Confessions of a Chronic Economist
Economics gets easier as you get older; changing jobs -- like I'm about to do -- doesn’t.
Not long ago, a successful executive in my building told me that anyone who wanted to switch careers had better do it before they turned 40. Mike got my attention, for reasons both personal and professional. Even though workers are retiring later, their options in middle age are still limited. That has to change — and I hope to be a part of it.
Around the world, people are living longer, and eligibility ages for government pensions are rising, if not quite as quickly. This doesn’t necessarily mean careers are getting extended, though. A baby born today has exactly as much education and skills as a baby born in the Stone Age. These days, however, babies have to spend a lot longer in school to become productive. The age of exiting the workforce has risen, but so has the age of entry.
As a result, the average age of the workforce has increased as well. Yet as Mike said, the options available to middle-aged workers haven’t caught up. Most of the ones with families can’t afford to take an entry-level job in a new industry, even if they’d like to. Others can’t devote as much time to a new business as young single people, even if they’d have more wealth to invest in it.
Of course, the problem isn’t just about workers’ time and money; sometimes it’s about how companies hire them. Age discrimination is illegal in the United States and some other advanced economies, but employers can usually find other excuses to hire young graduates — with their lower health care costs and willingness to work longer hours — rather than older folks taking a fork in the road.
At least pop culture is starting to take notice. Recently Robert De Niro starred in a film about a 70-year-old who returns to the workplace in a new industry as a lowly intern. I imagine the concept sounded pretty provocative at the pitch meeting, but it certainly isn’t new to me. In fact, I know a better version.
When I was in school, a man roughly 20 years my senior took a job as an administrative assistant at the research institute where I worked. The hire might have seemed a bit incongruous; it was, after all, close to an entry-level job. But not long afterwards, the institute made up a binder with short biographies of everyone on staff. Peter had done everything. There must have been two dozen different jobs listed, from bouncer to teacher, and a whole lot of stops around the world in between. He was perhaps an odd role model for a budding academic economist, but in time he became one for me.
Before I finished my doctorate, I’d already realized that I wasn’t a big fan of the ivory tower. Fortunately, I found that being able to think like an economist opened a lot of doors: I’ve been a government economic advisor, director at a global consulting firm, author, journalist, and occasionally even a professor in the 15 or so years since I left graduate school and that institute. I’ve lived and worked on four continents and met people from many walks of life. I’ve walked through villages where people lived in the same thatched palm hovels as their animals off the beaches of East Timor, and I’ve had a beer at the zany Buenos Aires residence of Daniel Scioli, possibly Argentina’s next president: an entire high-rise building with one floor garaging his cars and another hosting a palm-laden tiki bar. One man’s only available building materials are another man’s kitschy décor.
Along the way, I’ve noticed that the most powerful tools in economics tend to be the simplest ones. It’s not surprising, given that an economist’s education consists of three repetitive stages: learning the principles of microeconomics and macroeconomics with algebra, then learning them again with calculus, then learning them one more time with the higher mathematics that underpin the theory. All the while, the principles remain the same. Yet for all that repetition, it’s not until you see the principles at work in the real world that you truly understand them.
You probably already know some of the most important ones. Take supply and demand — it turns out they affect the prices of securities as much as future returns. And then there’s elasticity. When it’s missing, commodity prices can shoot up or down with even small changes in — you guessed it — supply or demand.
On the macro side, consider capital and labor. When you put them next to each other, say, in a city, they both become more productive. Do that enough, and you get economies of scale, both in production and in delivering services like health care and education. Once you’re done with that, and you’ve absorbed all the world’s most cutting-edge technology, you’re at the frontier; only innovation and entrepreneurship can keep living standards rising.
Economic cycles aren’t so mysterious, either. Recessions come along fairly regularly. Stock prices start rising about a year later. Then the economy begins to grow, and eventually jobs come back. If you’re lucky, and the boom lasts long enough, wages get a boost as well. But the size of that boost will depend in part on workers’ bargaining power, which in turn depends on the supply of and demand for labor.
I’ve written about these themes a lot in the past. And as the end of the third economic cycle in my professional life draws near, I’ve been writing about them again. I’ll be honest – it’s starting to feel like a cop-out. I’m like a retired athlete, dining out every night on the same stories. You and I both deserve better, and that’s one reason why I’m going on hiatus from this column.
The other reason is that economics has opened one more door for me. It’s exciting, different, and Peter would probably think it was pretty hilarious if he were still with us. When I tell Mike about it, he’s likely to think I’m crazy. Either way, I’m going to take some time to walk through the door, look around, and fill my head with new ideas. Meanwhile, plenty of younger people will be eager to write those same old stories for the first time. I bet they’ll write some new ones, too.
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