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)

Economics at Cambridge 2011 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 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” ( ); Their grandparents (b. 1930s) – “the cradle-to- grave welfare state” ( )

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 13 TH SEPTEMBER 2007

“YOU STUPID BOY!”

2010 – Denmark’s Windpower

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) How Did Economists Get it So Wrong? (by Paul Krugman)