Programs Physics or Economics Degree: Which Is Better for a Career?

[barthayn]

Which will be better to have for a job, physics or economics? I know on the undergraduate level that there are not many high paying jobs, but I have interests in both fields. I like physics because it is heavily math based and it is good to have a good knowledge of science, but economics opens the door for careers in business which is what I find may be worth-while because of what the company may turn into it. As well, it is good to know economics to invest in things like stocks.

What do you think or recommend?

 

[Pyrrhus]

It depends on your preference. Now, if you only care about money, probably a business degree then it's better for you. The problem with an economics degree is that only if you get a PhD in Economics you'll be earning a high salary. I am talking ON AVERAGE, of course. On average, an economist with a PhD earns more than an economist with just an undergraduate degree. Thus, it requires quite a bit of effort to study for about 10 years just to start earning significant amount of money.

 

[lisab]

Have you considered engineering? They earn fairly high salaries with just a bachelor's.

 

[Pyrrhus]

Have you considered engineering? They earn fairly high salaries with just a bachelor's.

This is true, especially for Petroleum Engineers. However, I think the OP should focus on exploring those two fields, and perhaps some engineering fields first before deciding only on salary.

I think salary is important, but should not be the reason for choosing a specific degree.

 

[barthayn]

To me salary and how much you like the job is important. However, I want to have a good knowledge of the investments and I know that I will not get that with a physics degree. Does anyone know that studying economics will benefit the my knowledge of investments?

 

[ZapperZ]

I suppose specializing in the field of "econophysics" is out of the question, eh?

Zz.

 

[Pyrrhus]

To me salary and how much you like the job is important. However, I want to have a good knowledge of the investments and I know that I will not get that with a physics degree. Does anyone know that studying economics will benefit the my knowledge of investments?

Are you willing to go to graduate school in economics? What level of depth are you looking for? how many years are you willing to spend?

It is not unheard of in economics for mathematicians, physicists, and engineers to apply to graduate school in economics with no economics background whatsoever.

 

[Shaun_W]

In the UK, economics has one of the highest starting salaries at the undergraduate level, only behind dentistry and medicine... although most of the jobs that economics graduates do can also be done by physics grads too. So you do decide on economics, move to the UK.

 

[Pyrrhus]

In the UK, economics has one of the highest starting salaries at the undergraduate level, only behind dentistry and medicine... although most of the jobs that economics graduates do can also be done by physics grads too. So you do decide on economics, move to the UK.

Is this true? I doubt this statement is accurate. Economists salaries are high, but only for economists with ample knowledge of quantitative methods which is obtained at the graduate level (at least a Master's). Economics undergraduate degrees are for the most part not really that mathematical in comparison to graduate degrees. For example, multidimensional integrals is a topic usually not presented to undergraduate economics students.

In fact, open a undergraduate book on econometrics, and compare it to a graduate level. The focus is so different. At the undergraduate level the use of canned software packages and interpretation of results as well as common diagnostic tests are emphasized. At the graduate level, the whole mathematical modeling machine is explored along with econometric specification and estimation of a student's own econometric models. This requires programming, and in some cases advanced knowledge of Monte Carlo Simulation, and other similar methods.

This doesn't mean that there are no jobs for economists with undergraduate degrees, but an engineer at the undergraduate level on average will have a higher starting salary.

 

[Ryker]

Is this true? I doubt this statement is accurate.

While we don't keep entry-level salary stats back home, I can confirm for at least one more EU country that those who have finished an Economics degree don't get paid peanuts when compared to other fields. And from what I heard, yes, their salaries usually higher than those of engineers, although I'm not willing to put my money where my mouth is there

 

[twofish-quant]

Which will be better to have for a job, physics or economics?

The best degree is the degree you finish.

As well, it is good to know economics to invest in things like stocks.

Curiously enough, this isn't true.

 

[twofish-quant]

However, I want to have a good knowledge of the investments and I know that I will not get that with a physics degree.

You won't get it with an economics degree either. Everything that you need to know to do personal finance, you can read on the internet or take a class on personal finance at a community college.

