What defines a successful economist / economist professor?

[avant-garde]

In recent debates of whether to pursue a career in Computer Science or Economics (both hopefully in academia), I've wondered how the measure of success differed between the two.

It seems that "success" in computer science is a little bit more straightforward, whereas economics... I have no idea. To successfully predict a next 5 years? Impossible. To understand what exactly went wrong with the economy? Also impossible.

Although economists/economic researchers and professors seem to use a lot of advanced math in their papers, what makes an economist 'successful' seems the be a bit blurry compared to computer science. My economics teacher told me that virtually all economics professors are geniuses and hardworkers, but the one who is correct is just lucky.

What do you guys think about this?

 

[avant-garde]

How about this then... is there any academic advantage of mixing both Computer Science and Economics (possibly double major)?

 

[cgk]

This is not expert's advice, but I assume that being a good programmer (which is not exactly the same as being good in comp sci) would really help you in economics. The economics models often are so unpredictive because they simply are too simple and miss essential aspects of the problems at hand.
My guess is that a major reason for that is that many researchers in the field are not able to set up and evaluate more realistic models/simulations/numerical studies etc. Becoming a good programmer takes five to ten years of dedicated work (if done as a intense hobby). But when you never see a programming language before entering PhD courses, you are likely to see coding&comp sci as your enemies instead of your friends, which they really are. Being able to easily pull off computational projects which other students are struggling with will surely give you a sizable advantage.

 

[General_Sax]

Although economists/economic researchers and professors seem to use a lot of advanced math in their papers, what makes an economist 'successful' seems the be a bit blurry compared to computer science. My economics teacher told me that virtually all economics professors are geniuses and hardworkers, but the one who is correct is just lucky.

Yeah, I agree with your econ prof.

Consider if you don't end up becoming a professor. I think you'll find more career options with a degree(s) in Comp Sci, than with Economics.

Plan for the worst, and hope for the best -- at least that's what they say.

 

[avant-garde]

Consider if you don't end up becoming a professor. I think you'll find more career options with a degree(s) in Comp Sci, than with Economics.

Are you absolutely certain about this?

At least in academia/government, aren't there a lot of jobs for research-end economists?

 

[Pyrrhus]

Are you absolutely certain about this?

At least in academia/government, aren't there a lot of jobs for research-end economists?

Yes, and they all start with 6 figures salaries.

 

[avant-garde]

^ with what kind of work do they deal with?

I thought economics was a relatively "imprecise" field compared to computer science

 

[kote]

This is what economists do:

http://www.newyorkfed.org/research/index.html
http://www.cbo.gov/Employment/whatwedo.shtml
http://econ.worldbank.org/
http://www.nera.com/
etc

There are not a ton of economists doing research though. Finance and accounting are much much larger fields. Business schools hand out PhDs in those fields - but at the PhD level those aren't huge fields either.

Success in nearly all research fields is measured by publication and citation rates. On the corporate/government side especially, it also has to do with impressing people who will hire you into higher profile positions.

 

[kote]

Oh, and many high profile economists in government come from the private sector - Goldman Sachs etc. Recent Treasury Secretary Hank Paulson, for example, has a Harvard MBA, but he never studied economics (an MBA is not an econ degree).

Many other government / policy leaders have followed similar paths.

 

[twofish-quant]

Oh, and many high profile economists in government come from the private sector - Goldman Sachs etc. Recent Treasury Secretary Hank Paulson, for example, has a Harvard MBA, but he never studied economics (an MBA is not an econ degree).

For that matter, you are likely have much higher chance of getting a job in an investment bank with a CS degree than an economics degree. Most people with economics degrees in investment banks write what is basically advertising material.

You might want to read Paul Krugman's recent articles on the musings on economists, and also some of the articles on Brad Delong's web page. My personal feeling is that economists in academia with the rare exception know pretty much nothing about how markets work. Freshwater economists are in some other planet and are generally totally clueless. Salt water economists like Krugman are at least on the same planet, but know surprisingly little about how markets really work.

