Many students mistakenly believe that economics and business studies are similar because both are related to money. They assume that if accounting or finance programs are too competitive, it may be easier to opt for the broader field of economics.
However, economics and finance are fundamentally different disciplines. Economics is a liberal arts subject within the social sciences, while finance is a professional field within business studies.
Their content differs significantly, and economics is not inherently easier than finance or accounting. More importantly, their career paths differ. Well-known institutions like the Big Four accounting firms and investment banks specifically target accounting and finance graduates. Only a small fraction of economics graduates manage to successfully transition to investment banking.
Why is this so? To understand this, we must first clarify what economics is.
1. What is Economics?
Economics isn't merely about money. Put simply, it's the study of how to allocate and utilize limited resources to meet human needs more effectively.
These resources aren't just financial—they include natural resources like land, water, air, and trees, as well as time and expertise. For instance, the consulting industry essentially trades knowledge and time for money. Unlike finance, which focuses on how to raise, allocate, and use money to maximize profits, economics covers a broader range of topics and tends to be more theoretical.
Possible research questions for economists include:
Why did the global economic crisis occur in 2008?
Why is there still a gender pay gap?
Why are some developed countries wealthy, but their citizens not very happy?
As we can see, the focus of economics is quite different from finance's emphasis on money, securities, and investments. Economics is more about general theoretical foundations, whereas business studies – like accounting and finance – is about practical applications.
2. What Do Undergraduates Study in Economics?
Given the nature of the questions economics seeks to answer, you might think it would fall under the humanities. However, you’d be wrong!
Historically, before the advent of the "scientific method," economics was indeed more humanities-oriented, focusing on historical context, analyzing economic phenomena, and understanding economic theories and government policies.
But as all disciplines have evolved towards more scientific approaches, economics has increasingly emphasized mathematical modeling. Today, any university with a strong economics program, regardless of the country, includes a substantial amount of mathematics and statistics in its core undergraduate curriculum. Historical, policy, and theory-related courses have largely been relegated as electives.
For example, at the London School of Economics:
The first semester's core courses include an introduction to economics and two math-related courses.
The second semester includes macroeconomics, microeconomics, and a statistics course.
This pattern continues into the second year, with increasing difficulty, and elective courses are only available in the final year.
Similarly, core courses at the University of Chicago focus on microeconomics, macroeconomics, and statistics.
Their math requirements are even more rigorous, specifying the level of calculus, data analysis, and linear algebra needed each semester. Clearly, economics isn't a simple "humanities" subject; rather, it's one of the most quantitative among the social sciences.
Of course, the examples I’ve provided are from select institutions with high quantitative requirements. Many schools might not have such stringent math prerequisites. In such cases, students might graduate with an economics degree by taking mostly theory-based courses. However, without data analysis skills, merely understanding basic economic theories won’t be very helpful in the job market.
3. What Can You Do With an Economics Degree?
Some students think that after earning a bachelor’s degree in economics, they can easily find a job in investment banking. However, unless you graduate from a top 30 U.S. university or an equivalent institution elsewhere, breaking into Wall Street with just an economics degree is very difficult.
It's important to understand that Ivy League economics graduates who get into Goldman Sachs or Morgan Stanley do so not because their major is directly relevant to their career, but because these firms believe that these students are exceptionally talented. The only reason they chose economics was because their schools didn't offer finance programs. Otherwise, why would an investment bank hire a student who only knows economic theory over one who can conduct financial analyses?
Of course, it is possible to have a pathway where you first earn an economics degree and then pursue a master’s in finance, eventually aiming for Wall Street. However, it's more straightforward to study finance as an undergraduate and specialize further at the master’s level.
If you don’t pursue a career in finance, what can you do with an economics degree? Generally, many economics graduates work for the government, such as in financial regulatory services, central banks, or think tanks, focusing on social welfare and policy analysis and development.
For instance, a Harvard alum I know works at the U.S. Federal Reserve, studying how to set bank interest rates. Many U.S. senators, representatives, and UK cabinet members also have backgrounds in economics. However, to become a high-level policy analyst, you typically need a PhD, which only a minority of students will pursue.
In summary, compared to finance, economics is indeed less employable, but such is the nature of a liberal arts discipline. It trains students to think critically rather than imparting specific job skills. Therefore, I always emphasize that liberal arts majors make the most demands on students. Unless a student is very proactive and adept at leveraging all available resources at their university to help him find a job, I wouldn't recommend choosing this type of major.
4. If You Want to Join the Big Four or Investment Banking but Can’t Get Into a Business School, Should You Still Study Economics?
This is a practical consideration for many parents and students since undergraduate economics programs are generally easier to get into than business school finance programs. While understandable, students need to carefully examine the curriculum. If the program emphasizes math skills, then graduates will not only understand economics but also possess strong data analysis skills, increasing their chances of entering investment banking.
However, if there are few data analysis courses, I strongly recommend that these students minor in statistics too.
In conclusion, while economics and finance may seem similar at first glance, they are fundamentally distinct disciplines. Economics, with its broad theoretical scope and strong emphasis on quantitative analysis, equips students with critical thinking skills rather than specific job skills. For students aiming for careers on Wall Street, it may be better to study finance or accounting, which offers a more direct path to their goal.
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