The Homa Files

Prof. Greg Mankiw of Harvard made headlines a few years ago when he got a million-dollar advance to write an economics textbook.

I just stumbled on this blog post of his … thought it was interesting.

Punch line: Business students force the faculty to think practically

* * * * *

Excerpted from Mankiew Blog, Are B-school economists different?, June 02, 2009

A journalist … mentioned that he was finding that many of his best sources on the financial crisis teach at B schools, not Econ Departments.

I don’t know of any hard data to establish whether journalists are more likely to cite economists in business schools than those in economics departments, but I can believe it might be the case.

On average, economists in business schools have a more practical and empirical approach to the field than do those in economics departments.

Why? I don’t think the answer is … a difference in training.

I think part of the answer is self-selection.

Economists who are naturally more abstract will have a harder time teaching MBAs and will gravitate toward economics departments. The PhD students there will not mind the higher level of abstraction.

By contrast, economists of a more practical and empirical frame of mind will gravitate toward business schools, where their practicality is valued.

Some business schools encourage more practical research. The case studies written by faculty at Harvard Business School are a particularly extreme example. This experience forces the faculty to come down to earth from the rarefied theory that often characterizes economics research.

Finally, the students themselves influence how the faculty thinks.

Faculty who teach PhD students are used to being asked, “How did you derive that first-order condition? “

Faculty who teach MBA students are used to being asked, “Is that really how it works?”

By contrast, the typical MBA student, like the typical journalist, is older and more self-confident; he or she will more likely balk at what seems to be excessive abstraction.

The business students force the faculty to think practically.

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