Easy money

Here are some numbers on average starting salary by college major from the Wall Street Journal. If we want to understand what drives people to study economics, part of the reason must be found here.

So, there's economics, a proud 4th with a not-too-shabby $43,419. First of all, being that I don't believe economics is vocational, and that I think we don't place a very high premium on intellectual excellence in the teaching of economics, this is already, to me, a bit weird.

The easy, and I think true, point to make is that if we do some kind of perceived difficulty/scariness of subject times starting salary, economics will win hands down. If all I care about is cash and how hard my degree will be, I doubt I'm choosing math or engineering over economics. It's easy money.

For once, I'm going to try to use some economics to talk about this. Labor and skills are scarce resources; salaries for graduates in the hard sciences are understandably high, since these skills are valuable and not so very many people study those subjects. But I see exactly zero reason why economics is different, in that light, from management science or history, for example. Does majoring in economics change your abilities in the same way that studying computer science makes you a better code-writer?

Where are the economists going, anyway? From the article:

Scott Bell, who plans to graduate this year from New York University with a degree in East Asian studies, was looking for a job in financial services or consulting. The 21-year-old was unable to land interviews with major investment banks, despite a strong grade-point average and an internship in the Tokyo office of global management consultancy Bain & Co.

East Asian studies would, in this context, seem to be more valuable than economics in preparing someone for a career in financial services or consulting. Economists seem to be facing stiff competition in the labor market for consulting and banking, and of course they are no more qualified for such jobs than anyone else who is literate and numerate, which might itself be contributing to the premium for economists.

I struggle not to fall back on the familiar signaling story for education. I said this a while ago:

Perhaps economics just looks good, perhaps even because it's confused with finance or business. Perhaps we, the educators, are complicit in the charade because it brings high enrollments and money. There is no incentive to change the program, even if the core is rotten. It's like an asset bubble - the value of economics as a major, the value of economics to a university, to economics departments, goes up and up and up, but at the bottom there is nothing.

I strongly recommend this short article, "What jobs do economics majors get?". Listen to this:

Employers are happy to hire students with undergraduate degrees in Economics. They are often looking for good mathematics skills, good writing skills, ability to use a word processing program such as Word and a spreadsheet program such as Excel. Some jobs require skill in using a statistics program - these are appropriate for people who did well in or liked ECON 3254. Computer programming skills are definitely a plus. Almost any programming language will appeal to most employers, although some have a preference for "C" and "Visual Basic."

OK, so employers want people who can read, write, do math and use a computer. Statistics is good. Computer programming is awesome. This has nothing to do with economics. And lo:

The important thing to understand about finding a job with an economics degree is that employers are less interested in whether you have a specific skill, like being able to find the intersection of the supply and demand curve, than they are in the package of skills that people with economics degrees have. Secret: most of the skills which people use on the job they learn on the job.

Cool, so all the stuff we teach in undergraduate economics is useless to employers (astonishment!), yet people study economics in record numbers. What's the disconnect here? Is it really just a house of cards, floating on air? What do we teach economics students to do that other students can't? What do employers think we teach? Back in the original article, this makes more sense:

A breakdown by industry shows that starting salaries for accounting and finance grads rose by a mere 1.9%, while business-administration and management graduates saw increases of less than 1%. The average offer for computer-science majors, on the other hand, rose 7.9%. Engineering graduates saw an average increase of 5.7%.

I'm not down on economics as a field of study. I think it can be interesting and multidisciplinary and philosophical and relevant and topical. However, it seems sometimes to all to be tailored to these numbers: you can earn big bucks by majoring in economics, and economics classes become just a crappy thing you have to do to get there. Everyone's happy with the status quo.