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Too much finance is bad for the economy

economist.com

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Re: Too much finance is bad for the economy

#111

Post by dllthomas »

chongli wrote: post #110
Chinjut wrote: post #99

Earlier quoted context omitted.

The complaints are not necessarily directed at individual people who rationally choose careers in finance over other vocations, given the system they live in. The complaints are to a large extent over the fact that our society has been set up this way, with the goal of perhaps trying to change that so that people would feel less incentive/need to abandon science, mathematics, etc., for finance (in multiple senses!).

It hasn't really been set up this way. It didn't even evolve to be this way. It's ultimately a law of nature: ownership of capital yields exponential growth. The more you start with, the faster you grow. Most other sorts of vocations yield linear growth.

I don't read "has been set up this way" in the parent as necessarily implying agency, but rather as an idiomatic way of referring to the status quo.

Re: Too much finance is bad for the economy

#112

Post by kevin_thibedeau »

PaulHoule wrote: post #39
nickbauman wrote: post #32

Earlier quoted context omitted.

Totally agree. When the finance sector grows, demands for return interest on capital investment intensifies, acting as a gravity-well for capital away from development. Firms like Goldman make every investment require higher and higher returns at a greater and greater scale. Money chasing money. Casino economy. Instead of opening a new line of business, your profits must be funneled into paying back on that loan at h…

Take a look at the allergy to investment in broadband in the US. The economics for Fiber Optics looks good in almost all situations in the US if you look at a ten year horizon. In the short term, however, Verizon can make more money by building an LTE infrastructure that costs more and does less and will be thrown away in five years and has 15x the OPEX of an optic fiber network. Today interest rates are crazy low an…

Frontier's home city of Rochester had to redeploy fiber for all their trunk lines after a disastrous ice storm in the 90's. You'd still be lucky to get 4Mbit DSL from them. They are bottom feeders only out to milk a dying cow. Improving infrastructure is cost center that doesn't pad the execs wallets so it gets ignored.

Re: Too much finance is bad for the economy

#113

Post by kevin_thibedeau »

randyrand wrote: post #56
tbrownaw wrote: post #20

No, a large financial sector is an indicator of inefficiencies elsewhere. Else, there wouldn't be a reason to pay middlemen to solve said inefficiencies.

The financial sector does a lot more than play middle man (in fact arbitrage is so quickly found these days its a hard to make much money doing this anymore) Primarily, they invest. Putting money into places that need capital and will likely grow.

Holding a position for a few days, hours, minutes, or seconds is not investing. It's gambling.

Re: Too much finance is bad for the economy

#114

Post by kevin_thibedeau »

rayiner wrote: post #93
eldavido wrote: post #49

I'm an engineer. I could go into a high-risk career trying to cure cancer, or I could flip houses. By my (admittedly rough and speculative) math, I'd make more money doing the second. This has nothing to do with finance and everything to do with how capitalism privileges owners. Just because I can do something (e.g. cure cancer) doesn't mean I should do it out of some regard for the "public good", requiring great sac…

I hate it when people complain about bright kids going into finance instead of STEM. My brother went to an Ivy and majored in physics. He asked me sometime junior year what he should do with his life. He'd already worked in research labs on nanotech, and was seriously considering getting a PhD. I told him to apply for finance and consulting jobs instead. He's glad he went into finance. He gets a ton of responsibility…

What happens when you have a society composed of nothing but managers and financiers shuffling paper around?

