Assessing the Role of Business Schools in the Market for New Economics Ph.D.'s

Abstract

The projection of an oversupply of new Ph.D.'s in economics has remained largely unquestioned by the profession during the past decade. However, the crunch has not appeared in the magnitude or form originally suggested. Why has the crunch not materialized? If only deferred, when is it likely to happen? What role, if any, have business schools played?In this paper we discuss six aspects of the projected oversupply. First, we review the basis for the projections of an oversupply and then examine official data to see if the projected oversupply materialized. Next, we discuss the emergence of business schools as the principal growth submarket for economists, and note the effect of the switch to other business disciplines on the market for economists. In addition, we review relative salary movements for evidence of developing market disequilibrium. Finally, we present some elements of the market outlook for economists.The Case for an 0l'ersupply of New Ph.D.'sIn the mid-1960s, Cartter ( 1965) shocked higher education circles with a finding that faculty quality-the doctoral ratio--was not in fact declining as official groups had widely reported. Hence, the quality-related need for increasing the output of Ph .D.'s disappeared. Though the trend was then hidden by truncated official projections, Cartter further stressed that a period of stable, or more likely falling, college enrollments was in the offing. If enrollment leveled off, then demand from market growth would disappear and leave only replacement demand. A sort of accelerator-effect decline would occur in the need for faculty and Ph.D.'s and would probably not be offset by a rising doctoral ratio. By 1971 Cartter, in an express examination of economics, pronounced the death knell for the seller's market. Cartter's ( 1971) oversupply position includes the following main points:-College enrollments at best will level off, but more likely will decline in the 1970s both because of a forthcoming decline in the age-eligible group (18-21) and a plateau in the participation rate.