Tuesday, September 19, 2006

Economics and Finance Education

Reading the plan for the construction of the new Moscow School of Management with a price tag of USD 70 million in today’s Financial Times, brought to mind the dire situation Armenia finds itself in. In particular, the statement that “While Russian universities have a powerful academic reputation in the sciences, they have no history in teaching western-style management” hits home. More to the point, there is no history of teaching economics and finance in Armenia, and no one seems to be aggressively promoting academic excellence there.

Last October, when I taught economics in Yerevan, I was struck by the lack of textbooks in most if not all areas of economics, finance, business, actuarial sciences, among others. Textbooks didn’t really exist at both undergraduate and graduate levels. For the graduate level, and for those with advanced training in math and are fluent in English, students may tap into online lecture notes and textbooks available from the servers of a number of universities around the world (check
AEA). Software such as Matlab and Mathematica commonly used in the teaching of advanced economics simply do not exist. At the undergraduate level, only a couple of textbooks have been translated into Armenian. Not only students are handicapped by the lack of textbooks and training materials, but the situation is further aggravated with official faculty salaries well below USD 200 per month.

It is not that funding is lacking, but that these funds are seldom diverted to improve the educational standing of academia. Tens of $millions have been spent on tax reform and tax administration projects. Yet there is not a single public finance textbook in the country. Millions are poured into the banking/financial sector, yet finance/corporate finance textbooks don’t exist. Similarly, no textbooks are available in the actuarial sciences despite the ongoing pension reforms. For those undergraduates with the means and fluency in English, getting over the lack of textbooks may not be an insurmountable task. But what are the majority remaining students, and their faculty, supposed to do. For those graduating undergraduates interested in an MBA, the American University of Armenia is perhaps the way to go. But otherwise, there is much to be done to raise the quality of training and funding of faculty and academia in all the remaining fields (see

Today’s students are the future leaders in commerce and finance of Armenia. One would hope that those present at the ongoing Armenia-Diaspora Conference are paying attention.


Shushan said...

I am sure you have heard about the new International School of Economics launched in Tbilisi this Fall (http://www.iset.tsu.ge/). It offers a two-year Masters program in Economics modeled after similar World Bank-supported programs in Moscow, Kiev, Budapest and Prague. I just skimed through the list of admitted students and found that only 4 out of 57 are of Armenian origin. I wonder whether the Armenian students simply did not apply to get in or they performed poorly on admission exams in Math, Econ and English.

Vahe said...

This is a great issue to discuss, David. I’m glad you’re doing so.
I was wandering if the lack of literature is an issue in Armenia for other disciplines as well. Do departments of natural sciences, for example, also experience such a material vacuum when it comes to up-to-date literature, qualified specialists, and so on? Does the medical school? I’m asking this partly because I wander what part does the demand for specialists play in this. If the demand for economists, managers, and financiers is relatively smaller than that for, say, dentist and pharmacists, and if it is satisfied by the (small) number of specialists trained abroad, then it would be easier to understand why the investment in finance education lags behind the rest (if it actually does). In other words, if the demand for medics is much higher than the demand for financiers, then, naturally, investment in medical education would be larger. I’m not sure what part of existing firms in Armenia hire actually trained finance specialists and MBA grads, and how actively.
Here, I can’t help asking who is the supplier of finance education? Are most finance specialists educated at state universities, or private ones? Private educators would be more sensitive to the market and, therefore, their investment decisions would reflect the demand for specialists more accurately. State (ran by the state) universities, on the other hand, are generally less sensitive to the markets and less efficient in managing their funds. Last I was in Armenia, however, state universities were still considered more prestigious by most people; there were only few private ones (all newly established), some of which did not even offer immunity from military service to their male students. I’m not sure what the education market in Armenia looks like today, but I think it matters for the issue in question.
Finally, some thoughts on education:
First, I personally think that in developing countries, such as Armenia, one should not be too quick to blame poor education system for the slow economic growth. I have noticed that many people do so, and many people also demand government’s active involvement in the improvement of it. Yes, education is a tremendously important factor: the more MBA grads in Armenia, the more successful companies are likely to emerge there. But one has to understand that education is an investment. There has to be a demand for educated specialists, i.e. business firms, in order for good educators to exist. Young people have to be comfortable that getting expensive education will pay, so do educators have to comfortable that investing in education will pay. This said, you have to have healthy economy in order to have good education, as much as you have to have good education in order to grow a healthy economy. This is not like the “chicken and the egg” question, however. This is precisely what makes economic growth a challenge, and why it takes time. And this is why, in my opinion, especially in today’s age of globalization, creating a good tax code, fighting corruption, improving the law enforcement, and abolishing government-backed monopolies all together are a higher priority for the government (and a bigger obstacle when not done) than promoting education. I think, when it becomes safer and easier to do business and when people feel more comfortable building long-term business plans, the growing demand for specialists will quickly make (finance) education a more profitable business, consequently raising the quality of delivered education.

HansG said...

good textbooks indeed are missing. I think this raises the larger and extremely uncomfortable question what future there is for home-language higher education.

Arguably, at the Master's Level (at the latest) proficiency in English is a MUST, since there simply cannot be enough home language material. There just isn't the financial base for publication, let alone peer-refereed publication.

So English, for better or worse, is the way to go. The positive externality is that it creates a more attractive investment climate, too, and in itself provides educational challenge.

Another, under-exploited, opportunity is in generating online material, wikipedia-style, for learning. But this requires a mindset that has not fully penetrated many of the relevant institutions.

HansG said...

On Shushan's point about ISET's low ratio of Armenian students: I think part of it was that ISET started fairly late (for many reasons), and had much better coverage in Georgia. I seem to recall that only 20 to 30 applied from Armenia, while more than 130 (as I saw myself at the entrance exam) in Georgia.

Spread the word, next year!

David said...

Hans: can you tell us a bit about the program at ISET. Obviouly English and not Georgian is the language of teaching, but at what level are they teaching? What kind of resources students have (e.g. software such as Matlab and Mathematica, books, ...) Is it more of an applied econ Master's or is it more the Master's degree you pick up along the way in a PhD program?

David said...

I am sure all fields suffer from textbook availability. They are doing ok in math and science (very strong soviet legacy). But the econ/finance/bus is a totally different story. Little is being invested in higher education by all the players in Armenia. Not sure where armenian faculty can go to fund the writing and publishing of textbooks. That is why I posted lecture notes on www.aea.am, but this is a drop in the bucket compared to the needs of the students. In my opinion, much is being done to "fix" the highschool system which was not truly broken, and very little invested in higher education.