New column: What's a banker worth?
My new column is online and in issue of TIME with the scary-looking banker on the cover. It's part of a "Why Main Street Hates Wall Street" package that includes Allan Sloan's take on "What's Still Wrong With Wall Street" and Steve Gandel's "Meet Ken Feinberg." My contribution is mainly a summing up of the recent research of NYU finance prof Thomas Philippon, who has been trying to come up with answers to such important questions as How can we tell if the financial sector is too big? and How can we tell if Wall Streeters are overpaid? He doesn't have a definitive answer to the first, and he and UVa's Ariell Reshef have determined that financial sector workers are 30% to 50% overpaid. So there you go.
This last tidbit ties in to an interesting BusinessWeek.com story from a couple of days ago. It told of a new study (pdf) which found that, contra Steve Fussell, there's no shortage of qualified science and engineering graduates in the U.S. It's just that many them would rather go work on Wall Street (or at McKinsey) than at a pharmaceutical company or a tech startup. Because, you know, they'll get paid 30% to 50% more there.
Philippon has written excellent jargon-lite versions of his research here and here. His work was also the subject of a Krugman column in April, a Lahart column in April, and a Surowiecki column in May. In June, Planet Money did a highly entertaining episode with Reshef on the whole Wall-Streeters-are-overpaid thing. (This column is part of my ongoing crusade to take the "new" out of newsmagazine.)
Update: As my sister notes in the comments, Floyd Norris has a column on the topic, and as tc125231 notes, so does Steve Pearlstein. Also, James Kwak offers a helpful Cliff's Notes version of Philippon and Reshef on financial-sector pay.
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Reminds me of this opinion piece in the wsj: http://www.opinionjournal.com/taste/?id=110008653
"Over time, he says, plots that ritually make entrepreneurs the bad guys have a pernicious effect: "This becomes part of our collective worldview. We think all businessmen are somehow scummy. We think you had to lie, cheat or murder to get ahead."
It appears many of the same issues running through reality right now. We see the successful businessman either being con-artists or grossly irresponsible with shareholder dollars.
So what's a businessman worth, probably anyone not near the top (or bottom) is probably paid pretty fairly imo. When there's ways to hold people accountable the free market seems to do pretty well.
-MBirchmeier
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[...] What’s a banker worth? Less. (Time also Curious Capitalist) [...]
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Today's Times by Floyd Norris is pretty good too.
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@mbirchmeier,
But we're not talking about generic entrepreneurship, generic businessmen. We're specifically talking about the financial sector. And the fact that, compared to other sectors that demand an equitable level of skill, they're vastly overpaid.
It's just as damaging to true entrepreneurship to distort the incentives away from a varied economy and drain talent away from other sectors. That's mostly the problem here - Wall Street is draining top-level talent from other fields, despite the fact that there are doubt about whether its any more effective at it's basic mission than it was 30 years ago.
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http://www.washingtonpost.com/wp-dyn/content/article/2009/10/29/AR2009102904681.html?hpid=topnews
Steve Pearlstein's contribution to this discussion.
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[...] What’s a banker worth? Less. (Time also Curious Capitalist) [...]
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". . . there's no shortage of qualified science and engineering graduates in the U.S. It's just that many them would rather go work on Wall Street (or at McKinsey) than at a pharmaceutical company or a tech startup. Because, you know, they'll get paid 30% to 50% more there."
Wait 'till you see what happens to the supply of doctors, nurses and hospitals when the "public option" forces payments down.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com -
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[...] web page for links). It’s also the subject of Justin Fox’s column in Time; see Fox’s blog for links to other discussions. (I also cited the paper in my ramblings provoked by Calvin [...]
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[...] web page for links). It’s also the subject of Justin Fox’s column in Time; see Fox’s blog for links to other discussions. (I also cited the paper in my ramblings provoked by Calvin [...]
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[...] web page for links). It’s also the subject of Justin Fox’s column in Time; see Fox’s blog for links to other discussions. (I also cited the paper in my ramblings provoked by Calvin [...]
- foxjust About to walk to LA Public Library for this http://bit.ly/7LgRu6 Am told only a nobody walks in LA - 1 day ago
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- foxjust Thanks to Bama fans for reminding us we needed to buy TP! (Turns out we're fine on detergent). Oh, and nice game #ironbowl - 1 week ago
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