Why study economics?

There are several reasons why might study economics. It might be because:
- you find it interesting!
- your friends are doing it.
- it provides useful skills for the working environment.

Another reason may be that gaining a degree in economics serves as a signal of you "superior" capabilities. It may be that you learn nothing useful while studying economics, but merely show the ability to pass such a programme with the achieved mark serving as an additional signal.

This is the view taken by Michael Lewis in his excellent book "Liar's Poker" which is one of the best novels on the excesses and indulgences of Wall Street (and the global financial sector in general) in the 1980s. Here's an extract where he considers his education.

There was one sure way , and only one sure way, to get ahead, and everyone with eyes in 1982 saw it: major in economics; use your economics degree to get an analyst job on Wall Street; use your analyst job to get into Harvard or Stanford Business Schools; and worry about the rest of your life later.

So more than any other, the question that my classmates and I were asking in the autumn of 1981 and the spring of 1982 was: How do I become a Wall Street analyst? Over time this question had fantastic consequences. The first and most obvious was a log-jam at the point of entry. Any one of a number of hard statistics can be enlisted to illustrate the point. Here's one. In 1986, 40 per cent of the one thousand three hundred member's of Yale's graduating class applied to one investment bank, First Boston, alone. There was, I think, a sense of safety in numbers. The larger the number of people involved, the easier it was for them to delude themselves that what they were doing must be smart. The first thing you learn on on the trading floor is that when large numbers of people are after than same commodity, be it a stock, a bond, or a job, the commodity quickly becomes overvalued. Unfortunately, at the time, I had never seen a trading floor.

The second effect, one that struck me at the time as tragic, was a strange surge in the study of economics. At Harvard in 1987, the course in the principles of economics had forty sections and a thousand students - the enrolment had tripled in ten years. At Princeton in my senior year, for the first time in the history of the school, economics became the single most popular area of concentration. And the more people studied economics, the more an economics degree became a requirement for a job on Wall Street.

There was a good reason for this. Economics satisfied the two most basic needs of investment bankers. First, investment bankers wanted practical people, willing to subordinate their education to their careers. Economics, which was becoming an ever more abtruse science producing mathematical treatises with no obvious use, seemed almost designed as a sifting device. The way it was taught did not exactly fire the imagination. I mean, few people would claim they actually liked studying economics; there was not a trace of self-indulgence in the act. Studying economics was more a ritual sacrifice. I can't prove this,of course. It is bald assertion, based on what economists call "casual empiricism". In other words, I watched. I saw friends steadily drained of life. I often asked otherwise intelligent members of the pre-banking set why they studied economics, and they'd explain that it was the most practical course of study, even while they spent their time drawing funny little graphs. They were right, of course, which was even more maddening. Economics was practical. It got people jobs. And it did this because it demonstrated that they were among the most fervent believers in the primacy of economic life.

Investment bankers also wanted to believe, like members of any exclusive club, that the logic to their recruiting techniques was airtight. No one was admitted who didn't belong. This conceit went hand in glove with the investment bankers' belief that they could control their destiny, which as we shall see, they couldn't. Economics allowed investment banking recruiters directly to compare the academic records of recruits. The only inexplicable aspect of the process was that economic theory (which is what, after all, economics students were supposed to know) served almost no function in an investment bank. The bankers used economics as a sort of standardised test of general intelligence.