What’s an economics major good for?

This is a few years old, but I don't recall having covered it already.  From Patricia Flynn and Michael Quinn:

It is often suggested that Economics is a good major for individuals interested in becoming business leaders. Despite this widespread assertion, little research has been conducted on this topic. Using the Standard and Poor (S&P) 500 companies, this paper examines the validity of such a claim. We find evidence that Economics is a good choice of major for those aspiring to become a CEO. Economics ranked third with 9% of the CEOs of the S&P 500 companies in 2004 being undergraduate Economics majors, behind Business Administration and Engineering majors, each of which accounted for 20% of the CEOs. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major. That is, the share of graduates who were Economics majors who were CEOs in 2004 was greater than that for any other major, including Business Administration and Engineering. The findings also show that a higher percentage of CEOs who were Economics majors subsequently completed a graduate degree – often an MBA – than did their counterparts with Business Administration and Engineering degrees. The paper demonstrates that while women now comprise over half of all bachelors and masters degrees awarded, they remain a minority in terms of undergraduate degrees awarded in Economics and in MBA degrees conferred. Economics programs may try to appeal to more women students as a stepping stone to becoming a CEO, especially as women continue to account for less than 2 percent of the S&P 500 CEOs.

For the pointer I thank Pablo Halkyard.

Comments

A paper by two members of an economics department explaining why becoming an economics major is a great idea. Who woulda thunk it.

Isn't it possible that undergraduates who choose to major in economics (or buisness administration) have a stronger interest in business careers than other majors? That seems a lot more plausible explanation than that economics is particularly good preparation.

At a minimum, shouldn't the study exclude graduates who chose not to follow business careers? If a biology major goes to medical school, or a physics major gets a Ph.D. and follows an academic career, is that evidence that studying economics helps you become a CEO?

Actually, the post should ask a different question. The question shouldn't be: Is economics a degree which will enable you to be a CEO, but, rather, what are the educational attainment levels of good CEOs.

There has been some work on the latter question: what are the educational attainment levels of successful tech companies. Mike Scherer, an IO economist at Harvard, told me (a lawyer with econ background) about a paper he published a paper on this about sucessful tech companies.

His conclusion (from an abstract):

"This paper analyzes data spanning 17 years on R&D expenditures and the educational background of top managers for 221 relatively research-intensive U.S. corporations. The fraction of companies for which at least one of the top two executive officers was educated in science or engineering peaked at 71.5 percent in 1980 and declined slightly thereafter. Controlling for profitability and the industrial fields in which the companies operated, having a science or engineering-educated leader is associated with more intensive support of R&D. A positive interaction between technical and legal education is detected."

So, CEOs with a science and engineering background (and lawyers did well too) were associated with successful tech companies. The logic was that science and engineering execs could better understand and assess R&D projects, and would know better where to place bets (maybe lawyers were good at this as well in terms of protecting IP assets or knowing how to slice and dice or license IP assets??).

Anyway, the group that was a poor performer were CEOs who had an accounting background. Probably didn't have the imagination to assess R&D efforts other than through the lens of a green eyeshade.

So, econ degree with a science or engineering background might be something to look at, or, as I hope, an econ degree with law.

As a current economics student, I'd argue being an economics major is good for unemployment.

That study has huge breaches in logic. I would guess that nearly all of those CEOs went to Ivy League Schools and elite Liberal Arts schools where Engineering and Business Administration were not even offered as majors.

Perhaps a better question relates more to Europe - what is a European masters degree in economics good for? You can't lecture, you aren't any more qualified in the eyes of non-academic employers to do economics work than you were 1-2 years before, and practically all academics will agree while nonetheless pushing them on their students.

Off the top of my head, the notable CEOs do not have economics degrees:
- the founders of google, including their sun cofounder CEO
- the founders of Microsoft and its CEOs
- the founders of Apple, and the CEOs of Apple when successful
- the founders of ebay
- the founders of Intel and its CEOs
- the managers of Berkshire Hathaway since Buffett bought it

On the other hand, I have the impression that a number of the banks that required bailouts have economics degrees, or at least they play at being economists.

Seems to me that non-economists make stuff that is real.

Economists make stuff that is derived from increasingly abstract things that are tied in some way to things that are real, with the intention of having the imaginary assets they create be disconnected from anything in the natural world.

And economics considers the natural world as something to ignore, unless the natural world lands with a hammer on the predictions of economists, and then economists declare an unforeseen external force had intervened like an angry god to disrupt the economy.

I am a software engineer and my economics degree serves me well every day. Take that for whatever it's worth.

Cue the idiots who want to claim econ is worthless ....

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I was an economics major before the profession was taken over by mathematics. I was on the verge of going to grad school in economics, but became an actuary instead. I have benefited by looking at the world through a cost/benefit/tradeoff prism that I learned by studying economics. I have also never lost interest in economics.

You can't do anything with an economics undergrad... So of course you're more likely to pursue higher education.

As a recent Economics graduate I can tell you EVERYTHING. Best decision I ever made. Now if only I could remember which way the demand curve slopes ....

For anyone posting who is curious, there were several additional results we had to cut from the paper due to space constraints.

1.) We ran ivy league CEOs and non-Ivy league separately and found the same results. So it is not just econ majors from ivies causing this outcome.

2.) The results hold regardless of whether or not business is an undergraduate major option. We ran the analysis separated on whether or not the individual had undergraduate business majors as an option at their university. So the effect is not just business oriented students going into econ, it holds even when they have business as an option.

3.) We ran the analysis for boom and bust cycles of econ majors and found that results still held regardless of whether people majored in econ during peak or troughs for major recruitment.

That being said, we do believe there is selectivity going on in that people oriented towards economics (or engineering) type decision making are more inclined to climb the CEO route. In the paper we explicitly made the point that we were not implying causality. There were also some interesting results by industry that we were not able to show. Economics scores the top major overall but not in certain sectors. Engineering was the top major for chemicals and industrial manufacturing. The banking comment was correct that econ majors were top in the financial sector. There were many different avenues we explored with this paper but in the end faced that dreaded page constraint.

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