Edmund Phelps_Teaching Economic Dynamism

EDUCATION

EDMUND S. PHELPS

Edmund S. Phelps, a Nobel laureate in economics, is Director of Columbia Universitys Centeron Capitalism and Society and Dean of the Newhuadu Business School.One of the worlds leading experts on the sources of economic dynamism, he is the author ofmany books, including

Rewarding Work andMass Flourishing.

SEP 2, 2014

Teaching Economic DynamismNEW YORK Business leaders oen argue that the widening education gap thedisparity between what young people learn and the skills that the job market demands is a leading contributor to high unemployment and slow growth in many countries. Fortheir part, governments seem convinced that the best way to close the gap is to increasethe number of students pursuing degrees in the so-called STEM subjects (science,technology, engineering, and mathematics). Are they right?

The short answer is no. Indeed, the two main arguments underpinning claims thatinadequate education is to blame for poor economic performance are weak, at best.

The first argument is that the lack of appropriately skilled workers is preventingcompanies from investing in more advanced equipment. But that is not how economicdevelopment usually works. Instead, firms begin to invest, and either workers respondto the possibility of higher wages by acquiring (at their own cost) the required skills, orfirms provide their current and future employees with the relevant training.

The second argument is that it is increasingly dicult for the United States and otheradvanced countries to match the gains that developing countries have achieved byinvesting heavily in upgraded equipment, targeted higher education, and skills training.But, again, this contradicts traditional trade dynamics, in which one countrys successdoes not imply hardship for another.

In theory, of course, a simultaneous shi in several countries toward STEM-focused

Teaching Economic Dynamism by Edmund S. Phelps - Project... http://www.project-syndicate.org/print/edmund-s--phelps-argue...

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secondary and higher education with large concomitant productivity gains coulddiminish the competitiveness of an economy that made no such eort. But this scenariois highly unlikely, at least in the foreseeable future.

In fact, the proliferation of highly specialized universities in Europe has failed tobuttress economic growth or employment. And the conversion of comprehensiveuniversities into specialized institutes for science and technology in the Soviet Unionand communist China did nothing to avert economic disaster in those economies.(Chinas top universities now oer two-year programs that emulate the structure ofAmerican liberal arts colleges.)

But the case for STEM education is even more fundamentally flawed, because it treatsan economy as an equation. According to this logic, job creation is a matter of slottinghumans into identifiable opportunities, and economic growth is a matter of increasingthe stock of human or physical capital, while exploiting scientific advances. This is adark view of modern economies, and a depressing blueprint for the future.

To lay the foundation for a future based on ideas and invention, businesses andgovernments should consider how new products and methods emerged in some ofhistorys most innovative economies: the United Kingdom and the US as early as 1820,and Germany and France later in the nineteenth century. In these economies,innovation was powered not by global scientific progress, but by the populationsdynamism their desire, capacity, and latitude to create and willingness to allow thefinancial sector to steer them away from unpromising pursuits.

The fact that innovative ideas have arisen largely from the dynamism of people beliesthe conclusion that all economies require widespread STEM-focused education. Thougha larger STEM base can benefit some economies, most advanced countries already havesucient capacity in these fields to apply foreign technologies and engineer their own.

What economies need instead is a boost in dynamism. The problem is that thehistorically most innovative economies have lost much of their former dynamism,despite retaining an edge in social media and some high-technology sectors. And others for example, Spain and the Netherlands were never particularly dynamic. Meanwhile,the emerging economies that are supposed to be filling the gap notably, China arestill falling short of the levels of innovation required to oset the declining benefits oftechnology transfer.

In other words, economies today lack the spirit of innovation. Labor markets do notneed only more technical expertise; they require an increasing number of so skills, likethe ability to think imaginatively, develop creative solutions to complex challenges, andadapt to changing circumstances and new constraints.


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That is what young people need from education. Specifically, students must be exposedto and learn to appreciate the modern values associated with individualism, whichemerged toward the end of the Renaissance and continued to gain traction through theearly twentieth century. Just as these values fueled dynamism in the past, they canreinvigorate economies today.

A necessary first step is to restore the humanities in high school and universitycurricula. Exposure to literature, philosophy, and history will inspire young people toseek a life of richness one that includes making creative, innovative contributions tosociety. Indeed, studying the canon will do more than provide young people with a setof narrow skills; it will shape their perceptions, ambitions, and capabilities in new andinvigorating ways. In my book Mass Flourishing, I cite some key figures who articulateand inspire modern values.

The humanities describe the ascent of the modern world. Countries worldwide can usethe humanities to develop or revive the economies that drove this ascent, while helpingindividuals to lead more productive and fulfilling lives.

https://www.project-syndicate.org/commentary/edmund-s--phelps-argues-that-restoring-humanities-education-is-the-key-to-building-innovative-economies

1995-2014 Project Syndicate


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