Whilst financial markets continue to chase macroeconomics for that elusive insight, the world of business still finds value in microeconomics. The latest to hop on the bandwagon is tech giants who have hitherto thrived on electronics, computer science and software engineers. The emergence of data science in new age technologies such as artificial intelligence and machine learning is likely driving this appetite for economists armed with an understanding of statistics as well as human behaviour in the Silicon valley as this piece in The Economist explains.
“Silicon Valley is increasingly turning to economics for insights into how to solve business problems—from pricing and product development to strategy. Job-placement data from ten leading graduate programmes in economics shows that tech firms hired one in seven newly minted PHDs in 2022, up from less than one in 20 in 2018 (see chart). Amazon is the keenest recruiter. The e-emporium now has some 400 full-time economists on staff, several times as many as a typical research university. Uber is another big employer—last year the ride-hailing firm hired a fifth of Harvard University’s graduating PHD class.
…For big tech, meanwhile, economists offer skills that computer scientists and engineers often lack. They tend to have a good grasp of statistics, as well as a knack for understanding how incentives affect human behaviour. Most important, economists are adept at designing experiments to identify causal relationships between variables. Machine-learning engineers usually think in terms of prediction problems, notes one Ivy League grad who recently started a job in tech. Economists can nail down the causal parameters, he says.
An e-commerce firm may want to estimate the effect of next-day shipping on sales. A ride-hailing firm may wish to know which sets of incentives lure drivers back to the city centre after they are hailed by customers attending a big concert or sporting event. In two periods between 2015 and 2017 Mr List and colleagues at Lyft, Arizona State University and Boston University manipulated the prices and wait times for Lyft rides across 13 American cities to estimate the value of time. The study, which found that Lyft users value their time at about $19 per hour, yielded a paper. It also led to a new feature on the Lyft app called “Wait & Save”, which lets riders opt for a longer wait time in exchange for a lower fare.”
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FAQs
For big tech, meanwhile, economists offer skills that computer scientists and engineers often lack. They tend to have a good grasp of statistics, as well as a knack for understanding how incentives affect human behaviour.
Why is Silicon Valley so successful? ›
Silicon Valley's success is attributed to a combination of key factors: proximity to renowned universities, culture of innovation and entrepreneurship, access to venture capital, networking and collaboration, supportive infrastructure, immigration and diversity, strong tech industry presence, government support, and ...
Why are tech companies hiring economists? ›
Economists often work directly on the core product, especially in firms developing new advertising models or new transactions platforms. Economists are naturally drawn to the challenges that these firms wrestle with, and cutting-edge economics research can be valuable to these businesses.
Why is there so much opportunity in tech? ›
The last few years have seen an unprecedented growth in digitalisation and demand for IT skills. This growth has been fuelled in part by the Covid-19 pandemic that has revolutionised the way we work, and also by businesses faced with a critical deficit in digital skills.
Is everyone in Silicon Valley rich? ›
While Silicon Valley remains a place of massive wealth, longstanding disparities persist. With the majority of riches and resources concentrated at the top, many residents are struggling with the rising costs for housing, food and child care.
How many millionaires are in Silicon Valley? ›
In Silicon Valley, we have some of the world's biggest winners.” Santa Clara and San Mateo counties had 163,000 millionaire households in 2022, which the report defined as households that had more than $1 million in investable assets.
What are the disadvantages of Silicon Valley? ›
Silicon Valley doesn't just need a high budget to establish a company, and it also requires an increased budget for livelihood. The higher cost of living than Silicon Valley poses makes it hard for the owners of startup companies to live an everyday lifestyle, even if they somehow arrange for the company's budget.
Why has the information technology industry developed in the Silicon Valley Short answer? ›
The name silicon valley came from the silicon chips which we use to manufacture different electronics nowadays. The availability of needed resources is the major reason behind the huge success of the information technology in the silicon valley.
Why do economists still like cities? ›
Large urban labor markets also encourage what economists call the coordination of labor: a big city makes it much easier for a worker or entrepreneur to find a niche. As Adam Smith noted, the bigger the market, the finer a division of labor is possible.
Which technology has had the biggest impact on the economy? ›
Which technology has had the biggest impact on the world's economy? E-commerce and targeted marketing have had the biggest impact on the world economy.
In 2022, the United States tech sector contributed nearly two trillion U.S. dollars to the country's overall gross domestic product (GDP), making up approximately 9.3 percent of total GDP. Since 2018, the tech sector's yearly percentage of total GDP has remained relatively consistent.
