Benefits of Majoring in Economics

1. The Economics major provides the preparation for understanding economic issues of great importance: Economics students learn to think creatively and deeply about some of the most important economic concerns facing the world today. You learn to apply a variety of theoretical perspectives to issues of economic efficiency, economic growth, globalism, social justice, wealth and poverty, power, individual freedom, discrimination, cultural values, and environmental concerns. Every day we hear about economically related problems on a global scale:

Computer engineers in the United States lose their jobs as a Silicon Valley research lab closes its doors and relocates its facilities in India where engineers are willing to work for half of what engineers get paid in the U.S. Do decisions such as these have on balance positive or negative economic outcomes and for whom?

The President places a tariff on imported steel from other countries to protect the domestic steel industry which is claiming unfair selling practices by other countries. What constitutes unfair selling practices in international markets and are protective tariff policies good ones?

Famine is reported in the Sudan while a recent study shows that obesity is a growing problem in the United States. What are the causes of global hunger and poverty, is it a production and/or distribution problem and what can or should be done about it?

Students, labor activists, environmentalists, and other social activists demonstrate and protest around the world in Seattle, Washington, D.C., Genoa, Prague, and Pittsburgh against the World Trade Organization and other international economic organizations. Is economic globalization good or bad? Who benefits and who loses from the global economic policies of organizations such as the WTO, International Monetary Fund, and World Bank?

Domestic economic concerns are also prevalent in daily news reports:

The financial and economic crisis which began in 2007 came dangerously close to a complete breakdown of the U.S. financial system in 2008 and it is causing widespread economic hardship in 2009 for millions of people who have lost their homes and their jobs. What are the causes of this crisis and who is to blame? Are government bailout policies to shore up the financial sector and stimulate the economy good policies and are they working? Critics claim that they are just giveaways to the corporate wealthy and will ultimately saddle government with huge deficits. Who is right and what kinds of government policies might promote healthy economic growth, put people back to work, and restore faith in financial markets?

Corporate management practices at some of our premier corporations such as Enron, WorldCom, General Electric, and Tyco have had dramatic and sometimes devastating consequences for employees and stockholders. How should we deal with such practices? Do competitive market forces provide sufficient correctives or do we need more public oversight of corporate practices?

Many if not most Americans believe that the Social Security Program is unsound and some believe the privatization of social security will solve the problem. What is wrong with the social security program, is there really a crisis and if so will privatization fix it?

Women and people of color in the U.S. continue to make considerably less income on average than white men, even within the same occupation. How do we account for such differences, is it the result of discrimination or is it the result of fundamental differences in individual skills and abilities or preferences? If discrimination is the problem, then what kinds of anti-discrimination policies should be adopted?

Economics is very much concerned with policy issues such as these and the major in Economics provides students with the analytical and critical thinking skills necessary for understanding these and other troubling problems facing the world.

2. The economics major provides substantial intellectual depth and interdisciplinary breadth as well as critical thinking. The Economics major allows exploration of a variety of disciplinary and interdisciplinary views on economic questions and policy. The Economics faculty represents an unusually wide range of specialties as well as a variety of traditional and non-traditional approaches to economics. Our courses are part of and the economics faculty participate in most all the interdisciplinary programs at Dickinson including American Studies, Environmental Studies, Latin American Studies, International Studies, International Business & Management, Policy Studies, and Women's Studies. As a result of this intellectual depth and breadth, Economics majors learn to think critically about economic issues and problems.

3. A major in economics offers students hands on learning opportunities. Economics courses offer students the opportunities to do computer simulations, economic experiments, create economic web pages, and participate in field work research projects. For example, in a recent Economic Analysis of Policy course students engaged in a faculty supervised project to measure the economic impact of Dickinson College on the local economy. In another course, students were engaged in a faculty supervised research project on labor market outcomes for Dickinson graduates. In other courses, student created web pages on a particular research project. In all cases, you get the chance to apply what you are learning and you gain valuable research experience in research design, gathering and analysis of data, and computer skills.

