Wednesday, August 16, 2006

The Cost of Comprehensive Exams

Studying for comprehensive exams is something just about every aspiring Ph.D. student in economics has to deal with. The more time I devote to learning the theoretical ins and outs of my profession, the more I realize that this whole comprehensive exam process is a big, real-life cost minimization problem. (Quick, write up the Lagrangian for it.)

In a sense, studying for exams is a tax. You are required to devote your resource (time) into studying (as opposed to a "productive" activity, such as researching). An argument could be made that the process of studying for the exams is something that will yield productivity benefits in the future, but that effect is likely minimal, especially considering the sheer amount of hours you put into it. Naturally, you aren't allowed to continue if you can't (eventually) pass these exams, but that is a self-imposed restriction-- that's like saying a company's efforts towards preparing tax returns is worthwhile, because if they didn't, the IRS would come and get them.

As with any tax, there is some deadweight loss. The way I see it, there are two types of deadweight loss associated with studying for comprehensive exams. There exists an amount of time that each person must study in order to pass the exam, unobservable to the person themself. This is the imposed fixed cost of having to study for a comprehensive exam. Since this amount of time is unobservable, however, students are forced to estimate how much time they think they will need to study to receive a passing mark. The descrepancy between the actual time put in and the unobserved required time is the variable cost. Risk aversion will certainly play a role in the decision of how much actual time to spend. The more risk averse the student, the more time they will spend studying in order to secure a more probable positive outcome. If the goal is simply to pass the exam, the problem becomes one of cost minimization-- reducing the amount of time spent studying on the exam per your risk preferences. Errors will always tend towards the higher cost side of the fixed cost since the threat of failing the exam and re-incurring the fixed cost the next time around is very real. After all, incurring an additional 4 hours now and increasing your chances of passing could be rational given your risk preferences when compared to potentially having to incur another 50 hour fixed cost of taking the exam again.

My sage officemate offers the following: "I've found economics at the graduate level to be very inefficient."

Here's to passing by a hair!

5 comments:

Rolub said...

Many of the NASD licenses, or CFP module, exams require a passing grade of 70%.

It is our belief that if you receive a 71% on the exam, then you studied 1% too hard.

Matt E. Ryan said...

After thinking about it yesterday, the requirement to take comprehensive exams isn't really a tax in the sense that it doesn't change the price of your time. A pain perhaps, and productivity minimizing, but not a tax, per se.

Generic Viagra said...

I think that it is so interesting, well,the Cost of Comprehensive Exams is so high, I think so.
Ihave been studying about because I have to do a test in the university next month!!22dd

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