Saturday, August 27, 2011

Who Should Go to Graduate School and Major in Economics

Recently, Gary North and Walter Block debated the value of getting a PhD degree in economics. They both made valid points for their positions. However, I don't think there is a one size fits all answer to the question.

For some, I think a graduate degree makes sense, for others it makes no sense at all.

One of the first problems for students of Austrian economics is that the Austrian school of economics rejects most of the empirical work being done today in economics, so it is a major headache for most to study math that to the Austrian is only used in voodoo economics.. This is, thus, a severe road block for many in obtaining a PhD in economics. If you don't understand the math, you are not going to get the degree.

That said, for those who aren't intimidated by the math, and, indeed, find the math easy, a PhD career path may make sense. But, you better really know the math and find it easy (before you attempt a graduate economics degree, peruse some heavily mathematical economic journals and see if you understand them).

If the math doesn't intimidate you and seems EASY (serious mathematicians think the math economists use is a joke) then a PhD career track should be considered, especially if in addition to a facility with math, you also have a strong personality, have the skills to get around a bureaucracy, have an abundance of charisma and won't be pressured by the mainstream to sellout.

If you have all these characteristics, you should be at Harvard or the London School of Economics, pronto. The Austrian school could surely benefit from such a rock star scholar, eventual professor.

If you have this combination of characteristics, then you need to start plotting your moves now. But don't fool yourself into thinking you have all these characteristics, if you don't. At most, I guess there might be only one or two of you out there that have these traits. That said, the value of someone like this blowing up Keynesian economics from the inside would be Hayekian. And, you would make a lot of money doing it.

The closest to achieving something like this was Robert Nozick, who somehow managed to be a minarchist (at least for awhile) on the philosophy department faculty at Harvard, and rocked some boats there.

For those of you who are not as comfortable with the math, or those of you who have not been exposed to enough of the math, a graduate degree shouldn't be completely ruled out, but other options should be considered first.

During the debate, Block revealed that he makes $170,000 as a professor and has a lot of free time. North did not reveal his income.

My guess is that Block is likely a very shrewd businessman and that if you looked at his balance sheet, it would be very impressive, but I don't think it would come close to North's personal balance sheet.

North, though having a PhD, has always stayed out of traditional academia, has been an entrepreneur for most of his life and has taught what he pleases, through books, newsletters and the internet, without the restrictions of  academia.

North is absolutely correct that you can reach out and teach a lot more people by working  outside the traditional academic career path. And, he is correct that most of the time you can make more money by staying away from the academic career path. I can think of a number of Austrian economists, outside academia, that are likely doing very, very well for themselves. Further, from my vantage point, I see opportunities for Austrian economists who can reach out to students, AEs who can become involved in the financial world, AEs who can become consultants to industry. The more that government hinders an economy, the more and more AEs are needed to explain to the financial world and the industry what is going on, how to deal with what is going on and what to expect next.

But before any of this, you need to have Austrian economics down cold. You need to spend hours and years at and read especially Mises, Hayek, Hazlitt and Rothbard. If you read all of Rothbard, you will not only gain a perspective on economics but on how the world works from a political and social perspective.

This non-academic method of working as an Austrian economist, I dub the "entrepreneurial approach" because it will take some entrepreneurial skill to recognize the opportunities that exist and the skill and perseverance to execute the opportunities.

For those who don't have the entrepreneurial personality and prefer a more structured career path, we can again turn to the academic route. But please, if you are not entirely comfortable with math, do not take a graduate path in economics. You are much better off choosing economic history, general history or sociology. Block only mentioned sociology in passing, but I recently spent some time at a sociology conference and got the sense that sociology is much more wide open to different kinds of thinking than academic economics and that in studying for a PhD in sociology you could pretty much do Austrian economics.

Bottom line, there are many opportunities for those who would like to have a career in Austrian economics and if you are talented  the money will be very good. Most important, you need to be honest with yourself about your strengths and weaknesses and choose your path from there.


  1. Robert,

    Thank you for this post. Very, very helpful. I am the "audience": currently taking the required math and econ courses to apply to an Econ PhD program.
    I'm not a math superstar, but can hold my own. If the math doesn't go beyond differential equations and linear algebra I should be fine, and I plan on taking Real Analysis as apparently this is excellent prep for the type of math I'll be seeing.

    Regarding knowing Austrian econ cold, I've been tearing through and plan on doing an A to Z on the first 3. My only question is Hayek. I'm more of a Mises/Rothbardian. Is it necessary to read ALL of Hayek to get AE? Can you give me a list of esential Hayek?


  2. your describing yourself, schiff and woods i believe. you 3 should get a tv show.

