Trudie’s advice to would-be economists

by on July 12, 2006 at 1:44 am in Education | Permalink

One loyal MR reader, Lee Beck, writes:

You handled love advice so well (Dear Tyler/Prudie)--how about career counseling?
 
MR is my favorite blog, and this is weighing heavily on my career plans. Is this foolish?

My idea is that economics can bridge the gap between my love of math (like real-analysis) and my love of political philosophy (like that of your man Hayek). Sadly, this hasn't worked out so far. I thought my micro and macro courses last year were bores. This confused me so much that I took my obsession with Richard Posner to be a sign that I should go into law instead of economics. Is that crazy?

How can I know whether being an economics professor is for me? What if I worked through Debreu's Theory of Value next semester and liked it. Would that be proof? What's the hard stuff that I should love before entering the field?

The answer, of course, lies beneath the fold...

Trudie responds:

It is not foolish to want to become an economist, but it is foolish to be attracted by this blog.  Yes we have serious posts about the option value of gold.  But graduate study in economics will not sample "Markets in Everything" (remember the Whizzinator?), not consider whether teenage Thomas Jefferson would have a crush on Veronica Mars, nor will it ask "Why Don’t People Have More Sex?".  Liking this blog, on average, is a sign that you have broad interests and thus are ill-suited for graduate study in economics.  There is also, dare I say it, a chance that you are simply a silly goose with time to kill.  On the other hand, Greg Mankiw is now reading Jacqueline Passey, so anything is possible.  Welcome, Bizarro Universe.

Two core groups of people are well-suited to be economists:

1. You math GRE score is over 800, you are totally focused, you love working long hours on your own, and you have good enough letters of recommendation to get into a Top Six or perhaps Top Ten graduate school.   Note that white Americans from this category have been partially preempted by competition from foreigners.

2. You could be happy as an academic without much of a research career.  Working at a teaching school is a rewarding life, albeit a poor one relative to your investment in human capital.

There is a third category, although you will fall into it (or not) ex post:

3. You do not fit either #1 or #2.  Yet you have climbed out of the cracks rather than falling into them.  You do something different, and still have managed to make your way doing research, albeit of a different kind.  You will always feel like an outsider in the profession and perhaps you will be underrewarded.  But you will have a great deal of fun and in the long run perhaps a great deal of influence.

Sadly, the chance of achieving #3 is fairly low.  You need some luck and perhaps one or two special skills other than math.

Did I mention that if you have a clearly defined "Plan B" your chance of succeeding at #3 diminishes?  It is important to be fully committed.

Greg Mankiw is a classic #1.  Brad DeLong started off as a #1, although he has been evolving into a #3.  Maybe he was a #3 in hiding all along.  I’ve been a #3, although with a dose of #1 from having gone to Harvard.  Alex is a classic #3.

Another thing: Don’t expect any classes to be interesting.  How should I put it?  "Most professors suck."  But a good professor can make almost any topic interesting.  So your reaction to the courses is just a reaction to the instructors you have sampled.  Treat that as noise, although I will ask why you are worse at picking teachers than at picking advice columnists.

Should you become a legal academic?  You will have a greater chance to work with ideas and concepts.  A greater chance to write books and also to read them.  You are more likely to strut, wear three-piece suits, and speak in stentorian tones.  If I were starting out today, perhaps I would take that route, although I would fail at the strut and the suits.  The pay is higher and upward mobility is easier to accomplish.  But overall the quality of intellectual debate is higher in the economics profession.  In economics the return to rhetoric is lower and you can’t get away with blather.  Your articles are refereed by your peers, and not by graduate students (well, it depends what journal you submit to…).  The academic world of law has weaker quality filters, which of course also makes it more open to new ideas.

Your choice, but note that many would-be legal academics end up lured by the private sector or government work.

And by the way, buy her roses, ask her to marry you, and live happily ever after.  The rest probably won’t matter so much for your happiness and life satisfaction.