4. An Economics major is good preparation for graduate school in Economics. Graduate study in economics requires a strong foundation in economic theory and mathematics, both of which are integral parts of the economics major. Many top graduate programs recommend as a minimum four semesters of college mathematics. Courses in mathematical economics and econometrics also provide valuable preparation in the quantitative skills that graduate students usually need. With an adequate mathematics background, a Dickinson economics major can compete successfully at any top economics program. Dickinson graduates have successfully completed Ph.D.'s at top graduate economics programs such as Notre Dame, Northwestern, Wisconsin, Virginia, and Brown, among others.

5. The Economics major is good preparation for Law School. An economics major is viewed favorably by law schools and many of our economics majors go on to law school. Law and economic principles are often closely related, and the concepts and tools of economics are used with frequency by legal scholars to analyze problems in law, focusing on contracts, property, torts, and legal process. Additionally, majoring in economics will provide you with the intellectual discipline and analytical abilities necessary to succeed in top law schools. Past economics majors have attended law schools at Harvard, Michigan, and Chicago.

6. An Economics major is good preparation for a Masters in Business Administration program. MBA programs look with favor upon the records of applicants with undergraduate majors in economics and many of our majors have gone on to MBA programs. Economics gives you the analytical skills along with the quantitative and computer skills valued in business and finance. The ability to apply economic theory to business decision-making is also valued. Note that MBA programs give preference to those who have two or more years of experience in business, public administration, or non-profit organizations. Be aware also that skills of clear and organized thinking, writing, and speaking, all skills that are developed in the economics major, are highly valued in MBA programs. Our economics majors have attended schools such as Harvard, Penn, Duke, and Michigan.

7. The Economics major provides an excellent foundation for any career or graduate study in pubic policy analysis. Economics is one of the keystones of public policy analysis, and both employers and graduate schools in public policy and administration require a strong foundation in economic analysis. The emphasis placed on policy analysis, applied economics, and quantitative skills makes Dickinson economics graduates particularly well prepared for careers as policy analysts in many different fields such as environmental policy, health policy, labor policy, community development, and social services.

8. An Economics major is good preparation for many private and public sector jobs and careers in managerial, administrative, or sales positions. Employers look with favor on college graduates with economics majors. The ability of economics majors to apply economics can enhance the kinds of decisions people make and is therefore of value to a wide variety of different employers. Studies of Dickinson graduates reveal higher average incomes for economics majors. Although higher income is only one consideration when choosing a job, economics provides students with a broad range of analytical, quantitative, and communication skills that are useful in many different occupations in management, finance, banking, public administration, non-profit organizations, and community service.

The importance of studying economics in today’s world

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

—Friedrich August von Hayek

The human race’s curiosity has expressed itself in the creation of various fields of study that examine specific aspects of the world around us. The ‘natural’ sciences like physics and chemistry study the behaviour of the basic particles and elements of the universe and their interactions with each other. The ‘humanities’, on the other hand, study the creations of humans, such as literary texts and the arts.

Interspersed between these two is economics—a ‘social science’ which deploys a highly quantitative, data-driven, problem-solving approach towards understanding the behaviour of human beings. Economics, therefore, is the field of study that is best placed to track, study, project and predict human behaviour; and as such is one of the most important and relevant skills for the world today, helping us choose wisely when it comes to our personal, social and professional lives.

Economics for sustainable growth

Understanding humans, and their motivations, is critical to designing initiatives that can have social and economic impacts upon society at a local, regional and national level. This isn’t an idealised notion—whole nations have transformed themselves for the better through the incorporation of economic principles in their policies, like China, South Korea and Singapore, to name a few.

China lifted over 200 million people out of extreme poverty since the 1980s due to a revision of economic policies, materially improving the lives of nearly 2.6% of the world’s population. This makes it clear that in a supportive policy environment, the impact that economics can have is virtually limitless. Economics helps us identify the policy measures that encourage prosperity and avoid inefficiency, making it a crucial driver in the search for sustainable growth.

Becoming an economist is a sound professional choice

Studying economics provides one with not just an understanding of human behaviour, but also cultivates in students the problem-solving, analytical, communication and persuasion skills that are critical for success in today’s job market. In business, economists can provide key insights into how to make a product or service appeal more to customers by de-constructing their incentives and desires. The deep insights into customer behaviour, business strategy and volatile markets that economics provides can help companies make intelligent decisions to promote greater business growth and success.

