Bryan Caplan  

Is the Econ Ph.D. a Free Lunch?

The Real Chiang Kaishek... Licensing Rents...

While you're earning a Ph.D. in economics, you learn two big lessons:

1. There's no such thing as a free lunch.

2. You are in serious pain.

On reflection, though, I've decided that both of these lessons fall short of the truth. In fact, a Ph.D. in economics is, relative to other graduate degrees, an amazing deal. It's not literally a free lunch, but it is a heavily discounted lunch. Consider:

1. What other Ph.D. can you realistically finish in 4 years? People in other fields routinely take six or eight years to get their degrees. Most economists don't finish in 4 years, but it's quite do-able.

2. What other Ph.D. can you earn without previous familiarity with the field? Ph.D.-level econ is so different from undergraduate econ that it isn't that much of a handicap to start from scratch. You do of course need to know a fair amount of math, but you could have learned that math studying dozens of other fields.

3. What other profession gives you so much freedom to choose your research topics? Many economists now devote their careers to studying topics which an outsider would classify as political science, psychology, or sociology. Some economists even do work that basically amounts to history or philosophy, though they probably need to work on more conventional topics until they get tenure.

4. What other Ph.D. has such a great safety net? A Ph.D. in philosophy (not redundant, though it seems so) who fails to become a professor of philosophy has few good alternatives. An econ Ph.D. who fails to become an econ professor can become an economic consultant and make big money.

5. The pain of the econ Ph.D. is not all that bad. Yes, it hurts at the time. But the key question too many grad students in econ - including me! - lose sight of is: Compared to what? Does it hurt more to be an econ Ph.D. than a Ph.D. in math? History? Classics? Does it hurt compared to a real job? I think not.

Overall, the econ Ph.D. is such a good deal that I would seriously advise people who want to do research in political science, psychology, or even history to just get an econ Ph.D. and become a professor of economics. Even if you have to research topics you don't care about until you get tenure (and you probably won't have to), you could easily earn tenure in econ before you would have defended your dissertation in another field.

Needless to say, it's not really in my interest for my field to be flooded by the best students in political science, psychology, history, and beyond. But - besides giving me the opportunity to do the work I love, with reasonable material comfort, and zero job stress - what's my field ever done for me?

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The author at Cold Spring Shops in a related article titled JUMPING ON THAT TENURE TRACK? writes:
    Bryan at Econ Log suggests a Ph.D. in Economics has a lot of upside potential. [Tracked on October 16, 2005 3:35 PM]
The author at The Club for Growth Blog in a related article titled Monday's Daily News writes:
    The Sun Will Shine Again - Larry Kudlow, Money Politics Top 10 Most Outstanding Conservative Senators - Human Events House GOP Leaders Set to Cut Spending - Washington Post Remembering the Taxpayer - Senator Jon Kyl, RCP Economic Expansion, Year... [Tracked on October 17, 2005 8:50 AM]
The author at De Gustibus Non Est Disputandum in a related article titled Discriminação de preços writes:
    Acho que qualquer pessoa que queira entender economia deve ter em mente que deve usar três insumos: (i) habilidade verbal/escrita; (ii) habilidade gráfica e (iii) habilidade matemática (algébrico-geométrica). Para colaborar com a primeira, eis um ... [Tracked on October 18, 2005 9:41 AM]
COMMENTS (27 to date)
Michael writes:

Bryan, I have a couple of questions. If you get a Ph.D in economics, what kinds of jobs can you have and how likely it is to get them? How about only a bachelor's in econ?

I have another question not related to this topic, I have recently started reading a lot of econ blogs but I think that I don't understand a lot of the content (especially in the case when actual economic concepts are discussed), what should I do to better understand the content of econ blogs? (I am an undergrad that majors in both accounting and econ and have only taken principles in micro and macro courses). Thanks!

Matt writes:

Michael, besides taking more econ classes, check out some of the "everyday economics" books to help you understand the content. Most of these books are quick reads, and very interesting. See: The Armchair Economist, Naked Economics, Hidden Order, and the forthcoming Undercover Economist.

Also check out The Worldly Philosophers and New Ideas from Dead Economists. These are also wonderfully written books that will give you a brief overview of some famous economists of yore and their ideas.

I think these books are great places to start learning all the neat stuff economics encompasses. Good luck & have fun!

Ahmed writes:

Thanks Bryan so much for this interesting article, Beacuse i'm student of Economic Masters but can't imagine how much i'm lazy and can't start my thesis yet :(
I guess you encourage me alot, sepcially i know the answer of Michael's question which is, after having an econ Ph.D what job will i got?
actully the answer as you said is being consultant in Reserach Centers or Even Ministries or Multinational Company,
I'm workin' as Senior economic researcher in Decision Support Center, and just got to know the econlib today

Lauren writes:

Hi, Bryan.

