A Letter to Students of Economics – 2025

Dear student, 

Economics has been front-page news in the media this year, primarily because of the tariffs imposed by the US (in effect a tax on its own consumption of imports) and the implications for the international trading system that had become the ‘norm’ in the twenty-first century.  As someone with an interest in economics, you will probably have read and thought about the possible impact on the domestic economy. And perhaps you have participated in discussions with friends and family on the topic. But this isn’t a letter about tariffs or the international trading system or the domestic economy but about the study and understanding of economics itself.

It is in fact my sixth annual letter to students of economics and, in keeping with many of the previous five, I am writing against the backdrop of extraordinary economic events.  It’s not that long since we had a once-in-a-lifetime pandemic, the ‘closing down’ of economic activity and the subsequent impact on supply chains as economies ‘opened up’, the start of a war in Europe and a major energy crisis, and very high levels of inflation. Tariffs have of course been this year’s dominating theme.

The mix of predictable transitions (the ageing of our societies, the warming climate, the digitalisation of our lives) and unexpected shocks (pandemic, war, tariffs, unpredictable policy making) has made the work of an economist both particularly challenging and particularly interesting.  

But why study economics in the first place? In my case, I chose it because I wanted to better understand the world and how to improve it.  I started studying economics at school and university and graduated to applying it in practice when I entered the workforce. I have been a public servant throughout my working life so, one way or another, I have spent all my professional life working in institutions that are involved in public policy or, as I see it at least, looking for ways to increase the wellbeing of communities.

Economics allows us to better understand the world and how to improve it.  It is, as Alfred Marshall wrote over a century ago, “the study of mankind in the ordinary business of life”.  It exists as a distinct discipline because every person, as well as every society, faces an 'economic problem' arising from the fact that individually and collectively we have limited resources (in the widest sense of the term, including our own time and capabilities) to meet unlimited wants.  Public policy looks to identify different ways to increase available resources – for example of human or financial and physical capital – and ration the allocation of these resources to their highest valued uses. 

I have been fortunate to have been involved in a lot of economic issues in my career and have learned – and am still learning – some things along the way.  I want to share some of them with you as you start the academic year.

First, to state the obvious, make sure you understand what you’ve chosen to study!  For me, economics is best understood in the way Alfred Marshall 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”.  An economy is complex and can’t be packaged into a neat box; it doesn’t provide the type of certainty you might associate with physics.  Instead, we must bring together the various threads that reflect individual behaviours, cultural norms, globally interconnected societies in constant – and increasingly rapid – change to come to outcomes that improve the wellbeing of our communities (with all the complexity of motivations, behaviours and values this entails). 

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. Be open minded and curious to better understand, embrace and respect the perspectives that other disciplines – anthropology, psychology or sociology for example – bring to thinking about, and solving, economic problems.  (I think of an economist as a ‘weaver’, someone who is able to bring together various strands of evidence and insights and weaves them into baskets to carry forward public policy and develop solutions to today’s and tomorrow’s challenges.)

Third, economists have various tools and models to help them think in a disciplined way in order to understand and solve problems. Technological advancement has led to significant improvements in that toolkit over the years – and perhaps AI will offer more in the future, but it’s important to avoid confusing the models and techniques 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 (Aristotle’s Politics, Adam Smith’s The Theory of Moral Sentiments, David Ricardo’s Principles of Political Economy) as well as more modern ones (Keynes’ General Theory, George Akerlof’s The Market for Lemons, Daron Acemoglu and James Robinson’s Why Nations Fail and many others).  Diversity of thought is essential for our individual and collective ability to analyse, understand and tackle difficult public policy problems.  We need to avoid the temptation to stop at economic ideas that leave us feeling comfortable which means that it’s also important to understand arguments that you don’t agree with.

Fifth, I strongly encourage you to study economic history. It’ll help you understand how we arrived at today’s world.  And 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 (or, as Keynes put it, “study the present in the light of the past for the purposes of the future”).  History may not repeat but it certainly teaches and we should observe, listen and learn its lessons.

Sixth, when ‘studying the present’, don’t take the views of one academic paper or lecture, one newspaper or magazine or social media commentator, one radio or TV broadcast as representative of all there is to know about an issue.  Being aware of current affairs matters and reading and listening widely and broadly will help you to understand an issue or problem better.  (Robert Shiller’s Narrative Economics is an interesting look at how popular narratives have an impact on the economy.)

Seventh, and finally, a practical but very important point. Learn to write well, which means writing clearly, simply and succinctly, however complicated the subject.  Ensuring economic analysis is accessible to others is an important skill to have, especially if you’re planning to go into public policy work in a government department or a central bank.  Developing the ability to writing about economic issues in clear, simple and succinct language is well worth the effort that you will need to put in.  (Have a look at George Orwell’s Politics and the English Language and his six rules of writing.)

Economics offers a toolkit to help us understand the issues that affect the way we live, work and play, and is arguably more important than ever in our rapidly changing world.  I hope you enjoy your time on campus, as well as your study of economics.

Gabriel Makhlouf