Companies are always eager to find better ways to make their value proposition clearer and more compelling; this is why skilled economists and economic analysts are in heavy demand across industries today. Following up the study of economics with an MBA opens up lucrative opportunities in marketing, finance and consulting, making it a vital first step onto a career path with exciting growth opportunities and prospects. This is one of the reasons that graduates in economics and postgraduates with a background in economics command some of the highest wages in the global job market.

Economics is everyday life

In our daily lives, we are called to make choices at our homes and in the marketplace, how much to spend and save, how to allocate our savings between different kinds of financial assets, whether to take a regular cab or an Uber, how much to pay for health insurance, whether to switch jobs, to move to a different city, where to go for vacation, and so on. These decisions are so much a part of our everyday life that they are also the domain of much of what politicians constantly make promises to us about.

How should we evaluate what our elected leaders tell us? How should we participate in a democracy as responsible, informed citizens? We cannot answer such questions without having a proper understanding of economics. It is a basic civic literacy requirement. It teaches us how to make choices, how to interact in society, how to evaluate the work being done by our elected representatives and much more. Every citizen in a country needs to know economics so as to live and participate meaningfully in the society.

Not just demand and supply

Economics underpins many of the phenomena unfolding around us every day. From driving Jio to offering free internet along with phone services and the use of box office earnings to determine the next Bollywood star, economics also determines the price and the variety of mango you will choose to buy once the monsoon arrives. India needs more of its citizens educated about the basic principles of economics so that they can understand the forces that materially move and determine the markets and prices around them.

As the Indian economy becomes more sophisticated and more connected with the rest of the world, the demand for economists in government, business and policy-making will rise. India’s economy needs a greater participation from those well-versed with economic principles, to guide the discussions in corporate boardrooms and governmental organisations so that the country can show greater growth. India has weathered more than seven decades of economic mismanagement, borne largely out of widespread economic illiteracy. This certainly needs to change.

By: Indradeep Ghosh

The author is associate professor and faculty dean, Meghnad Desai Academy of Economics, Mumbai. Views are personal

Understanding Finance vs. Economics

Finance vs. Economics: An Overview

Although they are often taught and presented as separate disciplines, economics and finance are interrelated and inform and influence each other. Investors care about these studies because they also influence the markets to a great degree. It's important for investors to avoid "either/or" arguments regarding economics and finance; both are important and have valid applications.

As a general social science, the focus of economics is more on the big picture, or general questions about human behavior around the allocation of real resources. The focus of finance is more on the techniques and tools of managing money. Both economic and finance also focus on how companies and investors evaluate risk and return. Historically, economics has been more theoretical and finance more practical, but in the last 20 years, the distinction has become much less pronounced.

In fact, the two disciplines seem to be converging in some respects. Both economists and finance professionals are being employed in governments, corporations, and financial markets. At some fundamental level, there will always be a separation, but both are likely to remain very important to the economy, investors, and the markets for years to come.

Key Takeaways Economics and finance are interrelated disciplines that inform each other, even if the specifics are distinct.

Finance, as a discipline, is derived from economics; it involves assessing money, banking, credit, investments, and other aspects of the financial systems.

Finance can be further broken down into three related but separate categories—public finance, corporate finance, and personal finance.

Economics looks at how goods and services are made, distributed, and used, as well as how the economy overall functions, along with the people who drive economic activity.

The two main branches of economics are macroeconomics, which looks at the overall economy, and microeconomics, which looks at specific factors within the economy.

Finance

Finance in many respects is an offshoot of economics. Finance describes the management, creation, and study of money, banking, credit, investments, assets, and liabilities that make up financial systems, as well as the study of those financial instruments. Finance can be divided into three categories: public finance, corporate finance, and personal finance.

Finance typically focuses on the study of prices, interest rates, money flows, and the financial markets. Thinking more broadly, finance tends to center around topics that include the time value of money, rates of return, cost of capital, optimal financial structures, and the quantification of risk.

