Studying Business — The Academic Route: Economics and Finance
Now that we have gotten through the math hurdle, it is time to talk about why we are here: economics and finance. As previously mentioned, while an extensive math course load is almost a universal requirement even to be considered for a PhD program, a significant number of students who have not taken a single economics course are admitted each year to programs nationwide and internationally. That is not to say that it is a good idea to shrug off all of these courses, but we will cover a few considerations below.
First, if you are considering a PhD program in economics or finance, having read the previous articles, you clearly have at least some interest in it. College as an undergraduate is a time to explore and grow. In graduate school, whether in a PhD or Master’s program, there is often no flexibility to have a change of mind outside of the department without leaving the program entirely. So, take this time and spread your wings; perhaps you may find something you love more than economics or finance. But at the same time, undergrad might show you how much you really love finance or economics.
As economists, we believe that fundamentally each person will maximize their own utility subject to constraints. So who am I, or anyone else for that matter, to tell you to give up taking courses in economics and finance if that is what makes you happy? While there is a trade-off, do not take so many as to miss math prerequisites; there are certain courses that may help ease the transition into graduate school and aid your application.
Demonstrating your interest and passion in economics or finance is a boon to your application. While certain courses may be more helpful than others, having courses and/or a major in the subjects can help demonstrate your passion. In general, upper-level, graduate, or math-intensive courses will be better at demonstrating this. However, I also will provide a few specific courses and ideas to consider when making a choice on which courses to select.
Introductory Macro and Microeconomics and Intermediate Macro and Microeconomics are listed by some schools as requirements. Again, this is not as ubiquitous as listing calculus or statistics. Having the intermediate level courses can help with having some economic intuition and can be beneficial in graduate school to have some basic understanding to build off of.
Econometrics is also listed by some schools. Topics in an introductory econometrics class are similar to what one would experience in a statistics course. However, certain tools and ideas are useful to obtain from this course specifically. The method of Instrumental Variables is a prime example. Unlike chemistry, biology, or physics, experiments are difficult to perform in economics. In the words of one of my professors, the method of Instrumental Variables is one of the key techniques that makes economics different from other social sciences. Exposure to notation and other advanced topics like time series or panel data is not part of every econometrics course, but is useful to get exposure to nonetheless. Another specific benefit is that these courses often have a research paper requirement. Doing research can help the application by itself, but it can also be a source of a writing sample or a strong letter of recommendation, a topic we will cover later.
PhD-level courses can be a major source of opportunity but they are also a double-edged sword. Students at UW are lucky in that they have the potential ability to take first-year PhD courses in economics (as previously noted first-year finance PhD candidates also take these courses more often than not). If performed well, these can demonstrate a strong level of skill. After all, we are all risk-averse; if the admissions committee knows you did well in a PhD-level course, the uncertainty of your performance in a PhD program is reduced. However, if done poorly, especially if your performance is below an expectation given past performance (for example you have straight As in all your classes and advanced math but get a C), this can harm your application.
One major consideration is that no matter how well you do or where you are admitted, it is almost certain that these courses will need to be repeated during the PhD program. It is actually an advantage to do so, not only to prepare for preliminary exams but also to get to know the rest of your cohort. In terms of picking between the three courses, there are a few considerations. Microeconomics and Econometrics are generally taught the same, using the same textbooks in fact, while Macroeconomics can vary between universities. As a signaling mechanism, Microeconomics is generally seen as the best. However, it is common knowledge that Microeconomics is also the hardest of the three.
Finally, there are personal considerations. If a class in a certain field of economics interests you, by all means, take it. Not only does this allow you to explore your interests, but it also shows consideration of your field of interest that is on the statement of purpose and is a possible source of a strong letter of recommendation.
To recap, taking courses or majoring in economics or finance is not necessary for admission to a PhD program. However, there are some major benefits that one should not ignore lightly. At the end of the day, each person’s journey to and through a PhD program is their own and while certain choices may be marginally better than others, the decision is ultimately an individual one.
