Which of these best describes your motivation for wanting to go for a Ph.D in economics?
Intellectual Curiosity. You like to explore ideas, you want to better understand how the economy works, and you want to come up with answers to puzzles and problems in the field of economics.
Lifestyle. You want to produce economics papers, you want autonomy, and you want your only professional interactions to be with other economics professors.
Other. For example, you may want a career in the field of policy-making in economics.
Unless you picked “lifestyle,” my advice is to do something other than go for a Ph.D in economics. Other goals are best served by doing something else, most likely pursuing a career in business. For example, if you are successful in business, you can move “sideways” into a role in economic policy.
In hindsight, my decision to go to graduate school was a mistake. My primary motivation was intellectual curiosity, and econ grad school worked against that.
I went to MIT in 1976, and I finished my dissertation in 1980. Meantime, the professors there did their best to stifle my intellectual curiosity.
The teaching method was “chalk and talk.” Professors would write equations on the board and explain them. These equations might be from widely-praised theories, or they might be from the professor’s own papers, however idiosyncratic.
There were no courses taught as discussion classes or seminars. Student input was nonexistent. They might call on you to see if you understood the model they were putting on the board. I remember in Dornbusch’s international macro class, he loved calling on me, because I had such bad intuition. He would ask, say, which way does the real exchange rate go in this case? I would say “up,” and he would say “Right. It goes down,” and everybody would laugh.
You were not there to contribute ideas or questions. You were there to learn mathematical and statistical techniques.
At the time, MIT was the dominant department in economics. If nothing else, MIT training gave you the tools to write publishable papers, which is the key to getting tenure.
MIT was dominant in part because Harvard still had not recovered from its antisemitic decision to let go of Paul Samuelson in the 1940s. Samuelson, incidentally, taught our cohort a one-quarter course on capital theory, in which he explained Austrian capital theory quite clearly (along with other capital theories that he explained less well). Usually, we got nothing out of the class. He told partial stories. Before he could get to the point, his mind raced ahead and he was on to the next story.1
Because MIT was so dominant, it populated many other departments with its graduates. So other departments came to think of the MIT approach as being the right way to conduct graduate school. There are other departments that are less populated by MIT alumni, and these may teach differently.
Are things different now? If you are a recent econ grad student, maybe you can write a comment on whether or not there is more class discussion today than there was back then.
If you are motivated by intellectual curiosity, I would recommend going into business. First of all, you will learn a lot about human behavior, which is important for understanding the economy. You will see the inside of a firm as something much different from the unitary, flawless profit-maximizing entity that is portrayed by economic textbooks and anti-capitalist demagogues alike. Real businesses operate in a fog of uncertainty, groping for ways to capture revenue and contain costs, surviving many mistakes and dysfunctional processes. Especially in large firms, one of the biggest challenges is getting the different parts of the organization to work with one another.
Second, you can study economic ideas on your own. The best economic insights are not esoteric.
If only to be able to call yourself an intellectual, you certainly want to have an understanding of the economic basics, including supply and demand, comparative advantage, and specialization and trade. You want to know some basic game theory. You want to know something about probability and statistical methods. But in my opinion, the fancy mathematical tools that you pick up in graduate school are not necessary for being able to apply economic knowledge.
For example, there is a story about Gauss, the mathematician, at a very young age showing that he understood the convergence of a series. His parents told him to eat half his peas. When he did that, they told him to eat half again. And then half again. At this point, Gauss started crying, realizing that he would end up having to eat all of his peas. Samuelson told the story this way: “Gauss did not like peas. His parents gave him peas, and he started crying.” Samuelson thought he had told the entire story.
My experiences were mixed. By odd chance, my cohort at Columbia was loaded with intellectually curious students (and the department thought us unusual). So outside of class, we made our own lively seminars at restaurants almost every week. And, fortuitously, some of the younger professors were regular participants in these pop-up salons. Yes, the classes were primarily aimed at conveying technique, but some of our professors also engaged us in stimulating discussions. Ned Phelps, Jagdish Bhagwati, Heraklis Polemarchakis, Martin Osborne, Donald Dewey, and others had lively discussions in their classes. (I drew and mass produced a class t-shirt featuring a helicopter dropping money on an island, and I believe Rudi Dornbusch bought one while attending a seminar.) The dissertation process, however, was horrible, and the professors negligent—with students vanishing off without degrees because professors were just too self-preoccupied to read dissertations. 15 years later, hearing that there was a sympathetic new dean, I went back and raised holy hell about my treatment. He agreed, readmitted me without charge or penalty. I rapidly assembled the greatest dissertation committee in PhD history and wrote a new one and defended in a very short time. All this said, I steered countless students away from getting PhDs in economics because, while I enjoyed a great deal about my studies, it is a hideously inefficient and risky way to begin a career. It wastes the most productive, energetic years of a career. And there is always a high risk that a negligent or malevolent dissertation chairman or committee member will ultimately prevent you from completing your degree.
The story about Samuelson's take on the young Gauss is wonderful. Readers: don't miss it because it is in the footnote. It seems to this non-economist that Samuelson and MIT were trying to scientize economics, i.e., obtain a degree of certainty that the subject matter did not permit, a failing typical of the social sciences of the 1920s and 1930s.