Should economists aspire to be academics or to work in government?

by on January 6, 2014 at 7:39 am in Data Source, Economics, Education | Permalink

From Scott Jaschik at InsideHigherEd:

The study was based on data from the National Science Foundation’s Survey of Earned Doctorates, and also on surveys of economics Ph.D.s who entered or left programs in certain years. The work was conducted by Wendy Stock, professor of economics at Montana State University, and John Siegfried, professor of economics at Vanderbilt University.

Comparing four cohorts of economics Ph.D.s by year graduated (from 1997 through 2011), the study found that while a majority still enter academe, that share is going down. And while salaries for those in business and industry exceeded those in academe throughout the period studied, the time span saw salaries in government grow such that they too now exceed those in academe.

In 1997 63.7% of new economics Ph.d.s went into academia, as of 2011 it is 56.3%.  The government to academia salary over that same time went from 0.87 to 1.17, see the chart at the initial link.  For instance:

…for those who earned Ph.D.s in 1997, the average annual salary increase was 8.2 percent. But for academics that was 5.7 percent, while for non-academics it was 15.0 percent.

You can earn more if you were hired later:

“Indeed, the median salaries of graduates of full-time permanent 9-10 month academic economists hired in 2002-3 actually exceeded the median 2003 salaries of their counterparts initially hired in 1997-98,” the paper says.

There is a marriage penalty for women but not for men, and the paper reports this:

The surveys of new Ph.D.s also asked them about the doctoral education they received. Among the findings:

  • Most said that the overall emphasis in their programs was “about right.”
  • Most also reported too little emphasis on “applying economic theory to real-world problems,” “understanding economic institutions and history” and “the history of economic ideas.”
  • Mathematics was viewed by most as more important in graduate school than in their careers.
  • Skills in application, instruction and communication were more important in their careers than in graduate school.

Here are related thoughts from Megan McArdle and from Bryan Caplan.  Can any of you find a link to the actual paper on-line (try this: http://www.aeaweb.org/aea/2014conference/program/retrieve.php?pdfid=305#sthash.Avt8kMpt.dpuf)?

Ray Lopez January 6, 2014 at 7:46 am

We need to see a drop in economists, same as what happened last year with law students. A drop. A decrease. A negative increase.

That’s because economics is snake oil peddling. The economy is by and large non-linear and though policies matter for growth (if growth is what you want–compare the Byzantine empire and others that lasted 1000 years with wage and price controls and hereditary occupations–and yes I do personally want growth over stability), it is also true that politicians largely listen to their constituents in a free market, and not to economists. What good are economists then? It’s to preach to the choir that believes they can forecast the future, akin to ‘star analysts’ in the stock market. It’s a celebrity and fad driven profession, not a serious profession. At best, it resembles the profession of historical studies and history, but with obscure and mind-numbing math models. Like chess, economics is a glorious waste of time. See if I make first comment…

Finch January 6, 2014 at 9:45 am

I don’t know. Aren’t most economists really employed as programmers with a decent stats background? They aren’t out there doing macro or any of the other wishful-thinking-based research topics of academia. Real economists are out there helping marketing campaigns get a little better and things like that.

I don’t think there’s anything inherently snake-oil about that use of economics training.

ZZ January 6, 2014 at 11:52 am

So true. I and all my former classmates all do something similar to this. Economics grads outside academia is mostly just common sense stats with a little computer science and programming. The “data science” world is ideal for economics grads of all types.

Explodicle January 6, 2014 at 12:35 pm

I was about to say the same thing. If you know something about markets, get out there and help them! Put your money where your mouth is. Academia will just censor you and waste your time, and the government will selectively hear whatever helps major campaign donors.

leftistconservative January 6, 2014 at 7:57 am

maybe they should aspire to be priests. After all, economics is the theology of the elites.

prior_approval January 6, 2014 at 7:59 am

‘Should economists aspire to be academics or to work in government?’

Asks an academic economist paid by the Commonwealth of Virginia as a state employee.

It certainly does not have to be either/or. And in the case of economists employed in state funded institutions, the distinction is essentially disingenuous.

Yancey Ward January 6, 2014 at 10:20 am

For once, I agree with PA- I too found the distinction made kind of hilarious. I would even go further, though- it seems to me all of the academies are basically state institutions these days.

Turkey Vulture January 6, 2014 at 3:53 pm

Agreed. Even ostensibly private institutions are funded by government-backed loans and tax-deductible donations.

Though I guess with the former it is more accurate to state that those academics are funded through the indentured servitude of the students who they are occasionally forced to teach.

wiki January 6, 2014 at 8:41 am

Based on this paper and related ones, the distinction actually seems quite relevant. State funded universities have not seen salary increases different from the median university and often trail private ones. In contrast, government agencies have had larger pay increases over the last decade or two even for non-elite positions in the FTC, regional Feds, etc.

mavery January 6, 2014 at 8:52 am

I would argue that math is more important in graduate school than in your career for mathematicians and statisticians as well as well as economists. It’s in part a signaling device. The hardest math anyone does in their life will almost certainly be in graduate school. Real world stuff (in my albeit limited experience) is about finding creative ways to apply the tools you’ve developed in graduate school. Your job is to find the right way to approach the problem, not invent something new.

