Why study economics? Because economics can change the world. In fact, without economics, it is arguably impossible to affect any substantive change. Economics defines what we value and how we exchange value in the real world. Like the sun that provides energy for life on Earth, economics is the driving energy of society.
It is tempting to think of economics as an arcane topic practiced by economists in ivory towers, the purview of professors and central bankers. When economics does impact our lives, it feels beyond our control: bubbles, interest rates, rising prices, and stagnant wages. Such are the consequences of human decisions, unforeseen circumstances, and social imbalance–economic decisions and policy outcomes.
Human culture is the expression and organization of a plurality of people sharing a common bond. These bonds are formed by institutions and beliefs, national or ethnic identity, business and commerce, art and language. Any shared values among groups of people serve as foundations for culture. Economics is the framework of cultures and civilizations, the “tangible science of social organization.”
We study economics to understand that framework. We study applied economics to use that understanding in making a better world.
What is Applied Economics in a Complex World?
Applied economics is a problem-solving tool–economics in action. From healthcare to global security, environmental economics to sustainable human development, the mechanisms of economics shape market and social forces, forecast future scenarios and determine solutions to the challenges we face.
Econometrics is one of these tools. The primary function of econometrics is to” convert qualitative statements into quantitative statements,” writes Ayush Singh Rawat.
Econometrics uses mathematical and statistical methods to “justify a theoretical economic model with empirical rigor.” In other words, econometrics clarifies the viability of an economic theory as applied in real-world circumstances.
But the “real world”–unlike traditional economic assumptions–is irrational, full of dynamic, interconnected, and often wicked problems. Theories based on assumptions of rational agents acting in a static world create “an elegant economics, but is restrictive and often unrealistic,” writes W. Brian Arthur in Foundations of Complexity Economics. It is not hard to see how unchanging, unrealistic economic presumptions break down in a complex, conflicted, rapidly changing world. There is no “Homo economicus.”
“Complexity economics relaxes these assumptions,” Arthur writes. “It assumes that agents differ, that they have imperfect information about other agents, and must try to make sense of the situation they face.”
The more we embrace complexity, the better our responses to the challenges of a volatile century undergoing systemic transformation. Like tree branches, resilient in their flexibility to the winds of change, a complexity mindset helps us adapt to an evolving world. Paired with the tools of applied economics, embracing complexity creates the context for problem-solving and change.
How Economics Can Change the World
We understand how economics is the foundation for collective human action. We know that, through applied economics, a complexity mindset, and using tools like econometrics, we can analyze quantitative economic theories, translating those theories into qualitative statements based on real-world data.
However, we’re still looking at applied economics from a 20,000-foot perspective. What does it look like for changemakers interested in using applied economics to solve problems?
Let’s look at two perspectives, one historical and the other forward-facing.
Bretton Woods and International Development
As World War II drew to a close, delegates from 44 nations met in Bretton Woods, Maryland, to forge an accord to rebuild a devastated Europe. In the aftermath of war, world leaders sought agreement to restore war-ravaged economies in the short term and create a lasting economic order of international cooperation.
Officially known as the United Nations Monetary and Financial Conference, the summit established the International Bank for Reconstruction and Development (IBRD). From the IBRD’s charter came the International Monetary Fund and World Bank.
Bretton Woods and the global economy it fostered are not without controversy. It is, in any case, a profound example of how economics influences a community of nations and the lives of its inhabitants. The fixed-exchange rates set by Bretton Woods ended in the 70s, yet we live in a world shaped by the ideas and policies of the agreement’s authors.
Today, the IMF and World Bank employ global trade and development professionals. The problem-solving tools of applied economics address systemic poverty, stabilize global financial systems, and promote sustainable development.
Sustainability and the Circular, New Energy Economy
Sustainability economics is increasingly mainstream in business, governance, and society. The ongoing economic and social transformation–let alone a global pandemic–is no less earth-shattering than the post-war world that emerged in the 1940s.
Through globalization, the economic juggernaut that arose as the US shifted its wartime manufacturing might to American consumers stretched around (most of) the world. With it came prosperity and higher living standards to more people than ever before in human history. But, without an appreciation of complexity and change, the downside of this expanding growth eventually comes home to roost.
Today, our challenges include widening gaps in income equality, persistent–if declining–extreme poverty, and a world bumping up against ecological and resource limits. Meeting these challenges obliges the malleability of applied complexity economics.
If “sustainability” risks becoming a marketing catchphrase, data-driven econometrics sorts the green from the greenwash. Visionary policymakers, economists, and multisectoral leaders help us frame what a circular, new energy economy looks like and how we might get there.
As before, these are controversial issues eliciting heated debate and emotional rhetoric. It is here that applied economics must reside. Like in Bretton Woods more than half a century ago, we must decide what kind of world we want to live in and how economics must work in the 21st century to make it so.
Unlike Bretton Woods, all motivated, knowledgeable, and visionary people are called to the table to help create a better world.
Boston College Master of Science in Applied Economics
Johann Wolfgang von Goethe famously said, “Knowing is not enough; we must apply. Willing is not enough; we must do.”
The online Master of Science in Applied Economics degree program is built from the ground up for professionals driven to “do.” They understand that doing demands knowledge, ethics, experience, mentorship, and collaboration.
Program director Dr. Aleksandar “Sasha” Tomic and his team consistently attract top talent from all walks of life into the program. “We are resolutely student-focused in everything we do,” says Dr. Tomic. “I am continually impressed with the caliber of students the program attracts.”
The industry-aligned program trains students in applied economics tools, methods, and principles. Students gain insight into industry and global trends, understand complex policy issues, and have the analytical skills to frame viable solutions.
The curriculum rests on the Jesuit, Ignatian tradition emphasizing reflective, ethical, people-centered decision-making. Students emerge from the program prepared to start or advance their careers in government, healthcare, global development, policy, and industry.
Earning the MSAE degree requires completing five core and five elective courses. Students can choose among 26 elective courses.
The MSAE program is a launching pad, forging mentorships and collaboration among instructors and students. Everyone is encouraged to learn from each other, create ideas, test theories, and affect change in the world to the extent of their interest and capacity.
At a Crossroads
“The global economy and capitalism are at a crossroads,” summarizes Kaushik Basu in an op-ed for Brookings. “Economists and society as a whole must confront profound intellectual and moral challenges in order to come to grips with the changing world.”
Now is the time for people willing to apply their talent, passion, and knowledge to confront the myriad challenges we face. There is a home for such people in the Master of Science in Applied Economics program at Boston College.
Can economics change the world? History shows us how it has. Applied economics tells us how it can.