Finance, as in the case of corporate finance, involves managing assets, liabilities, revenues, and debt for a business. Businesses obtain financing through a variety of means, ranging from equity investments to credit arrangements. A firm might take out a loan from a bank or arrange for a line of credit—acquiring and managing debt properly can help a company expand and ultimately become more profitable.

Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings, and retirement planning.

Public finance includes tax systems, government expenditures, budget procedures, stabilization policy and instruments, debt issues, and other government concerns.

Special Considerations

A degree in finance is a common denominator among many of those who work on Wall Street as analysts, bankers, or fund managers. Likewise, many of those employed by commercial banks, insurance companies, and other financial service providers have college backgrounds in finance. Apart from the finance industry itself, a degree in finance can be a pathway to senior management of companies and corporations.

Finance involves assessing the value of financial instruments, such as the determination of fair value for a wide range of investment products. Finance includes the use of stock-pricing models like the capital asset pricing model (CAPM) and option models like Black-Scholes. Finance also includes determining the optimal dividend or debt policy for a corporation or the proper asset allocation strategy for an investor.

It can also be argued that finance affects the markets with a seemingly constant stream of new products. Although many derivatives and advanced financial products have been maligned in the wake of the Great Recession, many of these instruments were designed to address and solve market demands and needs. For example, derivatives can be used to hedge risk for investors, hedge funds, or large banks, thus protecting the financial system from harm in the event of a recession.

Economics takes a more theoretical look, while finance is more applied, however, both are connected disciplines, with some overlap.

Economics

Economics is a social science that studies the production, consumption, and distribution of goods and services, with the aim of explaining how economies work and how people interact. Although labeled a "social science" and often treated as one of the liberal arts, modern economics is in fact often very quantitative and heavily math-oriented in practice. There are two main branches of economics: macroeconomics and microeconomics.

Macroeconomics is a branch of economics that studies how the aggregate economy behaves. In macroeconomics, a variety of economy-wide phenomena are thoroughly examined, such as inflation, national income, gross domestic product (GDP), and changes in unemployment.

Microeconomics is the study of economic tendencies, or what's likely to happen when individuals make certain choices or when the factors of production change. Just as macroeconomics focuses on how the aggregate economy behaves, microeconomics focuses on the smaller factors that affect choices made by individuals and companies.

Microeconomics also explains what to expect if certain conditions change. If a manufacturer raises the prices of cars, microeconomics says consumers will tend to buy fewer than before. If a major copper mine collapses in South America, the price of copper will tend to increase, because supply is restricted.

Macroeconomics can be applied in tracking GDP, inflation, and deficits to help investors make more informed decisions. Microeconomics could help an investor see why Apple Inc. stock prices might fall if consumers buy fewer iPhones. Microeconomics could also explain why a higher minimum wage might force a company to hire fewer workers.

1:55 The Difference Between Finance And Economics

Special Considerations

When economists succeed in their aims to understand how consumers and producers react to changing conditions, economics can provide powerful guidance and influence to policy-making at the national level. In other words, there are real consequences to how governments approach taxation, regulation, and government spending; economics can offer insight and analysis regarding these decisions.

Economics can also help investors understand the potential ramifications of national policy and events on business conditions. Understanding economics can give investors the tools to predict macroeconomic conditions and understand the implications of those predictions on companies, stocks, and financial markets.

For those who choose to pursue a career in economics, academia is an option. Academics spend their time not only teaching students the principles of economics but also researching within the field and formulating new theories and explanations of how markets work and how their agents interact.

Economists are also employed in investment banks, consulting firms, and other corporations. The role of economists can include forecasting growth such as GDP, interest rates, inflation, and overall market conditions. Economists provide analysis and projections that might assist with the sale of a company's product or be used as input for managers and other decision-makers within the company.

Economics can be used by market participants to help understand the causes and likely outcomes of market events and the impact on various sectors, companies, and the overall business cycle.

The applications include understanding how changes in national income, inflation, long-term economic growth, and interest rates impact the markets and ultimately stocks. An important area of focus for economists is determining how changes in monetary policy by central banks like the U.S. Federal Reserve can impact the economy, both in the U.S. and globally.