29 January 2009

Looking Forward, Looking Back

Cambridge Crocus by .mushi_king
Perhaps I am imagining it, but I have been wondering whether we investment bankers have turned a corner, and perhaps everyone suddenly doesn't hate us any more. Or at least: not quite so much. Either way, I don't seem to have spent so many dinner parties pressed against the back of my chair, and I was cheered to read this week that:
One can’t explain an unusual cluster of errors by citing greed, which is always around, just as one can’t explain a cluster of airplane crashes by citing gravity. Anyway, the greedy aim at profits, not losses.
Lawrence White, writing in Cato Unbound
A sentence with a clarity of thought that made me remember why twenty-five years ago I enjoyed being an economist. Probably, now I think about it, more than nowadays I enjoy working in an investment bank.

In those days I went to lectures, read books, wrote essays and in the exam room attempted to invent clever little economic models on the fly.  Nowadays I go to Town-Halls, read policies, write powerpoint and late at night when I get home I attempt to amuse mysterious people I am never likely to meet with silly little blog-posts written on the fly.

Not that I am complaining - for banks pay more money than universities and as an ex-economist and current investment banker I certainly understand the power of incentives. Great big medium-sized yearly incentives. In return we're willing to work for them when we need to and, this being January, we need to very much indeed for we are reorganising which is quite the most exciting project that anyone who works in a large organisation can engage in. (We're breaking down our horizontal silos with the some front-to-back verticals)

I studied my economics at Cambridge (the one in England) but if I was nineteen now I'd be strongly tempted to study at GMU which is in. .... well, it's in America somewhere... choosing the economics faculty solely on the quality of their blogging. Does that sound silly? To me it's a lot more sensible than the criteria I chose when I selected my old alma mater (the density and colours of its spring crocuses). For a taster of GMU, and the way economists think you can do worse that listen to this conversation with an earnest Russ Roberts and a laconic Robin Hanson in conversation - eventually - about whether economists actually know anything useful at all. Answer? They do.

Mind you, economists are pretty unpopular as well, but in the long run I hope it's going to be hard for the public to maintain a serious dislike of either economists or bankers - patly because there simply aren't very many of them and partly because I think they're going to be maintaining a rather lower profile.

But I worry that, before too long it might be turn of another group to bear the brunt of the public's displeasure: I found this in the FT rather chilling
So why should industrious Asians earn a tiny fraction of what citizens in the west earn? Especially when they have so much of the cash and productive resources, while we have deficits, high costs and poor demographics.
Prepare for a wrenching, unstoppable redistribution of wealth – and I am not talking about domestic taxes. For too long it has been more profitable in the west to finance consumption rather than production. That cannot continue. I am afraid that the west’s credibility – and luck – has run out.
This vast reordering of our economic system has only just begun. We shall have to cancel all the self-indulgence of endless welfare spending and cultivate rather more of a work ethic and a sense of self-sufficiency  

Luke Johnson - The West's Luck has run out   
It may not be a comfortable time to be out of a job in the next few years.


M4GD said...

Morning…it seems your coffee is tasting funny this sunny AM. Did the Starbucks near you close down already? Let’s see: (1) you are not “attempting to amuse mysterious people.” You are already doing it. Why mock it? Think of it as a two-way charity reflecting your giving nature. You give your two cents or two pence to the world which in realty is worth much more and you sure do get your return on investment! This can be a form of the human contact you are seeking too in your new year resolution! (2) Incentives matter, Incentive Work, Incentive Rock! I do share your belief in this one and I always spread the ‘I’ word (3) GMU is a fine establishment. It’s never too late to try it. Besides Fairfax County is stunningly beautiful. (4) If there is someone who knows it all, it would be an economist in my opinion. Economists are unpopular because they are often misunderstood. People naturally fear what they do not understand or consider ‘Mysterious.’ So, how to get around making Economists Or making you popular? Reach out in a grassroot movement style rather than a top-down one. Go to the core and use every opportunity to explain every day simple life phenomena using Economics i.e. something à la ‘Freakonomics.’ We need YOU. (5) Re Luke Johnson’s quote and the state of affairs at the moment: I say let’s be calm. If I use Economics to explain it I’d say: (a) I still believe in Adam Smith Invisible Hand, (b) not sure if I remember this right perhaps it can be explained in Pareto Optimality and the Edgeworth Box the shaded area between the two curves has gone now and we reached a saturation point. No more to do, hence the need to reorganize to create a new bigger shaded area. (6) Think Quantum Physics: The Banking Sector is like an open system it has reached its threshold of tolerance of outside input. Since it’s an open system, It’s only normal to reorganize. It can’t stand still. There will be life not blood! (7) And finally, think spirituality and zen: whatever is happening is one just more cycle of death and rebirth and with every ending comes a new beginning! Peace.

Botogol said...

There's a interesting bit in the podcast where Hanson observes that people only disagree with academics when the academics accidentally encroach upon somthing important to them. Physicists can opine on 8-dimensional string theory without anyone paying attention, but mention global warming and the house falls down.

Economics intersects more often than other subjects with the domain of 'things that are important to people'. Hence the derision.

So much for economics. Next week: minds and consciousness :-)

M4GD said...

Excellent. I like very much the way you write. Your style sort of ‘unconsciously’ sneaks up and permeates into the brain. I’d say powerful with embedded subliminals! So, is it in the water you drink? Bottled or tap? Looking forward to minds and consciousness. Have a nice weekend :-)
PS Your last comment “@M4gd – “ on your prior post was it intentionally left blank?