Sunday, 27 February 2011

'Business school' versus 'School of economics'

In practice, I have actually parted company with my school, although in theory I'll do it when I pass my Master's exam. Formally I'm still a student, and both as a student and as a would-be graduate (a diploma from the Warsaw School of Economics is a recognised 'brand') I should be interested in the strategy of WSE (PL: SGH), thus the direction in which it is drifting.

Recent years have brought significant changes in the workings of my university. Most of them have been brought about by an obligation to implement the so-called Bologna system. The biggest revolution to take place under the new system was the shift towards two-tier studies. Each student now has to no choice, but to take a three-year BA course and then, if they wish to continue their education, a two-year MA course. This has replaced the previous cycle of five-year MA studies, which left the decision to take a Bachelor's exam at students' discretion. The shift necessitated changes in the curricula. In the old system studies lasted five years, now they last three plus two years. This indeed equates to five, but the new system lacks continuity, as studies have to be split into two separate cycles and new curricula for each cycle have had to be drawn up.

Proponents of the shift (not those from Poland, but EU officials and scholars) pointed out the Bologna system would bring benefits to students. As it now transpires, its introduction was to the benefit of the overwhelming, problem-piling-up bureaucractic machinery and students are not key beneficiaries of the Bologna system. Since the introduction of the new system in 2006, when I began my studies, SGH has pressed on with two curriculum reforms. Both have come in for harsh criticism for cutting down on number of course hours allocated for "core" courses (intermediate macro- and microeconomics, advanced economics, statistics, econometrics, mathematics) and "not strictly economic" courses (sociology, economic history). The most ardent opponents of the reshaped curricula even cried out against SGH turning into a "vocational school" and retaining the word "economics" in its English name only.

In the West we have two different types of universities:
1) business schools,
2) schools of economics.
And they must not be mistaken for each other!

Let's look at the top bar at "The Economist's" main page.

This is not a coincidence that 'economics' and 'business' have separate sections.

The difference between the two is quite simple. Economics is about understanding people's and companies' behaviours on the marketplace and functioning of economies and it is a social science. Business in turn is simply about making money. The two are strongly tied-up with each other, yet the latter is just a part of the former.

This assertion leads us to another conclusion. It takes much more to educate a good economist than a good businessman. In fact a 'vocational school' would suffice to churn out graduates who would pursue their careers in 'business'. They should have all competencies and skills that would allow them to generate money for their corporations and, consequently, for themselves. A graduate of a business school can work in a consultancy firm, as accountant, auditor, product manager, at a bank, they can successfully run a company. In many of the jobs listed above they would outperform graduates of economics, but think about a business school graduate analysing financial markets, working in a central bank (remember the former president of Polish central bank, ridiculed for his diploma from an 'inferior US business school'?), as an economist at a bank or drafting a pension system reform. All those tasks require a graduate of economics, equipped not only with essential knowledge, but also taught to understand all complex phenomena that take place in the economy, taught to analyse and track causations and, above all, able to shape their own opinions independently. In the context of independence the word 'business' has to be stressed. Being in business involves money-related tie-ups and conflicts of interests that jeopardise an economist's independence. But bear in mind that only business, but also politics might pose a threat to an economist's independence.

Nevertheless, the education of an economist needs to be much broader that the one of a business school student. Courses such as sociology, economics of development, economic history, economic policy have to be run and taken by students. Being an economist requires broader horizons and open mind. The style of teaching should differ. Students of economics should be encouraged to discuss; during such discussions various opinions should clash, substantive arguments backed by examples and calculations should be traded. Analytical skills should be developed, students should be taught to discern possible impacts of some factors on other ones. A few useful rules should be instilled, such as recently quoted one that in economics you can prove a theory if you can't disprove it. And a grasp of psychology is essential when analysing the mechanics of economies and financial markets! Business students, in turn, can crack case studies, learn how to manage people, run companies, foist stuff upon customers and develop other skills requisite for making money.

I don't wish to denigrate students and graduates of business schools. They're just a different breed and are not cut out for some jobs. As a rich man I would not hesitate to take on a business graduate to run my company (but remember the currency-option botch-up from early 2009), but they would not be allowed to manage my personal finances.

And having said that I can't stress strongly enough there is no clear dividing line between business and economics. At my job I am somewhere in between; I try to make the most of my knowledge in economics, but the job has a tilt at the 'business', which means my career path might have to be reassessed...

Coming back to the issue of SGH, I'd like them to settle on 'school of economics' model. Maybe this is not what the market, ruled by money, needs most, but this what next generations will surely need. Moreover, 'business school' means taking a path of least resistance, while SGH with at least some of its excellent staff, is capable of aiming much higher. May it stay the Warsaw School of Economics, not in name only!


Michael Dembinski said...

An exccllent post - one worth reading and re-reading. Good one, Bartek!

scatts said...

Where were all these well educated economists leading up to this recession? I mean, what's point of all this excellent theoretical knowledge if it either a) doesn't work or b) is ignored?

Business is the side of reality and of actually making the money that economists can then theorise about. Past, recent, experience proves that business does what the hell it likes, no matter how stupid and that governments help it along, neither of them seemingly paying a lot of attention to economists.

student SGH said...

Scatts, nice to see you back here.

Just to remind you, there were several economists who warned in mid-2000s against a financial meltdown. These were: Nouriel Roubini, Peter Schiff, Joseph Stiglitz, just to name a few. But their warnings were totally ignored, because good times were rolling on, money was made and maintaining the status quo was convenient both for 'the business' and for 'governments'. Plus some of thos economists were paid by institutions which profited on growth of credit bubble. Imagine you are a chief economist at a bank which earns zillions on mortgage-backed securities. Could you openly tell the world days of the shady machinery are numbered? Some of them were so besotted by money that they did not discern the perils. And some wanted to hold down their jobs and said what was convenients for their bosses.

So the right answer is b) it is ignored, for reasons I wrote above.

Another pre-crisis fact you must not omit is that 'quants' entered the world of economics and tried to explain everything with numbers and formula. Yet, the real world is far too complex to be described with equations, integrals, square roots, etc. Economics, based on maths only doesn't work.

Take care!

student SGH said...

Michael, Ian,

here another article to confirm my view :)