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should econ grad students pay for their own education?

In grad skool rulz #9, I argued that graduate students should not pay for their own education. Why? Academia doesn’t pay well. If you want talented people specializing in things like Croatian syntax, don’t saddle people with mortgage sized debts on the way out. Every self respecting arts and science program should have a healthy system of fellowships, tuition waivers, and teaching opportunities to minimize debt.

However, we don’t have that financial system for MBA’s, MD’s, and JD’s. Why? Students in these fields will, sooner or later, have fantastic job opportunities. It’s reasonable to ask them to pay for a resource that yields such a high return.

Economics has shifted from lowly paid arts and science to well compensated professional field. Consider the following: In an article on the crummy academic job market, the Wall Street Journal reports on a University of Arkansas study that shows that entry level econ PhD’s make $86,000 (scroll about half way down). That’s right – an average econ PhD with few (or no) publications makes the same as a full professor in many arts and sciences areas. If an economist lands a job at a leading program, the assistant professor salaries easily start at $100,000+. B-schools start even higher. In the private sector, consultancies and related work are better compensated.

Let me emphasize this: professional economists do better than nearly any other arts and science field (except maybe computer science) and do well compared to lawyers and MD’s.

Do not interpret this as class warfare. If an economist has more market value than a Bach specialist, that’s fine with me. We need to pay top dollar for highly talented people. But if they are doing so well, it obviates the argument for a subsidized graduate education and we should treat the economics graduate degree more like an MD than a philosophy PhD.

PS. There’s a collective action issue – no PhD program wants to be the first to pull the plug on comfortable graduate fellowships. That doesn’t undermine my main point, but it does show the futility of this post!

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Written by fabiorojas

February 17, 2009 at 9:31 pm

27 Responses

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  1. I was shocked to learn that many of the 1st year Econ students here at Michigan do not have funding. Most will get TA positions for most of their time here, and apply for fellowships, but many have no support their first year (I believe). Of course, their program is also twice the size of most other social science departments (first year cohort is something like 35-40 students).

    That being said, I think it’s a shame how much debt JDs and MDs have to take on. It’s part of why so many people start law school wanting to work for non-profits and end up working at corporate firms. Even if you were willing to take the smaller paycheck, at some level you just can’t afford to with $150k of debt. Ideally, wouldn’t we want to even things out a bit? Especially for MDs – pay for their education in exchange for having the job pay a bit less in the end?

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    Dan Hirschman

    February 17, 2009 at 9:40 pm

  2. Many econ depts have recently increased support for all years of grad school for their students, but not all are doing so. Most stipend offers (all but those for the top students) include TAing as part of the deal to get the support. So, just like in other disciplines, the econ grad students are working for the pay (if you call TAing working) just like grad students in other social science and humanities fields BUT not professional school students like MBA or JD.

    I also note that the demand for econ TAs is very large. Because lower level econ courses are in high demand and because econ is a popular major (especially at colleges and univs without B-schools), there is also a large demand for econ classes and, hence, good econ TAs. Because the best econ TAs are econ grad students, there is actually large demand for econ grad students.

    Your comparision of econ PhD to MD was puzzling. My guess is that you would have compared econ PhD to PhD in engineering or other “hard science” (can I use that phrase here?). That seems the more appropriate direction. But even with that there is a difference. Much of the engineering students funding comes through large grants that their advisors get. Econ advisors just don’t get that type of funding. So I think econ PhD is more similar to, say, math PhD than to engineering PhD.

    All this leaves out the obvious: econ PhDs still are in school to do research, unlike professional school students. This type of training is perhaps the biggest difference between econ PhD and professional school.

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    Mike McBride

    February 17, 2009 at 11:02 pm

  3. Should econ grad students pay for their own education? No. Top econ grad students have lucrative alternatives in the “real world” (well, less so perhaps these days) and thus fellowships offset some of these alternatives (alternatives that the Croatian syntax expert presumably does not necessarily have). In many cases $80k starting (after 5 years of study) is paltry compared to alternatives (that is, if we’re only talking about $).

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    tf

    February 17, 2009 at 11:05 pm

  4. Why not switch econ to the public service fellowship model used in some med/law schools? In those schools, individuals take on debt to complete their educations. However, graduates who choose to follow public service career paths (such as rural medicine, public health clinics, public service law, and lower-paid legal positions) have a portion of their debt forgiven for each year of such work. Those who elect high-paid private sector positions have to pay the loans back at reasonable interest rates.

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    Mikaila

    February 17, 2009 at 11:14 pm

  5. Mikaila: I like that model.

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    tf

    February 17, 2009 at 11:23 pm

  6. Mikalia: I second that motion.

    McBride: In substance, economists are similar to engineers. In career and income, I think they are more like primary care physicians. After a 4-6 year training period (med school + 1/2 years of internship), you go into a career where about $100k is the norm and its relatively flat.

