Yet-Another-Major-Filter: Economics vs. Finance vs. Accounting

November 20, 2010 11:10 AM

Yet-Another-Major-Filter: Economics vs. Finance vs. Accounting

I have read up on all three. In addition to what I have learned from the Bureau of Labor Statistics, google, and old askme's, I'm looking for personal anecdotes...such as, have you or someone you know studied any of these? What have you learned based on your experience? Which careers are possible outcomes? How do you like your career? What advice would you give a prospective economics/finance/accounting major?

In addition, I am considering a minor in CIS.

Thank you.

posted by DeltaForce to work & money (16 answers total)

Finance is an obvious career choice.

Note that these subjects require different levels of mathematical aptitude, with economics being more quantitative than finance and finance being more quantitative than accounting. (By "more quantitative, I mean "requires higher level math skills.")

You could end up working in an investment bank or private equity fund or hedge fund or venture capital, or something else.

I would not pay too much attention to BLS data, frankly, especially given how quickly the economy is undergoing structural changes. The BLS data tends to lag changes in the economy.

If the finance and investment sector continues to shrink, as many expect, it would not be as viable a career option as the BLS suggests.
posted by dfriedman at 11:34 AM on November 20, 2010

They way I see it, economics is the most "academic" of the disciplines, and is more concerned with the structure of systems and behavior of groups of people, whereas finance and accounting deal with the practical applications of the concepts created by economists.

It is also my impression that someone with a degree in economics would not have as much trouble getting a job in finance or accounting as someone with a degree in finance our accounting would have getting a job as an economist.
posted by Jon_Evil at 11:40 AM on November 20, 2010 [1 favorite]

I know lawyers with economics backgrounds. If you want to work for the SEC or anything like that, you need the math skills, and a lot of people don't have that. By contrast, an accounting degree is no more useful than an English degree.
posted by J. Wilson at 11:50 AM on November 20, 2010

Other than that each can claim in some sense to be the study of "money", the fields don't have an enormous amount in common.

Economics is a wide-ranging academic discipline -- a cousin to statistics; an excellent complement to political science, quantitative sociology, law, or certain studies of decisionmaking processes such as psychology, evolutionary biology, or decision theory -- the study of which reformats your brain a little so that you think about complex patterns more systematically.

Finance and accounting are professional rather than academic disciplines, the purpose of which is to give you practical skills rather than a new mental language:
- finance is about designing and managing assets like stocks, debt, or complex derivatives in order to maximize wealth, minimize risk, or match liquidity to ongoing needs (it is particularly useful to forms of business that move money around such as insurance companies, banks, brokerages, or very large companies);
- accounting is about the surprisingly-involved logistical groundwork that goes into making ANY business operate (it is helpful to all businesspeople, as well as to people whose jobs involve taxation).

If all three seem appealing to you right now, I strongly recommend that you take at least one class in econ (because it is more dramatically different from finance and accounting) and that you take or audit a class in at least one of the other two fields.
posted by foursentences at 11:50 AM on November 20, 2010 [2 favorites]

I want to emphasize that these fields just aren't close substitutes for one another.

ECON: How do people and institutions interact, as mediated by money?
FINANCE: How can I package up a bundle of goods into a new asset that will work somewhat like money?
ACCOUNTING: Where has my money been coming from and where has it been going?
posted by foursentences at 12:02 PM on November 20, 2010 [2 favorites]

I was an Economics major. It's a very "logical" discipline - you set rules and parameters, then manipulate variables and see what happens according to the rules you set. It teaches a way of thinking, a way of viewing the actions of people, companies and countries. That's why it is called a "social science".

Why did Company A do action X when the unemployment rate went up by y%?

Would Jill buy oranges from Sally in Australia or Frank in Florida if the tariff were cut in half? Why? How would an influx of illegal immigrants working for below minimum wage for Frank affect Sally's decision? Support your answer with a graph and / or equations.

What happens to consumer spending when the interest rate goes up, and why? If the government wanted to increase GDP by x, but only increasing consumer spending while holding government spending steady, what monetary policy should it implement?

