Marginal Revolution: Sarah asks about age and productivity

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Sarah asks about age and productivity

[Please discuss the] relationship between age and productivity.

Economics has a real problem. The smartest people, by the time they are forty (if that), have extremely lucrative opportunities for consulting. They can earn hundreds or thousands of dollars an hour. Most of them cash in, even if they continue to produce good work based on 80 percent of their core attention and capabilities. We get a steady stream of young innovators, but we have few truly deep thinkers at the top of their game.

On the other hand, the economics profession stays broader than it otherwise would be. Non-lucrative fields, such as public choice, economic history, and cultural economics, keep their best thinkers to a greater degree, relative to econometrics and finance. But perhaps these low-paying fields attract fewer really bright people in the first place.

#17 in a series of 50.

Posted by Tyler Cowen on March 10, 2007 at 06:34 AM in Economics | Permalink

Comments

It is for the first time that I am hearing about lucrative fields and non-lucrative fields within economics!I thought that all fields within the subject are given equal preference by aspiring young economists.
What is the most attractive and money-making field within economics where mad rush ultimately lead to natural selection and the emergence of victorious think-tank money spinners?

Posted by: GVV at Mar 10, 2007 7:17:09 AM

I'm a 31 years of age and have gone back to school after years of working so that I can study economics. Clearly this is not a winning strategy and I am therefore not all that bright.

As to the post, why do you think these low-paying fields might attract less really bright people in the first place? Is it soley the fact that they are low-paying? Why do these other fields keep their brightest to a lager degree? If financial reward is the motivating factor at work here, wouldn't these fields lose just as many? Crossing out of a low-paying field to a high-paying economics/finance related job couldn't be all that difficult for the brightest lot.

Posted by: CMC at Mar 10, 2007 10:10:14 AM

My comment above didn't touch on the relationship between age and productivity. Sorry 'bout that. Still, I think what I said/asked was relevant.

The young are highly productive in terms of energy/innovation/creativity. The older have vastly more experience, which also counts. I don't think the post says much to the relationship between age and productivity. So I’m unsure what facets of it you want discussion on.

Posted by: CMC at Mar 10, 2007 10:19:13 AM

I thought this posting was going-to be about the trajectory of productivity in an economics professor's career.

In the natural sciences this usually declines from about 45 - leaving two decades of less producive work up to retirement. Which is a lot. I suspect this is one of the hidden reasons for academic tenure (as recently discussed by Levitt, Mankiw and now Caplan) - if it wasn't for tenure, there would not be anything like so many academics aged over fifty, because they would not deserve their jobs on the grounds of merit.

Of course, some of the best continue to produce above average amounts of good work up to retirement - but this is the exception.

So - I think tenure _mostly_ tends to institutionalize exploitation of younger academics (wrt the primary functions of universities - amount of teaching and production of research - younger academics are squeezed to produce these). It does this by front-loading employment insecurity.

The worst effects of tenure would be mitigated by perfomance-related pay - payment linked to amount of teaching and research production (averaged over suitable periods - eg 5-7 years). Even if tenured academics could not be fired for poor perfomance, if their pay was reduced significantly for poor perfomance, this would provide a positive incentive to work and would liberate resources to cover their deficiencies.

The fact that this does not happen is interesting, Caplan suggests it is to do with the non-profit status of universities. I think he may be right.

Posted by: Bruce G Charlton at Mar 10, 2007 10:20:04 AM

GVV: The big money-making opportunities for economists are not so much for "think tank money-spinners" as for litigation consultants in areas of finance, intellectual property economics, industrial organization, transfer pricing, government regulation, and pretty much anything else that can become the subject of a lawsuit. Sure, a lawyer or a well-trained non-famous economist can probably explain the relevant economic theory, but when it comes time to put an "expert witness" on the stand, highly successful economists have extensive CVs. In a topic like finance where a layperson is likely to have little knowledge, the value of the work presented at trial is largely contingent on the perceived reliability of the person presenting it.