David Wright July 12, 2006 at 2:41 am

Good God, you do not need to decide as an undergraduate whether you will be a professor! Make decisions like this “at the margin”, which is to say: continue to study a subject as long as you enjoy doing so. (You don’t have to love the lectures, but if you don’t love the lectures, you had better love working through the textbook on your own.) If your continue to love learning about the subject as an undergrad, graduate student, postdoc, and associate, then you will likely end up as a professor. If at any point you cease to enjoy the subject, do something else. Don’t worry too much about not landing on your feet: if you are good at math and manage
to get some undergraduate degree, you won’t starve.

anon July 12, 2006 at 3:17 am

You know the maximum posible score in the math section of the GRE is 800, right?

Luis Enrique July 12, 2006 at 3:25 am

Is anybody else out there about to embark on an economics post-grad course and thinking …. 1. -er, no ….2. er, no … 3. er, I wish, but not likely? Thank God for you David Wright

quitacet July 12, 2006 at 9:04 am

The question is, what’s the best way to set up an exit strategy should you find that you’re neither 1 2 or 3 after all? The quant skills should be pretty transferable to industry but will the lifestyle?

don Hosek July 12, 2006 at 9:13 am

The GRE General Math test does go up to 800, but it essentially measures your understanding of high school mathematics. If you can’t score 800 on it, then perhaps graduate study of economics is not the best option.

Alex July 12, 2006 at 10:03 am

“Liking this blog, on average, is a sign that you have broad interests and thus are ill-suited for graduate study in economics.”

On average you may be correct, but I’m not so sure. I am a prospective econ grad student (currently working on BA/MA), and I read this blog as break from more rigorous material. I find it very interesting and enjoyable, but it has little to do with higher-level econ. BTW, where would you class those looking at business econ research?

hamilton July 12, 2006 at 10:18 am

I wish to echo SM, but from a different point of view. How should those of us who would consider a graduate program in economics engage in the consideration of GMU’s graduate program? It isn’t in the top ten, but it has a lot of excellent faculty in some really fascinating areas. Are we destined for a life of (2) or (3) if we go to GMU?

no July 12, 2006 at 11:38 am

What if I worked through Debreu’s Theory of Value next semester and liked it. Would that be proof?

That’s not the book to read. Don’t.

What’s the hard stuff that I should love before entering the field?

Take a look at serious research in, say, three different areas in economics. E.g., read “Putting Auction Theory to Work” by Paul Milgrom, papers by Acemoglu (http://www.vanderbilt.edu/AEA/JohnBatesClarkMedal.htm), and classic papers on finance (Black-Scholes; books by Merton (Continuous-Time Finance) and Cochrane (Asset Pricing)). If you manage to get through the books and papers (and don’t expect it to be easy) AND find at least one of the areas exciting (i.e., you’d be willing to spend 10 years of your life on it), you should go to grad school.

However, only go if you get accepted to a top 5-10 department; the probability of Tyler’s (3) is negligible.

Noah Yetter July 12, 2006 at 12:31 pm

Speaking from experience, #2 is not sufficient if #1 does not hold.

no July 12, 2006 at 12:48 pm

Tim S. — go to law school.

Steven McMullen July 12, 2006 at 3:17 pm

Tyler seems to be a little pessimistic here. People getting Ph.D.’s even from programs ranked below the top 30 may often end up with rewarding and interesting jobs which might not involve teaching at an undergraduate institution. There are many positions in NGO’s, government, and various industries which pay reasonably well and for which Econ Ph.D.’s are very competative. Overall, the unemployment rate for Econ Ph.D.’s is very low, and they find it easier to get jobs than those with many others with advanced degrees.

Additionally, Law school does not seem to be all its cracked up to be. You have to be really really good to get one of the top academic positions, and for many law students, any math skills you have may go to waste. And the law degree is very expensive considering that many of the people who get their degrees do not end up practicing law.

mickslam July 13, 2006 at 12:12 am

Are you this funny in real life? Its pretty good advice and extremely funny.

anonymous July 13, 2006 at 12:51 am

–Good God, you do not need to decide as an undergraduate whether you will be a professor!