These are economics questions. At least, these are the types of questions I had as an undergrad.

As you get more advanced, the questions involve more math. Instead of the answer being "x went up" in Econ 201 it's "x went up by 8% and here's the calculus equation that proves it" in Econ 401. Some universities teach with more math than others - this is the norm - but some universities (U of Chicago, for one), take a much more theoretical approach. This is an important distinction: theoretical versus mathematical economics.

Theoretical is (I think) all about setting up rules and equations and graphs and using them to show how all this stuff effects people's behavior but not actually solving anything with hard numbers. Mathematical economics is all about statistics and using data to prove hypotheses ("State X should decrease tolls by 2% to stimulate growth in the Gas Station industry. Here is my econometric model that proves it:"). Graduate level economics is usually all about this sort of econometric modeling. Lots of math required.

Finance and accounting, from what I understand (though I never took courses in either one), is much narrower - i.e. you manipulate data in certain ways and learn formulas and whatnot, but you don't learn "why"s or "how"s or broad systems of thinking about problems. Your learning is very specialized.

This is sort of rambling, so I will wrap it up:

Undergraduate Economics degree = way of thinking about the world and people's behavior that involves logic and some calculus-level math. Makes you employable in a wide range of fields depending on your drive and interests, gives you exposure to tools/foundation you need to go farther in other specialized fields (graduate economics included, though you really need some calculus and higher level undergrad math to succeed here).
Undergraduate Finance/Accounting degree = makes you immediately employable by companies seeking these services, almost like a technical degree. Downside is it's boring (my opinion).
posted by 3FLryan at 12:30 PM on November 20, 2010 [2 favorites]

This isn't even close. Econ is a flavor of liberal arts, whereas Finance and Accounting are vocational degrees. In the past when I was involved in hiring undergrads we cared way more about how someone thought, their intellectual curiosity and how they were able to communicate. I couldn't care less if they knew how to calculate the convexity of a bond or how to account for an acquisition. Those things are easily teachable if you are hiring smart people. If you are trying to get into "traditional" finance (and pay heed to dfriedman's warnings on the future) pick a liberal arts course of study that requires real quantitative skills (calc, stats, etc) or even consider engineering. If you are more interested in the quantitative side of finance then at a minimum you need to be in engineering, math, or a hard science - There also might be some legit quant finance undergrad programs - I personally don't know because that's not what I do.

To be perfectly honest I'd be more interested in a history major with quant coursework then I would be in a finance major.
posted by JPD at 12:48 PM on November 20, 2010 [2 favorites]

Undergraduate economics (without extra math, econometrics, or statistics) is a total waste, in my opinion as a UC graduate in the subject. I haven't been able to find a job in my field at all as most companies seem to want (as mentioned above) more quantitatively-oriented people.

This is all besides the fact that Western, neoliberal economics is kind of a load of crap anyways and can be bent and manipulated in any way to meet political gains. But that's a topic for another post!
posted by speedgraphic at 1:37 PM on November 20, 2010

You can get a job in finance with any of these degrees. A degree in finance is the most broad as it will require some accounting and Econ courses.
posted by blargerz at 3:05 PM on November 20, 2010

I have a BBA in Econ, graduated in '01. To the t, almost all of the other econ graduates I knew that had *plans* were busting hump for the LSAT or MCAT our final year. One or two may have been headed to Econ grad school and a prospective career in academia. I wasn't quite sure. I got a pretty decent job with local (county) government in the policy department. That was okay, I guess, but I was far from broken-hearted when I was laid-off 2.5 years into it. So it goes. I'm now taking pre-reqs in the hopes that I'll become a DVM. But I'm kind of anti-corporate and it took me a bit to figure shit out, so don't take my example as anything close to normal.

Of the folks that I knew in all three majors, the consensus (and fallout) was basically:

Econ folks had a much harder time getting a job with just a Bachelor's (see the comments above about it being a "social science". It can be, but it isn't necessarily. I took two semesters of stats and Econometrics as an undergrad, but you don't exactly flaunt courses taken on your resume). But those that were going on to further education had great success.

