are economists really well-paid?

At Freakonomics, Daniel Hamermesh suggests maybe not:

While differences in earnings by college major are huge, once you account for longer hours worked by business and engineering majors, by the fact that they often have higher SAT scores, and other factors, the differences are much smaller; indeed, over half of the variation in earnings by major disappears.

This is via Maynard at Creative Destruction, who laments his marginal product:

So whereas I thought that by driving my students hard in my courses I give them human capital that helps them in their future careers, the truth is that by driving my students hard I cause hard-working, smart students to self-select into my classes. With economics degree in hand, they signal their future employers that they are smart, hard-working students (otherwise they would’ve majored in Political Science for god’s sake!), and they are rewarded with high-paying jobs. My value-added: virtually nothing, except for the rubber stamp.

Hamermesh seems to be freakonomizing his result a bit: in this case, half of a lot of variation remains a lot of variation. Nor does it exactly smash one’s intuition to find that smart people end up with relatively high-paying jobs conditional on such training as they’ve received.

I’d like to see a version of Hamermesh’s analysis for graduates with advanced degrees, which on its face has greater potential for countering intuition as there would seem to be a lot less variation in the right-hand-side variables. My prior is that almost nobody who can get a graduate degree from a decent university is shit-stupid, and if representations regarding the academic workweek made amid the Larry Summers kerfluffle are generally true (other Scatterbrains surely know more than me about that), then there’s little reason to expect raw brains or hours worked to explain a lot of the difference between the pay of investment bankers and that of English Lit professors.

So the (junior) economics professor’s coup is to be compensated in accord with the theory of opportunity costs, i.e. they collect a premium for the implicit threat to go slumming in the private sector and to cry all the way to the bank. (Not surprisingly, this effect is even more pronounced for B-school assistant profs.)

The irony, and possible additional direction for freakonomic research, is that economics departments seem to do just about everything they can to undermine the credibility of the threat by often actively discouraging reasonably smart PhD candidates from actually taking non-academic jobs. My plural-anecdotes include a post-defense conversation with one of my committee members [*] to the effect of “Yes, Really, I Do Economics For A Living” [**], and memory of our increasing difficulty as the Clinton-era boom waxed at recruiting any new PhD capable of rubbing two sticks together, culminating in a good candidate of no pedigree taking a mediocre academic job literally on the other side of the world under reportedly intense pressure from his department. I want to know what’s the minimum credibility at which the premium can be claimed.

[*] At this point, I’d already been working for a couple years as an ABD.

[**] This is not a totally trivial discussion, since a lot of non-academic “economics” (esp. at think tanks) is actually what I think Krugman terms “policy entrepreneurship,” which is to say generating plausible explanations for foreordained conclusions off of which some sponsor thinks money can be made. Of course, some academic economists do this, too, without getting paid upfront.