    If you are talking about graduate financing, econ is a mix of traditional arts & science (college just coughs up for fellowships/TA’s) and grant support. Most social sciences seem to work that way. Engineering is almost fully grant dependent.

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    fabiorojas

    February 18, 2009 at 12:54 am

  7. Not on board with this. I agree with the above comments — at my university, Intro Micro has 700 or 800 seats *every* quarter. Also, it disincentivizes those who wish to work in non-profits and in the public sector.

    I was discussing the MD admissions process recently and how incredibly stratified it is. Volunteer work, internships, etc. are all necessary to get into top programs, yet the only students who can afford to take summers off for unpaid internships are usually those students who don’t need to support themselves financially. Add to that the need to fly to interviews on a week’s notice at one’s own expense and the immense financial cost of medical school and, voila, you have an extremely difficult path for low income students.

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    Trey

    February 18, 2009 at 12:56 am

  8. McBride, deux:

    “All this leaves out the obvious: econ PhDs still are in school to do research, unlike professional school students. This type of training is perhaps the biggest difference between econ PhD and professional school.”

    Agreed, but just because you intend to teach doesn’t mean that it should be subsidized. Lots of people in JD, MFA, M Ed/EdD, and MD programs want to teach – and the prof ranks are drawn from them – but we don’t subsidize them. I think the “public service” model would work well for econ.

    PS. In most academic fields, about 50% of the folks actually end up tenure track. I think the same is true in econ – lots of people don’t do academia and land jobs consulting, the Fed, etc. Why should these people get subsidized education?

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    fabiorojas

    February 18, 2009 at 1:01 am

  9. I think you have to look at this problem from the other side of the coin – why do MDs, JDs, and MBAs have to pay so much for their degrees? It’s largely because the professional school is set up to be a money-making venture for the university. Schools not only hope that their professional schools will break even, the top programs expect their programs to produce a revenue surplus each year. Econ, sociology, or any other arts and science PhD program aren’t designed with that same goal in mind. Usually PhD programs are seen as a means to an end: to increase research productivity among faculty and bring in more grant dollars. PhD students are wonderful in this regard because they pick up the teaching slack for the full profs who are bringing in grants and they help the profs publish more.

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    brayden

    February 18, 2009 at 2:03 am

  10. B-King: You hit the nail on the head – econ programs are now huge profit centers. What you say is true – the traditional PhD program is designed to help faculty. But it’s not the only model, law schools employ a different model and they do great. I don’t think that the current PhD financing model is the only one that can support good research.

    Another observation: I didn’t have this feeling back in the 1980s, when I started college. Back then, econ grad school was highly similar to other fields – definitely not a profit center. But something happened in the last 20 years or so – the econ profession “broke away from the pack.” There are now huge rewards inside and outside academia for the econ PhD. Econ programs have also attracted hefty endowment. On a gut level, it just doesn’t seem appropriate to not treat it as a profit center, the way we treat the JD Or MD.

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    fabiorojas

    February 18, 2009 at 2:46 am

  11. The idea that economics graduate students need to pay simply because they make more later is the silliest argument I have ever heard. It’s all about demand and supply: given the many econ undergrads, universities have decided that it looks good for them to have a top-notch economics program. And let’s face it, part of what helps being perceived as a top-notch program is having great PhD graduates who win accolades etc. So it’s no surprise that the top PhD programs compete generously to recruit good incoming graduate students.

    Of course, many people choose to pay their way through a top school because they think about the future. I know that at both MIT and Northwestern, some people (who didn’t have other commensurate options) have paid full.

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    competition

    February 18, 2009 at 4:21 am

  12. “The idea that economics graduate students need to pay simply because they make more later is the silliest argument I have ever heard.”

    It’s not silly (though it may be wrong) – it’s common to charge more to wealthier people. Firms discriminate all the time based on present or future income. The university is all about charging different rates to people with different current and future incomes. Undergrads from modest families pay less via financial aid. PhD students pay less than MD students. Social work charges less than the MBA.

    And your point about the reputation of the program – lots of other units charge their grad students and they still have great reputations. I don’t see the med schools dropping in prestige or drawing less talented people.

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    fabiorojas

    February 18, 2009 at 4:42 am

  13. PS. There’s a collective action issue

    There is — it’s just at the other end, where the junior job market is pretty-well cartelized (and queued) at the upper end, and the resulting salary-setting has pushed up the bidding for junior candidates pretty consistently.

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    Kieran

    February 18, 2009 at 3:59 pm

  14. See what you think of this argument:

    Ph.D. students *in any discipline* in elite top-5 PhD programmes should pay for their own education. Financial support should be provided only to those in lower-tier, less prestigeous programmes. Students graduating from top-five programs are likely to place into relatively well-rewarded tenure-track jobs inside academia. Students in worse programs will end up, more often, as sessional, adjunct and otherwise non-tenure track faculty, faculty in primarily undergraduate institutions or 2-year colleges, and otherwise less financially rewarding careers.

