Ask an Economist

[downtown]

Really? Are you talking fresh out of undergrad? The average starting salary for a ECON BACH is between 30-35K. If you're saying that starting salary, well that's an abberation.

In order to make that amount in the federal government, you either must have 10 + years service or a graduate degree.

No, not right out of undergrad. If you dont have any government experience, I imagine you'd start out as a "Data Jockey", and make around 35-40K.

However, you can make a decent living in the public sector in city government with just that BA. My old boss was making around 60K or so with just his Economics degree from Indiana (he hated the city he was working for, so he eventually got his masters)

Because working as an Econ Director for a city involves a lot of administrative and people skills, the pay can be decent, 'specially when you factor in the low costs of living in some of those cities.

 

[JerichoHill]

@@DT
No, not right out of undergrad. If you dont have any government experience, I imagine you'd start out as a "Data Jockey", and make around 35-40K
--Depending on where you live, more like 30-35K is the average. I don't normally like to look at promotional potential in a job but at starting salary potential, hence why I was confused.

Because working as an Econ Director for a city involves a lot of administrative and people skills, the pay can be decent, 'specially when you factor in the low costs of living in some of those cities.
--It can be, but I imagine it'd be pretty boring to someone who loved economics as you get mired in bureaucracy.

 

[mrt144]

Im working on my BS in Econ and working on a minor in statistics. of course I want to work towards a career in risk analysis, so i was just wondering if it was something that plays a major role in the salary of someone in the insurance industry...

 

[JerichoHill]

You should have a good background to build on for that career with those educational choices. The most important lesson in economics is taught in undergraduate courses from day 1 : Everything has an opportunity cost.

 

[Fifty]

Something by Von Mises or Hayek. The Road to Serfdom by Hayek is an excellent book, a classic of economics.

I've read The Road to Serfdom and agree it is an excellent book, but I was more interested in books/articles on why the specific methodological tendancies of Austrian Economics are superior to those of Neoclassical (or any other rigorously mathematical/mainstream) branch of economics.

Do you have any recommendations in that regard?

 

[Godwynn]

I was in economics today and the teacher showed us a graph about supply.

P = Price
Qs = Quantity Supplied
S = Supply

It seems wrong to me, the graph shows that as Price increases, so does Quantity Supplied and Supply. I thought as supplies decreased, price was supposed to rise. Here is the graph:

Explanation?

 

[shortguy]

I was in economics today and the teacher showed us a graph about supply.

P = Price
Qs = Quantity Supplied
S = Supply

It seems wrong to me, the graph shows that as Price increases, so does Quantity Supplied and Supply. I thought as supplies decreased, price was supposed to rise. Here is the graph:

Explanation?

You seem to be confusing a change in quantity supplied and a change in supply. The graph shows that there is a positive correlation between price and quantity supplied. You're right to say that a supply decrease would cause a price rise, but a supply decrease is signified by an upward shift in the entire line.

 

[Lockesdonkey]

I was in economics today and the teacher showed us a graph about supply.

P = Price
Qs = Quantity Supplied
S = Supply

It seems wrong to me, the graph shows that as Price increases, so does Quantity Supplied and Supply. I thought as supplies decreased, price was supposed to rise. Here is the graph:

Explanation?

NOTE: Things in small type are asides to the economist guy, to show him I'm not oversimplifying. Godwynn, you might want to ignore them if you don't want to get confused.

Here's the thing: You have to get rid of the idea that "supply=the amount of product sold." That's Quantity Supplied.

"Supply", when an economist talks about it, is the amount of product that a price-taking firm (i.e. a business that can't do anything about the price it sells its product at) is willing to produce/sell given a certain price. (of course definitions change in the factor markets, but that's another story...)