Does anyone know that studying economics will benefit the my knowledge of investments?

Not really. Just like learning to pilot a 747 won't help you plan a vacation to Hawaii. Different skills.

Curiously enough a lot of advanced economics is based on the mathematical principle that you *can't* consistently beat the market.

 

[twofish-quant]

It is not unheard of in economics for mathematicians, physicists, and engineers to apply to graduate school in economics with no economics background whatsoever.

It's also quite common for people with physics Ph.D.'s with no formal economics training to get jobs on Wall Street.

I suppose specializing in the field of "econophysics" is out of the question, eh?

It's a dead field. One of the problems with using advanced physics math to model economics is that it's not that useful if you can't get large numbers of people to understand that math, or if it turns out that the process can be understood with less advanced math.

One problem is that "so what?" question. For example, it turns out that there is a very deep connection between general relativity and currency trading. You can think of currency trading as a change in coordinate systems (i.e. measure something in dollars, then major something else in euros). If you try to impose a condition that things remain symmetric in one coordinate system, you get an extra term which in general relativity is called "gravity" and in finance is called a "quanto correction."

It's pretty cool. But you tell a trader that and he'll look at you and ask "so how do I make money from that fact?"

 

[qspeechc]

Does it matter? In the first two years you can take both the physics and economics courses, and only then decide which one to pick. There's no rush. You can always change your major. You can even double major, it's very hard work, no doubt, but it's doable.

 

[barthayn]

Does it matter? In the first two years you can take both the physics and economics courses, and only then decide which one to pick. There's no rush. You can always change your major. You can even double major, it's very hard work, no doubt, but it's doable.

I know. I will be taking economics and physics first year. However, I don't want to double major. If I want to get a physics degree I want to get a specialist physics degree and a minor in mathematics. This is to prepare me for grad school

 

[Shaun_W]

Is this true? I doubt this statement is accurate. Economists salaries are high, but only for economists with ample knowledge of quantitative methods which is obtained at the graduate level (at least a Master's). Economics undergraduate degrees are for the most part not really that mathematical in comparison to graduate degrees. For example, multidimensional integrals is a topic usually not presented to undergraduate economics students.

In fact, open a undergraduate book on econometrics, and compare it to a graduate level. The focus is so different. At the undergraduate level the use of canned software packages and interpretation of results as well as common diagnostic tests are emphasized. At the graduate level, the whole mathematical modeling machine is explored along with econometric specification and estimation of a student's own econometric models. This requires programming, and in some cases advanced knowledge of Monte Carlo Simulation, and other similar methods.

This doesn't mean that there are no jobs for economists with undergraduate degrees, but an engineer at the undergraduate level on average will have a higher starting salary.

British economics degrees are extremely quantitative - probably much more so than engineering degrees. Statistics certainly show that in the UK economics degree holders have some of the highest starting salaries, only behind dentists and doctors. Engineering here typically pays very low; what inflates the figures for engineering is that many engineering graduates will go into finance - particularly accountancy - banking, consultancy, etc.

 

[Je m'appelle]

It's also quite common for people with physics Ph.D.'s with no formal economics training to get jobs on Wall Street.

I suppose you mean Quantitative Analysts, but how common is it? And there are no requirements which you usually don't obtain by just following a Physics academic path (B.Sc., M.Sc., Ph.D.)? Would you mind to elaborate a little further? I'm quite interested in the subject.

 

[Pyrrhus]

British economics degrees are extremely quantitative - probably much more so than engineering degrees. Statistics certainly show that in the UK economics degree holders have some of the highest starting salaries, only behind dentists and doctors. Engineering here typically pays very low; what inflates the figures for engineering is that many engineering graduates will go into finance - particularly accountancy - banking, consultancy, etc.

I have no doubt about that. However, you may be grouping Economists with graduate degrees vs. Economists without graduate degrees. Economist students are more likely to go to graduate school in comparison to engineers (that is the expectation). The reason is Economists must handle quantitative tools. The reason Economist exist is to analyze data and compare it versus theory (established or new mathematical economics model). For example, revising for vertical integration of activities, is it less costly to integrate or separate activities in the production, also about scale production, does the produce increase above proportionally given the inputs?.