  3. I checked out some Economics journals last week at the library and the math these guys are using is really really complex. But in the end the solution to all problems in society and in the economy is to print more money. If that doesn't work just print more.

    You don't need a P.hD in Economics to understand economics. All you need is some common sense. Common sense will take you a lot farther than you think.

    Robert, you should do some video blogs, a radio show or something :)

  4. Slightly off topic, but an idea for the entrepreneurial sorts: I think it would be great to see more books and teaching resources from the Austrian School perspective geared toward the younger learners. Just imagine - a book for 1st/2nd graders that talks about what money is. A course for high school students that gives them the tools they need to jump into the work force. And various units in between for students. As a homeschooling mom I know I would jump on the resources. My kids aren't school age yet, but I'm already thinking about how I'm going to give them more knowledge about economics by the time they're 18 than I know at ahem, 30-something.
    Just to give you an idea of what is reaching kids right now, go to: (note that Ben Bernanke approves enough to attend the opening of one of this groups parties).
    P.S. Mr. Wenzel, thank you so much for your blog. It's one of my favorite learning spots. Long removed from the University, I think that my economic understanding and world-view is more realistic and mature now than it was coming out of a top-rated business program. I owe that to this blog,, and the wonderful books and writings of so many folks who are willing to swim upstream for their ideas to spawn.

  5. As someone who was ABD in a traditional economics program before abandoning academia for the private sector, I'm much less inclined to recommend this career path to anyone interested in Austrian econ. The math is, honestly, not that difficult: at the PhD level, you're not really expected to excel in coursework, so as long as you're willing to spend the time on learning the math, I think anyone with an aptitude for real analysis and basic calculus can learn it.

    The real question, and the most important one that any potential grad student needs to answer, is what you want to do with the degree. When you join one of those departments, the vision they have in mind for your career is this: either (a) doing theoretical work in academia; or (b) doing empirical research in academia, government, or thinktanks. And by "theoretical work" they mean heavily stylized mathematical formulations of economic phenomena. The Bible for this type of work is Mas-Colell, Whinston and Green's "Microeconomic Theory"; if you don't like this book, you won't like path (a). More importantly, neither path fits well within the Austrian research paradigm. So you might find it hard to get support for Austrian work and to get that work published in the journals your peers care about.

    I'd agree with Bob that there's a growing audience for Austrian economic scholarship. But that audience isn't in academia, and you'll probably be a lot happier in your work if you can find creative ways of communicating with people genuinely interested in this type of work.

  6. "Anonymous said...
    your describing yourself, schiff and woods i believe. you 3 should get a tv show.
    August 28, 2011 6:24 AM"

    "an A to Z on the 3". I'm in the process of reading all of Mises, Rothbard and Hazlitt. The 4th author RW mentioned, Hayek, I'm not crazy about.

  7. I am of the opinion that Paul has launched a political revolution among the young towards liberty based thinking. Look at how even in the Gallup polling among GOP voters that Paul is at 29% and in first place in the under 29 demographic!

    I also think there is a massive education bubble, and along with the current depression we are in, the college business model is going to have to radically change in order to stay in business. I also think with the spread of the internet, more and more education of people can be done online instead of through academia.

    I say this as someone with a degree in econ from just a few years ago, too. Those of you who took econ at college, be honest with yourself and remember how many people were actually paying attention. Or how many people were just doing what was necessary to pass the tests instead of really understanding it.

    Both numbers are very small, so I don't think the influence of mainstream econ in the form of academia is as important as most believe. Where I view it as being more important is in the media. TV, newspapers, radio, magazines, etc is where older people tend to be influenced, not what they learned in college.

    This is all a long winded response saying that I think there is a lot more money to be made, and it will reach a lot more people to concentrate on the general public and not academia. Sites like this one, lew rockwell's, and Tom Woods' site are influencing far more people than academia to have permanent ideological shifts.

    Besides, us austrians can fairly easily apply the business cycle theory to both make money and help our friends and relatives not make mistakes. I personally did this prior to the last crash in 07/08, and now all of those people amazed at what I did want to know what will happen next. You all can do the same thing on blogs, websites, youtube channels, etc to gain credibility...

  8. You forgot to mention Philosophy as an alternate course of study for those interested in Austrian Economics.

    There is a rapidly developing paradigm rift between the central planners/empiricists/consequentialist ethicists and those who advocate for decentralized organic order/deductive a priori logic/deontological or natural rights ethics.

    We could use some good thinkers on our side to help train young minds to think critically. The dark side only has obfuscating sophists unwittingly serving the grand designs of their evil masters.

  9. Though a lot of people would think that it requires a special innate talent to be an economist, the graduate degree in economics offered by a lot of accredited schools prove that being one can be studied.