22:24 GMT +00:00
Playing it safe
Posted by: Economist.com | NEW YORK
Categories: Labour Markets
THERE seems to be a certain amount of glee circulating over the prospect that the finance sector will contract. Yes, the industry did become too large. It offered extraordinary upside attracting labour from people who never belonged in finance in the first place, because they never had an intrinsic interest or talent for it. Now the industry will be smaller, containing only the people who belong there.
We’ve seen several reports over the last few years that suggest recent Ivy League graduates owed the world the benefit of their talents, but were instead seduced into the heady world of finance. Ester Duflo believes the sheer size of the industry fed the crisis and that, hopefully, a more efficient labour outcome will emerge from a downsizing of the financial sector.
More pragmatically, the disappearance of their exorbitant earnings may encourage younger generations to join other industries, where their creative energies would be socially more useful. The financial crisis could plunge us into a severe and prolonged recession. The only silver lining is that it could cause a more realistic allocation of talents. One must hope that the bail-out packages in Wall Street and in Europe does not convince the best and brightest that the financial sector is still their best option.
The finance industry was bloated, but I wonder if less appealing finance careers will actually lead to more socially efficient labour market outcomes. Innate talent or interest in a field does not solely determine career choice; individual risk preferences also play a role. Finance had become the industry to join if you wanted to make a lot of money and have many job options. These are highly desirable traits in an industry. For some people money and security matter more than doing something they find interesting and socially useful.
The pay in finance may have gotten so inflated that it attracted labour from people whose preference for such a career, as opposed to a "nobler" pursuit, was marginal. These workers might now end up in more personally fulfilling careers, but many of their peers will simply shift to the next hot, high-paying field. That field might be technology, or perhaps it may revert back to law. If we end up with a world (slightly more) full of lawyers will that be a better social outcome?
Playing it safe
Posted by: Economist.com | NEW YORK
Categories: Labour Markets
THERE seems to be a certain amount of glee circulating over the prospect that the finance sector will contract. Yes, the industry did become too large. It offered extraordinary upside attracting labour from people who never belonged in finance in the first place, because they never had an intrinsic interest or talent for it. Now the industry will be smaller, containing only the people who belong there.
We’ve seen several reports over the last few years that suggest recent Ivy League graduates owed the world the benefit of their talents, but were instead seduced into the heady world of finance. Ester Duflo believes the sheer size of the industry fed the crisis and that, hopefully, a more efficient labour outcome will emerge from a downsizing of the financial sector.
More pragmatically, the disappearance of their exorbitant earnings may encourage younger generations to join other industries, where their creative energies would be socially more useful. The financial crisis could plunge us into a severe and prolonged recession. The only silver lining is that it could cause a more realistic allocation of talents. One must hope that the bail-out packages in Wall Street and in Europe does not convince the best and brightest that the financial sector is still their best option.
The finance industry was bloated, but I wonder if less appealing finance careers will actually lead to more socially efficient labour market outcomes. Innate talent or interest in a field does not solely determine career choice; individual risk preferences also play a role. Finance had become the industry to join if you wanted to make a lot of money and have many job options. These are highly desirable traits in an industry. For some people money and security matter more than doing something they find interesting and socially useful.
The pay in finance may have gotten so inflated that it attracted labour from people whose preference for such a career, as opposed to a "nobler" pursuit, was marginal. These workers might now end up in more personally fulfilling careers, but many of their peers will simply shift to the next hot, high-paying field. That field might be technology, or perhaps it may revert back to law. If we end up with a world (slightly more) full of lawyers will that be a better social outcome?
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