The Real Poop
Need to brush up a bit before you dive into the world of economics? Take a peek at our Finance Learning Guides to make sure your knowledge is up to snuff.
Money talks. An economist is the one who sits there and listens.
Have you ever heard the phrase, "Buy low, sell high"? This economic concept was first applied by a man named Fan Li, a Chinese state advisor, several hundred years B.C. (Source). He was one of the first economists in recorded history. It's hard to believe that one of the key principals that we still use today was developed in a world before the stock market, computers, and Harvard degrees, but the concept's longevity only speaks to its importance. Sometimes the truly great ideas never change. Which is why the chocolate chip cookie hasn’t really been altered since its invention. You can't improve on a classic.
Look how shiny.
Economists collect data, conduct research, analyze economic trends and create forecasts that help a variety of companies, as well as the United States government. For instance, the government employs economists to help assess economic conditions, such as the dollar's fluctuation against foreign currencies. Those working in the Federal Trade Commission may assist in making statutes to eliminate unfair or monopolistic commodities. The Federal Trade Commission's Bureau of Economics Staff produced a report in the 1980s that resulted in funeral homes getting busted for not providing consumers with price sheets of services. A price sheet or General Price List keeps funeral homes from charging customers bogus prices. In this instance, economists win and price gougers lose.
However, economists do not always come out on top. Accurate economic theories come from successfully predicting human actions to help create forecasts that look like a lot of graphs and numbers. The ability to successfully apply these forecasts to the real world makes an economist useful. If an economist inaccurately forecasts or creates a defective theory, all Hades can break lose. Look at the unemployment rate. Economists working under President Obama's administration underestimated the severity of the United States' economic problems, which led to a stimulus package that was too small to handle the rising unemployment rate.
Economists are completely necessary for certain types of industry. They are the parsley on the plate for Wall Street firms. Cargill, an international producer of food and agriculture, has to have them around to figure out how much soybeans will cost next year. No one wants to see the next soybean depression. Airline companies like Southwest Airlines use economists to make sound financial decisions like hedging on high oil prices. A hedge is an investment that accrues earnings that can offset any losses. In the case of Southwest Airlines, the company makes money when fuel prices go up even though they are losing money, because the fuel prices are going up.
Students who enter the realm of economics will be studying a social science that analyzes the use of goods and services. Basically, economists try to figure out how people decide to purchase goods, why people like certain services or goods, and what trends can be spotted by analyzing their data.
In order to obtain this information in the first place, economists develop methods such as surveys and mathematical models. Once their data has been collected, they prepare reports that present their statistical concepts in a way that the layman would understand. Some economists analyze the economy for the media. Television shows often choose economists specializing in a particular field to highlight a segment. Unfortunately, economists or the television show have no culpability if forecasts are wrong or the advice given turns out to be bad advice. If Jim Cramer, a former hedge fund manager, from CNBC's Mad Money gives you bad advice and you follow it, you have only yourself to blame.
Most economists focus on a specific field of economics. For example, microeconomists study how a consumer makes decisions to allocate their limited resources (generally money). Microeconomists are not, as some mistakenly believe, very small economists.
Macroeconomists review historical trends in order to predict future trends in such areas as economic growth, inflation, and unemployment. Industrial economists analyze the economic markets of particular industries to take a close look at competition and potential monopolies. International economists investigate global markets. Labor economists look at how wages are determined. With so many fields, how does one choose one? Is there some "economist dartboard" we can hurl a dart at and see where it sticks?
Uh-oh. Aunt Sally's throwing darts in the backyard again….
Before you select a focus, you have to get through college. Generally, people major in economics but minor in a relevant field such as mathematics, statistics, history, or business. Math classes will come in handy for your entire career, no matter what specific field you go into. Regardless of focus, you will be collecting and reviewing data, and data consists of numbers. You simply cannot get around it, so hopefully you aren't allergic to calculus.
Once you have your undergraduate degree, you can pursue a master's or PhD degree (which will help you readily find more—and better—employment opportunities); this is a perfect time to choose the particular area you are going to zero in on. An undergraduate degree in economics is meaningless unless you go into business or law. It would be like someone performing brain surgery after earning their First Aid merit badge from the Boy Scouts. The best and only course of action is to get a master's degree, and then a PhD.
In order to choose, be an economist of your own career. Are there certain classes that you particularly liked? Do you have any personal heroes in the field of economics? Has a fortune cookie recently suggested that you move in one direction or another?
Furthermore, not all economists become "economists," per se. Economists can follow a variety of different careers, including researcher, journalist, auditor, investment banker, broker, credit analyst, and political speechwriter. To quote the famous economist, John Kenneth Galbraith, "Economics is extremely useful as a form of employment for economists."