Re: Too much finance is bad for the economy

#115

Post by [deleted] »

rayiner wrote: post #93
eldavido wrote: post #49

I'm an engineer. I could go into a high-risk career trying to cure cancer, or I could flip houses. By my (admittedly rough and speculative) math, I'd make more money doing the second. This has nothing to do with finance and everything to do with how capitalism privileges owners. Just because I can do something (e.g. cure cancer) doesn't mean I should do it out of some regard for the "public good", requiring great sac…

I hate it when people complain about bright kids going into finance instead of STEM. My brother went to an Ivy and majored in physics. He asked me sometime junior year what he should do with his life. He'd already worked in research labs on nanotech, and was seriously considering getting a PhD. I told him to apply for finance and consulting jobs instead. He's glad he went into finance. He gets a ton of responsibility…

[deleted]

Re: Too much finance is bad for the economy

#116

Post by wffurr »

bhouston wrote: post #9
gumby wrote: post #7

Basically bankers are like lawyers, gardeners, cooks, doctors, pool cleaners etc: service jobs to help other people get things done. When you elevate the sector to have implicit value you get a terrible distortion.

I agree with a caveat. In the grand scheme of things everything is a service to help others get things done (there is no final all important job) and there needs to be a balance.

Since the start of the industrial era, energy extraction has been the linchpin to civilization. Without net energy available to society to do work, we could never sustain such a huge population.

Re: Too much finance is bad for the economy

#117

Post by monochr »

astazangasta wrote: post #67
hawleyal wrote: post #22

Earlier quoted context omitted.

Not sure I agree with putting doctors and cooks on that list. Providing services basic to life is not the same as supporting recreation, wealth, or luxury. To put a finer point on it, doctors and cooks, along with farmers, builders, teachers, daycare workers, et al. existed ever since everyone started specializing. They directly support life needs.

There have been gardeners for at least as long as there has been civilization. Entertainers have probably always been around. Your idea of "life needs" doesn't seem to coincide with history's.

If we diverted billions of dollars to doctors or cooks we would gain the benefit of increased, more healthy lifespans.

If we did the same for bankers we would get, well what we got in 2008.

The difference between service jobs which are purely symbolic, in that they only work within human created environments, only interface with other people and ultimately the only arbitrator of how good a job they do are people and those which have to deal with the real world at least tangentially is huge. Artists and banker are in the former category, doctors, gardeners, cooks are in the latter.

Re: Too much finance is bad for the economy

#118

Post by chongli »

dllthomas wrote: post #111
chongli wrote: post #110

Earlier quoted context omitted.

It hasn't really been set up this way. It didn't even evolve to be this way. It's ultimately a law of nature: ownership of capital yields exponential growth. The more you start with, the faster you grow. Most other sorts of vocations yield linear growth.

I don't read "has been set up this way" in the parent as necessarily implying agency, but rather as an idiomatic way of referring to the status quo.

It's hard to say. We're talking about humans and the systems we live within. Humans, by definition, have agency. When does an effect resulting from the actions of humans cease to be the product of agency?

Re: Too much finance is bad for the economy

#119

Post by Bjartr »

gaius wrote: post #105
bhouston wrote: post #3

Summary: > In short, the finance sector lures away high-skilled workers from other industries. The finance sector then lends the money to businesses, but tends to favour those firms that have collateral they can pledge against the loan. This usually means builders and property developers. Businessmen are lured into this sector rather than into riskier projects that require high R&D spending and have less collateral t…

In short, the finance sector lures away high-skilled workers from other industries LOL. When other industries aren't run by chinless public schoolboys where engineers are second class citizens, call me.

What is meant by "public schoolboys" exactly? I'm struggling to grok the intended message.

Re: Too much finance is bad for the economy

#120

Post by sliverstorm »

eldavido wrote: post #49

I'm an engineer. I could go into a high-risk career trying to cure cancer, or I could flip houses. By my (admittedly rough and speculative) math, I'd make more money doing the second. This has nothing to do with finance and everything to do with how capitalism privileges owners. Just because I can do something (e.g. cure cancer) doesn't mean I should do it out of some regard for the "public good", requiring great sac…

What opportunity is there for a traditional engineer to cure cancer (or the like)? As far as I can tell, we can only work indirectly to enable the chemists and biologists who work directly with cancer. Which is good, but you do that by making lab equipment, not by working in a lab.
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