The teaching of economics faces a crisis. The number of students opting for economics as a main option is falling dramatically. Business studies is proving a far more popular choice. In short, the demand for economics has dropped.
Given that the very core of the subject is about markets and the interaction between supply and demand, one might have thought that economists would have evolved a strategy to cope with the problem. But this is far from being the case. Their standard response is to blame the consumer - in other words, the student - for choosing a discipline which is held to be less rigorous and difficult.
Alec Chrystal and Richard Lipsey have attempted an ambitious and positive response to the challenge. Their book is aimed at students who need to know some economics as part of a business studies course. The authors cover a wide range of economic theory, but try to relate it to practical business examples.
The first half of the book, on firms and markets, is a considerable success. The authors move well beyond the standard economics textbooks, and introduce a number of ideas at the forefront of economics. Many of the examples used to illustrate points are well chosen. A discussion of the labour market and wages leads to the problem of company directors' pay, and whether or not it is too high. The potentially dry concept of the elasticity of demand is brought to life with a highly topical analysis of the British newspaper market and the issue of predatory pricing. Indeed, this part of the book is much more interesting than textbooks for pure economics courses, including the worldwide bestseller which Lipsey himself wrote.
The authors are optimistic in believing that their entire material on firms and markets could be covered in a single term, for to do so would stretch even the very best economics students. And, occasionally, the old pomposity of economics appears, as in the statement "The economic analysis of firms provides a decision rule that managers will find useful. Any action that adds more to revenue than cost should be undertaken, while actions that add more to costs than revenue should not." What a surprise.
The second half of the book, on macroeconomics, is much less successful. But this is a reflection of the more esoteric nature of this part of the discipline. The theory of real business cycles, for example, is one which even many academic economists feel is straining the bounds of sanity and is quite out of place in a textbook. The section on the balance of payments and exchange rates is much more of a model of good exposition. But here, at least, the authors have clear-cut results to explain, such as the distinction between current and capital accounts, and the fact that exchange rate changes are unpredictable.
But, overall, the book will be very useful for students at all levels where economics is a minor part of the degree. Indeed, many full-time economists will find it interesting and rewarding, and anyone who mastered the entire contents would have few problems in satisfying even the most demanding economics examiner. It is perhaps still a bit too technical to be used on its own on business studies courses, but it goes a long way towards making the interesting bits of economics accessible to the business student.
Paul Ormerod is chairman, Post-Orthodox Economics.
Economics for Business and Management
Author - K. Alec Chrystal and Richard Lipsey
ISBN - 0 19 877 539 3 and 538 5
Publisher - Oxford University Press
Price - £45.00 and £19.99
Pages - 720