Where are the new homes of top shelf economists? Universities? Nope. The government? Nope. Think tanks or Wall Street? Nope. Try companies, especially those that deal in information.
For example, Hal Varian, formerly a dean at the University of California at Berkeley and author of columns for newspapers such as the New York Times, has taken a job at Google. In that new position he will be a team of economists and statisticians to assist the company in strategy.
During my time at Google we have built up a world-class group of quantitative analysts, and the economics team will complement these existing resources. Google has a great infrastructure for data analysis, and a management team that is very receptive to quantitative methods and willing to invest in this area. In addition to working on analytics, I’ve also worked on various business strategy and public policy issues, and will continue to do so as the occasion arises. This set of issues will only get more important to Google as time goes on.
The impact of data, or information, is the new economics.
Google’s mission is to organize the world’s information and make it universally accessible and useful. Other people in that business will have a competitor. What’s happening now is you had telephone directory doing one thing and card catalogues doing another and classified ads doing something else. But now, the online world, not just Google, all say we can do information search through a single interface. That’s definitely shaking up that market.
But what is the future of economists in information industries? In effect they become part of the marketing effort.
In the past, promising new economics PhDs who didn’t want to work in government or academia probably aspired to work on Wall Street. In the future, will they aspire to work at companies like Google? I think marketing is the new finance. In the 1960s and 1970s [we] got interesting data, and a lot of analytic fire power focused on that data. So we saw huge gains in understanding performance in the finance industry. I think marketing is in the same place: now we’re getting a lot of really good data, we have tools, we have methods, we have smart people working on it. So my view is the quants are going to move from Wall Street to Madison Avenue.
Information really is becoming the new currency.