What You Need to Know About the Economy

Interesting piece in the NY Times by Harvard’s Greg Mankiw. It’s his recommendations to incoming students – and the rest of us – on “what kind of foundation is needed to understand and be prepared for the modern economy?” Pretty interesting list. Not all economics courses. Not surprising he starts with an introduction to economics, the basics. But then it’s statistics, finance and psychology. He finishes with “ignore advice as you see fit”.

Finance because of the need for all of us to manage our own money. Something many of us have done poorly. Psychology because it explains lots of what is going on in the economy that economics can’t. People many times don’t behave as the rational consumers and producers that economists presume. To rely only on economic theory can lead you down the wrong path.

Ignore advice as you see fit, of course, seems like it is always good advice. But particularly now in times of great and constant change. Following conventional wisdom may close off new opportunities that abound in times of economic transformation.

His inclusion of statistics is of particular interest to me. I have heard over and over from folks in higher ed that statistics is a far more important fundamental to most of their students than the advanced math that is now part of the required high school curriculum in Michigan and increasing around the country. Mankiw sure seems to agree. He writes: High school mathematics curriculums spend too much time on traditional topics like Euclidean geometry and trigonometry. For a typical person, these are useful intellectual exercises but have little applicability to daily life. Students would be better served by learning more about probability and statistics. One thing the modern computer age has given everyone is data. Lots and lots of data. There is a large leap, however, between having data and learning from it.

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