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Archive for the ‘gilded age’ Category

Why no bailout?

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Representatives in Congress received thousands of phone calls and emails from constituents against the bailout, which some wags have characterized as “no banker left behind” πŸ™‚

We can trace this popular reaction against CEOs and Wall St. to growing income and wealth inequality. Ordinary people no longer feel they have a stake in the system. Their reaction may be irrational (even the poorest American has a big stake in the continued functioning of the economy), but it was certainly predictable.

Next spring, unlike last year, less than half of the Harvard graduating class will take jobs in finance. I guess that signals a top in the market 8-/

Related posts:

financier pay

all about the benjamins

a reallocation of human capital

a new class war

non-residential net worth

working class millionaires

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Written by infoproc

September 30, 2008 at 2:48 pm

Bye bye Fannie and Freddie

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On my way back from Europe, I noticed that Fannie and Freddie have been nationalized, with shareholder value going to zero! It’s a huge development — much bigger than Bear earlier in the year. The housing bubble still has further to pop, so stay tuned!

Here’s economic guru John McCain on the subject — his sentiments are right, but the fact that he can’t get the exec compensation to within 3 orders of magnitude is a bit worrisome. (I suppose Palin could have nailed it within two orders of magnitude or better πŸ˜‰

NYTimes: β€œIt’s hard, it’s tough, but it’s also the classic example of why we need change in Washington. It’s an example of cronyism, special interest, lobbyists. A quasi-governmental organization, where the executives were making hundreds of β€” hundred some billion dollars a year, while things were going downhill, going to hell in a handbasket,” Mr. McCain said, adding that the two companies need β€œmore regulation, more oversight, more transparency, more of everything, and frankly, a dramatic reduction in what they do.”

But not to worry, McCain / Palin’s grasp of economics and finance is every bit as solid as that of our most recent great Republican leader George W. Bush, and look how well he did!

Video: [Bush, blathering off the record on something he doesn’t understand — was that Bush on July 18, or McCain this weekend?] “There’s no question about it. Wall Street got drunk —that’s one of the reasons I asked you to turn off the TV cameras — it got drunk and now it’s got a hangover. The question is how long will it sober up and not try to do all these fancy financial instruments.”

I’d post the video itself here except it’s old news, and, well, nobody wants to talk about GW anymore — especially not the people (the same ones who are backing McCain and Palin, more or less) who predicted what a great president he’d be. Too bad we don’t judge voters on their records like we do traders. I know who I’d fire.

You voted for GW? Twice?!? Your P&L is negative one trillion dollars for the united states. Put your stuff in this box and follow the security guard out the door. No, you don’t get to take a position on this election or advise any geneticists on evolution.

Note I’m not trying to blame Bush for the credit disaster — the trillion dollars is for Iraq alone.

Written by infoproc

September 7, 2008 at 7:27 pm

WSJ compensation survey

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The WSJ has posted some interesting compensation data which can be sorted by college and degree type. The data covers people less than 5 years out of school and more than 10 years out (“mid-career”), in all cases excluding those that earned advanced degrees — so that the outcomes are most sensitive to the undergraduate background of the respondents. Note you can click the column heading to sort by that variable (starting salary, 75 percentile mid-career salary, etc.).

There’s also an accompanying article. The author notes that schools (Ivies) at which a large fraction of students head into finance tend to have the highest starting and mid-career averages. Engineers have high starting salaries but not as much appreciation.

A social scientist can now regress the salaries on avg SAT and school / major to calculate the economic “value add” for a particular major or institution. (See UT Austin data here.) A significant confound is that people who *do* get advanced degrees would not appear in this data. (Almost half of all Caltech undergrads get PhDs and probably well over half get other advanced degrees.)

Some random results:

Caltech grads had the highest median starting salaries at $75k; by midcareer Dartmouth is number one with median compensation of $134k (MIT $126k, Caltech $123k).

Salaries by degree | starting | 10th-90th percentile midcareer range

Physics | $50k | $56k — $178k
EE | $60k | $69k — $168k
English | $38k | $33k — $136k
Economics | $50k | $50k — $210k
Philosophy | $40k | $35k — $168

β€’ Survey respondents included two sets of U.S. bachelor’s degree graduates: Full-time workers with 5.5 years of experience or less and full-time employees with 10 or more years of experience.

β€’ The survey excluded respondents who reported having advanced degrees, including M.B.A.s, M.D.s and J.D.s. Self-employed, project-based, and contract employees were also not included.

β€’ Salary included annual cash compensation, including base salary or hourly wages, combined with commissions, bonuses, profit sharing and other forms of cash earnings.

