOT be intended to train people as economists, per se, but to produce economically literate graduates -- an excellent thing. To become an economist requires graduate school.

But everyone is missing the great, earth-shaking and truly wonderful decision announced by Thrasymachus (which may have something to do with the virtues of economic historians!): along with introductory economics, UC-Berkeley econ majors will now have to demonstrate some achievement in world _history_!

All that's needed now is to get the Berkeley History department to support world history (I tried a little a few summers ago, with enthusiasm from the students who took my course...); perhaps, in a gesture of wise reciprocity, they will also require acquaintance with economics, (or a suitable alternate, from literature to statistics) for history majors, too! Hmmm... maybe my department should do this, too, which would build institutional solidarity while also encouraging students to think about the links among courses in different fields.

Posted by: PQuincy on October 12, 2003 06:39 PM

If it requires majoring in economics to produce economically literate graduates, what room does this leave for producing scientifically literate graduates, politically literate graduates and most importantly musically literate graduates. As to history, it too would be a good thing.

An excellent exercise for professors is to sit down and decide which 20 things they really want students in the introductory course to carry with them through life. You can expand that number if you wish or shrink it.

Posted by: Joshua Halpern on October 12, 2003 09:19 PM

A dialogue from middle of the last century (CE)


Why do you want to major in the Political Economy of Industrial Societies?


Because it is the only major that rhymes [sic] backwards and forwards:

Society [sic!] Industrial
of Economy Political

Brad is the Chair of the PEIS group major at Berkeley, a program which assembles a coherent and rigorous body of social-science teaching to support the undergraduate investigation of modern society. Many years ago it introduced me to economics, which I have practiced enthusiastically ever since...without losing the broader socio-economic-political-historical perspective which motivated the founding faculty.

After a quarter-century the program prospers (if the evidence is the number of happy students), in spite of a certain lack of enthusiasm from the disciplinary departments.

Brad deserves thanks and congratulations for his service to this important program.

--Jason Christian
A.B. Economics and PEIS (double major) 1980
M.Sc (Economics), University of London (LSE), 1981
Ph.D. Economics, George Washington University, 1990

Posted by: Jason Christian on October 13, 2003 02:11 PM
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