1. What other Ph.D. can you realistically finish in 4 years? People in other fields routinely take six or eight years to get their degrees. Most economists don't finish in 4 years, but it's quite do-able.

The way you ask this suggests that some institutional or technological barriers stand in the way of completing a Ph.D. in a timely 4-year manner--in other fields, but even in economics. Jokes aside, I doubt technology or institutions are involved.

Why do many students take more than four years to complete their Ph.D.s? Why is the average longer in some fields than others? The simple answer is that students make realistic choices based on market opportunities. University institutional or technological barriers have not changed. Claims that economics Ph.D.s "realistically" get their degrees faster are misleading. It's endogenous to the students' individual choices and opportunities, in economics and other fields!

Ph.D. students in economics have relatively large financial incentives to finish up in four years. The salaries they are offered, and the job prospectives they can accept, often outweigh the costs they would incur to remain as Ph.D. students.

What is realistic is the choice each year to complete or delay one's studies. Ph.D.s in all academic fields are demonstrably do-able in four years. Yet many Ph.D. students, in economics and other fields, sometimes spread their studies longer. Why? It's realistic for an individual to weigh the payable costs--tuition, room, board, lost wages, etc.--against the benefits--Is there a job possibility I could take? Have my tuition, room, board, interest payments on loans, etc. been offset by the university via scholarships? student-work options? subsidized government loans or delays on repayments? waivers? my parents?

The reality is: There are immediate jobs for students with a Master's degree or Ph.D. in economics from a good school. Jobs range from assistant professorships to government jobs to private sector jobs with banks, the finance industry, etc. Getting a job with a Ph.D. in English is probably tougher, with lower salary rewards to compensate.

To say that economics Ph.D.s "realistically" finish faster than the current average for Ph.D.s conflates the technological constraints with the sensible choices of students faced with the margin: job opportunities if they graduate Now.

drtaxsacto writes:

Aaron, shh. You are correct, but shh. Nullum prandium non es gratuitum.

Barkley Rosser writes:

I would provide one caveat about the far end of the advice given here: the idea that one can think about some topic, hold a perspective, or whatever, that one must wait to get tenure to pursue and then pursue it. Technically of course this is true. However, my observation as someone older than the masters of this blog and those commenting on this thread is that this rarely works out in practice.

I have known many people who started out having ideas that would hinder them getting tenure if they pursued them prior to its being obtained. Some did follow their original dreams/intentions, but many more get caught on a kind of path dependence treadmill. They start doing something that gets them tenure, and when they get it they are so tired/locked in, etc., that they just keep on doing it. It is the rather rare individual who goes back to that forbidden topic or approach and does it.

What one does see more often after people get tenure is them pursuing projects with longer time lags, especially writing books. However, this is still, more often than not, an extension of whatever it was that they were doing that got them their tenure. Again, of course, there are those idealistic exceptions who actually pull off what they always intended to do when they finally feel that they have a genuine opportunity.

Michael writes:

Thanks for your reply, Matt. I have read Naked Economics and Freakonomics too. The first one, which you have mentioned was interesting but I think it does not present enough economic ideas, especially related to financial economics. The second one is obviously, not very realted to traditional econ. But both books I liked. Do you know any books I can just read online for free?

I understand some of the things written in this blog and marginal revolution, especially when they don't involve deep understanding. But when there is a discussion about oil or financial markets (as in Nouriel and Brad Setster's blog, I have a hard time understanding anything at all), what can I do with that?

Thanks and sorry for getting off topic.

Robin Hanson writes:

I can attest to Bryan's claims. I started my econ Ph.D. with no prior educational experience, finished in four years, and did a lot of work on topics that might otherwise be called philosophy and psychology, in addition to economics. Of course there is one big catch Bryan didn't mention: you have to be smart/creative/insightful/persistent enough to actually write and publish interesting things.

DavisT writes:

...ahhh -- "Credentialism" !

...or -- why I need a fancier sheepskin to enhance my employment prospects & self-esteem ?

What was the historical origin and purpose of the PhD ?

If one loves economics -- what stops you from independently studying & learning whatever you want, more efficiently, than via the slow, clumsy bureaucracy of academic institutions ?

How come Alan Greenspan does not have or need a PhD in economics ?

