Usefulness of the article: Large technology companies are now faced with tasks that require skills particularly well developed by PhDs in economics. American web giants have understood this and are recruiting heavily from doctoral programs in economics departments.

Summary :

• Throughout the world, doctorates are highly valued by companies, while France is an exception in continuing to favor the recruitment and higher remuneration of graduates from prestigious universities.
• The United States is doing the opposite, and one doctoral discipline is of increasing interest to web giants: economics.
• The article identifies three skills specific to the discipline that are highly prized by digital companies.

American universities supplanted by web employers

Amazon now employs more economists with PhDs than any American university. The appeal of these highly qualified profiles is winning over many tech companies, including Airbnb, eBay, Facebook, Google, Groupon, Microsoft, Netflix, and Uber.

Recruiting economics researchers can be extremely profitable. This is the case at eBay, where three economists found that the $50 million budget allocated each year to advertising campaigns on Google and Bing offered an overall negative return [1]. These economists did not just raise the issue. They solved it by recommending that online advertising be targeted more at infrequent customers and internet searches that did not include the company’s name.

The concern for relevant advertising targeting is not new. As early as the 19th century, the wealthy John Wanamaker, founder of Philadelphia’s first department stores, declared:  » Half the money I spend on advertising is wasted. The trouble is I don’t know which half. »

A similar example can be found among advertisers. Yahoo!’s revenues increased by several million dollars thanks to the work of two economists who refined the pricing of keywords used in internet users’ queries [2]. All they had to do was apply theoretical results, known for several years in academic circles, on the subject of auctions.

During their theses, economists develop a range of skills that are now attracting the interest of companies involved in new technologies. Three skills specific to the discipline are particularly appealing to recruiters in the sector.

Making data speak

First, the ability to « make data talk » by going beyond empirical correlations to identify cause-and-effect relationships. This skill is highly sought after by Silicon Valley companies, whose decisions are driven more by data interpretation than by subjective criteria. It complements the range of processing offered by statisticians and big data experts. While machine learning is an excellent predictive tool, it is less effective when it comes to providing counterfactual analysis. By conducting appropriate experiments, economists are able to answer hypothetical questions, such as estimating what would have happened if the entry-level version of a product had not been brought to market. Or, to identify the most promising innovation even before engaging in research and development activities. There are countless scenarios to test. That’s why Amazon recruits more than a hundred PhDs in economics every year [3].

Analyzing strategic interactions

Economists are also particularly skilled at analyzing strategic interactions based on the information environment. This allows them to better structure an offer and adapt a service to market conditions, which explains the constant changes to the user interface of websites or mobile applications of companies such as Airbnb, Facebook, Groupon, and Uber. This skill also gives them the opportunity to study the effects of reputation and to work for rating sites such as Expedia, TripAdvisor, or Yelp.

Distinguishing between short- and long-term effects

Finally, PhD students in economics are well versed in distinguishing between short- and long-term effects, which can sometimes be contradictory. This skill is particularly useful for configuring decision support algorithms that perform the tasks for which they are programmed, but ignore anything that is not specified. Let’s take the simple example of an import company that wants to buy low-priced products in China to resell them in France. It is easy to develop an algorithm capable of detecting in advance which items are likely to sell best. Before embarking on the operation, however, it is important to consider the quality of the imported products. Otherwise, after achieving its short-term sales goal, the company will be exposed to a surprisingly high rate of merchandise returns in the long term. To avoid this inconvenience, simply add a variable to the model that checks the item’s rating on sites such as Amazon. Various companies continue to use services designed to maximize the number of clicks on a link, without considering the longer-term goal of keeping consumers satisfied with their experience on the site. The situation is perfectly summed up by Susan Athey, professor of economics at Stanford and former chief economist at Microsoft:  » Within the company, PhDs in economics are much more sensitive to long-term issues than engineers. »

Professional integration in France

In France, the business world remains too unattracted to these profiles. However, PhDs in economics and management have little to complain about. According to the Ministry of Higher Education and Research, this discipline has the highest median salary one year after graduation (see Table 1). The rate of permanent employment among PhDs in economics and management is also very respectable, ranking second only to information and communication sciences and technologies (ICST).

Table 1: Net monthly salary and proportion of stable employment after obtaining a doctorate

Source: IPDoc 2015 survey – MESRI-SIES

However, it is regrettable that France continues to strongly favor the employment of students fresh out of prestigious universities over that of PhDs. While throughout the world, a PhD is the most prestigious qualification in higher education, companies in France are unfamiliar with this degree. Too often, recruiters perceive PhDs as « lab rats » who are unable to adapt to the corporate world, and prefer to recruit operational staff from engineering and business schools.

The latter are also better paid than PhDs (excluding health), whose median full-time net salary is €3,000, compared to €3,200 for engineering school graduates and €3,290 for business school graduates. The highest degree awarded by French higher education still pays more than a master’s degree, which has a median net salary of €2,400.

Professional integration in the United States

In the United States, the employment conditions for PhDs are incomparable. Their unemployment rate is only 1.5%. However, this figure should be put into perspective with the low unemployment rate for master’s degree graduates (2.2%) and for the country as a whole (3.6%). As might be expected in a low-unemployment environment, the salaries of the most sought-after profiles are striking. This is not surprising in a country that is more unequal than ours, where even the smallest degree can multiply salaries. In a study ranking the 50 highest-paying doctorates in 2018-2019, doctorates in economics came in second place, with an average starting salary of over $100,000 and a maximum of $250,000 at the senior level (see Table 2). At the top of the list is a new field that has been on the rise since the advent of big data and mainly includes computer scientists and mathematicians, but also a few economists. This field is insurance information processing.

Table 2: Annual salary of PhDs at the start and peak of their careers in thousands of dollars. Top 15 positions among 50 fields.

(Source: www.online-phd-degrees.com/highest-paying-doctoral-degrees)

Conclusion

The theoretical and empirical training that structures thesis work makes economists increasingly attractive to American companies. Only time will tell whether this recruitment policy will one day catch on in France.

[1] See T. Blake, C. Nosko, and S. Tadelis: « Consumer heterogeneity and paid search effectiveness: A large-scale field experiment. » Econometrica 83, no. 1 (2015), 155-74.

[2] See M. Ostrovsky and M. Schwarz: « Reserve prices in internet advertising auctions: A field experiment, » under review in the Journal of Political Economy.

[3] See Amazon’s economics PhD recruitment website.

[4] See S. Athey and M. Luca: “Economists (and Economics) in Tech Companies,” 2018.

Jérôme Mathis is a professor of economics at Paris-Dauphine University and author of the book La finance au cœur de nos vies (Finance at the heart of our lives), published by Le Tremplin des Idées, 122p., 2018.

Table 2: Annual salary of PhDs at the start and peak of their careers in thousands of dollars. Top 15 positions among 50 fields.