Accounting: My uni had a 5-year Masters in Accounting that pretty much every acct. major I knew opted for. Back in the heyday of the early 2000's, most of them were landing decent jobs with the (then) big five firms, and were probably set for moderate success. I don't know how many of them were truly *happy* with that option, but that may be some form of confirmation bias/folks I prefer to associate with. It always struck me as a "Learn this thing and then do it for 40 years and retire" kind of career. I could've done it, but I'd've been miserable. Not a judgment on those that choose it, but not for me.

Finance: Most of the folks that graduated with Finance degrees (and this is the smallest subset of the group) went on to either MBA's straight after graduating (which seems a bit...spurious at best to me) or signed on with big investment firms, meaning they left to do long training stints (re-education camps, as one friend told me) and then landed in big cities. They worked horridly long hours and made great money. But (but!) this was before the recent economic fallout.

Apologies if this seems rambly, but I'm a bit tired. Feel free to me-mail/e-mail if you need clarification.
posted by Ufez Jones at 4:30 PM on November 20, 2010

I think this really depends on your school and ambitions. If you're very ambitious career-wise and go to a school with a top Finance program, I think it's a good choice. If you're at a mediocre school, I think Accounting is probably more practical.
posted by mullacc at 7:58 PM on November 20, 2010

An undergraduate degree in economics or finance could help you get a job at a bank. That is a fairly common background among the support roles (e.g. operations, product control, compliance, etc). If you are interested in front office jobs (like sales or trading) then the quickest route is through a trainee program. There is a lot of competition for those spots and you will typically need to come from a top school with an excellent academic record and relevant internships. Often undergrads, MBAs, and people with graduate degrees will be competing for the same spots.

People at banks generally don't care what you studied so much as how smart you are. For the more quantitative roles like trading or risk management, a background in engineering or mathematics is a plus.

Outside of banking related jobs, a finance degree could get you a job doing more traditional "financial analysis" for a company - forecasting expenditures, managing the budget for projects, etc.

I work in market risk management at an investment bank. I did engineering in undergrad then a master's in mathematical finance. Most of the people I work with have master's degrees - economics is the most common one, followed by mathematics, and there are a few finance master's/MBAs as well.
posted by pravit at 8:06 PM on November 20, 2010

By contrast, an accounting degree is no more useful than an English degree.

As someone who has both an accounting and an English degree, I completely disagree. An accounting degree will actually get you a job, and is, in my opinion, on of the few degrees worth paying for. An English degree...well, all I can say is that joining a book club would have been a hell of a lot cheaper.

To answer the OP's question, I think it depends on what school you are going to. At a prestigious school, any of the degrees would probably get you a job. At a less selective or prestigious school, I would go with accounting. The accounting curriculum is usually much more rigourous than general business or finance degrees, and at the end of the program you will be qualified (or close to qualified) to take the CPA exam, which not just anyone can do (usually takes 150 credit hours and certain specified classes including auditing, tax, etc.) Plus, the job prospects for accountants these days are much better than those for most other fields.
posted by banishedimmortal at 9:50 PM on November 20, 2010

Another thing: Internships mean as much if not more than your choice of major from this list.
posted by blargerz at 10:06 PM on November 20, 2010

BA in Economics here. I've found my degree to have no marginal value over a BA in basket weaving. In Economics, if you don't go on and get a graduate degree in it, it's just not that special.

Finance job market is in the toilet.

Meanwhile, accounting majors can do either accounting OR finance. Whereas finance majors are not qualified to do accounting. You can also start in public accounting, get some experience and your CPA (probably need a masters degree for that, depending on your state), and then go into many other fields in business. Public accounting gives you a look inside the operations of many different businesses and employers really value that experience.

So, majoring in accounting will give you the best job options.
posted by Jacqueline at 3:54 AM on November 21, 2010

As always, thank you to everyone for taking the time to answer my question. There is a lot of useful information here for me to consider, I greatly appreciate it!
posted by DeltaForce at 12:18 AM on November 22, 2010