1. Start with the rankings. For some recent rankings of economics departments, click here and here and here. All ranking systems are imperfect, but other things equal, higher is probably better.
2. Talk with the graduate students who are now in the programs you are considering. Are they happy?
3. Don't make a decision based on a single faculty member. He or she may leave or turn out to be not quite as wonderful as you now presume. Look for a department that is strong overall.
4. Don't presume you know your specific research interests and focus just on faculty in that narrow area. Many students change their mind over their first few years of grad school.
5. Is the location of the school a fun place to live? Grad school is a long haul, typically 4 to 6 years, which is a significant fraction of your life. Being a PhD student is hard work, but it should not be a miserable existence.
6. Is the university overall a good place? It is always more fun being part of a great institution. Even if the economics department is perfect, if it is an island in a sea of mediocrity, being there will be less satisfying.
7. Are the undergraduates there good students? At some point as a graduate student, you will (and should) do some teaching, perhaps as a teaching assistant in an undergraduate course. If the undergraduates are an academically strong group, they will be more intellectually engaged and more rewarding to teach.
8. Don't be distressed if you did not get into your top choice. What you do in graduate school (or college) is far more important than where you go. Your personal drive matters more than the ranking of the school you attend.
Update: Readers suggest an additional criterion:
9. Look at the record of recent PhD students. What fraction who start the program complete a PhD? What kinds of jobs do they get upon completion? Are they the kinds of jobs you aspire to? The placement record will give you an indication of the caliber of students who enter the program, the value-added of the program itself, and how well the department sells its students on the job market.
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