Actually, you do unless you are a classic #1, and then you’ve defacto decided anyway, because the system pushes you in that direction unless you do something to fall off the path.

“love of learning your subject” doesn’t teach anyone how to DO research–how to pick a research topic, how to write a paper, how to complete it by the necessary deadline. It doesn’t teach you how to pick an advisor, or a mentor. It doesn’t help when you hate your thesis, office mates, or folks in your dept.

only classic #1s find those things easy, and even then, it’s not the grades–it’s an intution about how academia works. the rest of those who might enjoy academia will need to keep finding out how to make that workable, and starting as an undergrad is the right time.

finally, if you’re NOT going to like academia, figuring that out BEFORE you go to 3 post docs is helpful. the sooner you begin questioning it the better.

Russell Nelson July 13, 2006 at 3:43 am

These tests go to eleven.

liberty July 13, 2006 at 4:20 am

I am a little stunned by this debate. I have always enjoyed math and used to be good at it, compared to my peers. I have not put myself to the test all that much recently, but I figure I am as good as the average undergrad (B in Calc I without trying much, have not done Calc II yet, but worked through “Mathematics for Economics and Finance” – Biggs on my own). But I would not expect that heavy-maths is the major component required for a good economist with good prospects.

I would think love of economics and ability to work with theory, models and various methods, hard working and never bored with the subject are much more important. The difference between the no-maths biology and the some-maths biochemistry and the heavy-maths chemistry, physics and maths dept is somewhat maths — but there are some with the maths that just can’t figure out the biochemistry of biochemistry, and meanwhile quite a few in the biochemistry dept that make sure to learn *just* the least required maths to get them through. I would imagine that its the same in economics.

Additionally, one can do a #3 fairly easily I should think – working in the private sector, writing independently and then working back in to academics over time. Again, the most important factor here being the love and devotion to the subject. Am I crazy?

Of course, staying up all night working on independent projects – that could help OR hurt…

RWP July 13, 2006 at 4:46 am

I am one of those morons that thinks life won’t be the same unless I get a Ph.D. in Economics. I scored alright on the quant section of the GRE; 780. I have a pretty high undergrad GPA. Moreover, I am crazy enough to subject myself to torture; I am taking rocket speed Calc 2 and Matrix Algebra. The fire hydrant has not blown my head off yet but it sure has ruined my summer.

Why am I doing this? I don’t really know other than I really want it. I start a masters in Russian Studies in the fall at U of Toronto and hope that I can get into Econ grad school after that. If I finish before 32 I will be happy. All this flies in the face of logic because if you look at the average pay of a professional Political Scientist and an Economist I should be getting the former. Maybe if I get a poor matrix algebra grade that is where I will be headed.

Finally, do economists ever sleep? TC was posting at 3 am eastern time at least. If he is a measure I should be in good stead. I never sleep – calc and matrix test tomorrow!! Yahoo!

jim July 13, 2006 at 9:56 am

That there is an over-indulgence of mathematical complexity in economic theory by the profession was periodically and prominently throughout the last century. There are signs that this debate may be headed in a productive direction as publications are emerging that empirically assess the benefits and costs of complexity in economic theory. Such studies are being made possible by the decline in cost in doing them; when Don Gordon hypothesized that increased complexity in economic theory reduces the ability to operationalize it the cost of testing his propositions was prohibitive. Happily, because of the existence of electronic databases (like the Web of Science, JSTOR, etc.), the internet, and personal computers Gordon’s hypothesis has been assessed empirically (with the evidence confirming it).

My point is that the debate during most of the last century about the “fruitfulness” of mathematical complexity in economic theory was largely fruitless because the costs of testing the arguments being made were prohibitive.

dearieme July 13, 2006 at 10:09 am

“I would disagree”: that absurdly redundant and pompous “would” must surely put anyone with good taste off studying law.

save_the_rustbelt July 13, 2006 at 12:42 pm

Get a PhD in accounting, there is a terrible shortage and you can always do honest work if you don’t like academia.