 

[Shaun_W]

I have no doubt about that. However, you may be grouping Economists with graduate degrees vs. Economists without graduate degrees. Economist students are more likely to go to graduate school in comparison to engineers (that is the expectation). The reason is Economists must handle quantitative tools. The reason Economist exist is to analyze data and compare it versus theory (established or new mathematical economics model). For example, revising for vertical integration of activities, is it less costly to integrate or separate activities in the production, also about scale production, does the produce increase above proportionally given the inputs?.

I'm definitely not. In the UK the best economics students won't even bother with postgraduate degrees because they'll already have jobs lined up in the banks, insurance firms etc. Economists here are least likely to do a postgraduate degree because it's a subject that tends to attract a high amount of the people who are "in it for the money" and there is no premium for postgraduate degrees here except in very rare circumstances.

 

[Mépris]

I'm definitely not. In the UK the best economics students won't even bother with postgraduate degrees because they'll already have jobs lined up in the banks, insurance firms etc. Economists here are least likely to do a postgraduate degree because it's a subject that tends to attract a high amount of the people who are "in it for the money" and there is no premium for postgraduate degrees here except in very rare circumstances.

I don't have any first hand experience with any of those people but I am inclined to agree based on what I have read around on the internet. Especially certain parts of a certain UK-based forum.

Another interesting thing is that, in many of the "big universities", Mathematics and Further Mathematics are required subjects to study Economics.

 

[twofish-quant]

I suppose you mean Quantitative Analysts, but how common is it?

Most investment banks have departments with dozens of Ph.D.'s.

And there are no requirements which you usually don't obtain by just following a Physics academic path (B.Sc., M.Sc., Ph.D.)?

Yes and no. One pretty firm requirement is curiosity and the ability to teach yourself new stuff. The thing about this is that people that go into "get the degree so I can get the job" often end up lacking in this area.

 

[twofish-quant]

I'm definitely not. In the UK the best economics students won't even bother with postgraduate degrees because they'll already have jobs lined up in the banks, insurance firms etc. Economists here are least likely to do a postgraduate degree because it's a subject that tends to attract a high amount of the people who are "in it for the money" and there is no premium for postgraduate degrees here except in very rare circumstances.

One consequence of this is that there is a healthy disrespect for credentials academic or otherwise. The standard problem for physics graduates (Ph.D.'s or otherwise) is that you don't have the right degree or piece of paper, but while it matters some on Wall Street, it matters a lot less than in other fields.

Another consequence of this is that anyone that gets an economics or finance Ph.D. is pretty much guaranteed a faculty position. However the flip side is that the admission rates for economics/finance Ph.D.'s are extremely low and most graduate students don't get funding and so have to get loans. Also, the amount of respect that you by just having the Ph.D. is a lot lower in economics than in physics.

Just to give you an example, if you have a physics Ph.D. give their latest theory on string theory, and someone with an undergraduate degree says "this is bull****" then people will think of the undergraduate as a crank. On the other hand, if you have an economics Ph.D. give their latest theory on foreign currency, and then a Wall Street currency trader with a bachelors degree says "this is bull****" (and traders do talk like that) people are more inclined to believe the trader. However, that happens pretty rarely. What happens a lot more often is that the trader and his friends quietly think "this is bull****" but doesn't say it outloud because they really don't care what academics says.

The other difference is that if you have your latest/greatest string theory, you tell everyone, since the currency of physics is peer approval. If you come up with a general theory of foreign currency transactions, you tell no one, since the currency of economics is money, and if you figure out how foreign currency markets work, you shut up and make money.

One thing that this means is that if you aren't sure about what you want to do and you see your degree as something more than a meal ticket, that it makes more sense to go physics, since it's not hard to go from physics -> economics, but people don't go the other way.

 

[twofish-quant]

One other weird thing is that in physics, the "golden job" is working as an academic in a big name university.

Curiously this is not true in economics and finance, and people will look down on you if you work as a research professor at a university rather than try to make big bucks on Wall Street.

