Is an economics PhD still a great deal?
Yes, but for different reasons than a decade ago.
My most popular post at my old blog, back in 2013, was called “If you get a PhD, get an economics PhD”. People still ask me about it to this day. In that post, I categorized PhD’s into three types:
Lifestyle PhDs, in which you get to think about fun stuff and exist in a stimulating intellectual community, but probably will struggle to find a job in your field,
Lab science PhDs, in which you will get a job after years of busting your butt working for a P.I. at a lab bench or in a cleanroom, and
PhDs that work, i.e. programs that get you both good job opportunities, intellectual fulfillment, and the lifestyle of an independent scholar.
Econ, I argued, was the paradigmatic example of the third type. As it’s mostly not a grant-funded lab science, PhD students get relative autonomy — a chance to think their own thoughts and set their own schedules. But because there are so many good job opportunities in econ — professorships, business school professorships, private sector econ jobs galore — you can largely do your own thing and be assured of a glide path to the upper middle class. And because economists occupy (or at least, occupied) a rather unique place in society, you can do all of this while still being afforded the respect given to the sages of the ivory tower. Thus, I argued, econ was the PhD that offered the best of all possible worlds.
To a large extent, that is still true. Econ still offers a good amount of personal and intellectual autonomy, despite a modest rise in grant funding and postdocs and the other trappings of lab science. There are still more academic jobs than for many other fields, thanks to the continued growth of business schools. And though economists are perhaps not viewed as the all-purpose sages they used to be, they are still afforded quite a bit of respect. Furthermore, the culture of econ is changing in ways that greatly mitigate the traditional downsides. In fact, overall I’d say that the economics PhD is an even better deal than it used to be.
Here are a few ways I see the landscape as having shifted in the decade since I got my degree.
The rise of data science
One of the most important trends over the past decade has been the emergence of data science as a highly lucrative and accessible field for people with PhDs. This field is red-hot — data scientists are some of the best-paid workers in industry, and demand for them continues to grow. This is being driven by a number of trends, but basically there are two stories here. First, the internet has generated a huge amount of data, and companies need people to wrangle that data and extract value from it. Second, deep learning turned out to basically be magic for many applications.
For economists, the first of these is more relevant. Yes, after a while in data science you might get into deep learning, but it’s not something that economists necessarily start out as specialists in; if that’s your goal you’re probably better off just going through computer science. Economists’ core strength is in statistical modeling; thanks in part to the empirical turn in the profession since the 1990s, people with econ PhDs are some of the better applied statisticians out there. So they’re a perfect fit for plenty of data science jobs that even Masters-level people can’t really do.
In fact, it’s extremely easy to transition from econ into the world of data science. You can just apply for jobs directly, or you can go through a boot camp like Insight that will quickly teach you the extra stuff you need to know. A good friend of mine from grad school decided to do this after she left her professor job; she now makes three times what her peak salary as a prof would have been. Not bad. And while figuring out how to optimize Spotify recommendations or whatever might not be quite as intellectually stimulating as searching for the true causes of unemployment, it does present you with a bunch of interesting mathy problems to solve. And if you’re into that sort of thing, it’s an alternative gateway to a lucrative career in tech company management for people who didn’t go the software engineer route.
Data science may not be the first job of choice for economists who want to do real econ work, but it provides a very safe and lucrative outside option that barely existed a decade ago. (This has more than compensated for the winnowing of quant finance, and it’s also far less soul-crushing.)
The boom in private-sector econ jobs
Data science uses the stuff you learned in econometrics, but it isn’t really an econ job per se. Fortunately, a lot more companies are hiring economists to do actual economics. For a primer, read this 2018 paper by Susan Athey and Michael Luca (Athey is probably the second-most-famous private sector economist after Hal Varian, and is one of the profession’s true geniuses, so heed her advice).
Essentially their are two stories here. First, tech companies have created a whole lot of online marketplaces — Google Ads auctions, Amazon Marketplace, two-sided search markets for Uber and Lyft, and a whole lot of others. They need economists to figure out how these markets work, and — perhaps more importantly — how they should work. In a way, creating an idealized market from scratch could be more intellectually fulfilling than studying more “natural” markets; with the magic of software, an economist can create the kind of economic interactions that previously were just theoretical approximations!
The second trend is, as before, the empirical turn in econ. The credibility revolution has produced a generation of economists who are able to think very subtly and intelligently about how to isolate causality from natural experiments and policy experiments. That’s something that’s proving increasingly valuable to businesses, who have all too often led astray by correlations that turn out not to be structural. Whether it’s A/B testing, or causal inference for marketing, or just figuring out the determinants of demand, companies want economists who can help them empirically understand how their corner of the world really works.
The softening of econ culture
One other way that an econ PhD has become an even better deal is that the culture of the profession has become much less dominated by jerks. I can’t actually prove this to you, but young people can feel it. I can, however, describe roughly what has changed.
First, there has been a big backlash against sexism (and, to some degree, racism) in the profession. A series of academic papers exposed the field’s gender bias from a variety of angles — toxic online forums, discrimination in the credit for co-authorships, discrimination in the peer review process, and so on. A few high-profile sexual harassment scandals chastened the behavior of some top male economists. The people who run the profession — which, if you don’t know, is a very hierarchical profession — have made concrete moves to signal that sexism and racism aren’t allowed. One example is banning interviews in hotel rooms.
These are small in substantive terms, but they send a strong signal about what type of behavior and attitudes will result in economists getting shut out from plum jobs. There are still a few universities that specialize in hiring disgraced professors, but overall the “old boys’ club” of economics is on the way out.
