How Much Economics Should You Take in College? (Updated)

Chris Blattman had a good post last week about how much economics one should take in college, and which every student should read.

In that post, Chris also compared economics to karate:

[I]ntro to microeconomics is the yellow belt, and intermediate micro is the green at belt. An undergraduate degree in economics is a brown and an MA is arguably the black. And if you want your dojo or jedi master status then get a PhD or go into investment finance.

And of course the ass who runs around looking for a fight is the ideologically left or right jerk who manages to turn a conversation about the weather into a diatribe about free trade.

(In college I was actually just such an ideological ass–I won’t tell you what side of the spectrum but leave you to guess. Glad to say it was just a phase.)

There is indeed such a thing as studying too little economics, or just enough economics to be dangerous. In introductory courses, it is often the case that students are exposed to textbook neoclassical economics — risk and uncertainty, market power, externalities, asymmetric information, transaction costs, etc. are assumed away and relegated to higher-level courses. Or when market failures are not assumed away, little to no time is spent explaining how government intervention can actually bring society closer to efficiency.

The result is that students end up believing the government can rarely do good, and viewing the world through the near fiction of the First Fundamental Theorem of Welfare Economics — a competitive equilibrium is Pareto efficient.

I should know: I, too, was an ideological ass when I was in college. Unlike Chris, however, I cannot hide it — at least not from French speakers. Here is a bunch of links to the editorials I wrote when I was editor of Quartier Libre, the student newspaper of the Université de Montréal.

Thank goodness I ended up taking more economics and learning about the limitations of economic theory.

But what’s someone who does not want to do a PhD to do? What shortcut can one take in order to go from introductory or intermediate micro to understanding the limitations of economics?

For me, the key lies in taking a course that will teach you how economic theory is tested as well as how to assess the credibility of the empirical evidence.

That is why I spend the second week of my development policy and my law, economics, and organization seminars teaching students the basics of linear regression and causality. This is also why I dedicate both seminars to bridging the gap between theory and empirics. This goes a long way toward showing students that although economic theory often gets things right, it also often gets things wrong.

In many universities, such knowledge can be found in upper-level undergraduate courses in development or labor economics. This is particularly true of courses in which students have to read empirical papers rather than relying on a single textbook.

UPDATE: In the comments, Emilia also suggests taking an environmental or resource economics class, since market failures feature quite prominently in those fields.