My professors are beginning to speculate about the effect of the Wall Street meltdown on the rest of the economics profession.  Econ professors (and grad students) are paid WAY more than their counterparts in other academic programs, because they have better outside options.  Make that: HAD better outside options.  If we go forward without those sky-high investment banking salaries and CEO compensation packages, academia won’t need to pay economists as much to attract the best and brightest and keep them from leaving for the private sector.

At the same time, if undergrads aren’t as attracted to the econ major (which, at many schools, substitutes for a pre-business major, even though it doesn’t actually teach anything business-related), that department will no longer be among the largest at any university and schools won’t feel as much pressure to have big name economists on their payrolls.  Both factors will decrease the (until now) huge amounts of money thrown at econ departments nationwide.

Everyone’s still trying to wrap their minds around the potential fallout from last week’s events.  Some professors told my classmates and I yesterday that the pressure is on to do well on the academic market because there are no longer any Wall Street jobs to fall back on if we don’t. They were sort of joking, but sort of not.  Academics generally consider themselves practically immune to economic fluctuations–which we probably still are, more or less.  But structural shifts in the economy like what seems to have occurred last week?  Most likely not.

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A few classmates and I sent out a survey to the other graduate students in our department this year, and noticed this exact phenomenon.  (We asked what year they were, and what year they expected to finish.)  I swear on Greg Mankiw’s Econ 101 textbook that I’ll be on the job market in… two years.