What is Economics?
An undergraduate degree in economics seeks to educate students about how choices are made by consumers, workers and firms, and how these decisions aggregate into economy-wide phenomena. Economics is often dryly described as studying “the allocation of scarce resources”. In practice, we study three major types of problems.
First – we study incentives, meaning that we are interested in how people make choices, and how they react to changes in prices and other aspects of the environment. For example, how will a household’s decision about whether to take out a mortgage depend on their expectation of future house prices and interest rates? And, how will a mortgage broker’s decision to approve a risky loan depend on their ability to quickly sell it off to a pension fund?
Second – we are interested in the strategic interaction of agents. When someone makes a decision, they must anticipate how other players will react, and what information is conveyed by these decisions. For example, if one mortgage broker weakens their mortgage requirements, will other brokers loosen theirs? And, if a mortgage broker tries to sell off a mortgage rather than hold onto it themselves, what should the investor infer about the quality (i.e. riskiness) of the underlying mortgages?
Third – we are interested in how individual decisions aggregate to the industry-wide level or economy-wide level, sometimes with unexpected effects. For example, in the run up to the 2008 financial crisis, mortgage brokers issued very risky loans knowing that they could sell them to pension funds, causing a bubble in housing prices. On the flip side, new financial products can generate economic growth by allowing the retirement savings of individuals to be channeled into new investment opportunities.
Find out more about our faculty research.
As an analytical, STEM-certified Bachelor of Arts degree, the Economics and Business Economics majors prepare students for a wide variety of occupations. Our graduates find jobs in accounting, banking, consulting, finance, government, management roles in entertainment and technology, but certainly not limited to these fields. They also go on to graduate school in fields like economics, business, law, etc.
Economics vs. Business
Many prospective students face the choice between studying in an economics department (like UCLA) or at a business school. There is a fundamental difference between the two types of program in the questions we ask. Economics seeks to understand how society should organize production. Studying business and finance is a component of this, but we also wish to understand macroeconomic questions (e.g. Why are some countries rich and some countries poor?) and public policy questions (How should society provide health care?). While a business school focuses on specific aspects of how a business runs (e.g. marketing, human resources), a liberal arts degree in economics provides a broad education that prepares students for a wide variety of careers and a lifetime of learning.
An economics degree also has the advantage of providing a more complete and rigorous foundation in the principles of economics and data analysis. We believe these skills provide students with the intellectual foundation needed for our challenging upper division classes, like finance and strategy, and for a successful career in a rapidly changing global economy.
Please see the pages about our courses for more details.