Just What Does An Economist At Facebook Do?

Thanks to the financial crisis we’ve all learned a lot about what economists do. We know they measure the economy and try to make predictions about where the economy is headed. In some cases, this affects policy, in others it may just be about helping an employer stay ahead of the competition. But the one common theme is that the primary subject is the macro economy.

These economists are often referred to as macroeconomists. But there’s a whole other field out there of microeconomists, and they’re much more concerned with topics that are smaller in scale, but more manageable and perhaps predictable. They’re called microeconomists. Recently someone asked what an economist for Facebook does. The answer is: a lot.

The question was answered by a real economist at Facebook. He explained that much of his focus is on the internal marketplace for ads within Facebook. Facebook uses auctions to solicit bids for advertising space. Auctions are a type of marketplace and the seller would always be wise to understand that market better than anyone else. The economist also looks at the behavior economics of working with Facebook. This includes understanding incentives, externalities (the impacts of decisions on others), and decision making under uncertainty. So the answer really is: there’s a lot an economist can do at Facebook.

It’s not just limited to Facebook though. Other tech companies employ economists in similar fashions. King of the auctions eBay almost certainly has economists to help the company understand the broad marketplace it facilitates. The same goes for Amazon. Google has an ad marketplace too, surely some Facebook economists have done tours of duty with the search engine.

It’s not just technology companies either. A cell phone provider like Sprint or T-Mobile would employ economists to help understand their position in the broader marketplace with giants AT&T and Verizon. An economist would help them understand their options in terms of gaining market share from an oligopoly power. Same with a soda company trying to break into the Coke and Pepsi market. Any company that works in a commodity industry like farming or energy needs economists too. Economists here can consult on exactly how and why events of supply and demand can impact the bottom line.

Very few of these economists would call themselves macroeconomists, but companies employ the macro guys too. Some economists probably do a little bit of both. A homebuilder would look to an economist to assess different regions of the country for the right place to set up shop. This includes macro assessments such as employment and wage growth, and micro assessments like competitive threats and regulatory friendliness.

It’s easy for people such as myself to get caught up in what the headlines say about economists. Some say macroeconomists get all the attention, and microeconomists do all the real work. All that means is that there’s an army out there of people who are economists, but aren’t trying the impossible task of hammering down how many jobs Obamacare might kill.

Read: What does an economist at Facebook do? (Marginal Revolution via @DumbAgent)

Image: TEDx Monterey

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