Tech: economists wanted

Tyler Smith (0:00)

Hi, everyone. This is Tyler Smith with a quick editor's note. From time to time, we'll be re-releasing some of our old audio interviews as bonus content. Back in 2019, I spoke with Susan Athey and Michael Luca about the increasingly central role that economists are playing in tech companies. With this year's job interviews winding down and students thinking about their next career steps, we thought it was worth revisiting. Hope you enjoy the episode.

Companies like Amazon, Microsoft and Google are pushing today's technology frontier, and critical to their enterprises are economists who've honed their skills at universities. In the winter issue of the Journal of Economic Perspectives, economist Susan Athey and Michael Luca outline this growing mutual influence between economics and the tech industry.

Athey and Luca have spent their careers with one foot in academia and the other in the tech sector. Athey, in addition to being a professor at Stanford, served as chief economist at Microsoft and currently sits on the boards of Expedia, Lending Club, Rover and Ripple. Luca is a professor at Harvard and works with a variety of tech companies. His efforts at Yelp led to the creation of an economic research initiative there. Athey says that economists have the training and tools to make meaningful contributions at tech companies while also feeling intellectually challenged.

Susan Athey (1:21)

You're firing on all intellectual cylinders all the time when you're working on hard problems in a tech firm.

Tyler Smith (1:28)

The AEA spoke with Athey and Luca about the many new opportunities for collaboration between tech companies with large amounts of data and economists looking to experiment in the digital economy.

Thank you guys again for really making the time to talk to me. Yes, you all are one example of this growing trend that you're pointing to in the paper. And the stat that I really like is that you show is that Amazon now hires more economists than the largest econ departments in the US. And so what is behind this recent growth?

Susan Athey (2:02)

I mean, one thing I would say is just that the problems are really novel and require new approaches, both to conceptualize the problems, as well as to think about how to map them onto empirical concepts. And if you're gonna be generally taking sort of a scientific approach to managing the business, which most of these large tech firms are, then you need to do these first steps, requires a fair bit of creativity. And I would say that kind of creativity is very related to the creativity that leading economists use in their research.

And so it's pretty natural to take that to these problems. So I think when an industry is very established for a long time, when the business models are established, when the nature of competition and the dimensions of competition are established, at that point, you can call a consulting firm and they'll be able to tell you best practices from other similar firms. And the students will learn about it in business school and they'll be able to come in and figure things out pretty well. But if you're sort of inventing a new business model, if the types of challenges you're facing are really very new, and if you're in an environment where you're expecting to operationalize the concepts with data, it's really requiring a skillset that's complex and you need good thinkers to do that. And so I think that really the demand for economists, in my view, economists as opposed to other PhDs, because there are lots of PhDs across the board, is that there's a certain skillset that we bring that's really very useful at this stage when you're sort of figuring things out, where many parts of the firm's problem have not been settled.

Michael Luca (4:00)

Yeah, so just to add on to that, I think about, say, from a research perspective, and you're thinking about why people are so excited about the tech sector, I think there are three flavors of things that are super exciting about it. The first is that there's new data that's now available to answer economic questions that have been around for a while, but have previously been difficult to answer. The second is platform design changes really kind of give us this playground to think about how markets move, especially when you think about platforms like Uber and Airbnb and Amazon that are marketplaces and that use that sort of shape.

And the third is that kind of the rise of platforms has given a whole set of new questions, which I think kind of where Susan was saying that the excitement of people are going full time into firms. I think kind of on the research side, all of these are interesting. I think on the firm side and why people are kind of being drawn in is kind of this appeal of both using existing economics toolkits that answer questions that are at the frontier of what these companies are thinking about, whether it's like how to optimize pricing at Uber or whether it's like how to design Airbnb in a way that's both good for the company, but also equitable and inclusive for people from diverse backgrounds.