 

[Pyrrhus]

For that matter, you are likely have much higher chance of getting a job in an investment bank with a CS degree than an economics degree. Most people with economics degrees in investment banks write what is basically advertising material.

You might want to read Paul Krugman's recent articles on the musings on economists, and also some of the articles on Brad Delong's web page. My personal feeling is that economists in academia with the rare exception know pretty much nothing about how markets work. Freshwater economists are in some other planet and are generally totally clueless. Salt water economists like Krugman are at least on the same planet, but know surprisingly little about how markets really work.

Economists don't know how the market works? I think that's a gross generalization coming from a scientist...

 

[MassInertia]

Freshwater economists are in some other planet and are generally totally clueless. Salt water economists like Krugman are at least on the same planet, but know surprisingly little about how markets really work.

Can you explain this freshwater/saltwater thing? Is this standard jargon in the econ world?

 

[twofish-quant]

Economists don't know how the market works? I think that's a gross generalization coming from a scientist...

My day job happens to be working in a financial firm, and during the financial crisis I was totally shocked at how little some economists know about how markets really work. One problem is that people that work in financial firms are often barred from saying anything about economics, so it's unwise post something on a internet site saying *XXXX IS A BIG FAT IDIOT* even it that is what you are thinking.

Some economists have clue, some economists have no clue. I've been *really* impressed by some of the stuff that is coming out of NYU, but the stuff that is coming out of Chicago right now is so dreadful that I read it largely for comedy purposes in the same way that I read what young-earth creationists say from time to time. I'd be terrified if anyone was talking any of this stuff seriously, but fortunately no one seems to be. The people that are making the big decisions right now, (Geithner, Bernake, Summers, Frank, Dodd) are people that I think "have clue."

It's also the case that economists can be brilliant about some things but clueless about others. Paul Krugman, for example, knows really nothing about how the banking system works.

Freshwater/Saltwater economists is standard jargon. Saltwater refers to schools that are on the coast (NYU, Columbia, MIT, UCLA), whereas freshwater refers to schools that are in the Great Lakes (Chicago, Minnesota) etc. The fact that different schools have different economics is interesting. For example MIT-physics really isn't very different from NYU-physics, but MIT-economics is very different from NYU-economics.

 

[MassInertia]

Freshwater/Saltwater economists is standard jargon. Saltwater refers to schools that are on the coast (NYU, Columbia, MIT, UCLA), whereas freshwater refers to schools that are in the Great Lakes (Chicago, Minnesota) etc. The fact that different schools have different economics is interesting. For example MIT-physics really isn't very different from NYU-physics, but MIT-economics is very different from NYU-economics.

So, even though MIT and NYU have very different economics (and both are saltwater), they are still more similar to one another than the freshwater schools? Would that be correct? Or is this freshwater/saltwater thing just an over-generalization and part of the typical prejudice against the Heartland (aka the "flyover") by those on the coasts?

 

[Astronuc]

. . . . shocked at how little some economists know about how markets really work. . . . .

Isn't this really about academics/theoreticians vs those (practitioners) in industry?

Some economists have clue, some economists have no clue.

One could say that about academics or theoreticians in science and engineering and those applying science and engineering in the world outside of academia - the difference between theory and practice.

. . . Frank, Dodd) . . . "have a clue."

? But they were two of the many caught off guard by (or were oblivious to) the looming financial crisis.


How does one measure success? By salary? By success of one's predictions?

Predictive analysis is only as good as the inputs (or knowledge thereof) and the integrity of the models. If the models reflect the 'actual' dynamics of the system, then one has a chance at good predictions.

Two problems with predictive systems - uncertainties in the inputs, or unforseen inputs, and unknowns in the models. This is a problem in economics models, as it is in physical models, such as weather/climate models, or highly engineered systems. The more variables, the greater the challenge, especially as non-linearity increases.

