Why Get an Economics Ph.D?

I've been getting quite a few e-mails lately from people asking me if they should consider doing a Ph.D. in Economics. I wish I could help these people more, but without knowing more about them, I'm not at all comfortable giving career advice. However, I can list a few types of people who should not do graduate work in economics:

Types of People Who Have No Business in an Economics Ph.D. Program

1. Not a superstar in mathematics. By mathematics, I do not mean calculus. I mean, the theorem - proof - theorem - proof type mathematics of real analysis. If you are not excellent at this type of mathematics, you will not make it to Christmas in your first year.
2. Love applied work but hate theory. Do a Ph.D. in Business instead - it is half the work and when you leave you to get twice the salary. It's a no-brainer.
3. Are a great communicator and teacher, but bored by research. Academic economics is set up for people who have a comparative advantage in research. Go somewhere where a comparative advantage in communication is an asset - such as a business school or into consulting.

A recent blog post by GMU Economics Prof Tyler Cowen, titled Trudie's advice to would-be economists that is an absolute must-read for anyone considering attempting a Ph.D. in Economics. I found this part particularly interesting:

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What You Should Know Before Applying to an Economics PhD Program

By Mike Moffatt

Types of People Who Succeed As Academic Economists

Cowen's first two groups are relatively straight-forward. The first group includes exceptionally strong students at math who can get into top-ten schools and are willing to work long hours. The second group is those who enjoy teaching, do not mind the relatively low pay and will perform a little research. The third group, in Prof Cowen's words:

"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 under-rewarded...

Sadly, the chance of achieving #3 is fairly low. You need some luck and perhaps one or two special skills other than math... if you have a clearly defined "Plan B" your chance of succeeding at #3 diminishes? It is important to be fully committed."

I thought my advice would be a great deal different that Dr. Cowen's. For one thing, he completed his Ph.D. in Economics and has a pretty successful career at it. My situation is a great deal different; I transferred from doing a Ph.D. in Economics to a Ph.D. in Business Administration. I do just as much economics as I did when I was in Economics, except I now work shorter hours and get paid a great deal more. So I believe I'm more likely to discourage people from going into Economics than Dr. Cowen.

High Opportunity Costs Destroy Grad School Completion Rates

Needless to say, I was surprised when I read Cowen's advice. I always hoped to fall into the #3 camp, but he's correct - in economics, it's very, very tough to do. I can't stress enough the importance of not having a plan B. Once you get into a Ph.D. program, everyone is very bright and talented and everyone is at least moderately hard working (and most could be described as workaholics). The most important factor I've seen that determines whether or not someone completes their degree is the availability of other lucrative options. If you've got nowhere else to go, you're a lot less likely to say "to heck with this, I'm leaving!" when things get really tough (and they will). The people that left the Economics Ph.D. program I was in (University of Rochester - one of those Top Ten programs Dr. Cowen discusses) weren't any more or less bright than those who stayed. But, for the most part, they were the ones with the best external options. Opportunity costs are the death of graduate school careers.

Economics Graduate School - Another Point of View

Prof. Kling also discussed the three categories on the EconLib blog, in an entry titled Why Get an Econ Ph.D.?. Here's a snippet of what he said:

"I see academics as very much a status game. You worry about whether or not you have tenure, the reputation of your department, the reputation of the journals in which you publish, and so on..."

Economics as a Status Game

I would agree with all that as well. The idea of academia as a status game goes well beyond Economics; it's no different at business schools, from what I've seen.

I think an Economics Ph.D. is a terrific option for many people. But before you dive in, I think you need to ask yourself if the people described as succeeding at it sound like you. If they don't, you might want to consider a different endeavor.