WHY STUDY ECONOMICS AS AN UNDERGRADUATE? Economics is the study of how societies, governments, businesses, households, and individuals allocate their scarce resources. Our discipline has two important features. First, we develop conceptual models of behavior to predict responses to changes in policy and market conditions. Second, we use rigorous statistical analysis to investigate these changes. Economists are well known for advising the president and congress on economic issues, formulating policies at the Federal Reserve Bank, and analyzing economic conditions for investment banks, brokerage houses, real estate companies, and other private sector businesses. They also contribute to the development of many other public policies including health care, welfare, and school reform and efforts to reduce inequality, pollution and crime. The study of economics can also provide valuable knowledge for making decisions in everyday life. It offers a tool with which to approach questions about the desirability of a particular financial investment opportunity, whether or not to attend college or graduate school, the benefits and costs of alternative careers, and the likely impacts of public policies including universal health care and a higher minimum wage. The complementary study of econometrics, the primary quantitative method used in the discipline, enables students to become critical consumers of statistically based arguments about numerous public and private issues rather than passive recipients unable to sift through the statistics.
Such knowledge enables us to ask whether the evidence on the desirability of a particular policy, medical procedure, claims about the likely future path of the economy, or many other issues is really compelling or whether it simply sounds good but falls apart upon closer inspection. Our department structures its courses in order to serve students with diverse interests. Some students may only want to take one or two courses in order to learn the basics, while prospective majors might want to explore the field in much greater depth. 1. Students interested in one or two economics courses
Those planning to work in the health care sector may want to learn health economics, and we have a course that focuses on that field. Similarly, we have courses on law and economics, economics of education, and economic history for students in other departments or schools who would like to explore the economics perspective as a complement to their main field of study. These courses require only one semester of introductory microeconomics as a prerequisite and are well-suited for non-majors who seek to supplement their major with related courses of study or simply have interest in these areas. 2. Students interested in minoring in economics Other students might want to minor in economics.
Economics offers a good complement to finance majors and others in the CBA, as well as LAS students majoring in political science, sociology, mathematics, and other areas. Premeds and College of Engineering students also often find the minor both interesting and valuable. 3. Prospective majors Of course economics majors can also take the courses described above as part of their plan of study. Majors gain a much deeper understanding of economic theory and have the opportunity to apply economics principles to a number of areas including finance, urban economics, labor economics, and international trade. We have a mix of mathematically intensive courses for those who enjoy the challenges of formal modeling and more applied courses that do not require calculus and focus on public policies and business. Students who major in economics graduate with skills that are highly valued in the job market. The economics major prepares students for careers in banking, insurance, service and manufacturing firms, real estate, consulting, government agencies, and non-profit organizations. A major in economics also provides an excellent foundation for students who intend to continue their studies beyond the bachelor\’s degree. In particular, it is a very good preparation for law school, MBA programs, programs in public policy and administration, master\’s and PhD programs in economics, and graduate school in other business and social science disciplines.
Understanding the economy requires a basic knowledge of the key flows that influence economic activity. How do interest rates affect households and businesses? How does government policy influence GDP? Forming a view on these and many other policy questions requires some knowledge of the economyвs structure. The two institutions that have the greatest effect on the economy are the Reserve Bank (RBNZ) and the government. The RBNZ has the most influence on economic activity. By raising or lowering interest rates the RBNZ can control economic activity. The government sets the agenda for medium to long-term economic growth by putting in place the necessary economic institutions and frameworks. The Governor of the Reserve Bank, will influence how the economy performs within the context of the economic infrastructure, but the government has the ability to alter that infrastructure. Those influences are easier to understand if we have a simple model of how the economy works in mind. Imagine a bathtub full of water, where the water level represents the level of employment or economic activity. There are two drains on the bathtub: taxes and savings. The government collects taxes and then uses it to fund a lot of other activities like health, education, justice, social welfare, etc.
The government can control how much it spends through its annual Budget. Savings are invested either by households or by businesses. So we could put our savings towards a house, or we could it put in the bank. The bank would then lend it to businesses to invest. That comes back to the economy. Now comes the trade-off: if the economy falls below the вfull employmentв level there is unemployment. If it rises above that level then there is inflation. Both of these are undesirable; we donвt want mass unemployment, nor do we want very high inflation. How much of the taxes and savings coming back into the economy depends on two key agencies: the government and the RBNZ. By controlling fiscal and monetary policy respectively they control the вtapsв that fill the bathtub back up. The government decides, for example, how much to tax and how much to spend. On the savings and investment side the RBNZвs key instrument is the interest rate. The key thing to realise is that the government and RBNZ cannot simultaneously reduce inflation and increase employment, so they face a trade-off between the two. If they were to try, then the two вdrainв and вtapв mechanisms would be fighting each other and get us nowhere. To get a better understanding of how these mechanisms work to influence the level of the economy, turn to the articles on and.