The erosion of sexism dovetails with another big change in econ culture, which is the decline of bullying. There has been a concerted effort to push back on professors who try to destroy speakers in the seminar room; the era of “Well, this is really more of a comment than a question” is rapidly fading. I conjecture that this also has something to do with the empirical turn in economics — when theory isn’t disciplined by evidence, a loud-shouting bully might advance his ideas to the forefront of the profession by force of personality alone, but when you have to bring data, that kind of crap just doesn’t work.
Finally, economics has become more politically progressive. Whether this is a good thing or a bad thing obviously depends on your personal politics. But since most of the Americans who are considering a PhD are going to be progressive, the fact that econ isn’t an outlier in this regard probably makes the field more attractive.
Add up all these changes, and the result is that doing an econ PhD no longer means having to worry (or at least, not having to worry nearly as much) about navigating an entrenched old boys’ club of right-wing bullies. That’s a big plus!
The changing role of economists in American society
Better culture, more private-sector jobs, and lucrative outside options in data science — those are three major ways that an econ PhD is an even better deal than it was in 2012. But there’s at least one major way in which econ is less like a $20 that someone left lying on the ground. Economists’ intellectual prestige has dwindled a bit.
Back in the 2000s, at the height of the finance-driven Bush years, economists were viewed as sort of all-purpose sages. Americans were thrilled to read economists’ insights on everything from abortion to how to name your kids. Economists held pride of place among presidential advisors, determining the fate of nations — or just telling you where to get a bite to eat.
The financial crisis and the Great Recession brought that world crashing down, and that definitely diminished economists’ prestige a bit. Donald Trump was another factor — he famously had little use for economists, preferring instead to rely on his own clumsy bellowing and aggressive tariffs rather than the nostrums of some academic scribblers. The utter disregard for the free-trade consensus — perhaps the only thing economists agreed on at the time — was a major symbolic defeat for the profession, and one that Biden shows no intention of reversing. In fact, astute observers have noticed a diminished role for economists in the current administration as well.
One more factor, I think, was the shifting of America’s fault lines to non-economic issues — matters of history, of race and gender, of culture and nation. Those deep questions about the nature of our society make the quotidian matters of real estate portfolios and GDP numbers less central to our lives, and I think that made Americans less likely to ask economists for their advice about anything and everything.
So if you do get an econ PhD, don’t expect to walk around and have people view you as a sage. It’s a bit more like being a biologist now — you have your area of expertise, and most (but not all) people will acknowledge it, but if you go outside your field you’ll be considered an amateur.
Personally, I like that better, but your mileage may vary.
General warning about getting a PhD
So the econ PhD is still one of the best PhDs you can get. I’d put it up there with computer science and applied math, which share many of these advantages. But remember that doing any PhD is going to have some major drawbacks and challenges. As I wrote in my 2013 post:
[A]n econ PhD program is still a PhD program. That means, first of all, that you will be in poverty in your late 20s. That is not fun for most people (some "lifestyle PhD" students and bohemian artists excepted). Also, econ PhD programs force you to manage your own time, while giving you very little feedback about how well or badly you're actually doing. That can be stressful and depressing.
PhD programs famously put an enormous strain on the mental health of many students. Even those who come out of it just fine often remember it as a very difficult time in their lives. That’s obviously not true for everyone — some people remember their PhD programs as the best days of their lives. But it’s a risk you should be aware of.
But if you decide that a PhD program is right for you, then I think you could easily do worse than economics. The role of economists in society has changed in the last decade, but in most ways I’d say it’s even better than before.
Do you (or any readers) know anyone who has gotten their PhD later in life, like in their 30s or later? Did they think it was worth it? If you want to study and use applied economics under what circumstances do you really need a degree?
My PhD is in economic development and public policy from the MIT Dept. of Urban Studies and Planning, which requires grad students to design their own fields. I was interested in design/implementation of federal/state industrial policy, not a focus that fit well in traditional economic departments. I found them to be disinterested, sometimes antagonistic, to industrial policy and not particularly interested in the skills required to transform economic research into policy. The great thing about the DUSP program was that I could take courses anywhere across MIT and Harvard and took a number of econ and business courses with the great and near-great.
I started my PhD program at 30 (in 1980) and graduated at 37. In between, I started Mt. Auburn Associates, a regional economic development consulting firm -- our first clients included Gov. Bill Clinton of Arkansas and Mayor Bernie Sanders of Burlington, VT. In the firm's name, I received a grant from the U.S. Commerce Department to carry out research that was the basis for my dissertation.
I found that being an older grad student worked to my advantage because I had more confidence in myself and my ability to be entrepreneurial. Any PhD program has the potential to be dangerous to one's mental and financial health -- because it is progressively isolating and carries high financial opportunity costs during years when many of one's peers are integrating themselves into family and workplace at decent pay. So it's important, I find, not to have magical thinking about what happens at the other end. That said, to Noah's larger point, most folks coming out of economics programs are able to land on their feet, which is not as much the case in humanities disciplines.
It very much helped that I did not want to be a tenure-track academic, so wasn't concerned about getting into peer-reviewed journals and other forms of approval from tenured academics. Many entry-level jobs requiring a PhD are inside a sometimes brutal pecking order -- I loved not having to worry about that.
I left Mt. Auburn in 1995 to go out on my own, got hired by Brookings in 2004, and became a research professor at George Washington University in 2011. In one form or another, I've run a fee-for-service consulting operation for 37 years. Currently, I'm a public policy research professor at George Washington University, which means I only get paid from the grants and contracts I bring to the university. Technically I'm a university employee, with medical benefits and retirement contributions, and functionally I'm self-employed -- my paycheck varies from month to month depending on open projects. When I was hired, I was asked to set my own salary, as the university doesn't care -- it's incumbent on me to raise it. I'm very happy as a research professor and highly recommend it for people who are comfortable running their own academic business.