Tuesday, July 05, 2005

Isn't it ironic...

...that in an article on the popularity of the economics major, the Wall Street Journal would say something like this:
According to the National Association of Colleges and Employers, economics majors in their first job earn an average of nearly $43,000 a year -- not as much as for computer-science majors and engineering majors, who can earn in excess of $50,000 a year. But those computer and engineering jobs look increasingly threatened by competition from inexpensive, highly skilled workers in places like India and China.
That is, a statement that is based on shaky non-economic reasoning. If I may quote Paul Krugman:
One last assertion that may bother some readers is that wages automatically rise with productivity. Is this realistic? Yes. Economic history offers no example of a country that experienced long-term productivity growth without a roughly equal rise in real wages. In the 1950s, when European productivity was typically less than half of U.S. productivity, so were European wages; today average compensation measured in dollars is about the same. As Japan climbed the productivity ladder over the past 30 years, its wages also rose, from 10% to 110% of the U.S. level. South Korea's wages have also risen dramatically over time. Indeed, many Korean economists worry that wages may have risen too much. Korean labor now seems too expensive to compete in low-technology goods with newcomers like China and Indonesia and too expensive to compensate for low productivity and product quality in such industries as autos.
So computer science majors shouldn't be getting too scared. Their marginal product isn't going to start falling any time soon. This part of the article is also misleading:
Like many people whose eyes glaze over at a supply-and-demand curve, Nicholas Rendler, a 19-year-old student at Brown University, in Providence, R.I., says he finds economics boring. But he has gravitated to the topic anyway: He chose a major combining economics, sociology, and anthropology because he thinks economics is crucial to understanding the world.
Nice job, Wall Street Journal. Way to paint economics as the vibrant, fascinating science that it is.

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