Jake July 13, 2006 at 1:56 pm

I am in the same boat, RWP. Only I decided to do it my last year and a half of college, so its been much easier on me. I don’t take the GRE until November, though.

And I would rather sandpaper my entire body than get a PhD in accounting to do “honest” work.

ThadRyan July 13, 2006 at 3:02 pm

Anyone concerned about the gradual transition from the trappings of the traditional University (tenure, esteem, flexible work schedule, good benefits and pension) to the for-profit model a la U of Phoenix with the part-time faculty sans benefits and job security?

I suppose that’s a good reason to become highly demanded – you’ll never want for work, and you can write your own ticket. Perhaps we’ll see more economics students enter finance and accounting after all?

Timothy July 13, 2006 at 3:53 pm

“Liking this blog, on average, is a sign that you have broad interests and thus are ill-suited for graduate study in economics.”

What does that say about the authors, then, I wonder?

liberty July 13, 2006 at 5:31 pm

>if its a choice between making peanuts teaching economics at a third rate liberal arts college, or bringing in six figures toying through principle agent models and teaching MBAs at a top 20 business school, its sort of a no brainer, isnt it?

How about making peanuts working at a decent (but not top tier) school where you can do interesting research and teach; plus doing some industry/policy private sector work for additional $$ such as summer consulting?

I have to think that their is an ulterior motive to some here who paint a bleak picture for future economists. I’m not getting scared away, however.

liberty July 13, 2006 at 11:21 pm

Complexity is important, but complex systems complexity, not static state mathematics.

Blissex July 14, 2006 at 11:04 am

«That there is an over-indulgence of mathematical complexity in economic theory by the profession was periodically and prominently throughout the last century. There are signs that this debate may be headed in a productive direction as publications are emerging that empirically assess the benefits and costs of complexity in economic theory.»

But the maths obsession will resurge and the ”waste of time” on empiricism will stop..

The wider purpose of economics is to prove that factor prices depend solely on productivity, ideally in the most impressive looking (and obfuscated) way.

If economics proves that, then it is good, if it does not, it is bad.Where good/bad relate to chances of getting a consulting or expert witness contract, or getting an endowed chair, at a top-10 institution.

Unfortunately empiricism is already producing quite a bit of ”bad” economics, like studies that show that raising the minimum wage does not increase unemployment but reduces profits, if it has much of an effect. This won’t last, because it is anti-American.

Blissex July 14, 2006 at 11:27 am

«How about making peanuts working at a decent (but not top tier) school where you can do interesting research and teach;»

Because easily getting money to do research in economics does not relate to being in a top-6 institution?

«plus doing some industry/policy private sector work for additional $$ such as summer consulting?»

Because industry/policy work easily goes to people whose authoritativeness is not backed by a top-6 school background? Because the main reason why that industry and policy work is commissioned is rarely if ever advocacy?

BTW, in a similar discussion on DeLong’s blog, a commenter said quite reasonably:

http://DeLong.typePad.com/sdj/2006/03/x_of_life_is_ha.html#comment-14892059
«Not everyone from the Ivy League schools who wants to teach can teach at that level, so most of them step down to, let’s say, Minnesota. Only a few from Minnesota will reach the Ivy league level, and most of them won’t be able to teach at the Minnesota level, either, so they step down to the Portland State level. Portland State PhD’s drive bus.»

http://DeLong.typePad.com/sdj/2006/03/x_of_life_is_ha.html#comment-14906683
«It really depends on the subject matter. You can do well with a PhD in economics (or for that matter, law) from many places, since you can get jobs in banks, consulting and the like. If you want a job using your political science PhD there are only about 12 places worth writing your dissertation. And for sociology, if you aren’t in the number 1 program, forget it.»

liberty July 14, 2006 at 2:31 pm

Jim,

Occams razor tends to be understood that a simpler explanation is better – tends more often to be true. This could as easily mean that supply and demand is a better explanation than a global conspiracy to keep production low in countries with high population rates, for example. As long as a theory can explain empirical evidence and takes into account short and long term effects, since we live in a world with time, then yes, it should be kept simple. The world is very complex because of time and because of consequences within the world – too simple a model simply won’t work. A single assumption is not better than multiple assumptions if the single assumption is wrong and destroys the ability of the model to predict correct outcomes – for example assuming a static state – no growth, no time, etc.

