Thursday, August 27, 2009

Too Many Graduates Employed in Private Financial Firms?

In his Financial Times column of August 27, 2009, Harvard economics professor Benjamin Friedman opines that too much of the nation’s talent in recent years went into private financial firms manipulating small margins in millisecond trading, instead of enterprises producing non-financial goods and services. While it was rational for each individual to pursue his own economic self-interest maximizing income, it fostered waste at the aggregate national level.

For a moment I thought Professor Friedman was writing about his colleagues in economics departments and business schools. The enormous growth in recent years of these two fields did little to prevent, perhaps even contributed to, the economic meltdown of 2008-09, having taught a generation of students that mastering mathematics and high-powered statistics will enable them to succeed in their individual careers and ability to manage the economy to prevent the eruption of catastrophic financial crises.

Yet, new buildings housing economics and business education are mushrooming at universities across the country, indeed around the globe. Perhaps what’s needed is a reallocation of financial and human capital teaching students how to make things and provide services?

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