This was really helpful to me. Like most physics Ph.D.'s figuring out that I wasn't going to be a research professor was rather traumatic since I had been surrounded by people that thought of being a research professor as the dream job and anything less as failure. However, being in an environment where everyone thinks that going into academia is considered a "lesser" position than going into industry and making money is quite helpful.

 

[twofish-quant]

The reason Economist exist is to analyze data and compare it versus theory (established or new mathematical economics model).

And most of that involves taking data, punching it into a computer system and putting the results in some powerpoint for a big meeting. You need some basic knowledge about what goes in and what comes out. This is one of those "I'm glad you are doing this sort of job because I'd go totally insane if I did that situations."

For example, revising for vertical integration of activities, is it less costly to integrate or separate activities in the production, also about scale production, does the produce increase above proportionally given the inputs?.

Economists don't end up doing that in any company that I know of. The reason why is to make these sorts of decisions you need to understand the details of the operations of the company or be able to get that information from people that do. This gets you into the world of an MBA which is a different degree.

 

[Pyrrhus]

And most of that involves taking data, punching it into a computer system and putting the results in some powerpoint for a big meeting. You need some basic knowledge about what goes in and what comes out. This is one of those "I'm glad you are doing this sort of job because I'd go totally insane if I did that situations."

That's the reason why economists generally dislike collecting data. The trend is to use somebody else nice dataset, and analyze it in a different way. This is a plus for engineers who are used to collect data.

Economists don't end up doing that in any company that I know of. The reason why is to make these sorts of decisions you need to understand the details of the operations of the company or be able to get that information from people that do. This gets you into the world of an MBA which is a different degree.

Economics is broad. There are different subfields. Generally, those in Industrial Organization study those elements, whether there are economies of scope and/or scale in industry sectors (e.g. transportation, electricity, even higher education). It wouldn't surprise me if to some extent MBAs do this. A lot of concepts from Economics has been transferred to other fields. For example, Marketing Research is mostly borrowed from economics. One of the many interests of economists is developing demand functions for different products, and also estimating direct-elasticites and cross-elasticities. Those in marketing are also interested in estimating the demand for products, and also of new products still not in the market.

 

[Pyrrhus]

One consequence of this is that there is a healthy disrespect for credentials academic or otherwise. The standard problem for physics graduates (Ph.D.'s or otherwise) is that you don't have the right degree or piece of paper, but while it matters some on Wall Street, it matters a lot less than in other fields.

Another consequence of this is that anyone that gets an economics or finance Ph.D. is pretty much guaranteed a faculty position. However the flip side is that the admission rates for economics/finance Ph.D.'s are extremely low and most graduate students don't get funding and so have to get loans. Also, the amount of respect that you by just having the Ph.D. is a lot lower in economics than in physics.

This is true as long as branding is there. A PhD graduate from University of Chicago in Economics will have a faculty position lined up either in Faculty of Economics, Business Management, and other related fields. Furthermore, the problem with Economics vs. Physics might be related to the issue of Social Science vs. Natural Science.

The other difference is that if you have your latest/greatest string theory, you tell everyone, since the currency of physics is peer approval. If you come up with a general theory of foreign currency transactions, you tell no one, since the currency of economics is money, and if you figure out how foreign currency markets work, you shut up and make money.

The problem is a PhD in Physics will have a harder time convincing others that his skills can translate. For the most part, there is a significant amount of job listings for PhD in economics with almost no experience required and six figures salaries (or close to six). Perhaps, those with PhD in Physics might be able to fill it, but usually they don't.

One thing that this means is that if you aren't sure about what you want to do and you see your degree as something more than a meal ticket, that it makes more sense to go physics, since it's not hard to go from physics -> economics, but people don't go the other way.

I've seen more common BS Physics -> PhD Economics or BS Math -> PhD Economics. However, I don't doubt there are some PhD Physics doing economics (in fact, while I was an engineer undergrad, my numerical methods class professor was a PhD Physics, and he was working out solutions to Black Scholes published to journals) at the academic level or
working as economists in the industry. I know there are PhD Math doing economics at the academic level, but then again to what quantitative field PhD Maths has not moved to? :shy:

 

[Je m'appelle]

Most investment banks have departments with dozens of Ph.D.'s.

