Econ majors and refrigerated gourmet dog food

One of the weirder status markers of the most exclusive colleges is that undergraduates normally can't major in business. West Hunter summarizes the distribution of majors nationally v. at Harvard:

Nationally [ 2009-2010], about 21% are business majors,  10% major in social sciences and history,  8% in “health professions and related programs”, 7% are educational majors,  6% psych majors, 5% in visual and performing arts,   5% in biological and biomedical sciences, 5% in “communication, journalism, and related programs”,  4% in engineering, 3% English and literature, 2% in computer and information sciences, 1.4% in physical sciences, 1% in mathematics and statistics.  I haven’t mentioned everything. 

Harvard [2009] is different. They had 758 kids majoring in economics, 495 in government, 306 in social studies, 290 in psychology, 247 in English, 236 in history, 158 in history and literature, 155 in neurobiology, 154 in molecular cell biology, 154 in sociology, and so forth.

A few colleges have done well for themselves having elite business schools for undergrads, such as Wharton at the U. of Pennsylvania and, in recent years, Stern at NYU. In general, though, letting undergrads study something directly applicable to getting a white collar corporate job is considered de classe. Studying business -- at least before your late 20s in MBA school -- is downscale.

Instead, economics has become the de facto business major at the Harvards of America. You're not dirtying your hands studying anything all that relevant to the vast majority of corporate jobs. Yet majoring in economics shows: Although I Am A Gentleman, I Am Also Interested in Money. So, it's the ideal major for the career path of Wall Street or consulting entry level analyst --> MBA School --> Big Money.

Something striking is how little relevance a strong knowledge of economics has for most jobs. As an old Econ major, I noticed this in the mid-1980s when I was in charge of introducing personal computers into the large marketing research company where I worked. I hired a PC tech guy who turned out to be notably smarter than me in sheer problem solving ability. But, like the Scarecrow in the Wizard of Oz, he didn't have a diploma. He'd enlisted in Admiral Rickover's nuclear Navy out of high school and spent six years minding the reactors on nuclear subs. 

I quickly let him move up from fixing computers to playing a sizable role in tactics and strategy. That led to the one incident in which I noticed a major benefit from my having taken nine full semester courses in Econ. One day in 1987 my assistant proposed that we should stop buying PCs from Dell (or PC's Ltd. or whatever it was called way back then). Instead, we should buy the parts in bulk and hire workers to assemble them for us.

This was back before highly engineered laptops, when PCs were simply big metal boxes with lots of slots in them, so assembling the 100 (or so) parts didn't require any impressive machine tools. Lots of hobbyists assembled their own PCs in those days. (There were opportunities for hot rodding PCs in those days. For example, I got an early IBM PC AT. The CPU's clock speed was set at 6 megahertz, but I ordered a part that made it run at 8 megahertz and enjoyed 33% faster speeds.)

I replied that PCs were a highly competitive business with no obvious barriers to entry, so it's precisely the fact that his plan wasn't ridiculous that meant that it most likely wasn't worth doing: competition would have driven the rate of return down to a level where we'd be indifferent between assembling PCs ourselves or having Dell assemble them for us. Management attention was our main limiting resource, so outsourcing to young Mr. Dell the obsessing over PC parts purchasing and assemblage was a task I was happy to pay him a small premium to do. 

My colleague did not believe me, so I encouraged him to make up a spreadsheet and see for himself whether he could beat Dell's price by much. A couple of hours later he came back and said I was right: if we did everything perfectly, we'd only save $10 or $15 per PC, and we wouldn't do everything perfectly. So why bother?

So that was one instance in which my Econ major's knowledge of economic theory could have saved us two hours of work. But there were surprisingly few others. (Of course, this was in managing a high school grad who would have maxed out a Raven's Progressive Matrices IQ test. A lot of other economic theory he simply grasped without having studied it because it was obvious to him.)

Fortunately for the dynamism of American business, most econ majors never take the quietist lessons of econ theory to heart. While U. of Chicago economics professors are said to never bother to pick up $20 bills off the sidewalk because surely the efficient market would have done it already, most Harvard econ majors are blithely immune to econ's basic model of perfect competition reducing profits to the risk-adjusted interest rate.

Two questions: 

1. What are the effects on the student of the upscale study path of econ -> business v. the downscale path of business -> econ? 

2. What are the effects on America of a social structure in which econ majors make up a sizable fraction of the rich and connected?

I've never seen any academic studies of either question. 

Off the top of my head, it would seem like it would make more sense when you are younger to study narrower topics of business; then, if you wish, come back to academia once you have some real world experience and study the broader topics of economics.

I was an unusual student in that I went directly from undergraduate to MBA school in 1980. Something I noticed was that at age 21-23 I enjoyed the MBA school topics more than the undergrad topics because they felt more age-appropriate. As an undergrad econ major, I was supposed to worry about things like: What should the Fed do now? I had lots of opinions on the Fed, but I never felt like the Fed was on the verge of calling me up and asking me for advice, much less paying me money to tell them what to do. In B-School, however, we talked about case studies like: should a pet foods company bring out a line of gourmet refrigerated dog foods for the luxury market? * That seemed like the kind of topic that a company might plausibly pay me money in the next few years to advise them upon.

As for the current dominance of econ majors in our national lives, it wasn't always like this. As an econ major in the 1970s, there was a sense that we band of brothers, we happy few were taking on the palpable ignorance that had led to idiocies like the President declaring a national wage and price freeze on August 15, 1971. 

The good news is that a country run by econ majors isn't likely to do that again.

The bad news is that certain fetishes of econ majors, such as an unthinking advocacy of free trade or open borders, become totemic status markers of having majored in Big Money Econ. Americans respect people with lots of money and so they respect econ majors, so they tend to be unskeptical about ideas that econ majors absorbed during their impressionable late teenage years.

Hence the elite credulity about open borders is understandable: dismissing immigration restrictionists as ignoramuses who obviously haven't majored in econ does correlate at some level with making a lot of money on Wall Street. 

But it's a helluva way to run a country.

* In case you are wondering about gourmet refrigerated dog foods, a little poking around on the Internet shows they they were not successful back in my day, but have over the last few years become an established category. I suspect a necessary condition was the development of stand-alone pet food stores and/or small, cheap refrigerators that are now ubiquitous in retail outlets, typically for soda pop. The big problem I noticed in 1981 with the idea (besides the obvious questions about whether it's stupid and does your dog really care?) was that supermarkets would be reluctant to stock dog food in with refrigerated human food, while pet food aisles in supermarkets didn't have refrigerators.