 

[twofish-quant]

So, even though MIT and NYU have very different economics (and both are saltwater), they are still more similar to one another than the freshwater schools?

Not really. It's just that there saltwater/freshwater is one important way of classifying schools of economics. You can google for the details.

 

[twofish-quant]

Isn't this really about academics/theoreticians vs those (practitioners) in industry?

No it's about people that are clueless versus people who aren't.

How does one measure success? By salary? By success of one's predictions?

This is a problem in economics. If you do something wrong, and you end up blowing up the world, then obviously you were wrong, but unfortunately you would have blown up the world, and there are no do-overs.

However, if you have an economics professor that insists that the sky is pink and therefore we need to dump cyanide into the water, and when you look up and it looks blue, then it's probably a good idea to ignore what that person is saying.

One thing which is funny is when someone says that you don't exist. I've seen stupid articles from the University of Chicago saying that there was no market panic after Lehman collapsed. Except that I was there, and there was total panic in the markets until the Fed intervened and calmed everything down. One thing that is sort of interesting is how calm a market panic looks like. You actually don't have screaming people (or at least no more than usual). You just have people quietly typing orders into a computer, except that those orders are "SELL EVERYTHING SINCE THE WORLD IS FALLING TO PIECES!"

Something I do remember from 2008 was how calm everyone was, which resembles some of the history that I've read about October 1929.

Predictive analysis is only as good as the inputs (or knowledge thereof) and the integrity of the models. If the models reflect the 'actual' dynamics of the system, then one has a chance at good predictions.

All models are wrong. Some models are useful. Some models are useful because they are wrong. Except in some very, very specialized situations, numerical financial modelling is not used to make predictions, because the economy is inherently unpredictable. Even the parts of the economy that are somewhat predictable are not necessarily numerically predictable. When I buy stock in a company, I care less about the P/E ratios or the balance sheet than to read something that the CEO and the management team has written and decide for myself if I think I can *trust* them with my money. For the housing crisis, people were too busy looking at Excel spreadsheets and not looking at the "GET RICH QUICK BY REAL ESTATE" ads on late night informercials.

Typically the way that it goes is that you start out with something that says assuming A, B, and C, you will get price D. However, you never actually do get price D, but comparing price D with the actual price you observe may tell you how far off assumptions A, B, and C are. Another game is given situation X, how much is it likely to change price Y.

This is one reason banks to like physicists. Physicists tend to ask questions like, so what does this number really *MEAN*?

This is a problem in economics models, as it is in physical models, such as weather/climate models, or highly engineered systems. The more variables, the greater the challenge, especially as non-linearity increases.

One problem with economics is that I think that economics professors use too much math and too little common sense. Except in some extremely limited situations (i.e. derivatives pricing), I don't think that you can really use deterministic numerical models to model economic behavior, and even in most of these situations these models are *NOT* predictive, and will in fact totally fall apart if it turns out that things can be predicted.

One problem in trying to force the economic into deterministic numerical models is that people have free will and can make decisions whereas clouds do not.

Also there are some self-fulfiling prophecies. If people *think* that the world is going to end, and they start pull all their money out of the banks, then the world will indeed end. This can be modeled, but not deterministically.

There are a lot of mathematical or semi-mathematical techniques that you can use to model complex systems. The important question sometimes is "what is the important variable?" "are there feedback loops?" "how wrong will I be if I leave out this factor?"

Also knowing that something *is* unpredictable is sometimes a good thing. If you are selling insurance, and you've convinced yourself that something truly is unpredictable then you can do some strategies based on unpredictability.

However sometimes "evidence" of predictability doesn't come from numerical models. If I'm selling insurance, and all of a sudden, someone for no good reason seems to want lots of insurance on something crazy like insurance against the Earth being invading by green alien spacemen, then I'm going to get on the phone and talk to him and find out why.