That's nice to hear. How competitive is it? High or low demand?

Yes and no. One pretty firm requirement is curiosity and the ability to teach yourself new stuff.

I see, I just thought there were some strong background requirements such as a deep knowledge in programming or even in finances. But I suppose these are not entirely necessary? Quants basically use applied physics and basic finances knowledge?

One more thing, have you ever heard of Emanuel Derman's "My Life as a Quant"? I'm about to read this as a guidance, what do you think?

 

[twofish-quant]

The problem is a PhD in Physics will have a harder time convincing others that his skills can translate.

That's not usually a problem. The managers also tend to be Ph.D.'s in physics. It works the other way also. It's not that our group refuses to hire economics Ph.D.'s, but if you have an economics Ph.D. you have to do more convincing that you like programming C++ and doing stochastic differential equations.

For the most part, there is a significant amount of job listings for PhD in economics with almost no experience required and six figures salaries (or close to six). Perhaps, those with PhD in Physics might be able to fill it, but usually they don't.

Same is true for physics Ph.D.'s. It's largely a matter of knowing where to look, and one problem with physics departments is that their career services are abysmal. Economics and finance departments invariably have contacts with employers so that there is a smooth path between Ph.D. and job, whereas physics departments don't.

 

[twofish-quant]

That's nice to hear. How competitive is it? High or low demand?

It changes from month to month. One thing that concerns me is that there was a lot of hiring last year, but once the Federal stimulus money ran out, you could almost hear the plane run out of gas. Personally, I think with the coming budget cuts, things are going to get a lot worse for employment in general.

One other thing is that we aren't talking about a large number of jobs, but we aren't talking about a large number of applicants either.

I see, I just thought there were some strong background requirements such as a deep knowledge in programming or even in finances. But I suppose these are not entirely necessary?

It will help a lot if you can program C++. I know people who aren't C++ specialists, but if you are allergic to computers, it's like not being able to read. If you are super-brilliant at something else, you can get hired, but most people aren't super-brilliant.

It will help a lot if you read some basic books like Hull, but the trouble is that 70% of Hull is either wrong, outdated, or irrelevant. The field changes fast enough so that anything that you read could be totally wrong, and without work experience, you won't know what's wrong and what's not.

The big thing that is useful is that you understand the language. So when someone talks about "gamma" you know what that means (i.e. second derivative of a option price with respect to spot). That's something that you can pick up with two or three weeks of reading.

One curious thing in finance is that the really important stuff is stuff that isn't published anywhere. In physics, you can go to a professor's web page and see what they are working on, and get copies of their latest papers. One thing about finance (which I find extremely frustrating) is that the "latest information" is not posted on the web. For example, I'd like to talk about the cool math problem I'm working on in the other window, but talking about it publicly may not only be against company policy, it could be against Federal securities law.

But that helps you. If you are a newbie, you aren't expected to know.

Quants basically use applied physics and basic finances knowledge?

Quants are a description for about a dozen different jobs that do different things.

One reason that physicists tend to get hired for this sort of thing is that the markets change very quickly. You figure out an equation that explains how the markets behave in 2005, and by 2008, you find that this equation doesn't work, and you have to think about how.

One more thing, have you ever heard of Emanuel Derman's "My Life as a Quant"? I'm about to read this as a guidance, what do you think?

It's great to read as "financial history" and will tell you a lot about how the markets looked like in the late 1990's. However, you have to read it knowing that today's markets are very, very different from what things were like in the 1990's, so don't assume that anything he talks about is directly applicable today.

Just to name a few of the differences, computers are a lot faster, Asia is more important, interest rates are near zero, no one wants complex options, etc. etc.

 

[motx]

Quants are a description for about a dozen different jobs that do different things.

Could you explain further?

For example, could you tell us what particular backgrounds, skills, etc. are required for these different quant jobs?