Its not only true in economics – think of the old ecological models that assumed a static state. Removal of predators from parks and the shock that occured when the prey species became overpopulated and ate too much, forcing other species into starvation, etc.

“Furthermore, when multiple competing theories have equal predictive powers, the principle recommends selecting those that introduce the fewest assumptions and postulate the fewest hypothetical entities. It is in this sense that Occam’s razor is usually understood.”

This I completely agree with – the problem is that models that don’t allow the complexity of time and consequences, that assume away endogenous effects, that assume as their single assumption a static state do not have the same predictive power. That is why complexity is necessary, in the meaning of complex systems theory.

Blissex:

Its true that many Ivy leaguers end up teacher at lower rung institutions, but the reverse can also happen. As you also point out- a PhD from many places will allow you to do consulting. You seemed to deflect that possibility earlier by asking where the policy and other private institutes would prefer a PhD from. Their are many tiers of private institution as well. In the private sector (as in academia as well) you climb the rungs. You may start out, with your PhD from a third tier institute, at a lower level of policy institute or consulting firm, but you make a name for yourself over the years with your work and independent research, and you climb the ladder.

Bruce Kratofil July 14, 2006 at 4:38 pm

If you are interested in economics, but not especially sure about an academic career, the National Association for Business Economics has a Career Center online at
http://www.nabe.com/careers.htm

alex July 14, 2006 at 6:14 pm

you have a point. i suppose i have already been infused with the bias that anyone who is already 100% positive they don´t want an academic career ought not to be getting a phd in the first place.

i really have no idea what proportion of econ grad students want an academic career, although i would hazard a guess that its a lot higher at the beginning of year 1 than at the end of year 5 (or even at the end of year 1).

Blissex July 14, 2006 at 6:29 pm

«Its true that many Ivy leaguers end up teacher at lower rung institutions, but the reverse can also happen. As you also point out- a PhD from many places will allow you to do consulting. You seemed to deflect that possibility earlier by asking where the policy and other private institutes would prefer a PhD from. Their are many tiers of private institution as well.»

Sure, and in the end what matters is odds, because the odds determine the expected value of an academic career in economics: peanuts for the vast majority who end up in tier N, mansions for a small minority in tier 1, a small minority to be sure with a token presence of non-ivy league graduates.

Now the big question one should ask to anybody who wants to do PhD research in a non top-6 university is: ”do you feel lucky punk”?

liberty July 14, 2006 at 6:48 pm

alex,

My husband is working on his PhD because without it he has increasing difficulty getting a) private sector b) gov lab and c) military jobs doing the cutting edge research oriented work he is interested in; his field is computer science / biology but it works similarly to economics. PhDs are getting more and more important in all fields especially at the cutting edge. I am not positive that I want to teach or do my research at a university but I am 100% sure that I want a PhD.

jim,

How can you know how important the endogeneity effects are if you assume them all away? For example, many investigations of the poverty effects of welfare systems looked at the difference that the welfare system (be it EITC-like or basic income support) had on post-transfer poverty. They compared pre-transfer poverty with post-transfer poverty and then reported the poverty reduction. They also analyzed areas with transfers to areas without transfers and reported on differences in relative and absolute poverty. The problem was that their method did not take into account any endogenous effects that welfare programs might have on pre-transfer poverty. They had already assumed that there wouldn’t be any significant effects. Turns out, there were.

As to the basic model of supply and demand, I don’t think that its flawed. It isn’t a complete testable model of a particular sitaution, its a descriptive model which is then used as a component of particular models and it is perfect exactly as it is. That elasticity changes over time is only relevant to particular uses of the model, where elasticity must be defined.

