No original content here, just two posts that make even more sense together:
- Mark Thoma proves he’s an economist (not just an econometrician) by reminding everyone of the Opportunity Cost of the Oughts from a long-term perspective*:
((Rdan…Attribution of the quote is in error due to a format error at Mark’s…the original is from Joseph Stiglitz at Korean Herald)
[T]he worst effects were on our human capital, our most precious resource. Absurdly generous compensation in the financial sector induced some of our best minds to go into banking. Who knows how many Borlaugs there might have been among those enticed by the riches of Wall Street and the City of London? If we lost even one, our world was made immeasurably poorer.
- Mark Cuban summarizes the effect of that skew in the short term**:
The beautiful thing about this country is that we like to work hard, and we like to take chances. Unfortunately, over the last 15 years, the incentives have been to take chances as a financial engineer rather than as an entrepreneur. We give far more money to people who play games with financial instruments than we give to people who come up with ideas for the next big thing. That needs to change if we want to remain a leader in this world. [emphasis his]
I have quibbles, but the direction and magnitude of the two above is correct: a massive reallocation of incentives that diverted talent from potential paradigm-shifting development to incremental risk re-allocation and obfuscation. The rest of us were just, well, marks. *Maybe more on this one later, from another angle. **Though he has a rather generous, imnvho, definition of an “investor.” But even by that weak definition, his point stands.