Wednesday, February 01, 2012

Tyler Proves Oddly Oblivious to Economics (and some Other Stuff, Too)

Tyler Cowen  offers up a clever and enticing theory as to why all the kiddies pile into finance, law and consulting, but there are two disabling flaws, of which lies at the heart of his own discipline.

Why go finance/law instead of out to the widget works in Dayton, you ask?  The simple and virtually sufficient answer is that it pays better. Sure, if you invent the better widget, you may get a gazillion. But a gazillion multiplied by the probability that you actually do invent the better widget is--a lot less.  Make the connection and you can climb aboard your cigarette boat in the Florida keys.  Miss the connection and you wind up as an operations manager in a non-better widget works: respectable and responsible work, but demanding and not that well paid.   And you're still in Dayton.

The other deficiency is more quaint and charming:

You will seek out jobs which reward a high “G factor,” or high general intelligence.  That means finance, law, and consulting.  You are productive fairly quickly, you make good contacts with other smart people, and you can demonstrate that you are smart, for future employment prospects.
 Two words, Tyler: Lieutenant Fuzz.  Do you--does anybody--really want to take advice on life-and-death decisions from a bunch of cosseted school children?  The question answers itself, or ought to.  "General intelligence" in the seminar-room sense usually translates into ideas that are clever, diverting, off-the-wall and in the vast majority of cases, a waste of good time.  Prudence, wisdom, vision--ah,those you are more likely to learn in Dayton.

[Hey wait, bozo--then why do the go-go firms hire the go-go children?  A partial answer is that the do not: that the gas seems to have gone out of that particular bag, and does not seem inclined to go back in again.  Another partial answer is that even if they do hire, they do not hire for "general intelligence" in the sense that Tyler, bless his heart, seems to perceive.  What we're really talking about here is a bunch of 190k proofreaders, and insofar as the firms do persist in their avid search for such talent, the chances are that it has more to do with the game-theoretic institutional needs of the firm than for the intrinsic merit of the sought-after.  Finance, I concede is a bit different: the big rewards there go to brutes who don't know the meaning of fear, and who forget to shut up in thee Goldman Sachs elevator.]   


Ken Houghton said...

"the big rewards there go to brutes who don't know the meaning of fear, and who forget to shut up in [the] Goldman Sachs elevator."

To the contrary, the ones who forget to shut up in the GS elevator" are, as The Epicurean Dealmaker notes, those who are out the door at GS after two to three years.

GS Partners know not to trust their Partners, let alone anyone who may overhear them in the elevator.

mike shupp said...

Hmmm... I took another meaning out of Tyler's Little Parable. I saw it presenting "Dayton" as the backwoods, as the backwoods provincial city where obscure mechanical enterprises engage in the production of useful but unedifying devices -- bobbins, say, or bicycles -- and where a young man of diligence and intelligence might hope to eventually rise into the local gentry and wed well and find his life had been meaningful. Dayton, Ohio, for instance, or Edinberg or Glasgow or Manchester.

And operating in opposition to this were young men with no time to waste on such rarely profitable careers, men already assured of their intelligence and social skills and high position in society, who grew to maturity at 'Varsity, on the banks of gentle rivers -- Cambridge, perhaps, or if your prefer Harvard, or George Mason. Aristocrats, in other words, who would collect their MBAs and Firsts and go forth to govern the Empire and garner its wealth because it was what they were entitled by their disposition and breeding.

Boffins and bloods, so to speak. I wouldn't say Tyler seemed to totally approve of such a division, be as I read him, he thought it as an ogoing process, as an inevitable one, and equitable in some sense.

But given such a setup, he's got his gall complaining about a lack of technological innovation.