The Market for Academic Economists

This morning's Wall Street Journal has a nice article on the market for big-time academic economists. Some quotes:

The tug-of-war over star academic economists is heating up, as U.S. universities continue to expand economics departments and revamp the way they teach the subject.

Harvard University is wooing Matthew Rabin of the University of California at Berkeley, a "behavioral economist" who seeks to explain why people don't always act in the rational ways that economists often expect.

...

The growing quest for economic talent is largely a response to market forces. Economics is the leading major at many top schools, including Harvard, where 15% of undergraduates major in the subject. Universities figure top-name professors will help recruit the brightest students.

"When you recruit top people, it also makes it easier to recruit top junior faculty," says Jose Scheinkman, an economist at Princeton.

The scramble for talent has driven up salaries. According to the Bureau of Labor Statistics, salaries for economics teachers, a category that includes professors, averaged nearly $140,000 a year -- based on a 52-week year -- in 2003, making it one of the highest-paid professions that the government tracks. But at the elite colleges, economics professors can earn substantially more, with some senior faculty commanding $150,000 to $250,000 for nine months' work. Other forms of compensation such as housing subsidies and signing bonuses can be used to bolster pay packages. Superstars, such as Nobel Prize winners, can earn in excess of $300,000.

According to this study published annually by folks at the University of Arkansas for the American Economic Association, new PhD's going to top research schools received starting salaries right around $80,000. At non-PhD granting institutions, such as mine, starting salaries for new PhD's average around $60,000. Here's more:

The sheer growth of the field also is playing a role, as schools rush to expand their programs. Among the most ambitious is New York's Columbia University, which is enlarging its department from 28 to the equivalent of 41 full-time professors, plus an additional five visiting professors each year. Such growth has helped create a hiring rush at all levels.

But while demand for academic economists has grown, supply hasn't. According to the National Science Foundation, U.S. universities churned out 1,051 Ph.D. economists in 2003, the last year for which figures are available. The number has held roughly steady for a decade.

Timothy Bresnahan, chairman of the economics department at Stanford University in California, says there is strong interest in the relatively young crop of economists who received Ph.D.s in the 1990s and are focusing on using economic theory to address issues such as crime and school reform. "These people are using economic principles to study things which are wrong and are looking for ways to fix it," Mr. Bresnahan says, noting that this new branch of the discipline is helping to make economics more academically vibrant and attractive to students.

The marriage of economics with other disciplines is also helping fuel the market:

Many universities want star professors who can help reshape how they teach economics. David Cutler, an economist and dean of social sciences at Harvard, notes that it has become more important to integrate economics with other specialties such as medicine and psychology. That is one reason Harvard is recruiting Jonathan Cohen, a Princeton psychologist who specializes in "neuroeconomics," the study of what happens in the brain when people make economic decisions. Mr. Cohen declined to comment.

That's what makes economics so cool - it's wide applicability to so many other fields other than itself and business: medicine, education, public policy, psychology, sports (and not just the business side either). Heck, I remember reading about a paper a few years back where researchers used economic principles (knowingly or unknowingly, I can't remember) to understand why female birds of a particular type were more likely to leave the nest than male birds. I'm going on memory here, but as I recall, the argument was that a female bird was more likely to find another mate if she left the nest. That's decision-making under uncertainty - Chapter 5 in your Intermediate Micro text!