The Other Jim January 6, 2014 at 8:55 am

There is a very fine line between working in academia and working for the Government.

And if these are the 2 main options, it explains why 98% of them are statist Krugman clones.

Bill January 6, 2014 at 9:35 am

What does working for Mercatus or Cato count as?

prior@approval January 6, 2014 at 11:08 am

Relying on donations for your paycheck.

Hopaulius January 6, 2014 at 12:46 pm

What does working for government or academia count as? Relying on taxpayers for your paycheck. Why not consider working for business? Because that is the only place where being wrong can get you fired.

prior_approval January 6, 2014 at 1:39 pm

‘Why not consider working for business?’

The Mercatus Center, or the organization formerly known as the Charles Koch Foundation, are not businesses in the customary sense – their sponsors are unconsidered with profit as measured by dollars generated by the organization itself. Instead, the people supporting those (tax favored) institutions are concerned about influencing public policy – and have no tolerance for anyone breaking with organization’s party line.

Though if one is cynical enough, such organizations are part of the true business of DC.

Hopaulius January 6, 2014 at 8:10 pm

Don’t for-profit corporations hire economists? I would think especially large corporations would have an interest in tracking trends and developing in-house economic forecasts tailored to their business models. Or is it really the case that economics is only about developing government economic policy, which would make it a subdivision of political science?

DC Economist January 7, 2014 at 8:40 am

I think the best analogy to understand the market for economists is to compare economists to transportation engineers, who specialize in building roads and bridges. Economists specialize in economic infrastructure, not transportation infrastructure, but in many ways these fields are similar.

Just like trucks, trains, and ships rely on public transportation infrastructure, a well-functioning economy requires economic infrastructure — skilled monetary policy, an efficient tax system, regulated banking and energy sectors, and economic and labor market data to support economic policy and business activity. Economists specialize in the design and mechanics of this economic infrastructure. That’s why there are so many job opportunities for economists at many of the agencies that control monetary and fiscal policy and regulate important energy, banking, and financial markets.

In the private sector, most economists are employed in consulting firms to help businesses minimize their tax burden (transfer-pricing) and provide econometric analysis for anti-trust and labor discrimination lawsuits. It’s not hard to understand why someone who cares more about the U.S. economy than about money might be more attracted to work in the federal government than some of these jobs, which do pay a good deal more but are focused on making clients money, which is generally less professionally and intellectually rewarding than much of the work in the public sector.

Don Freeman January 6, 2014 at 9:42 am
Eric Falkenstein January 6, 2014 at 9:55 am

Given most people think economists understand business in general, isn’t it ironic that the private sector is not even mentioned? All those C and B students are more valuable than those who know basically wrote the book on how to maximize profits.

DC Economist January 6, 2014 at 10:47 am

I am in this cohort of economists (although ashamedly a non-responder to the NSF SED survey – I filled it out but neglected to mail it). And I did chose a government job over an academic offer and I’ve never been sorry that I did.

All my academic offers (2002) were from public institutions, mostly on the west coast and mid-west. For the next five years of my career, almost all of those departments had pay freezes. Meanwhile, I was quickly promoted in my government job. While the cost of living in DC eats a comfortable share of that salary differential, it was decidedly better financial move in retrospect to take the federal job. (I did not know that ex ante; my federal starting salary was actually lower than the starting pay for my best academic offer, and I assumed I was making a financial sacrifice to take a job I genuinely preferred.)

You can make even more money in consulting, but it’s a different world, and I’ve known a fair number of economists who move back and forth between consulting and government, depending on their relative preference for money vs. interesting work. Colleagues that have moved back and forth between academia and government have often voiced to me their extreme surprise how interesting and rewarding the work can be.

I just got back from recruiting at the AEAs and as always, I remain truly surprised how strongly candidates prefer academic jobs to government work. Academic jobs often have serious drawbacks — geography, teaching, collegiality (the incentives are stronger for us to all get along on this side of the market), the gut-wrenching uncertainty of the tenure track. Government jobs often offer better opportunities to do research (especially empirical work) and find similar co-authors. DC is also a great place to be an economist – lots of jobs, lots of interesting work – and the policy work is often more rewarding than teaching can often be. The one serious drawback is a lack of sabbaticals and summer research time. I often groan at the inevitable co-author email flood in May – let’s get back to our paper! – while I’m still working as hard in June as I was in March. But that’s not enough to tempt me back to academia – I’m much, much happier here.