Written by infoproc

July 31, 2008 at 3:18 pm

WSJ on income stagnation for college graduates

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All examples given where incomes rose (often dramatically) are in the financial sector, and typically require relatively high IQ. The lawyer profiled below specializes in cat bonds!

WSJ: For decades, the typical college graduate’s wage rose well above inflation. But no longer. In the economic expansion that began in 2001 and now appears to be ending, the inflation-adjusted wages of the majority of U.S. workers didn’t grow, even among those who went to college. The government’s statistical snapshots show the typical weekly salary of a worker with a bachelor’s degree, adjusted for inflation, didn’t rise last year from 2006 and was 1.7% below the 2001 level.

…Economists chiefly cite globalization and technology, which have prompted employers to put the highest value on abstract skills possessed by a relatively small group, for this state of affairs. Harvard University economists Lawrence Katz and Claudia Goldin argue that in the 1990s, it became easier for firms to do overseas, or with computers at home, the work once done by “lower-end college graduates in middle management and certain professional positions.” This depressed these workers’ wages, but made college graduates whose work was more abstract and creative more productive, driving their salaries up.

Indeed, salaries have seen extraordinary growth among a small number of highly paid individuals in the financial sector — such as fund management, investment banking and corporate law — which, until the credit crisis hit a year ago, had benefited both from the buoyant financial environment and the globalization of finance, in which the U.S. remains a leader.

Richard Spitzer is one of those beneficiaries. He received his undergraduate degree in East Asian studies in 1995 from the College of William and Mary and graduated from Georgetown University’s law school in 2001. The New York firm for which he works, now called Dewey & LeBoeuf, has a specialty in complex legal work for insurance companies. There, Mr. Spitzer has developed an expertise in “catastrophe bonds.” An insurance company sells such bonds to investors and pays them interest, unless an earthquake, a hurricane or unexpected surge in deaths occurs.

Experts in these bonds are “probably a rarefied species — there’s only a few law firms that do them,” says Mr. Spitzer, 35 years old. He typically spends two to four months on a single deal, ensuring that details like timing of payments or definition of the triggering event are precise enough to avoid disputes or default.

Mr. Spitzer’s salary has doubled to $265,000 since joining in 2001, in line with salaries similar firms pay.

Written by infoproc

July 17, 2008 at 3:43 pm

What’s your social status?

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Calculate your social status using this tool from the NY Times. (Click on the components of class tab.) The inputs are occupation, education level, income and wealth. The tool was created to run with a week long series of articles on class in America, back in 2005.

Amazingly, my result is 95 (averaged over the 4 inputs), despite being pulled down by the occupational prestige score 82 of astronomers and physicists πŸ™‚ We’re ranked number 5 overall out of several hundred occupations listed, with doctors and lawyers 1-2, and, strangely, database and system administrators 3-4. CEOs are way down at 46!

While social status can be crudely modeled by the average of the percentile results from the four inputs (higher average = higher social status), the figure doesn’t actually represent the percentage of the population with lower status, since the four inputs are correlated and the score assigned to occupation isn’t really a population percentile.

Written by infoproc

June 26, 2008 at 11:41 pm

What’s your social status?

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Calculate your social status using this tool from the NY Times. (Click on the components of class tab.) The inputs are occupation, education level, income and wealth. The tool was created to run with a week long series of articles on class in America, back in 2005.

Amazingly, my result is 95 (averaged over the 4 inputs), despite being pulled down by the occupational prestige score 82 of astronomers and physicists πŸ™‚ We’re ranked number 5 overall out of several hundred occupations listed, with doctors and lawyers 1-2, and, strangely, database and system administrators 3-4. CEOs are way down at 46!

While social status can be crudely modeled by the average of the percentile results from the four inputs (higher average = higher social status), the figure doesn’t actually represent the percentage of the population with lower status, since the four inputs are correlated and the score assigned to occupation isn’t really a population percentile.

Written by infoproc

June 26, 2008 at 11:41 pm

What’s your social status?

leave a comment »

Calculate your social status using this tool from the NY Times. (Click on the components of class tab.) The inputs are occupation, education level, income and wealth. The tool was created to run with a week long series of articles on class in America, back in 2005.

Amazingly, my result is 95 (averaged over the 4 inputs), despite being pulled down by the occupational prestige score 82 of astronomers and physicists πŸ™‚ We’re ranked number 5 overall out of several hundred occupations listed, with doctors and lawyers 1-2, and, strangely, database and system administrators 3-4. CEOs are way down at 46!

While social status can be crudely modeled by the average of the percentile results from the four inputs (higher average = higher social status), the figure doesn’t actually represent the percentage of the population with lower status, since the four inputs are correlated and the score assigned to occupation isn’t really a population percentile.

Written by infoproc

June 26, 2008 at 11:41 pm