Supply and demand is an economic law that is true regardless of elasticity, though elasticity defines the specific effect it will have; other models ignore time in such a way as to ignore endogenous or unexpected effects, such as the way that a market rigidity will affect future decisions by firms, hiring and firing, wages and price and then the way that job loss or changes in wages or price will affect demand, etc. The lack of time in that kind of model means that the assumption changed the result from, for example, a net increase in poverty to a net reduction, erroneously.

Eric H July 14, 2006 at 11:00 pm

I quote myself from Bainbridge:

Has anyone read Warren Gibson’s article in the April EconJournalWatch?

As an engineer and an openly amateur economist, I agree with his point, which is that engineers use heavy mathematics to solve problems, while economists frequently use mathematics to obscure them (paraphrasing and taking poetic license liberally). Gibson concludes, “What if real answers to urgent problems could be delivered in plain English? Do economists have the courage to shun the romance of mathematics and produce such answers? Let us hope so.”

liberty July 15, 2006 at 12:39 am

jim said: “All models are incomplete by definition; they are valuable because they abstract from a host of concerns that are largely irrelevant to the factors under consideration”

Sure, but time and consequences are rarely irrelevant in economics. Sadly, many economists have ignored this. As Peter Bauer said about many economic models of the 20th century:

“…the abstraction and aggregation render them irrelvant… they become travesties which divert attention from the essentials and obscure the issues.”

He was speaking mostly of deveopment economists, but it is true equally of most welfare economists (for both meanings) as well as the socialists economists of before-1990 and many macroeconomists today studying all of the above.

jim July 15, 2006 at 10:47 am

liberty:

You wrote: ” “…the abstraction and aggregation render them irrelvant… they become travesties which divert attention from the essentials and obscure the issues.”

He was speaking mostly of deveopment economists, but it is true equally of most welfare economists (for both meanings) as well as the socialists economists of before-1990 and many macroeconomists today studying all of the above.”

I agree completely with this because the aggregation requires a level of complexity in the analyses that foils their applicability to anything. I think you are making my point here, perhaps unintentionally?

liberty July 15, 2006 at 12:28 pm

jim: “I agree completely with this because the aggregation requires a level of complexity in the analyses that foils their applicability to anything. I think you are making my point here, perhaps unintentionally?”

As I said, I do not believe in the “complexity” of mathematical economics in its typical 20th century form — I have said repeatedly that what I do believe in is “complexity science” complexity; which does not aggegate at all and only requires micro-level assumptions (such as response to prices). And I do not see how the old aggregation and abstraction techniques require your definition of complexity either – what is simpler than to assume a static state and aggegate the whole economy into a Solow model and say that all that’s required is more savings? Simple and useless. (if it worked, wouldn’t the Soviet Union be happy today?)

liberty July 15, 2006 at 4:44 pm

jim,

We are probably in agreement, if we could agree on terms :)

jim July 15, 2006 at 7:54 pm

The law of demand is probably the most empirically robost theoretical proposition in the social sciences. Seen any exceptions……………………………? Didn’t think so.

jim July 16, 2006 at 2:45 pm

Chris,

You wrote: “Cowen and DeLong are right. If you can’t get into a top 10 or 15 program, you probably shouldn’t bother if you want to get into academia.”

What about #16, 17, 18, . . . 50? Do you really believe that the top “10 or 15″ have a monopoly
over the professorial training market such that its “probably” not worth going anywhere else?

By the way, I graduated from Purdue University in 1983, and have since had a very enjoyable career teaching and publishing. So if your theory were correct, since Purdue was not a top 15
program in 1978 (when I began graduate studies), I should “probably” not have bothered (unless I am some sort of exception to the rule).

People end up in other-than-top-15 programs for all kinds of reasons. Are the top 15, better
than the others. Sure, that is why they are top 15. Do you really think that an other-than-top-15 degree make it probable that a newly minted Ph.D. in economics will have an unsuccessful academic career?