But every year I offer a job to a junior candidate who turns me down for a really marginal academic job. I understand being turned down for a good-to-great academic offer, but turning this job down for a really marginal academic department makes no sense at all to me. And yet so many junior candidates can’t seem to imagine themselves in another line of work that they torpedo their own research opportunities to take a lower-paying, high-teaching load, academic job. Maybe they are just not that into research, and would rather have their summers off than be placed somewhere where they will work harder but have better opportunities for research. Or maybe they worry that all government jobs are being some boring government bureaucrat and they can’t see past that initial bias (those jobs do exist, but those agencies aren’t often looking for Ph.D. economists at AEAs to fill them).

Graduate students really should be more strongly considering some of the great government jobs in the DC area. You really can have a great, rewarding career here.

DC Economist #2 January 6, 2014 at 11:46 am

Also a government economist, I can’t really disagree with anything here. I would add that I think a lot of job market candidates dream about summers and sabbaticals and they imagine that an academic job is less stressful or more flexible than a government job, but my experience is the opposite. Jokes about lazy government workers aside, my work/life balance is awesome and I am able to research prodigiously.

DC Economist #3 January 6, 2014 at 1:13 pm

Being an economist working for the government is so much better than most people think.

mike January 6, 2014 at 1:15 pm

Are there people out there who think taxpayer funded sinecures aren’t nice for the people who have them?

prior_approval January 6, 2014 at 1:44 pm

Ask someone whose tour in Iraq was involuntarily extended a couple times about what they think about their ‘taxpayer funded sinecure.’

Explodicle January 6, 2014 at 1:55 pm

@prior_approval: It’s hardly a “sinecure” if you can’t quit and involves hard physical work.

DC Economist January 6, 2014 at 1:55 pm

I realize that there are people for whom all taxpayer-funded positions are, by definition, sinecures. But I will point out that most academic jobs are also at taxpayer-funded public universities. Even private university pay is heavily subsidized by taxpayer-funded federal loan guarantees and grants from federal science foundations.

So really, from your perspective, I am comparing one type of taxpayer-funded sinecure to another here.

DK January 6, 2014 at 7:44 pm

I am comparing one type of taxpayer-funded sinecure to another here

That’s very true. There is a lot of fat that can be trimmed. The country will be much better off with both academic and governmental sinecures cut by several-fold.

prior_approval January 7, 2014 at 3:01 am

‘It’s hardly a “sinecure” if you can’t quit and involves hard physical work.’

You think a lot of the pre-2001 enlistees thought they would be fighting a few years in Iraq/Afghanistan during their enlistment, with their term extended involuntarily?

However, good point about the term ‘sinecure’ – ‘A position or office that requires little or no work but provides a salary.’ Though does anyone remember what many people were saying about military members hanging out in places like Germany in the era of the ‘peace dividend?’

Explodicle January 7, 2014 at 9:03 am

“You think a lot of the pre-2001 enlistees thought they would be fighting a few years in Iraq/Afghanistan during their enlistment, with their term extended involuntarily?”
No.

Do I think they still couldn’t quit “at will” even then, and that it required hard work?
Yes.

DK January 6, 2014 at 11:01 am

56% PhD remaining in academia is incredibly high. In biomedical sciences that number is no more than 25%, probably a lot less.

RPLong January 6, 2014 at 11:57 am

“Give him threepence, since he must needs make gain of what he learns.”
– Euclid

mayk January 6, 2014 at 3:34 pm

Interested to know if this evolves over time in grad school or is there any difference between grad school application and exit? When applying to econ grad school most of my professors at the time told me that indicating in my application that my intention was to go into gov’t work/research rather than academia would hurt my changes of acceptance and/or funding. I assumed this would be more likely for schools with higher rankings.

Rusty Synapses January 6, 2014 at 3:38 pm

This seems easy to me, at least in terms of where it’s going. Academia is already hit by the market forces creating more “winner take all” – my brother in law is a very senior econ professor at a top tier school, and his career and life has been great – but for newer academics/PhDs, only a few lucky ones will have that kind of life, and many more will be adjuncts – it’s like the transition that law firms went through (I used to be a lawyer – equity partner at a big firm) – the top (equity partners) makes more than ever, while more and more lawyers are contract lawyers or non-equity partners, (= not on the “tenure” track). In neither case, though, have I/do I see government lawyers/economists subject to the same kind of forces. In both law and economics, I think fewer people are fooling themselves that they’ll “win” so government will become more popular.

dead serious January 6, 2014 at 5:54 pm

I also found this an odd “choice.”

What about private sector opportunities? Goldman Sachs has a Chief Economist, for example.

Marc Roston January 6, 2014 at 10:55 pm

As a non-academic member of the 1997 cohort, (summer ’96,) I believe I’ve answered the surveys at least twice.

However, my recollection is that the “Employment Outcomes” salary measures are way off because they specify “salary” and exclude bonuses, etc. For those toiling away in midtown Manhattan, “salary” may be dramatically lower than “total compensation”. This will matter somewhat immediately for the newly minted PhD, but dramatically in the subsequent surveys.

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