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AIMS OF THE CAMBRIDGE COURSE To educate students • so that they can DO GOOD (provide informed advice to policymakers in government, business and international organisations); • so that they can DO WELL (apply the ‘fundamental’ economic considerations which influence outcomes in financial markets) • so that they can DO MORE (have the skills needed to continue to graduate study in Economics) WHAT CAMBRIDGE IS LOOKING FOR Applicants with • the intellectual curiosity to investigate contemporary and historical patterns of economic behaviour • a wide-ranging interest in the evolution of the global economy • quantitative skills and an interest in applying mathematical and statistical tools to real problems Economics at Cambridge 2011 SUBJECT CHOICES FOR A-LEVELS ETC Applicants from other backgrounds (Sciences, Languages) welcomed, provided you have Maths A Level The course will teach Economics without assuming any prior knowledge You must be taking • A-level Maths – Further Maths (at AS or A2) is also very useful – some Colleges may demand it – IB candidates should be taking HL Maths – better if you can take Pure and Statistics rather than Mechanics Other desirable A levels • Economics (Take Economics rather than Business Studies if your school offers both subjects – do not take both at A2 level) • History • Geography Economics at Cambridge 2011 THE ODDS What qualifications you need • Competition for places is strong - about 7 applicants per place • You should have at least 6 GCSE’s at A or A* • Offers are typically A*AA so you should have clear A-grade marks at AS level – offer may require one A* grade • Overseas applicants should also have very strong academic records • Overseas applicants whose first language is not English must pass an additional language test before admission Economics at Cambridge 2011 DESIGN OF THE CAMBRIDGE COURSE The course is a 3-year degree programme, known as the Economics Tripos Divided into three Parts, with an exam at the end of each year Each year is free-standing – there is no cumulation of marks across years The Economics Tripos is a single-subject degree – but there are options for switching to other subjects • Switch to History/Law/PPSIS after one year • Switch to Management Studies after two years All switches require College approval – and there is a quota for Management Studies entrants Economics at Cambridge 2011 Economics is about understanding • How each of us makes the best of what we have got – Opportunity costs (“no such thing as a free lunch”) – Robinson Crusoe’s rationality and optimisation; • How we co-ordinate the productive activities of individuals and firms in a large society – Through markets (“invisible hand”, prices as signals) – Through managerial hierarchies (“visible hand”) – Through spontaneous co-operation (“big society”) The “wealth of nations” is about • Division of labour • Specialization and accumulation of assets (investment) • Technological progress • Capital is accumulated by investment (today’s jam sacrificed for more jam tomorrow) • Perhaps! All investment is speculation – a (hopefully reasonable) expectation of future returns A Generational Perspective The evolution of economic thinking can be illustrated through the experience of successive generations: • Today’s university students (b. 1990s) - “the return of depression economics” (2007-??) • Their parents (b. 1960s)- “the end of history” (1979-2007); • Their grandparents (b. 1930s) – “the cradle-tograve welfare state” (1945-1973) Two hypotheses on finance • Efficient Markets – Finance “oils the wheels” of the market – It speeds up income convergence at lower cost in current consumption – Rational expectations ensure stability – Competition empowers rational expectations • Financial Instability – Expectations intrinsically volatile – Volatility creates real economic damage – This damage can be long-lasting (hysteresis) – Prudential regulation must be strict “GREED IS GOOD” A BRANCH OF NORTHERN ROCK 13TH SEPTEMBER 2007 “YOU STUPID BOY!” 2010 – Denmark’s Windpower 2010 - Ireland’s Ghost Estates Additional Readings • The Keynes Hayek Rap • The Keynes vs. Hayek Debate • How Did Economists Get it So Wrong? (by Paul Krugman)