Essentially, the marginal value of an economist's consulting work accumulates over time, but the marginal value of an economist's academic work doesn't accumulate in the same way. Academic work is a complement to litigation work, but litigation work is a poor substitute for academic work, since the law values well-tested and well-accepted theories, while academia values new and groundbreaking research. Thus, it's relatively easy to woo top economists away from their academic pursuits with high-paying consulting work.

Posted by: Lee at Mar 10, 2007 1:29:14 PM

The question was general, but the answer in the post was specific to the economics profession. Maybe a generalized answer is too difficult, but I'd be interested in it. Especially for other professions such as law, medicine, engineering, etc. Probably beyond the scope of a 2 paragraph blog post....

Posted by: James at Mar 10, 2007 1:47:28 PM

Bruce writes:

"if it wasn't for tenure, there would not be anything like so many academics aged over fifty, because they would not deserve their jobs on the grounds of merit."

I have often wondered why older, less productive workers earned higher wages than their younger, more productive counterparts. I think that the main reason we observe this phenomenon is that older workers serve as mentors to younger workers, thereby increasing the productivity of younger workers. This positive externality of having older workers on staff justifies their wages being above their level of productivity.

Posted by: James McNiece at Mar 10, 2007 2:01:13 PM

Bruce,
I think this linking of performance and productivity among tenured academics already happens de-facto in the natural sciences. A large number of the tenured professors in the sciences that I have personally observed work extremely hard, not much less than their untenured counterparts. I dont know whether this anecdotal experience of mine suggests a more general phenomenon however.
------

If one extends the logic in this post by Prof Cowen, only idiots and "not smart" people would be doing academic research in the sciences. I think wages and "smartness" are not so directly correlated as implied in the post.

Posted by: A former student at Mar 10, 2007 6:38:42 PM

Lee:

This is a problem confronted by many research institutions in India.The academicians do lucrative consultation work using facilities available in their institutes,and they give little attention to high quality academic work.

Posted by: GVV at Mar 10, 2007 11:17:42 PM

JM,

At major research schools, the older do not necessarily earn more than the younger -- especially in economics. If you look at the salary distribution at mid level departments, assistants and new associates are often paid more than the lower end of the full professors. Tenure protects employment, not relative salaries.

To "a former student": Bear in mind that Tyler is partly speaking in jest. But he is also correct at the margin. Even though on average, it is not money that attracts people to academia or to various fields, large money can lead to profound shifts in how effort and talent are allocated. Thus, those who first entered a field out of love may find that passion sorely taxed if tenure or good pay are not forthcoming. Conversely, those who disdained certain types of research or consulting, may be more inclined to favor it as the $$ increase. That some stay in fields just out of love is not in doubt, it is just that less committed faculty are easily swayed by loot. I have no doubt, for example, that if schools paid million dollar salaries for economists who specialized in the writings of David Ricardo, a number of clever mathematical economists would find some way to work on Ricardo's ideas.

Thus, less lucrative fields tend to keep many more of those who successfully entered them because there is a lower opportunity cost to indulging their passions.

Posted by: Thack at Mar 11, 2007 10:56:05 PM

I dont think that as a person grows older that there productivity as workers decreases. I believe that a older, more experienced person would produce more. They would surely be more accurately skilled than a rookie. They would possibly be more focused and responsible as well. I feel that age helps production.

Posted by: Mitchell Hatley at Mar 12, 2007 10:27:10 PM

I think that people gain more knowledge as they grow older but it isn't necessarily always true that the older people are more intelligent that younger adults. There are some very smart people that are young in age but very mature. People may think that they are not capable of a task because they may not have experienced all the things that older people do. It just depends on the person and how their learning style is and when they acquire the knowledge that makes them intelligent, not just by their age.

Posted by: Talia Maples at Mar 13, 2007 12:01:24 AM

This is true in all feilds not just economy. Your education level plays a part in your pay and what type of career you pursue, but I personally think your love drives you more. Teachers for example is one of the hardest jobs. Some get payed more than others ,but it's the love and passoin for teaching that drives them and that's the same for other jobs.

Posted by: Marcus at Mar 13, 2007 12:03:09 PM

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