    As far as I can understand, it follows much of the same logic — but I suspect will be far less appealing to the readers here.

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    gradstudent

    February 18, 2009 at 5:06 pm

  15. I know when providing PhD students with funding at my university, we actively try to secure them TA slots for their own funding, but to also help with the large undergraduate courses. I think if we made PhD students pay and didn’t offer TA funding, we would be in trouble. Similarly, professors have budgets for RAs because those who spend on RAs really need them for their research!

    That’s simply what most places have in terms of $$. Those that offer generous fellowships do so only because they are trying to attract stars: the same happens in law schools where a select few do get fellowships.

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    John Smith

    February 18, 2009 at 5:41 pm

  16. Gradstudent: I agree – if it’s tied to market wages. For example, if sociology suddenly became a profession where $100,00K+ salaries were the norm – I say “make ’em pay.” However, some disciplines are very poor paying, even in Ivy League schools. Musicology, for example, will need subsidies for the rest of eternity. Soc – my own disciplines – has huge variation. Most starter PhD’s make $40-$60k. A few landing in b-schools and law schools will do $100,000k+.

    I’d do it on a case by case basis. Computer science, econ, management PhD’s – definitely make ’em pay. Poli sci? Not sure – I’d need to see the info for them. Music? Linguistics? Definitely not.

    On the same note, I say we should subsidize other kinds of education where people pay out of pocket. Take MFA programs – yeah, a few grads become art stars, but most practicing artists live on misery wages. yet, we make make pay $35K+ per year while people in other disciplines get deep subsidies. Atrocious.

    John Smith: You are right – there’s always a battle for talent. Fellowships for grad students and professional students are here to stay.

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    fabiorojas

    February 18, 2009 at 5:52 pm

  17. Here’s a possible unintended-consequences rejoinder:

    There’s a huge faculty recruitment problem in financial accounting right now.* The problem is that anyone with masters-level training in financial accounting already can make big bucks in industry. The opportunity cost of 4-6 years of doctoral training is absolutely enormous.

    So, these people go on to b-school faculty jobs at $110-130 starting salaries with freshly-minted doctorates. These high (even by b-school standards) salaries are a function of inadequate supply. Make grad school even more expensive (i.e., hey, you study financial accounting, you pay your own way), enrollment will drop further and the absurd salaries will become even higher as schools try to throw money at their hiring problem.

    * Or, at least, there was before this shitstorm in the financial markets

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    accountant

    February 19, 2009 at 5:50 am

  18. There many problems with this suggestion.

    First, more than half of graduate students in most economics PhD programs are from foreign countries. Many of them do not have access to affordable credit, and there is a question whether they will ever be able to pay off their grad school debt once they go back to their country. (While many do remain in the USA, many others do go back to work in the government and universities in their home countries, which include many place where they can’t earn US level salary).

    Second, IMHO, most of the economics PhD students are basically the cream of crop of the graduates from their respective undergraduate institutions. Many hold degrees with economics, applied math, statistics, etc, usually with very good grades, honors, etc. Most of them could get very good jobs straight out of school. For example, when I graduated (one of top undergrad institutions in USA) many of my classmates took jobs that paid around $70K per year straight out of school. Five years later, they will be making close or over $100K, possibly even more than many fresh minted PhDs in economics. They can start a family, drive a new car, possibly buy a house, live comfortable life, etc NOW and 5 years later they probably still earn at least as much as an average econ PhD graduate. Those who choose to pursue a PhD in economics have to work in slave-like conditions while being paid peanuts for 5-6 years. Tuition waivers and graduate stipends do help to offset the lost opportunity costs for those who choose to go to graduate school. A typical large state university with econ PhD program probably asks about $30K in out-of-state tuition fees, plus one needs to afford the living expenses. This cost probably adds up to about $200,000 over 5-6 years. Who could possibly afford that without funding? At least MBA students need to stay in school for only 2 years. If econ PhD students were required to pay tuition, the number of people who go to graduate school and their quality will drop sharply. I personally would just take the $70K job instead of joining a PhD program at such a PhD program.

    The presumption that we get our education for “free” is actually wrong. We work as TAs, graders, and RAs. Many of us actually _teach_ regular courses during summer sessions and during 5th years in the program. You’re basically need someone with the qualification of at least a BA in economics for such jobs. If the school actually had to _hire_ people to do this work, it would also have to pay dearly for those services (e.g. at least more than enough to exceed the tuition).

