In August 2012, founding professor Dick Sargent reflected on the experiences of nearly five decades earlier, when he was starting an economics department from scratch on a stretch of countryside at the edge of Coventry.
He discusses the transatlantic influences that led to two key decisions that would define the department from its inception, and have continued to the present day.
The first was to make economics a stand-alone department, rather than a cog in an inter-disciplinary set-up – a departure from educational trends of the times in the UK, but one which Sargent considered essential for vigorous intellectual interaction among the economics faculty.
The second was to emphasize, to a degree unheard of in the UK at the time, the need for training in mathematical skills and the quantitative methods that were growing in prominence in the profession at that time. These have become a signature of Warwick’s economics department, and an essential tool for the economics field as a whole.
But has all this been good for the subject? Sargent muses on recent criticisms of the emphasis on mathematical and quantitative methods. He concludes that, even if the mathematics is sometimes overdone, and econometric models have failed to incorporate powerful forces behind the economic events of the 21st century, they remain indispensable tools.
"The Original Aims; The Founding of the Department of Economics at the University of Warwick" by J.R. Sargent
In 1963, when Jack Butterworth asked me to come to Warwick as the first professor of economics, I had taught the subject at Worcester College, Oxford, for eleven years.
At that time in Oxford, teaching was essentially a college responsibility, and most colleges had a single tutor for each subject. While scientists also had their labs, for most other subjects there was a lack of central facilities in which to meet, talk with and learn from practitioners in the same subject.
The opportunity to talk over lunch with the other fellows of one’s college, in history or mathematics or modern languages or other subjects, was certainly interesting and agreeable, but it did little for one’s professional development in one’s own subject. For that, one was on one’s own.
Founders of the University of Warwick (left to right): J.R. “Dick” Sargent, Economics; Donald Charlton, French; Tom Waddington, Molecular Science; Christopher Zeeman, Maths; A. Philips Griffiths, Philosophy; Malcolm Clark, Molecular Science; Arthur Shercliff, Engineering; Jack Butterworth, Vice Chancellor; George Hunter, English and Comparative Literary Studies; John Rigby Hale, History; P.E. Tucker, Librarian; Wilfrid Harrison, Politics and Pro-Vice Chancellor; Dennis Linfoot, Registrar; Peter Gaywood, Finance Officer.
Towards the end of my time at Oxford, I went on sabbatical leave to the U.S.A. in 1959-60. The economics faculty of the Massachusetts Institute of Technology, where I spent much of it, was not just an ocean apart but a different world. The MIT economists (who at that time included Paul Samuelson, Charles Kindleberger and Robert Solow) all had their offices near to each other on a single floor of the university’s Sloan Building – the luckier ones with a view over the Charles River to downtown Boston.
This physical proximity to economist colleagues was one thing that helped to create an interactive community of professionals. Another was the habit that most of them had of leaving their office doors open, a sign of their readiness to be consulted and to exchange ideas which rarely proved misleading. The exchanges would continue over lunch in the Faculty Club, at one of the large round tables to which the economists naturally gravitated.
As my ideas for Warwick began to form, these contrasting experiences, in equally distinguished institutions on opposite sides of the Atlantic, increasingly drew them towards MIT as a model. The quality of economics at Warwick, it seemed to me, would be built on the professional cohesion of a department of economics.
That meant swimming against a tide of educational opinion which was flowing quite strongly in the U.K. at the time, and aimed to submerge the boundaries between different subjects, which individually were considered to provide too narrow a basis for a university education. The University of Sussex, founded a few years before Warwick, was particularly dedicated to a broad inter-disciplinary approach, both to the structure of its degree courses and to the organisation of its teaching staff.
Despite the attractions of this as an educational ideal, it seemed to me that the possibility of applying it in practice was being fatally undermined by the speed with which economics was itself expanding and, as an ineluctable feature of that expansion, was developing its own internal specialisms. This meant that, to hold economics together as a discipline, it was necessary for the university’s economics staff to keep close contact with each other as members of a department.
