| Its C. the market doesn't follow traditional models anymore. The whole profession was basically centered around putting a dollar amount on risk. For example, lets say I give you a chance of either taking $1k now, or playing a game where you have 1 in 10 chance to win $200k. What would you do? The right answer is "sell" the risk to someone. For example, on the average, if I "buy" the game from 10 people, at a price of $10k each, I can realistically win twice what I spend. Repeat that over x number of steps and more complex games, and that is what the PhDs worked on in terms of pricing. For most of the time it worked ok. In a few instances (most notably the Gaussian Copula that was a large reason for the subprime house market crisis in 2007) it didn't. The problem is that now, its impossible to predict whether orange man is going to throw a hissy fit and cause the market to go up or down, or if large investors are going to artificially prop up stock like they did with Tesla. |
As the article indicates, a huge portion of the market for hiring PhDs is directly or indirectly dependent on federal funding. Universities are freezing hiring and reducing PhD cohort sizes, institutions like the IMF and World Bank are in crisis, and US government agencies have been reducing staff sizes. There was hope that the tech industry would provide another big source of jobs for PhD economists, but that hasn't panned out.
Source: the article, and my wife works in the UChicago economics department.