Economists (and Economics) in Tech Companies

Susan Athey  and Michael Luca, Economists (and Economics) in Tech Companies, Journal of Economic Perspectives, 2019, 33 (1): 209-30.

Amazon’s hiring has been especially notable, as they have hired more than one hundred economists in the past five years, making them the largest employer of tech economists. In fact, Amazon now has more PhD economists than the largest academic economics department....

Companies like Amazon actively discourage academic publishing, and assign economists to business problems they are struggling with in the short term. In contrast, companies like Microsoft have economists operating within the main business, but also have many economists working out of research centers, essentially doing research and development, publishing self-guided research in academic journals comparable to that of economists working in business schools or economics departments. These centers, at their best, provide frontier insights, some of which will yield transformative ideas that will guide the future direction of the company...

Airbnb has economists working on issues ranging from pricing to reputation systems. Uber has teams of economists focused on understanding policy issues in addition to pricing and incentive design. HomeAway has a PhD economist leading market design and data science for the marketplace...

MIT’s economics and computer science departments have partnered to create a new major in computer science, economics, and data science. Harvard has developed a data science initiative, drawing in computer scientists, economists, and other social scientists...

Economists work extensively with data to answer social science questions. Relative to other disciplines, economists generally have two strengths in thinking about data. 

First, economists are interested in understanding which relationships are causal and, critically, which are not. Over the past thirty years, the field of economics has developed a toolkit to identify causal relationships in real-world data. From a practical perspective, this allows economists to understand what works, what doesn’t, and why. Within tech companies, economists have used this toolkit to estimate things ranging from the causal impact of Yelp ratings on restaurant sales to the effect of Google ads on visits to eBay (Luca 2016; Blake, Nosko, and Tadelis 2015). While correlational data led eBay to invest fifty million dollars per year on search ads, a large-scale experiment run by their economics team demonstrated that many of these ads were ineffective....

Second, economists are interested in understanding the tradeoffs involved in different outcome metrics. Outcome metrics are crucial to everything that happens inside firms, particularly technology firms that make decisions primarily based on data (as opposed to subjective criteria). Product design decisions, marketing decisions, and even human resources decisions are determined on the basis of empirical analysis, and the choice of what metrics represent success guides incentives throughout the companies. Economists have sought to better understand the relationship between short-term metrics such as clicks on an advertisement (also called “surrogates,” e.g. Athey, Eckles, and Imbens 2016) which are easy to observe, and longer-term metrics (like revenue or the lifetime value of a customer), which are more difficult to observe, but better represent company goals....

In 2002, Hal Varian received a call from Eric Schmidt, the chairman of a young company called Google. Schmidt was intrigued by Information Rules, a book Varian had coauthored with Carl Shapiro, his fellow economist and colleague at the University of California, Berkeley. In what turned out to be a productive conversation, Varian spoke with Schmidt and went on to become a consultant for Google, and ultimately, the company’s chief economist....

Advertising is one of the areas that have changed dramatically as a result of the involvement of economists. This involvement has been concentrated in two areas: the design of advertising auctions and estimating the returns to advertising....

Online reviews and reputation systems have become increasingly prevalent in the past decade, and now cover nearly every product and service imaginable. Platforms like Yelp, TripAdvisor, and ZocDoc contain hundreds of millions of reviews for businesses ranging from plumbers to hotels to physicians. The rise of online marketplaces such as Uber and Airbnb rely heavily on reputation systems in order to facilitate trust between strangers, and traditional retailers ranging from Home Depot to Gap have developed review systems of their own...

Positions for Economists at Tech Companies: Data Science/Analytics, Experimentation or A/B Testing, Advertising/Marketing Analytics, Product Manager, Regulation/Litigation, Public Policy, Public and Media Relations, Chief Economist Team, Other Teams