I have just finished teaching the Business Macroeconomics module on the BSc Mathematics and Actuarial Science programme at the University of Leicester for the first time, as part of our response to the Institute and Faculty of Actuaries’ (IFoA) Curriculum 2019 exercise, which has refreshed and in many cases entirely revamped what is expected to be learnt by actuarial students.
Actuarial students are not expected to be experts in economics, but they do need to know enough to be able to ask sensible questions and also to be aware of what is available to them from economics when tackling business problems. One stimulus for the revamp of the Business Economics subject by the IFoA was the general feeling that actuaries had, in some cases, been drawing on a narrower range of economic thought than needed to fully address all dimensions of the increasingly complex and multidisciplinary problems we face as a profession.
One of my key references when structuring the course (while not wanting to depart too far from Sloman, the source of most of the syllabus, in my first year of teaching it) was The Econocracy: The Perils of Leaving Economics to the Experts, by Joe Earle, Cahal Moran and Zach Ward-Perkins. As graduates from economics degrees themselves, they make a very convincing case for how economics as it is taught at university has little to do with the real world, often uncritically setting out a model based on rational individuals and an economic system that tends towards equilibrium. They advocate amongst other things the teaching of different schools of economics and also a greater focus on economic history. As the new IFoA syllabus had specifically added these last two points as part of the review, I felt encouraged that this was also criticism shared by the actuarial profession. Indeed, the Actuarial Research Centre of the IFoA have recently engaged Dr Iain Clacher on a project to understand how economics interacts with the actuarial profession, with the following initial conclusions:
- The current regulatory environment may be counter-productive in some cases, particularly if it is based on too narrow an economics focus.
- The much more quantitative approach to economics which has been dominant for the last 60 years or so may be pushing us towards a world where we think less.
- There is scope for the actuarial profession to take much more from economics in trying to understand what is really going on.
One quote from The Econocracy which particularly struck me was:
It is hardly an exaggeration to say that it is now possible to go through an economics degree without once having to venture an opinion.
One of my objectives in teaching this module was therefore to change that, and to try and focus as much as possible on giving students the opportunity to develop opinions as they grapple with trying to understand what is really going on.
Have I succeeded? Well while it would not be true to say that I have been entirely successful, neither would it be accurate to say that I have not succeeded at all. I changed the examination from one where 80% of the marks were for multiple choice questions to one where only 16% were, with 60% devoted to four long questions requiring, at least in part, higher order skills of analysis and the ability to make an argument. The examination was 70% of the overall module mark, with 30% for a 3,000 word mini project which investigated whether the Office for National Statistics were correct in their proposal to re-designate student loans within the national accounts and asking students to comment with reasons on whether they agreed with the approach taken for valuing student loans for sale. And I broadened out the references within the course significantly, for example:
- Economics: A Users Guide by Ha Joon Chang was invaluable for its concise descriptions of different economic schools.
- This time is different: eight centuries of financial folly by Reinhart and Rogoff, to show how banking crises continue to impact developed countries while other types of financial crises are now rare in such countries.
- End This Depression Now! by Paul Krugman for its succinct explanation of the The Great Capitol Hill Baby Sitting Co-op Crisis (itself based on Monetary Theory and the Great Capitol Hill Baby Sitting Co-op crisis by Joan and Richard Sweeney). I found this to be a very good case study for getting across the idea that one person’s spending is another person’s income, which public discussions of austerity often seem to gloss over.
- Doughnut economics: seven ways to think like a 21st-century economist by Kate Raworth and GDP: A Brief but Affectionate History by Diane Coyle, to offer both criticism of the almost universal target of maximising GDP growth and ideas about alternative approaches.
- Debt: the first 5,000 years by David Graeber, particularly for its evidence on how societies did not start with barter then money then credit, but have generally developed in precisely the opposite direction.
Amongst many many others.
Students found it tough at times, as some of the feedback I received made clear. Much of macroeconomics can be counter-intuitive, particularly for first year undergraduates. But those who engaged with the module definitely ventured opinions along the way! There was a lot of reading required, for much of which I provided more concise lecture notes, but there is plenty of scope for being more targeted next year in what we dig into in more detail. There will be less on the schools of thought at the beginning next time, as in my view it makes much more sense drawing this out as particular aspects of economic theory are being discussed – much better I think to work on the students’ comfort in group working initially, so as to get them discussing the subject more openly earlier. I also did not use the material built around the Core Project’s The Economy as much as I would have liked this time, although it was available to the students. I will be discussing how I can remedy this at the RES Nuffield Foundation Workshop: Teaching and Learning with CORE at the University of Warwick this week!
It has been a very stimulating experience and greatly increased my understanding of how actuaries have traditionally approached economics questions, while also allowing me to explore ways in which I would want those approaches to change. I look forward to Year Two!