18 Aug 2009

Academic Economists

Another in a series...

I was talking to my dad, explaining how academic economists are not very good at describing how markets work [seen the news recently?].

For example, many economists talk about "equilibrium," i.e., when supply and demand are balanced. I asked him the last time he noticed the real estate market in equilibrium.*
"You mean where prices are stable? Well, that happens every so often."
"But you only know that prices are stable after they stop being stable, right?"
"Oh yeah, right. We never know where things are going until after we've been there."
Anyway, I told him that economists often assume equilibrium so that their mathematical models will work.
"But how can they do that if the real world is not like that?"
"Oh, because most of them have never been in the real world (they stay at university from their BA to their PhD to their job as professor). Even worse, they "job" is mostly about writing stuff for other academics.** And those writings are all about models that show equilibrium."
"What about teaching?"
"No, there are few rewards for teaching. You get tenure (lifetime job security) and promotions if you publish. Student evaluations don't matter."

"But what about the stuff you do? The blogging?"
"Nobody pays me for that. My postdoc salary is for "research," and I decided that blogging was the best way to use my time and skills. Look at my teaching -- I am doing that for free*** because I think that's important too."
"So will blogging and teaching help in your career?"
"No -- if you want to be a professor, all that matters is publication. That's why I am not going to apply for professor jobs at research universities.****"
Bottom Line: Those in the Ivory Tower will only serve the people if they walk outside every so often.
* My dad's been in the RE business for 30 years. He says it's easy money -- 6 percent! -- and I've spent a lot of time trying to understand why 6 percent commissions persist. It's not the exclusive access to data -- the internet exposes data, but 6 percent persists. I think it's more because people are willing to pay 6 percent on the biggest transaction they will ever make.
** Although I find that few academics bother to read that stuff.
*** UC Berkeley will pay me $9,000 to teach EEP100. Since my postdoc is for "research," my postdoc salary will drop by $9,000.
**** This is a big decision I recently made (more to come...)


  1. David,

    At teh risk of sounding like I'm taking umbrage to your post (which I'm not, even though i am one of those Ivory Tower, BS to PhD types who has never seen the real world), I do think you overstate the emphasis that academic economists place on equilibrium. I won't speak for all, but to me, equilibrium is a teaching and modeling concept to help understand why real world observation doesn't match theory. To me, the interesting question is "If markets want to naturally equilibrate in the absence of outside influences, what outside influences are causing what we observe in the real world?" It is the concept of equilibrium that allows us to identify the failings of markets and potential provides prescriptive remedies (assuming equilibrium/efficiency is the goal).

  2. @Tim -- good point, and you're biased by exposure to the real world. :)

    OTOH, I think it's important to remember that people who work with the same ideas, day after day, will have trouble perceiving other ideas that DIRECTLY conflict with those ideas.

    I think that's why a lot of economists still dislike behavioral and experimental economics -- most of the behavior is off-equilibrium (e.g., bubbles), participants are not "rational" (they satisfice, violate transitivity, etc.)

    The result is that they, academics, do not understand how "real" things work and cannot contribute improving things.

    Obviously, this is a bigger problem for some than it is for others. My point is that the incentives go one way, and the "useless output" follows them...

  3. David,

    With the 100% tax rate, you should have negotiated a 30 student class and a $3,000 stipend; instead of 90and $9,000!

    In addition to the noble cause of teaching, I suspect you are teaching for the evaluations and the teaching experience, because those non-research universities you apply to WILL care about them.


  4. @Jeff -- all too true. But the UC forbids lower pay scales (to protect me), and I am not sure if I will be applying at any universities. (still thinking about liberal arts...)

  5. Those who can, do.
    Those who can't, teach
    Those who can't teach teachers
    Those who can't teach teachers, become administrators

    1) In 30+ years, I encountered maybe, 1,000 "professors". A maximum of 10% of them could have held much of a job beyond clerk outside of the university. I looked at the high paying job jobs in the UC system which you supplied and everyone of the highest paid people were either coaches or medical doctors, except for one guy whose job classification was "miscellaneous". Miscellaneous for $500,000?? Wow.

    2) When I decided to get into the professor business, I thought it might be a good idea to learn something about my new adventure so I enrolled as a Higher Education minor and took the required courses at the USC School of Education. The first course was a seminar with about 80 teachers and covered the history of higher education in the U.S. It as pretty interesting, but the instructor wouldn't put my test scores on the board. In the whole course, is missed one question, when was USC founded. The instructor said, Tee Hee, the answer was right there on the cover of your blue book test.

    Then I took a course called Problems of College Teaching, and I thought, O.K. that's for me. In this seminar there were only about 40 students and the instructor was the dean of higher education in Southern California, a Southern gentleman with great white hair swept back. The text book for the course was Jonathon Livingston Seagull!!! Everybody in the class, instructor included, hated me because I said it was a dumb book. The only B I got in the PhD program.

    3) What do you do when you are forty years old and have a PhD in English and discover that you hate teaching and that you are lousy at it? Of course, you go into management. This little absurdity is repeated over and over again. We had a vice president of international relations that I sometimes had to work with on various projects. Bill Haddad was known to go into the corridor and yell at the top of his voice, "I will commit suicide before I go into a class room again," which was always met with loud applause.

    Higher education is the only activity in the world where the cream sinks.


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