The Economics of Business School

The payoff of going to graduate school is simply a matter of comparative advantage and supply and demand, according to Kevin Murphy. Murphy, George J. Stigler Distinguished Service Professor of Economics, outlined his ideas about the value of a GSB education when he welcomed new students to the Executive MBA Program on June 23.

Students from all three of the program’s permanent campuses—Chicago, London, and Singapore—gathered in Chicago for “Kick-off Week,’ a full schedule of networking, classes, seminars, and activities. This year, 280 students have enrolled, representing 41 countries of residence and 49 countries of citizenship. Speaking at a luncheon at the Rothman Winter Garden, Murphy shared with the international group what to expect in a GSB classroom.

“To make an analogy to sports, what you do here is more like the weight room than it is like a scrimmage,” Murphy said. “That is, we’re not going to replicate exactly what you’re going to do in business. Our goal is to train you, make you stronger, and make you better for when you practice business in the real environment.”

In economic terms, students leave the GSB with skills that get rewarded because they are specialized and scarce.

If the professors are here to prepare students to take a unique knowledge back to the business world, the students’ responsibility is to pick up all the analytical tools and theories made available with an eye on the bigger picture, he said. Material that may seem irrelevant for the latest task to land on the desk will be useful for a later project–even if that project comes down the pipeline next week or in the next few years.

“When you go to school and you take courses, your goal should be to absorb things and do the work even when it’s not obvious at the moment what use you’re going to put that to,” Murphy said. “I can trace almost every piece of work I’ve done since [my years as a student], back to something I should have understood at the time if I had really understood what my professors were saying.”

These same lessons apply beyond the boardroom or office to such public policy issues as oil and global warming. The GSB approach to education, with its emphasis on fundamental concepts, changes the way of viewing these current topics and encourages a reexamination of the simple solutions. According to Murphy, one proposed method for slowing global warming—American industries converting to an alternative energy source—results in higher oil emissions worldwide.

—Kate Fratar