The Disadvantage of a PhD in Economics
Posted by Andy Rush on 17 Feb 2006 at 12:22 pm | Tagged as: Audio & Video, News & Commentary
Innocent until proven guilty. One of the foundations of our justice system. That’s what we’re supposed to believe. In the movie Enron: The Smartest Guys in the Room, there is one head-shaking-in-disbelief scene after another about the fraud “allegedly” committed by Ken Lay, Jeffrey Skilling, and others in the biggest corporate scandal in U.S. history. OK. Let’s not pull any punches. It is the biggest scandal period. Ever.
Enron is the first movie I received from my new Netflix service, and it couldn’t be a better time to rent it. With the trial underway as I write this, Ken Lay maintains his innocence, attempting to claim victim status. As I looked for the latest news in the trial I stumbled across this editorial by Al Neuharth, the founder of USA Today. You see Al has a degree in journalism, but didn’t do well in Economics. He states, his chief financial officer could have bluffed him about anything going on with the bookkeeping at his company because “balance sheets were not [his] bag”. Ken Lay has a PhD. in Economics. See the movie, read Al’s opinion, and you decide about Ken Lay.
UPDATE: I encourage you to keep up with the latest in the Enron trial in the Houston Chronicle.
I have not seen the movie and have not been following this story closely. I have no idea whether Ken Lay is guility or innocent. But, speaking as a PhD in economics, there is absolutely no reason why a PhD in economics should know anything substantial about accounting. Economics is not the “study of business” nor is it a training ground for people who want to run businesses. It is a methodology for doing research on a wide variety of topics. The operations of large corporations might be one of those topics among millions more. I will bet 90% of economists have never studied a bit of accounting, and 95% of them do not need to know any accounting to do their jobs.
I am trying to think of an analogy here. It is like saying all instructional technology specialists know how to do the electrical wiring that provides the power to a large mainframe supercomputer. It is all computers, isn’t it? Obviously not.
I may have been too hasty to ascribe accounting talents on Ken Lay. Let’s try this approach - would there be any signals, such as the ones the Fortune magazine reporter announced (”Is Enron Overpriced”) that would begin some internal investigation by Lay, or would he not ask any questions because his stock portfolio was doing so well.