Let's say Alice runs an ice cream shop. Now, (to get some bothersome issues out of the way) she lives in a city with a literally infinite number of ice cream shops, which all sell identical ice cream (if you think this is ridiculous, just look up perfect competition, which is the assumption for most Econ 101 supply/demand curves). She decides she'll set up prices like this:

If the going price is $1.00 per cone, she'll produce 10 ice cream cones a day.
If the going price is $1.50 per cone, she'll produce 15 ice cream cones a day.
If the going price is $2.00 per cone, she'll produce 20 ice cream cones a day.
If the going price is $2.50 per cone, she'll produce 25 ice cream cones a day.
If the going price is $3.00 per cone, she'll produce 30 ice cream cones a day.

Et cetera!

That's called the supply schedule: what the supplier is willing to produce at each given price. Plotted as a graph with quantity on the x-axis and price on the y-axis, and you get the supply curve.

SO supply is the curve itself; the actual amount of things produced is not supply but quantity supplied.

Quantity supplied changes along the supply curve depending on price.

The supply curve only changes if the prices of inputs change, the expectations of the suppliers changes, or the number of suppliers changes (the last one only applies for whole-market supply curves, rather than individual-firm supply curves). Supply does not respond to price.

 

[Integral]

Lockesdonkey and the shortguy have it.

My humble contribution

A change in price does absolutely nothing to supply. Rather, it changes the quantity supplied. The distinction is critical. Quantity supplied is the amount a seller will produce at a given price; supply refers to the entire line; i.e., what the seller will produce at all price levels.

If the going price for pens is $1 per pen (it's a nice pen) while the price of pencils is $0.50 per pencil, you bet I'm gonna set aside more of my production to pens. However, if the price of pens falls to just $.20, and the price of pencils stays the same, then ceterus paribus I'll shift production to pencils.

The supply curve shows this: at higher prices, it is more profitable (i.e., less opportunity cost) to produce that good. At lower prices, opportunity cost increases, and production shifts to more profitable goods; thus the quantity supplied falls.

Integral

 

[Integral]

Jericho,

1. Where did you do your graduate work? What was the experience like?

2. I'm an undergraduate majoring in economics and mathematics, and might go to graduate school in economics. What kinds of higher math should I take? (Assume I already have the basics: 3 semesters of calculus; linear algebra, and ordinary differential equations.) I know to take a course in real analysis using Rudin's book, but beyond that what do you suggest?

Integral

 

[Godwynn]

Thanks Lockesdonkey, shortguy, and Integral.

I myself am trying to struggle through calculus. Finite mathematics was cake, but calculus is a brick wall for some reason.

 

[WillJ]

2. I'm an undergraduate majoring in economics and mathematics, and might go to graduate school in economics. What kinds of higher math should I take? (Assume I already have the basics: 3 semesters of calculus; linear algebra, and ordinary differential equations.) I know to take a course in real analysis using Rudin's book, but beyond that what do you suggest?

Jericho can give an "official" answer, but I might as well tell you what I've heard from multiple sources (since I'm sort of in the same boat as you). Advanced mathematics can be divided into five big groups of study, and four of them have classes that you should try taking, some of them more crucial than others:

1) analysis

take: real analysis, related classes (like measurement theory), possibly complex analysis​

2) abstract algebra

nothing here has significant relation with economics​

3) geometry

take: topology​

4) foundations

take: axiomatic set theory​

5) applied

take: probability and statistics (mathematically rigorous versions of these, not watered down ones), possibly computational math​

Real analysis and probability/statistics are the only ones that you should DEFINITELY take. The others you have lee-way with. Building proof-theoretic skills (even in category 5) is the key, rather than learning a bunch of applied tricks (although the latter is nice too, if you have the extra time, but first thing's first). If you're interested in doing Ph.D. work in theory (macro, econometric, or especially micro), you'll need a lot more math than if you're interested in doing Ph.D. work in applied stuff (health economics, antitrust economics, development economics, etc.). Of course, you'll ideally want a bunch of math regardless.

Now I'll sit back and see what Jericho has to say about my answer.

 

[The Yankee]

Thanks Lockesdonkey, shortguy, and Integral.

I myself am trying to struggle through calculus. Finite mathematics was cake, but calculus is a brick wall for some reason.