I don’t.

jim July 17, 2006 at 10:31 am

I thing Jeff’s comments are well put and fairly accurate, although I would take issue with the implicit assumption that he makes that the trends over the past 20 years (upon which he bases his conclusion that “if you want to end up teaching at a top 30 or 40 department, going outside the top 10 for your Ph.D. essentially sets that probability to zero”)are going to continue. One reason that the hiring has gotten more elitist is that the top economics journals has quashed the ability of scholars to critique the work done by those at the top. That is, the top became a self-admiration society over the past 20 year to a greater extent. But I see hopeful indications that this strangle hold over critical scholarship at the top is breaking down. In particular, as Jeff mentioned, we now have Econ Journal Watch filling the critical commentary void (i.e., holding those who publish in the top journals accountable for what they write). Hence, I believe that probability of upward mobility in academia will slowly rise back toward the more reasonable levels that were observed in the era prior to around 1980 (when the top journals really started insulting their articles from criticism from scholars working at lower ranking institutions). This is the counter-trend (to current clubishness) that I am hopeful about.

jim July 17, 2006 at 12:49 pm

Sorry about the spelling and grammar errors in the above comments I posted; I was about to go to teach a class and got in a hurry.

jim July 17, 2006 at 8:35 pm

As I said, seen any exceptions to the law of demand? Didn’t think so.

Assertions to the contrary notwithstanding, there are no undisputed exceptions.

And don’t tell me that Irish potatoes are an undisputed example; NOT.

The fact that the AER and JPE have in the past 13 or so years been entertaining
upward sloping demand models (that are untestable) of course means little (other
than the editors have gotten really loosey goosey).

What is really dangerous are ascientific assertion about the law of demand (that is
assertions without solid empirical support).

Then there is this theory by Oz Shy about network externalities leading to upward
sloping demand; talk about a model whose assumptions defy empirical testing.
Not only that the history of the behavior of firms with regard to such things as fax machines
is in direct violation of the Shy model’s assumption that each firm can buy one and only one
unit (e.g. one fax machine). In the real world lots of firms bought large numbers of units for communicating between branches of a common firm. That is the network externality was captured
in large part by individual independent firms; and LATER the communication between firms blossomed. In short network externalities do not make the case for upward sloping demand.

With one thing I agree, a little knowledge can be quite dangerous.

jim July 18, 2006 at 9:10 am

tc7,

You appear to be generalizing from a sample of one, John List. I could state the name of several who have “made it” in top programs who, while they are probably good mathematicians, are in my view NOT very good economists. But I will not name names, because this is just an opinion I have about several individuals: even if my opinion has merit, it would be a poor indication of the general to use such a small sample.

But what we do know is that criticism of top economists has been for years stiffled by the top journals, and again, as I said above, this era happily appears to be seeing its demise. Again, as I said above, I think there is a good chance that slowly, slowly, the probability of scholars working their way up on their merits will rise. Of course it will take some time to reverse the clubish trend at the top that has been going on for the past twenty or so years. So you are probably correct in the near term that students should expect it to be difficult to work their way up, regardless of their merit as scholars. But, again, I am more optimistic that in the long-run merit will carry the kind of weight it did thirty years ago relative to “where you got your degree”.

jim July 18, 2006 at 11:52 am

The Unknown Professor has a good suggestion. The salary gap accruing to finance is consistent with the notion that emphasizing operationism is valuable (he notes that more econometrics is required of finance students).

Existence proofs of general equilibrium models may impress the publishers of some top econ journals, but where are the operational implications? Ditto for models that generate multiple equilibria: what is the operational power of a model that predicts 20 different solutions?

This salary gap surely sends a signal to students, but it appears that it is also sending a signal to top econ journals because they are increasing publishing empirical pieces. This is another reason for optimism with regard to “the Econ” [tribe].

jim July 18, 2006 at 2:33 pm

PrestoPundit,

It is possible that you might be more optimistic if you read the book:

“Vienna and Chicago, Friends or Foes?: A Tale of Two Schools of Free Market Economics”
by Mark Skousen

I haven’t read it yet, but its on my short list; since hearing Skousen speak several months ago, I’ve been wanting to have a look at it but have not yet gotten to it.

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