That need not exclude degree courses in which students would combine economics with inputs from other disciplines. But for those responsible for teaching economics, it was essential to create an environment which would enable individuals to develop special interests within the discipline without losing touch with the mainstream. There was a second lesson from the USA that I was minded to apply at Warwick.
Dick Sargent discusses The University's motto.
Specifically, this suggested that the design of courses in economics for a new university in the UK should ensure that students engaged upon them with a solid grounding in the necessary mathematics. The importance of this was twofold. First, since macroeconomics in particular attempts to grapple with a system in which market participants are continually reacting to each other and to external influences, and which is usually also growing, it calls for, as a minimum, the ability to handle simultaneous equations and differential calculus.
But secondly, since economists often cannot test their propositions by designing experiments but depend upon the empirical data which is available, it is essential that they be familiar with the statistical methods they need to apply in analysing the data, and thus with the mathematics which underpin those methods.
These considerations were embodied in two features of the Warwick economics courses as they were originally designed. The first was that all students were required to pass an examination in mathematics at the end of their first year, and the second was that econometrics was made a compulsory subject for the second year. I would emphasise, however, that we specifically rejected the idea that, for sixth-formers, a pass in mathematics at A level should be a condition of entry to economics at Warwick. We reckoned to teach what was needed ourselves.
Added to these two transatlantic influences was a purely indigenous one. Coventry in the 1960s was an important industrial centre. It therefore seemed right that its local university should provide students with the option to specialise in industrial economics within the courses taught in its Economics Department. This was a specialism which seemed at the time to have lagged somewhat in the rapid development of economics as a whole. When Warwick had already appointed a professor of industrial relations, and intended to start a business school, a complementary development within the economics department was an obvious necessity.
"Retrospect" by J.R. Sargent
Since 1965, Warwick’s Economics Department has grown well beyond what its founder members can have contemplated then, and has established a formidable reputation.
As it envisages its future, there is one element of the reminiscences above on which a comment from me may be relevant. The economics profession is currently engaged in a bout of introspection in the wake of the recent financial crisis and the subsequent recession. One element of this is concerned with the charge that the subject has become ‘over-mathematicised’.
Certainly, a look at the subject’s academic journals can leave one with a strong impression that some of the authors are in it for the mathematics rather than the economics. Issues often seem to have been chosen because they were amenable to mathematical treatment rather than because of their intrinsic interest or importance.
Nevertheless the fact remains that, since so much of economics is concerned with changing relationships between magnitudes - the price of x and the price of y, monetary policy and the price level, real wages and employment, and so on - mathematics is a natural and appropriate language in which to express and explore it. There may be questions worth asking about how large a mathematical vocabulary is needed by students at different levels (undergraduate, masters, doctoral). But at all levels a mastery of the appropriate vocabulary must continue to be treated as an indispensable tool with which to unravel the problems which economists are asked to confront.
A further reason for emphasising this is that there is so much work to be done in econometrics. This may seem surprising when the economy seems to be cluttered up with elaborate econometric models.
The trouble with them seems to have been that they have devoted their attention mainly to refining the numerical relationships between their endogenous variables, while neglecting the more demanding but equally necessary task of striving to endogenise the exogenous ones. Changes in business confidence, financial innovations, government regulations, people’s willingness to incur debt, even interest and exchange rates, have all tended to be treated, almost with a shrug of the shoulders, as given or only guessable. Yet influences such as these appear to have been the prime movers of events in the 21st century.
There may be differences in the extent to which they are amenable to quantification or empirical research, but a major effort is needed to gain a better understanding of what moves them and thus to incorporate them more meaningfully into econometric models.
If room had to be created for that by de-emphasising mathematics, the arguments above would weigh against it. It should not be forgotten that econometrics, except in cross-sectional studies, is itself a kind of economic history, and is applied by some economic historians. If more of the narrative kind of economic history could be costlessly accommodated in economics courses, it would no doubt help to broaden students’ minds.
It might also to help them to appreciate the important part played in economic history by things not found in the existing historical record, that is to say by innovations, and thus to recognise the limits to learning from the past.