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Monday, May 12, 2008

Economics studies suffer as math focus diminishes

There has been a sharp decrease in the number of students who major in natural sciences in their undergraduate years and then take up economics in postgraduate courses. I will attempt to identify the reasons.

First of all, those students who have concentrated on natural sciences very seldom show interest in economics and other social sciences; becoming an economist is no option in their career building. In 1961, when I entered university, the national universities adopted two sets of subjects for applicants at entrance examinations: one for humanities majors and the other for natural sciences majors.

Specifically, humanities majors were required to take only Mathematics I and II, while natural science majors had to take Mathematics I, II and III. The latter no longer had to take Chinese classical literature. Still, each category of students had to take two subjects from the other category.

Such distinction in entrance examinations, which never existed until 1960, has widened to the extent that those seeking to major in humanities can now enter university almost without studying the natural sciences, while science majors no longer need spend much time studying the social sciences.

Moreover, since student political activism has nearly died out, a large majority of science majors graduate without taking any interest in or learning anything about social and economic issues.

Second, mathematical economics and econometrics are no longer the mainstay of economic science. As more and more emphasis is placed on knowledge and research in international finance and other economic institutions and systems, the once-absolute advantage of mathematical ability has diminished drastically. As a result, natural science majors who study the basics of economics in order to pursue that subject in postgraduate school enjoy little advantage for their efforts.

Third, the only economics field that can attract natural science majors is finance. A large number of such students landed jobs with financial institutions in the wake of the sensations created by financiers like Yoshiaki Murakami and Takafumi Horie, who were subsequently arrested for wrongdoings.

Amid the growing popularity of financial engineering, securities firms hired a large number of natural science majors to work on designing new financial products. That's because science majors in general are capable of comprehending the basics of financial engineering while very few humanities majors can understand the "probability differential equation" of professor Kiyoshi Ito of Kyoto University.

Fourth, financial engineering is so highly mathematical that it is virtually impossible to teach it in the economics department. As a result, the subject is being shifted to the math department, as in the United States. Most likely, future natural science majors interested in finance will choose to study financial engineering in the mathematics department of a graduate school.

Fifth, no small number of natural science majors are interested in environmental issues. Indeed, during the 10 years I served as head of the Society for Environmental Economics and Policy Studies (SEEPS), two-thirds of the members were graduates of natural science departments of various universities.

Environmental studies is one of the few disciplines that cover both the humanities and natural sciences. A majority of former natural science majors who became SEEPS members had been engineering majors. After graduation, they pursued environment-related research at think tanks and later taught environmental economics at universities. In other words, they became environmental economists without having received basic training in economics.

The growing divide between students in humanities and those pursuing the natural sciences has cast a cloud over the future of economics in Japan, as evidenced by the increasing number of economists who are poor in mathematics, pseudo-math economists who are not good at manipulating numerical expressions, and econometrists who know nothing about mathematical statistics.

Logical thinking is essential to all branches of learning. In economics, in particular, logical thinking based on mathematical training is indispensable because what it deals with must be quantified.

Milton Friedman, famous for his persuasive arguments, was mobilized for war during World War II as a mathematician. John Maynard Keynes, too, was a mathematics major when he graduated from Cambridge.

Although my background is purely in humanities, I spared no effort to study mathematics after enrolling at a university. The distortion of education reform has caused irreparable damage to the study of economics in Japan.

Takamitsu Sawa is a professor at Ritsumeikan University's Graduate School of Policy Science and a specially appointed professor at Kyoto University's Institute of Economic Research.

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