An economist licence

We licence other service professions, why not applied economists?

What I’m thinking is that economists could get a licence through a university where they have to sit an exam on certain, essential, points of economics. They would have to resit it every 5 years. Don’t make the licence compulsory persee, just make it something that economists can put up when they talk – like a master builder sticker.

This way we could make sure that all registered economists have a full recollection of concepts likes the “impossible trinity“, the lack of a long-run Phillips curve, how to interpret relative prices, the prisoner’s dilemma, and what comparative advantage is.

Note: Of course, different types of economists need different fundamental skills, so there might have to be a slight range of licences.

I mean, I would definitely enjoy the occasional refresher course on central concepts in economic analysis and I think setting it up in this way could be a useful way for non-economists to recognise that if they are getting a certain standardised level of economic advice.

  • CPW

    As economists, shouldn’t we be suspicious that an economist license is a way to restrict supply and extract rents from the non-economist public?

  • @CPW

    😀

    But surely if it is voluntary it is merely a way of signaling quality …

  • Quality in regard to what? The ability to pass exams? Don’t firm reputation carryout this function now?

  • @Paul Walker

    I am not sure that firm reputation is sufficient in the current case for two reasons:

    1) Applied economics institutions have high turnover even though the quality of analysis relies on human capital.

    2) Most people are not subject to observable and significant repeat interaction with economic discussion and its usefulness – as a result they don’t really get to update their beliefs regarding quality.

    3) Human capital declines over time without investment, so even if a reputation appears strong the individual may now be running down human capital without people realising

    It isn’t the tests I am concerned about here, it is merely making sure that those of us that are now out of academia keep in mind the fundamental framework and knowledge embedded in economics.

  • @Paul Walker

    Also note I am not asking for one to be set up per see, but maybe if economists voluntarily agreed to set up such a device themselves they could use it to signal quality.

    Of course as Chris says this will be used to extract surplus to some degree by limiting supply – but it does have the advantage of providing information.

    Seriously, there are people who put themselves as economists out there who are pundits making things up – a licencing agreement would help to lessen this issue. Of course I better hope I’d pass the damned test 😛

  • I think that journal referees should have to pass the same sort of test. Not that I’m bitter or anything, just less naive these days.

  • @rauparaha

    😀

    Man, if only more people realised what a Nash equilibrium (or subgame perfection) actually was

  • Matt. Are you not just moving the problem back one level? We don’t trust the economist so we make him get a license. But why should we trust the license? Or more properly trust whoever gives the license? You seem to want to deal with one adverse selection problem by introducing another.

  • @Paul Walker

    Not quite. We may not be able to rely on the reputation of individual firms or individuals because of a lack of repeated interaction – but we can rely on the reputation of a standardised test that economists have to repeat through time.

    If it turns out that the economists that pass the test are more reliable, then this in itself becomes part of the way consumers can source information helping to improve outcomes.

    It is in the interest of economists that can pass the test to do it (as they get a premium for showing this), it is in the interest of consumers to use the economists that passed the test, and economists that can’t pass the test lose out. I don’t see as much of an adverse selection problem once the test is instituted

  • They already have this system in the US, if you don’t have a PhD over there you aren’t an “economist”:)

  • @agnitio

    That is a little bit different though.

    Getting a Phd isn’t a REPEATED test, so you may build up your human capital to get the Phd and then stop investing in it.

    The suggestion here is to have a repeated test – something you have to sit every 3-5 years to keep the nice little sticker. That way you can’t let your human capital deteriorate below a certain level, or you’ll lose your sticker.

  • Anyone in mind you’d like to see de-certified? I have a running list :>

  • @Eric Crampton

    No no NZ economists are lovely. Just wouldn’t it be nice to have a central test to make sure we are all on the same wavelength with regards to our underlying fundamental description of our discipline …

  • How about students?

  • Miguel Sanchez

    Matt Nolan :
    Seriously, there are people who put themselves as economists out there who are pundits making things up

    One of the many chuckles that I get from watching Fox News is when they bring on Ben Stein as an “economist” – while he does have some economics training, the closest he’s come to being a practicing economist is playing the teacher in Ferris Bueller’s Day Off…

  • @Matt Nolan
    I agree

  • Owen

    More fundamentally, who do you class as an economist in the first place? I have an applied economics degree, but dont work as an ‘economist’ as such, so have never really thought of myself as one.

    What are the criteria for calling oneself an economist?

  • Falafulu Fisi

    Matt, I completely agree with your proposal here, even though I am not an economist myself, just a keen reader of economic principles.

    What pisses me off more is that there are lots of wannabe economists who regularly appear on our TV evening news or front page in our daily local newspaper making (supposedly) expert comments on issues relating to economics which is way beyond their understandings. They also taking snipes frequently at the opinions of real economists. In my view, they want to do this (rubbishing economists) so as to drive more customers to their (consulting or whatever) businesses. I often find their media commentaries correct, but anecdotal.

    This is in direct contrast to someone like you , Paul Walker or Eric Crampton where you can argue this issue, then back up by reputable studies which are facts and not anecdotal.

    I can’t remember exactly which TV1 Close-Up that I saw this lady (non economist) arguing with Gareth Morgan about interest rates I guess, and this lady kept rubbishing Gareth despite Gareth kept bringing up with Mark Sainsbury about a few overseas studies that showed what the lady was saying was all bollocks (Ok, he didn’t use that exactly), but it was obvious to the viewers that Gareth was frustrated by this lady.

    If your community will move to have something like you’re proposing (voluntary to start with perhaps), then the members of the public will definitely know who to go to for advice, etc… In this way, the public can tell the difference between real economists and wannabes.

  • @lecence me

    I’m guessing students that wanted to do it could sit the licence

    @Miguel Sanchez

    Hehehe

    @Owen

    Well a voluntary licence would help to clean that up – there would be a definite standard.

    @Falafulu Fisi

    Economics is an issue that involves how we all think and feel – and as a result it is something everyone DOES know something about. This is why economists get attacked so much, because it is an issue everyone feels they have some handle on.

    However, as you say, without a clear standard it might be hard to figure out who to get information off without constant trial and error.

    I think often us economists over-rate our ability, but I think sometime people downplay the importance of getting another opinion on social issues from a person like an economist.

  • Human capital declines over time without investment, so even if a reputation appears strong the individual may now be running down human capital without people realising
    This souds good,i like it