A letter to students of economics – 2023

Dear student,

I’ve written an annual letter to students since taking up my position. My previous three letters have all noted the extraordinary events that were dominant features of the Irish and global economies: the pandemic and the ‘closing down’ of economic activity, the subsequent (uneven) lifting of restrictions leading to significant impacts on global supply chains, Russia’s attack on Ukraine and its people, and very high levels of inflation.  Some of these have subsided but some, sadly, are still with us.  Arguably 2023 has brought us some more ‘events’ although perhaps these were less unexpected: the northern hemisphere’s hottest summer in recorded history, the extreme weather in Europe and the wildfires in Canada are part of the pattern of changes that we have been seeing in our climate. And they have significant costs, whether in human suffering or in financial and economic terms.

I usually describe the changes to our climate as one of the three significant transitions that the world is undergoing (the other two being the ageing of our societies and the digitisation of our lives). I still think that’s right but perhaps the word ‘transition’ gives the impression that any impact is ahead of us when, on the evidence, that’s not the case. 

As I said in last year’s letter, the mix of predictable transitions and unexpected shocks has made the work of an economist both particularly challenging and particularly interesting. Economics offers a toolkit to help us understand the impact of such changes and how best to manage them. It is the “study of mankind in the ordinary business of life”, as Alfred Marshall wrote just over a century ago, or “the study of human welfare” as Angus Deaton described it recently.

You and your fellow students may have different reasons for having chosen to study economics. I chose it mainly because I wanted to better understand the world and how to improve it. I graduated from studying economics to applying it in practice, in various government departments – across different countries – and now in the Central Bank. Looking back, a common thread in my professional life has been working in institutions that have been involved in public policy or, as I see it at least, looking for ways to increase the wellbeing of communities. (As it happens, the Central Bank’s founding legislation echoed an article in Bunreacht na hÉireann and couched the Banks’ functions and duties as being for the welfare of the people as a whole.”)   

I’ve learned a number of things along the way (I’m still learning!) and, as you start the academic year, I thought I’d share some of them with you.

First, make sure you know what you’ve chosen to study. For me, economics is best understood in the way Alfred Marshall and Angus Deaton described it.  Economics provides a disciplined way of thinking about “the ordinary business of life” but it is, as John Maynard Keynes wrote, "essentially a moral science and not a natural science”.  In other words, it doesn’t provide the type of certainty you might associate with physics.  Economics is ultimately a human science, full of actors who operate in complex ways and not according to straightforward and predictable scientific formulae.

Second, being “a moral science” means that economic analysis and its insights and recommendations are most effective when developed and applied in collaboration with other disciplines.  It’s worth making the effort to understand, embrace and respect the perspectives that other disciplines – anthropology, biology, psychology or sociology for example – bring to thinking about, and solving, economic problems.  We need to gather the best evidence we can and that means being open to other insights.

Third, economists have various tools and models to help them think in a disciplined way in order to understand and solve problems. Technology has led to significant improvements in that toolkit over the years but it’s important to avoid confusing the models developed to think systematically about economic problems with the reality being addressed. At the end of the day, conclusions need to be anchored in the real world, especially if they are to be turned into policy decisions.

Fourth, there is a rich history of – and diversity in – economic thought that is worth exploring.  Read some of the old classics (and I mean as far back as Aristotle’s Politics) as well as more modern ones (Keynes’ General Theory, George Akerlof’s The Market for Lemons, Darin Acemoglu and James Robinson’s Why Nations Fail and many others). Incidentally, it’s also important that you understand arguments that you don’t agree with.  As John Stuart Mill wrote, he “who knows only his own side of the case doesn't know much about it.  His reasons may be good, and no-one may have been able to refute them; but if he is equally unable to refute the reasons on the opposite side, and doesn’t even know what they are, he has no grounds for preferring either opinion”.

Fifth, I strongly encourage you to study economic history.  It’ll help you understand how we arrived at today’s world.  It’ll also show you that some of the world’s problems aren’t new; the better we understand the past, the greater the chance that we will learn from it.  History may not repeat but it certainly teaches and we should observe, listen and learn its lessons.

Sixth, and finally, a practical but very important point.  Learn to write well, which means writing clearly, simply and succinctly, however complicated the subject.  It’s a great skill to have, especially if you’re planning to go into public policy work in a government department or the Central Bank. It’s also hard to do and takes time to learn but developing the ability to do it well is worth the effort.

At some point you’ll probably be asked the question “what is an economist?” (at least by your family and friends!). I suggest you think of an economist as a ‘weaver’, someone who brings together different strands of evidence and analytical frameworks and weaves them into baskets to carry forward public policy and find solutions to today’s and tomorrow’s challenges.

Economics is about the issues that affect the way we live, work and play in Ireland and around the world. I hope you enjoy studying the subject, whether you are in your first year or completing your PhD. Once you start thinking about a future career, don’t forget us at the Central Bank of Ireland. Our mission is to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy. Our constant and predominant aim is the welfare of the people as a whole which makes it a very fulfilling place to work.

The Central Bank's Graduate Programme 2024 is now open for applications. Find out more about the progamme.

Read more:

• What’s up with the weather (and what might it mean for inflation)?