What would happen if, as so many people are hoping, home prices were to go up dramatically again as they did in the early 2000s? Would such a change really benefit society?
People who most ardently desire this are homeowners who are underwater on their mortgages, who took out mortgages at the peak of the boom and now find that their homes are worth less than they owe on them. They would just feel relieved to get out of the red as soon as possible.
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Showing posts with label Finance and the Good Society. Show all posts
Showing posts with label Finance and the Good Society. Show all posts
Friday, April 20, 2012
Wednesday, March 28, 2012
Don’t let banker-bashing hide the beauty and importance of finance
IN SPITE of all the ugly criticism that the financial community has been getting since the financial crisis began in 2007, there is something beautiful about finance. It can charm those who see beauty in abstraction or who are impressed by the complex systems that make our civilisation work.
When I teach introductory finance to young people here at Yale University, as I have been for 25 years, I tell the students that the sense of beauty is not to be neglected when choosing a career. One ought to live a life genuinely involved with one’s economic function, and so the aesthetics matter.
Mathematical intricacies are part of the beauty of finance. There is a natural aesthetic in systematisation and generalisation of our quantitative intuition, in the finality of proofs and their revelation of a transcendent reality.
Mathematicians also tend often to find themselves interested in finance. It is a curious historical fact that Thales of Miletus, the man often acclaimed as the world’s first real mathematician, c.624-c.547 BC, was so interested. Aristotle described him as a successful speculator in options on olive presses.
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When I teach introductory finance to young people here at Yale University, as I have been for 25 years, I tell the students that the sense of beauty is not to be neglected when choosing a career. One ought to live a life genuinely involved with one’s economic function, and so the aesthetics matter.
Mathematical intricacies are part of the beauty of finance. There is a natural aesthetic in systematisation and generalisation of our quantitative intuition, in the finality of proofs and their revelation of a transcendent reality.
Mathematicians also tend often to find themselves interested in finance. It is a curious historical fact that Thales of Miletus, the man often acclaimed as the world’s first real mathematician, c.624-c.547 BC, was so interested. Aristotle described him as a successful speculator in options on olive presses.
Read more
Wednesday, March 7, 2012
Finance Logic Can Banish Corruption
The economic power that some in the financial community attain bothers many people deeply. It offends our ideal of a society that aspires to respect, appreciate and support everyone. The pursuit of power that often drives financial capitalism seems contrary to the concept that finance should be about the stewardship of society’s assets.
Yet successful societies develop elites partly because they need leaders with the power to get things done. We have to make it possible for a relatively small number of people to use their personal judgment to direct our major activities. A system of financial capitalism will eventually imbue those in possession of such faculties with wealth and power.
Yet successful societies develop elites partly because they need leaders with the power to get things done. We have to make it possible for a relatively small number of people to use their personal judgment to direct our major activities. A system of financial capitalism will eventually imbue those in possession of such faculties with wealth and power.
Still, there is a reason that the level of resentment of the wealthy and powerful is so high: A free capitalist system can support an equilibrium in which some kinds of social conspiracy pay off. George Akerlof, in his 1976 article, “The Economics of Caste and of the Rat Race and Other Woeful Tales,” explains the tendency of certain social groups to form a sort of business conspiracy against outsiders. He uses the caste system, most notorious in traditional India, to examine the phenomenon of power elites in business and finance.
Don’t Resent the Rich; Fix the Tax Code
We have ample reason to believe that financial markets are quite useful. And yet our wonderful financial infrastructure has not yet brought us the harmonious society we might consider ideal. There remains the ugliness of extreme economic inequality, of some who endure hardship while others are pampered.
While some inequality is actually in many ways a good thing, for the motivation and stimulation it provides, arbitrary and extreme inequality poses problems. It is an imperative that people feel society is basically fair to them.
We see this aversion most clearly today in the worldwide protests associated with Occupy Wall Street and its variants. Rising inequality is certainly a valid concern, and one that must be addressed. But financial capitalism does not necessarily produce unjust wealth distribution.
While some inequality is actually in many ways a good thing, for the motivation and stimulation it provides, arbitrary and extreme inequality poses problems. It is an imperative that people feel society is basically fair to them.
We see this aversion most clearly today in the worldwide protests associated with Occupy Wall Street and its variants. Rising inequality is certainly a valid concern, and one that must be addressed. But financial capitalism does not necessarily produce unjust wealth distribution.
Monday, March 5, 2012
Finance Isn’t as Amoral as It Seems
Many people assume there is something sleazy about the business of finance, or the people who practice it. This impression is probably behind the commonly voiced opinion that it is a shame so many young people today are going into finance-related occupations, when they could be doing something more high- minded in other fields.
It’s true that many people in business do seem to feel rewarded, for the short run at least, in putting salesmanship ahead of purpose and in cutting legal corners. They seem too focused on money to have moral purpose in their business affairs.
Yet if one lives in the real world, one has to work with, or even for, such people. They are a reality, and it makes sense to try to understand them -- to see if they are as simply sleazy as people think.
Sunday, March 4, 2012
Walt Whitman, The First Artist of Finance
One of the myths surrounding economic inequality in our society is that high incomes are often the result of selfishness and narrow-mindedness, rather than idealism and humanity. We tend to think that those in careers other than our own are fundamentally different kinds of people.
Personality and character differences are, indeed, somewhat associated with occupation. But we tend to attribute the behavior of others to personality differences far more often than is warranted.
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Personality and character differences are, indeed, somewhat associated with occupation. But we tend to attribute the behavior of others to personality differences far more often than is warranted.
Read more
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