“I am an economist,” I once proudly mentioned at a party, in a round of small talk. “Oh, so you do a lot of money counting and financial reporting?” was the reply I heard, like so many economics graduates before me. “Nah, let’s leave that to the business and finance professionals,” I answered. But what do real economists do exactly?

This might come as a surprise to someone outside the field, but economists come in different packaging. The two most common career options – policy and academia – offer widely different paths for economists. 

This begs the question, especially for the upcoming economics graduate: what are the differences?

I have tasted both worlds myself: after working for an economic think tank, I returned to academia to pursue a PhD in economics. Although both paths offer an intellectually challenging environment, and my research continues to be policy-oriented, I clearly see differences in the research scope, working process, and the kind of outcome that is expected from me.

Solving vs Finding Problems

The most radical and noticeable difference between policy and academic economists is that the former work with the problem they are given, whereas the latter contemplate what problems are worth greater attention. 

For example, the government is not happy with the unemployment rate in the economy. It has increased by 2 percentage points over the past year. One of the options to bring people back into the workforce is to introduce active labor market policies, ranging from funded retraining in the workplace to career counseling programs for the unemployed. A policy economist would be hired to help design a solution. Thus, the problem is given to them. 

In academia, on the contrary, people have the opportunity to choose the topic they are genuinely interested in. They quest for a problem or a research question themselves, rather than have it dropped from above. So, they can choose between studying labor market policies or voting behavior of single mothers, for example. Or they may choose to study anything else within the scope of their expertise.

Theoretical Mechanisms vs Practical Implementations

When the problem is given to a policy economist, their task is to find a viable solution, often within the given budget constraint, so as to answer the how question. When an academic researcher faces the same issue, their task is to evaluate what works in principle, so as to answer the what question.

Let’s say the government is still serious about combating unemployment. The task of a policy economist would be to study the evidence, including the world’s best practices, and propose an economic policy design that would best suit the country’s context. They do not have the luxury of time, and they have a strict budget they must adhere to. 

In contrast, the task of an academic economist would be to use large datasets, perhaps from other similar countries, to assess the effectiveness of each existing policy option (or perhaps theorize a new one). This is not a short project, neither is it context-specific. In academia, researchers are interested in the universal mechanism rather than the solution to a specific problem. 

Well-Rounded Professional vs Specialized Expert

Policy economists should be equipped to tackle any problem that is thrown at them, so developing a working knowledge across a range of topics is vital. In academia, narrow expertise is valued, so an academic economist would go deeper in one direction. 

Considering the same unemployment issue, a policy economist is expected to be aware of the main theories and empirical evidence in Labor Economics, too. What is also expected is that they are well aware of the context: how the labor market functions in their country, including a good grasp of legislature, market trends, and existing government policies.

An academic economist will devote much more time to a narrow slice of the issue, which often entails researching a pattern that fills in the patches in the literature. For example, they would research whether giving study vouchers to the unemployed increases their chances to get a job. That is why people in academia often specialize in one or two research areas, in this case, in Labor Economics. 

Persuasion Skills vs Methodological Precision

The policy world is solution-oriented, so mobilizing as many people as possible around the policy idea is a success factor. Meanwhile, academia is expected to generate new scientific evidence, so focus is on the way the problem is approached. 

The task of a policy economist is to persuade a group of policymakers that the idea will solve the problem of their concern with a positive impact on the people and economy. As the stakeholders are often not economists themselves, a policy economist should know how to speak to them in a language that they understand with a degree of assertiveness. The goal is to push the idea through, as this is how a think tank makes its business; by having its policy proposals adopted and enacted. 

What academic economists are concerned with is how their analysis is implemented. Methodology plays an important role, and so does the way the hypotheses are framed. The output should shed new light on the old problem, methodologically or theory-wise, or discover a new phenomenon using known concepts. The goal is to share the result with the community of fellow, let’s say, labor economists, who speak the same language. 

Making Changes vs Furthering Knowledge

Policy economists are hired to find a feasible solution to a time-specific economic problem, so the outcome of their work is a well-designed policy that brings the expected results. Academia, in contrast, produces new knowledge, so the outcome is measured in terms of the contribution that is being made to existing scholarship. 

Following our unemployment case, a policy economist will bring a paper to policymakers stating which of the options would work best and why. In addition to a detailed policy design, which is an obvious deliverable, a policy economist should estimate the costs and benefits of the initiative, and whether legislation needs to be amended to accommodate it. Ideally, a policy proposal turns into an act. 

Meanwhile, a major goal of academic output is publication in a reputable journal so that other members of the research community can get insights into a particular mechanism. Although some academic works explicitly discuss policy implications, they are often universal and not context-specific. 

My experience: the pros and cons of each

Which career path to follow depends on one’s preferences for maintaining a wide view (policy economist) or developing a deep expertise (academic economist), changing projects quickly (policy) or slowly (academia), and communicating within (academia) or outside (policy) the professional community of economists. 

When I worked for a think tank, I often interacted with professionals from both the public and private sectors. Policies are made by people and for people, and as people differ, so did my approach to each policy – this required a lot of mental load and empathy. I genuinely enjoy communicating with people, so personally I found this a positive aspect of the job rather than a burden. In academia, interactions are less frequent and often within the same research communities, which is perhaps not so attractive for more extroverted people.

On the other hand, as a policy economist, I did not have much of a choice of which topic to work on. Most projects were exciting and absorbing, while some just had to be done, and I could not say no or transfer my tasks to a colleague. Now that I have PhD status, I have the freedom of choice. I am responsible for the gratification I am getting from my intellectual work, and I can drop the projects I do not feel excited about. Loving what you research is crucial in academia. 

Although often treated as orthogonal, the paths of policy and academic economists have a lot in common. Both must have deep knowledge of economics, and both probably receive many comments about financial markets at parties. Moreover, one cannot exist without the other. Policy people need academics to generate new knowledge usable in real life, whereas academia needs real-world policy problems to evaluate, and to provide inspiration for new avenues of research. 

Trying out both worlds can help an economist know which they prefer, and gain an appreciation for both. What eventually matters is that one genuinely enjoys what they are doing.