Economics is in crisis - fewer students study it and those who do aim for a desk in the City rather than a chair in academe. Ron Amann, outgoing head of the ESRC, shares his concerns with Kam Patel

Ron Amann has many things on his mind at the moment. He is certainly preoccupied with Tony Blair's flattering invitation to him to join the Cabinet Office, where the prime minister wants him to help the government to do "joined up thinking".

But he is also very worried about what many see as a crisis in economics in Britain. That is the subject that "flashes up immediately on the radar screen", confides the outgoing head of the Economic and Social Research Council.

"It is becoming increasingly difficult to recruit good British economists into universities ... I mean the levels are really low," Amann says.

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The council has been trying to find out what the causes of the decline are, and the more deeply it looks the more worried it becomes. It has commissioned a report, to be published next month, which paints a stark picture. The number of British students taking doctoral degrees in economics is in freefall. There are declining numbers taking A levels in the subject - more sixthformers are now studying sociology than economics:

"I find that worrying," Amann says. And posts in British universities are virtually impossible to fill with homegrown talent.

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Certainly low salaries in academia compared with the fat-cat salaries in the City partly explain the exodus. But they are not the only cause. Amann believes there are fundamental problems with economics as a discipline that also need to be addressed.

Amann, whose own research focused on science policy in the former Soviet Union, says a lot of work in the field "is becoming very technical, theoretical and disconnected from evidence". Analysis of statistical data sets is favoured over the grind of original field work.

It is hard to see the application of such abstract and complex modelling to the economic problems of the real world, and this, thinks Amann, is one of the discipline's problems. But if this is the case, then the solutions being mooted are very much rooted in the real world. Generous salaries - up to Pounds 100,000 for economics professors has been suggested - could help pull young British economists back into the academic arena.

Funnily enough, this is the ball-park figure Amann has been offered to take up the directorship of the newly created Centre for Management and Policy Studies. Located at the heart of a beefed up Cabinet Office, the centre will be both a think-tank, with access to the "best new thinking on current issues", and a means of exposing top civil servants to latest approaches to management and training.

As director of the centre, 56-year-old Amann will have permanent secretary status and report directly to cabinet secretary Sir Richard Wilson. He is understandably cautious about going into details about his new post: "With such a significant job, I need to talk to all the stakeholders first," he says diplomatically.

But he is willing to reveal that the setting up of the centre is a recognition that while civil servants have, over the past 15 years, become much more efficient in delivering policy, their "overall effectiveness" has suffered: "Civil service departments have found it difficult to work together," Amann explains. "They have lost the capacity to be reflective about policy issues. It is time to pause and try to define what the role of the civil service is in policy-making and how it can be better supported."

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Academic researchers and think-tanks outside the university sector will have a "very big" role to play in the activities of the centre, their work feeding not only into policy-making but also into the training of civil servants. "We want to be sure current members of the senior civil service and those actually being trained for it are more at home with leading-edge research and are able to draw upon it for their future thinking," he says.

The setting up of the centre was announced last year. Some regard it as further evidence of the increasing centralisation of power by Blair, complementing his moves towards establishing a more presidential style of governing. But Amann robustly rejects such notions: "The idea this is a move towards centralisation is just wrong. If you let people into government on the scale we are contemplating, so that civil servants meet with people who do the original thinking face to face, so they are not reading reports of reports, that has got to be democratising."

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While the centre is to be located in the Cabinet Office, it is intended to have an impact right across the civil service to help create an environment conducive to "joined up thinking" and bring to an end the divisive fiefdoms that are part and parcel of Whitehall intrigue. So, does this mean Amann is going to be part of Tony's "policy police" or one of his band of "fiefdom fighters"? "Absolutely not!" he laughs. "That is a pretty extreme and incorrect way of looking at the whole thing."

Rather, his task will be to help Whitehall get to grips with "wicked issues", problems that are difficult to deal with because of their inherent complexity: "Often such problems are only approached with a partial perspective, which means only partial intervention. Things like crime, educational performance, housing ... these are all connected in complicated ways and it is an intellectual challenge to try and unravel what those causal relationships are."

The implication for academic researchers working in these fields is that their work needs to be interdisciplinary. He is particularly keen on encouraging "evidence-based policy" in Whitehall, with academics helping to evaluate the merits of policies that have already been implemented elsewhere in the world - like Welfare to Work.

The centre will have a budget of Pounds 20 million, much of it for the running of the Civil Service College in Sunningdale, where elite civil servants are trained. Clearly, with Amann charged with bringing new approaches to training to bear, the college is destined for a bit of a shake-up. "Policy-makers, while extremely efficient in many ways, have found it difficult to find the time really to reflect because they have been under such pressure."

So, is there an analogy here with academics, struggling so hard to cope with the administrative burdens of the research assessment exercise and the teaching quality assessment that they lose sight of the bigger picture? "Well, I would have to say it is the same problem ... we have to be careful to preserve time for original research, otherwise there is an illusion of activity without depth to it."

Which brings us neatly back to the crisis economics finds itself in. Maybe it is all the fault of the RAE? "It is only a hypothesis, but people can do brilliant, desk-based theoretical research, get it published in top journals and that is great. But if the research involves going into companies, trying to understand how they operate, going to strange parts of the world where you have to know difficult languages, interpreting culturally different behaviours, then it is going to be a long time before you write that book or any articles."

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Additional reporting, Simon Midgley Business and management books, pages 31-34