Friday, May 1, 2009

Study Economics

3 comments:

Gregory said...

Economics salaries are strongly favorable only for those with 10-20 years experience. Nevertheless, the results are remarkable for a profession that utterly and completely failed to predict a major, global economic contraction even a few months before its onset. Given that BEA backdated the start of the recession to Q4 2007 and most economists hadn't caught on until well into 2008, even that initial assertion is generous. The profession remains split about how long the recession will last and what are the best mechanisms to deal with it. We may yet slip further into recession, and--on the other side--we may lose control of inflation and reigning in all this excess liquidity.

Far from keeping itself above the fray of politics, economics is itself a major source of divisiveness among Americans. Has monetary policy hit its limits? Is the stimulus bill simply straddling us with debts while accomplishing nothing. From the economics profession, little is certain. All things considered, the profession's track record of late is looking pretty dismal.

Sorry, Professor, I don't intend to target you personally. If my attacks on the profession are way off base, I apologize. Maybe as a regular Americans I could be given a little slack. Maybe I am holding economics to too high a standard. My industry, Information Technology, gave the world not only Moore's Law (yay) but also Windows Vista (sorry about that). We gave the world Google (yippee) but cannot deliver more than 30% of our projects on-time and under budget.

Patrick Emerson said...

That's quite all right, that's what forums like this are all about. I don't think it is a condemnation of the entire discipline in general, and I don't have any concern that most economists did not predict this crisis as most of us are unaware of the breadth and depth of the whole derivatives markets (though some of those that did tried to sound the alarm). The best analogy I have heard is the forecaster that fails to predict a tornado. We can predict the weather pretty well but aren't so good at extraordinary events.

What I find most interesting is that macroeconomists are getting all the blame, not finance economists. And especially that industrial org. economists and law and econ types who study principal-agent problems and incentives in contracts haven't be a part of the public flogging. Clearly the biggest failing of economics in all of this is that we badly misunderstood the internal incentives of big banks in the face of a loosened regulatory structure.

What this chart shows, I think, is that economics as a major provides students with a host of quantitative and logical skills on top of some specific knowledge which turns out to be pretty useful in the American economy of the 21st century.

It is also the most popular major at schools like Harvard, Yale, Princeton and Duke, which also suggests that it offers students a lot in terms of intellectual stimulation.

Dennis said...

It is also the most popular major at schools like Harvard, Yale, Princeton and Duke, which also suggests that it offers students a lot in terms of intellectual stimulation.Surely it is also popular because people think they can make a lot of money with it, yes? Even at such prestigious schools, I would imagine this to be a major motivator...