58 Finance & economics The EconomistAugust 8th 2020
2 returnontangibleequityaveraged6%at
thestartoftheyear,halfthatoftheirAmer-
icanpeers.Thathasleftthemwithwafer-
thincushionswithwhichtoabsorbprovi-
sionsbeforetheyeatintocorecapital.The
vastuncertaintyabouttheeconomytrans-
latesintoequallyuncertainprojectionsfor
defaults—andmayhavegivenbanksthe
leewaytobookprovisionstheycanbear.
Investors are not fooled. European
banks’sharepriceshavestillfallenbyas
muchasthoseinAmerica, ifnotmore.
Theyhavenotbeenhelpedbythefactthat
theecb, inanefforttopreservecapital,has
forbidden banks to distribute cash to
shareholdersuntilatleasttheendofthe
year.(InAmericaregulatorshavebanned
share buybacks, but only capped divi-
dends.)InvestorsusuallycovetEuropean
bank shares for their stable dividends,
whichtheythenfunnelintohigh-growth
technologyorpharmaceuticalstocks.The
ban,saysRonitGhoseofCitigroup,a bank,
is“anothernailinthecoffin”. 7N
abbing a topacademic job in America
requires obtaining a phd, preferably
from a good university. That, in turn, re-
quires stellar undergraduate marks, the
right maths courses and a glowing letter of
recommendation. Increasingly, pre-doc-
toral programmes, or pre-docs, are serving
as a new rung on the professional ladder.
These schemes, which typically involve
two years of research at a university, are
both the cause and consequence of
changes in the profession.
Economists have long sought work ex-
perience before embarking on a phd,
whether in consultancy, the public sector
or finance. But over the past decade or so
the nature of the experience has changed. A
study by Kevin Bryan of the University of
Toronto examined the cvs of sought-after
economists, and found that none of those
applying for academic jobs in 2013-14 had
been research assistants before they began
their phds, but around a fifth of those grad-
uating in 2017-18 had.
Formal pre-doc programmes have bur-
geoned, especially in elite universities
such as Harvard, Stanford, the University
of Chicago and Yale. Participants clean and
analyse data, write papers and do adminis-
trative tasks. In exchange they may receive
free or subsidised classes, a salary in the re-
gion of $50,000, potential co-authorshipof the papers they work on, and, most
prized of all, a letter of recommendation to
a top phdprogramme.
In part pre-docs show how economic
research has changed. “Economics has be-
come more like the sciences in terms of
both the methods and the production pro-
cess,” says Raj Chetty of Harvard, who di-
rects the Opportunity Insights team, a
group with a reputation for working its pre-
docs hard. When analysing tax records that
gave access only to a certain number of
people, he switched away from using part-
time research assistants to a lab-like team,
inspired by his own family of scientists. As
bigger data sets, new techniques and gen-
erous funding made such collaboration
worthwhile, others followed.
Done well, pre-docs enrich both econo-
mists and economics. They help produce
good research and open up the profession.
Peter Henry of New York University started
his programme in 2014 to increase the rep-
resentation of minorities. Camille Gard-
ner, one of his pre-docs, says the experi-
ence has persuaded her to pursue a phd,
and taught her skills important for gradu-
ate study, such as how to write a good pa-
per. She thinks of Mr Henry as her mentor,
“not just my boss”.
There are some concerns, though, that
pre-docs leave junior researchers open to
exploitation. Academic economists are
neither rewarded for good management
nor punished for being bullies. Michael
Greenstone of the University of Chicago ar-
gues that “if you misbehave, it is going to be
hard to get people to work for you”. But aca-
demic economists, as the profession’s
gatekeepers, still hold plenty of power.
Programmes vary widely. Sometimes it
is unclear whether pre-docs are students or
employees. One pre-doc tells of tensions
over the timing of holidays. Another says
they were told they would be collaborating
with professors, but were then given muchless freedom than that implied. Another
complains of not being given enough time
to take classes.
Others tell of a hyper-competitive work
environment, fuelled by some professors
ranking pre-docs in their letters of recom-
mendation. More than one tells of being
asked to game a statistical test until it
showed the results the professor wanted,
and of struggling to push back.
Fortunately such experiences do not
seem to be common enough to deter many
pre-docs from doing phds. According to a
new survey of around 200 pre-docs by Zong
Huang and Pauline Liang of Stanford and
Dominic Russel of New York University,
only 12% say their current position has
dulled their interest in further study.
It is less clear, though, that pre-docs are
helping diversify the profession. The evi-
dence on the question is mixed. Those at
the top seven institutions who responded
to the survey were roughly balanced in
terms of gender, but just 2% were black.
Compared with recent phdgraduates, they
were less likely to have attended a top-ten
university. But they were more likely to
come from a top-ten liberal-arts college—
not quite the diversity the profession may
have been striving for.
Programme managers like Yale’s Rebec-
ca Toseland are working to alert a diverse
set of students to their schemes; some say
they review all applications from minor-
ities. Others are considering whether to
make sure undergraduates know which
maths courses to take. But a few, like Mr
Henry, are more sceptical, worrying that
pre-docs could come to represent another
stage in the credentials arms race. Indeed,
nearly a quarter of pre-docs at top institu-
tions who were surveyed had been full-
time research assistants before starting in
their position. In other words, as pre-docs
have gained prominence, so too have pre-
pre-docs. 7WASHINGTON, DC
What it takes to become an academic
economist is changingPre-doctoral programmesSelection effects