I feel your pain. [/Bill Clinton]

Exactly the same for me.

Would like to see Jericho's answer to the above. Also on any good reading materials, if possible. Always good to see references for certain books/works.

 

[Fifty]

To add to WillJ's list, if you're interested in finance stuff be sure to also take a lot of differential equations crap, and numerical analysis, and learn C++

 

[The Yankee]

Bleh, I hate C++, but maybe that's because of the combination of a) car accident w/ injury at the beginning of that year and b) terrible teacher, that led me to hate it and also not care/fail that AP course in HS.

But knowing me, if I applied myself, I could probably figure it out.

 

[JerichoHill]

Lockesdonkey and the shortguy have it.

Indeed they are! Woohoo!

 

[JerichoHill]

Jericho,

1. Where did you do your graduate work? What was the experience like?

2. I'm an undergraduate majoring in economics and mathematics, and might go to graduate school in economics. What kinds of higher math should I take? (Assume I already have the basics: 3 semesters of calculus; linear algebra, and ordinary differential equations.) I know to take a course in real analysis using Rudin's book, but beyond that what do you suggest?

Integral

I did my graduate work at George Mason University, that bastion of libertarian-esque economics. My specific interest was in the economics of romantic relationships (influenced by Posner's Sex and Reason book). GMU is the only Austrian influenced school, which means we place less emphasis on math and more on logic. However, that doesn't mean one gets to slack at math. My experience was wonderful, as I worked on a blog with fellow students for a year with several of my posts being picked up and used in economics undergrad classes in the US (woot). I loved graduate school because thats where your pontificate over beer, so you learn when youre not sleeping. It is a ton of work, a TON. My dating life suffered horribly my first year.

As for math, you sound like you have a good base. Make sure to take your school's econometrics course. I'd take a programming course too, in some sort of statistical analysis software (I use SAS , SPSS, and GAUSS). Maybe a course in simulations, to get your feet wet on Monte Carlo? Save the really tricky math for graduate school, honestly. Just get a good base, which I think you're doing.

 

[Fifty]

Bleh, I hate C++, but maybe that's because of the combination of a) car accident w/ injury at the beginning of that year and b) terrible teacher, that led me to hate it and also not care/fail that AP course in HS.

But knowing me, if I applied myself, I could probably figure it out.

Well I should be clear that I'm talking about if you're interested in financial engineering or PhD level financial research, because in those situations you have to be able to do serious mathematical modelling of stuff. Just being in the field of finance doesn't necessitate any of that stuff.

PS: I have to disagree with JH on the math prep advice. Real Analysis in particular is absolutely essential for getting into any good grad school (except GMU with its Austrian emphasis). I'm assuming you mean PhD by grad school. If you mean MA then those classes are much less important.

this thread should give you a good idea of the kind of math involved in getting into a good grad school.

 

[JerichoHill]

Expanding on WillJ

1) analysis

take: real analysis, related classes (like measurement theory), possibly complex
analysis​

--Real analysis definitely, measurement theory is helpful IF you want to do theoretical work (ie research, non-applied).

2) abstract algebra

nothing here has significant relation with economics​

--Indeed. You can ignore this. Economists are abstract enough as is.

3) geometry

take: topology​

--I don't think you need to worry about geometry for economics, for the most part.

4) foundations

take: axiomatic set theory​

--YES!

5) applied

take: probability and statistics (mathematically rigorous versions of these, not watered down ones), possibly computational math​

--Double Yes

Also, you should ground yourself in other social sciences, as they interplay quite a good bit. A good economist should take courses on rhetoric, psychology, and computer science to prepare.

 

[Integral]

Thanks for the advice, Jericho and WillJ

Thanks for the link, Fifty. Yes, I meant PhD when I said grad school; the USA doesn't have any terminal MA programs in econ worth considering, and an MA isn't the path I'd go anyway. If I wanted a masters, MBA or MPP would be top of the list.

Integral