Neema writes:

I think most of you are ignoring the science and engineering Ph.D.'s. In most of those fields (like mine, Biophysics), we get a stipend, school is free, teaching is relatively light, and coursework consists of 5-7 classes. Opportunities for fellowships are abundant (for example, 1/4 of National Science Foundation fellowships are for Biology-type things), and they pay well (the NSF pays a stipend of $30K). Biology Ph.D.'s definitely don't finish in 4 years, but it generally takes a while to publish articles in prestigious journals. As long as you don't want to be a professor, jobs are plentiful, especially for those with quantitative backgrounds.

Matt writes:

Michael, you could just pick up an intermediate macro textbook if you want to learn all the theories behind trade deficits and the kind of stuff the blogs you mentioned seem to discuss. I don’t know any good “bed time” reading books on the subject though, so I’m sorry. If anyone else here has some suggestions, I’d be interested as well.

DavisT, much of the degree's value is its ability to signal prospective employers your worth. This is why Ph.D. candidate’s institutions seem to be so important in the job market. The harder the school is to get in, the better you must be for doing so. At least that’s the logic. So of course you can always study anything you love independently, but without any 'proof' of your study, can you really expect a college to hire you just because you say you studied everything on your own? Alan Greenspan’s life is the exception, not the rule.

Michael writes:

Thanks for your suggesstions anyways Matt.

Also, I know that Alan Greenspan has a phd in economics even though he got it when he was like 50, which is pretty late.

Bob Knaus writes:

Bryan, what a hoot! I started out reading this blog thinking that I might improve my knowledge of business cycles, and thus my ability to time stock investments, but I have stuck with it for the pure entertainment value.

In the spirit of "unexpected generalization", I would suggest a lengthier topic for you -- "Life Has Never Been Easier For The Gifted".

I can provide anecdotal evidence, if you like. In theory, I should have been semi-retired at 40, lollygagging about the Caribbean and doing the occasionally socially useful thing such as teaching Boy Scouts how to sail. In practice, not only have I been doing that the last 3 years, but I've also put my pattern recognition skills to work in creating and selling shell jewelry that the natives somehow cannot see as a commercial opportunity. And, my old firm in Seattle keeps hiring me to do management consulting for them. Not bad for a high-school dropout.

My point is that, in the right cultural context, there is an insatiable demand today for bright people. No matter what your lifestyle choices are you will find somebody who wants to throw money at you.

Or, more briefly, if you're bright enough to get a PhD in Econ you're bright enough to do anything.

Capt. Bob Knaus

Chevalier writes:

Apparently, while you're earning a Phd in economics, things like the proper usage of YOUR and YOU'RE manage to slip by.

Sorry, had to do it. Hope to earn my Econ Phd at U of C.

Robert Schwartz writes:
2. What other Ph.D. can you earn without previous familiarity with the field?

My wife has a PhD in clinacal psychology. She never took a psychology course before she started her PhD program.

Mr. Econotarian writes:

If you look in the back of The Economist magazine, you can find all kinds of opportunities all over the world for Ph.D. Economists. You can go help plan Ghannan rural electrification, or plan the finances of a desalination plant in Dubai, etc.

Steve Sailer writes:

"What other profession gives you so much freedom to choose your research topics? Many economists now devote their careers to studying topics which an outsider would classify as political science, psychology, or sociology."

Indeed, but it would help if economists, when they move into other fields, would bother to learn some of the basic facts of that domain before running their regression analyses. The most notorious example is Steven D. Levitt's abortion-cut-crime theory, which most experts on crime rates roll their eyes over. (For an example, see James Q. Wilson's review of Freakonomics in Commentary at .)

The abortion-cuts-crime theory had been kicking around for decades before Levitt publicized it in 1999, but during the early 90s it had disappeared because the crack wars made the crime rate among teens shot up so horrendously, making the theory look prima facie dubious. The teens born in the late 1970s, after abortion was legalized, had a homicide rate three times worse than the teens born in the late 1960s, so people gave up on the theory because it obviously wasn't working.

In 1999, however, Levitt and Donohue wrote up this old chestnut, using data just from two points: 1985 and 1997. I don't think they were being intentionally misleading. I think that, as economists, they just hadn't quite noticed the crack wars that happened in between 1985 and 1997.

They took their draft paper around to symposiums at elite economics departments and apparently, none of the famous economists they read their paper to pointed out to them that the horrific surge in teen violence rates between 1985 and 1997, which peaked in 1993 and 1994, made their theory sound implausible.

