Reforming Business Schools

The September 26-October 2, 2009 issue of The Economist has an article on reforming business school education. The article argues that business schools should teach more of economic history (I always tell my students the origins of the ideas that I teach, the context and setting of the ideas, and even hand out some of the original papers in which the ideas and innovations have appeared in). In addition, I bring the material to life by including news and events on topics in my lectures. For one thing, if we know the history as well as the scholarly literature, we won't be reinventing the wheel!

In addition, the article emphasizes that business schools need to change their tone and to foster both scepticism and cynicism. In my field, we always state the assumptions underlying the models that we are using. If the problem at hand satisfies the assumptions, then one brings to task the appropriate tools and methodologies.

The article goes on and states rather stridently that It is worth noting that such scepticism is second nature to the giants of financial economics, as opposed to the more junior propellerheads. It then singles out Professor Andrew Lo of MIT (who, by the way, will be speaking this Friday in our Speaker Series in Operations Research / Management Science at the Isenberg School. His talk is co-listed with the Finance Seminar Series).

According to the article, Andrew Lo, of MIT's Sloan School of Management, was fond of pointing out that in the physical sciences three laws can explain 99% of behaviour, whereas in finance 99 laws can explain at best 3% of behavior.

We can hardly wait to hear Professor Lo's talk on Friday, October 2, 2009, at the Isenberg School. The title of his talk is: Kill All the Quants?: Models vs. Mania in the Current Financial Crisis. Additional information on his talk with abstract can be found here.