As an economist who is married to an economist, I firmly believe that the wise Deans should invest more in academic economics. But, this is an age of scarcity and there is an opportunity cost associated with investing in Economics Departments. Given that we can't run a randomized field experiment where the Deans choose a department at random and give it $10 million dollars and then judge value added ten years later, how do we evaluate what is the rate of return on investments in Economics?
Washington Univ. in St. Louis offers a salient case study. This important university has invested a large amount of $ in its Economics Department. I have read about the Department's very nice new building. It has hired some older faculty to sit in this new building. Given this Department's "Big Push" starting in 2006, one could look at some outcome indicators such as output targets such as papers published in top 10 journals, or graduate students placed at top 50 universities. How have the undergraduates benefited from a stronger Econ Department? Have they become better problem solvers? Did they conduct their own original research? Are more of them entering top 20 Econ Ph.D. programs? Are they increasingly likely to receive offers from Fortune 500 Companies? So, this is an example where we can't calculate the rate of return on a large investment in a well known economics department. There are objective criteria for determining excellence. Which Departments are offering a high rate of return?
In this new age of accountability, will departments that offer a higher rate of return be rewarded by deans by receiving more resources? Deans could substitute away from academic economists given that our wage per course taught is quite high. What can we do to be more cost-effective? Do academic demand curves slope down?