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    Jacob

    February 19, 2009 at 4:13 pm

  19. Jacob: Much of what you point out is true. However, my response your comment, and others, is: why doesn’t the same logic apply to professional schools? Aren’t MD students at the top of their class? Don’t they have huge opportunity costs? Don’t MD students have the right to earn a decent living after grad schools and internships? How do foreign students ever make it into MD programs? Don’t many of them work internships and other jobs to help pay the costs?

    Professional schools succeed in getting students and do groundbreaking work with a model that is different than the PhD programs. It works because the boost in income associated with professional education is often so large that it justifies the cost. My argument is that the econ PhD programs now, in terms of income, have come to resemble these well compensated professional tracks.

    The main response in the thread so far is that PhD programs are really ways of getting cheap teaching and research assistance. I agree – PhD programs often have huge undergrad courses that need armies of cheap teachers. At the same time, there is no rule set in stone that these courses have to be taught by PhD Students. Take non-research 1 schools – who teach 90% of American students in techy fields like econ and the sciences – without subsidized PhD programs. They simply have armies of part time adjuncts – and even the R1 schools are trending toward this state. The same is true for research – the sciences often use the post-doc model. In short, the traditional arts and sciences model (PhD subsidized through teaching and waivers) is not the only one.

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    fabiorojas

    February 19, 2009 at 4:36 pm

  20. I think this thread is in need of data. How big is the disparity in starting pay (between econ and soc, say)? To what extent is there already a disparity in funding? Etc.

    Some of the opportunity cost arguments seem a bit off to me, and rely on that annoying feature of modern economic arguments that they often ignore the benefits of costly actions and the costs of beneficial ones – in particular, when it comes to the distastefulness of work. There is an opportunity cost to going into an Econ PhD program instead of say, banking (the last few months aside..), but there are also some payoffs in terms of lifestyle. As much as we academics complain about our workloads, most grad students are not putting in 80 hour work weeks. And we enjoy a lot of our work. If we didn’t, no one would be here. We are not working the same way that medical students and interns or junior associates at law firms work. We have incredible flexibility over our schedules and research areas. Etc.

    I guess the larger question is, what kind of a system are we working towards here and with what kinds of assumptions about who we think should end up in what kind of job?

    Lastly, couldn’t we all agree that this problem would be solved by a nice large redistributive tax increase on the wealthy? :)

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    Dan Hirschman

    February 20, 2009 at 5:28 am

  21. One of the smart moves made by our econ department a couple of years ago when part of the university was restructuring was moving from the college of arts and sciences (which was being split apart) to our business school. They went from one of the least desired graduate programs, to one of the more desired after the move. The pay of the faculty went from the usual social science level to on par with finance, insurance, business law faculty. So, in a sense, they were “professionalized.” The grad students have the opportunity to receive graduate assistantships throughout their grad careers. Most Masters students are given the intro and second level econ classes to teach and/or TA. The doctoral students are mainly given research opportunities with faculty, but some are given mid-grade courses (2000- and 3000-level courses) to teach.

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    Hillbilly

    February 20, 2009 at 2:47 pm

  22. Why should anyone at all be subsidized? If a field isn’t paying well, doesn’t that mean that either it isn’t that useful to people or something is distorting the pay?

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    teageegeepea

    February 20, 2009 at 6:52 pm

  23. “Professional schools succeed in getting students and do groundbreaking work”

    Pls to be giving example of ‘groundbreaking work’ in MBA programs, lol

    Like

    LOLPhD

    February 20, 2009 at 9:02 pm

  24. LOL: The MBA students, are by definition, not researchers. But the faculty in b-schools is exceptional and b-school PhDs often do well in their home discipline. Example: Susan Athey – Bates Clark Medal 2007 – stanford b-school PhD (in econ).

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    fabiorojas

    February 21, 2009 at 12:04 am

  25. maybe we need to look at the academic funding market from a macro perspective – the funding allocation evolves in response to the market’s perception of efficiency. So it all boils down to whether you believe in the market (lagged and sometimes skewed that it’s responses are !) or you dont. Based on that beleief we’ll all have to agree to disagree :)

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    sd

    February 21, 2009 at 7:39 am

  26. If you want talented people specializing in things like Croatian syntax, don’t saddle people with mortgage sized debts on the way out. Every self respecting arts and science program should have a healthy system of fellowships, tuition waivers, and teaching opportunities to minimize debt.

    A provocative rejoinder would be: reverse your recommendation for who pays. The problem: there are way too many people going to graduate school, studying subjects for which they will not be marketable in academia. If you raised the tuition and got rid of fellowships for English literature, for example, then most people would be incentivized NOT to go to graduate school . . . which would be a GOOD thing.

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    John Doe

    March 2, 2009 at 6:31 pm

  27. […] When I suggested this for econ grad school, I was half joking. But the more I think about it, the better the idea is. If your job is an important factor in your life long happiness, then why have a college tuition system that consistently encourages many young people to not experiment with different career tracks while they still have the chance? […]

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