Ivy League Funneling People To Wall Street At Society’s Expense
As we all know the finance sector produces nothing. It is, at best, a utility like sewage that does not create value so much as allow the condition for value to be created elsewhere. Nonetheless, the incredible payment that can be chiseled working in finance entices many of the so-called “best and brightest” in American society to give up a productive life and dive, snout first, into the Wall Street rackets.
Robert Shiller, a Professor of Economics at Yale University, seems particularly distressed by this waste of potential and has penned a column to trumpet his dismay.
We surely need some people in trading and speculation. But how do we know whether we have too many?…
Indeed, a 2011 paper by Patrick Bolton, Tano Santos, and José Scheinkman argues that a significant amount of speculation and deal-making is pure rent-seeking. In other words, it is wasteful activity that achieves nothing more than enabling the collection of rents on items that might otherwise be free.
The 2011 paper Shiller cites is but one of many that has laid the groundwork for an emerging consensus in academia and beyond that Wall Street is a net negative for the economy. Something that I imagine is not news to many people reading this, but please know common sense is well fortified by the evidence.
Shiller also cites an article by Catherine Rampell at the New York Times noting the high percentage of students from Ivy League colleges going to work in finance. Her analysis was built around the trend of decreasing work in the financial industry post-crash but still showed high percentages for Harvard, Yale, and Princeton. Financial services still ranged in mid to low double digits at each campus.
That’s a lot of banksters. Surely there is a better use for these educated people than a life of chiseling and racketeering.
Though the study also gives an insight into why prosecutions have been light during and after the crash. It seems many of the same institutions that produce the crooks also produce the lawyers who would populate both sides of the aisle in a Wall Street court case. So the revolving door gets started at college. But don’t worry, we don’t have a class system in America, promise.
Photo from Lobo512 under public domain.