Wednesday, February 22, 2006

Derived demand 

Via voracious reader jw we learn that business schools are having a hard time hiring faculty.
The schools have been competing for students for years as the number of master in business administration programs at universities has soared. Now the schools also are competing for a dwindling supply of doctoral business faculty to teach those students.

Major accrediting groups and business school officials say the diminishing supply of people with doctorates in business and the rapidly increasing demand for their services globally have pushed doctoral salaries through the roof. It's also forced business schools to devise ways to effectively compete for doctoral faculty and find alternatives for filling vacant faculty positions.

Many years ago a large university advertised a position for a sports economist. I thought that was interesting and, since I was doing more research in the area at the time, thought I might try to apply for it. Given it's a prestigious school I thought it a lark that might at least get me to talk to some people there. They not only flew me to campus, they offered the job. But the salary was less than I made in a college of social sciences here, and the money was soft money. I was perplexed at their penurious offer, and inquired why. "Well, if we wanted to pay you that much we would have hired someone in finance, since that's what we really wanted." Amazingly, they thought they could buy an economist on the cheap. As much as I liked the school, I declined.

We're seeing this now with salaries in economics for new PhD's, particularly for those who have some interest or background in finance. This is the natural course of markets, and the article here tells us how rising prices lead to substitution.
Other solutions to the shortage problem include hiring people with doctoral degrees in related areas such as statistics, math and social sciences to teach in business schools. They would then take business courses to help the transition.

Business schools also are hiring more part-time instructors from the private sector who have MBA degrees combined with real-life business experience.