When their draft paper leaked out to the Chicago Tribune in August, 1999, the die was cast, and Levitt was stuck with a slipshod theory being permanently associated with his name. A few economists, most notably Ted Joyce at CCNY, pointed out the flaws in Levitt's theory. (Joyce told me that that in 1987, he had discovered his landlady's corpse after she'd been murdered by a crack addict. So, Joyce, unlike Levitt, was always aware of the basic recent historical facts of criminology.) But the economics profession as a whole has rallied to Levitt's defense and dismissed his critics out of hand.

So, I expect more 99% fact-free theorizing from economists in the wake of the huge success of "Freakonomics."

T.R. Elliott writes:

I've got a better proposal: get a PhD in something that actually matters and will make a difference to the economic competitiveness of the US. Say, a PhD in solid state physics. Or a PhD in one of many engineering sciences.

We've got enough economists running around blathering in a non-predictive, barely explanatory fashion.

eric writes:

Isn't the starting salary of MBAs greater than for econ phds? Doesn't that suggest getting a masters in a dumbed-down version of econ, with an emphasis on finance, is best? All that real analysis, macro, econometrics a waste?

Roger McKinney writes:

If you're looking for jobs for PhD economists, check out!

Phil writes:

You can earn a Ph.D. in economics in four years with no previous academic classwork in the subject? Geez, maybe I should check it out ...

Eric writes:

We need a reality check here. Very, very few people can finish an econ PhD in 4 years. The median is probably closer to 5 years. And of course it depends on what type of dissertation you choose to write: a more technical dissertation (i.e., one that will make you more desirable come job time) = more time.

Capt. Obvious writes:

Why not do a Ph.D. in business instead? You can study everything you mention above, stipends are much, much higher for B. school Ph.D. students than econ ones, the work is easier, and the job prospects (and exit salaries) are higher with a Ph.D. in Business Administration than they are for Economics.

The only downside is that B-schools expect that their students have at least some command of the English language, which economics departments typically have no such requirement.

If you can speak English you'd have to be absolutely daft to pursue a Ph.D. in Economics.

Fabio Rojas writes:

I think that Bryan's main point is probably right - econ PhD's give you more bang for the buck than most other PhD's. But I did have a few extra thoughts:

1. Most social science PhD's can be done without prior knowledge of the field. Prior knowledge usually helps, but there is nothing taught in an anthro or poli sci program that a smart & motivated person couldn't figure out. Seriously, I bet any person who regularly reads econlog could walk into most 1st year social science grad program and pick up the content. It ain't that hard!

2. If you actually look at graduation rates in other fields, the average time is longer, but many people do finish in 4-5 years. The key is to pick a topic that doesn't require original data collection and where it is customary to write simple & short dissertations. The experimental fields often fit this mold. The same for fields where you analyze data collected by others (such as demography). You also have to avoid toxic advisors.

3. It is very hard to resist the professional pull. I concur with Rosser - few people can hold out for ten years and then do something totally new. Most people just stay on their path. So ask your self - can you plausibly pre-commit to the plan? I suspect most people can't.

4. Bryan works in a department that values non-mainstream work, so it's easy for him to say that you can do whatever you want once you get tenured. In most programs, you would still be pushed into main stream work because pay raises are linked to publication in AER, JPE & QJE at most places. The pressure doesn't stop once you get tenure.

5. Bryan's advice doesn't work if you are really bad at math! Seriously, econ level math may be modest compared to engineering, but it is a serious hurdle to most social science students. I suspect that the cushy life style Bryan reports is supported by the barriers to entry into the field created by the math requirement.

Anyway - good discussion!


Chris Bolts writes:

My heart's desire is to get a PhD in Economics, but my math sucks so badly that I dropped Mathematics for Economists and barely got a B in Calc I. But yeah, I generally agree with Bryan in that getting a PhD in Economics can open so many doors.

Also, a couple of good books to read on economics for beginners is Hidden Order by Milton Friedman's freakazoid of genius son, David, and Law's Order (by the same author) which gives so great insight into law and economics. You also can't go wrong with "Free to Choose" by Milton Friedman and "The Law" from Frederic Bastiat. That's more than a couple, but I like to read. :)

Eric Thebikeman writes:

As someone who recently completed a Ph.D. in Chemical Engineering (from a top-10 school), I take issue with Neema's recommendation that people do Ph.D.s in science and engineering. Jobs for PhDs are extremely tough to find (especially for men) and publicly-posted jobs typically have >100 applicants. I was completely flexible about the field I worked in, and it still took me a year to get an offer - $76k (I hear Intel offers $83k, but demands that you work 60 hours a week).

mstanley writes:


Haven't you ever heard of supply curves, Bryan? You're going to ruin a good thing here!

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