Pessimism of the Intellect, Optimism of the Will Favorite posts Twitter: @steve_hsu
This is what people don't get. Its not being in the top 1% that it is the problem, its how people are getting there. I don't think anyone begrudges true innovators or captains of industry. But they know finance, law, and most CEOs have basically just been working the system and getting in cozy with government over the last few decades.What's sad is that people getting in the top 1% doing finance could probably do so some other more productive way too, but it would be harder and involve more risk so they take the easy way if we make it available. Whether or not to sell out to the street is a decision a lot of top Ivy kids talk about. They don't necessarily want to, but they are also competitive and want to be winners so they will do what it takes, even if its not good for society, if we let them.Instead of just blanket taxing anyone who happens to be successful we should focus on these industries that have grown out of proportion and try to pass laws and targeted taxes to bring them in line.
relevant to this post is probably my thread on "alpha" in the last post
Interesting that sports and entertainment isn't bigger. Not enough of them? Or do they get thrown into other categories?
"Not enough of them?"Duh. Or both. Ticket sales, lunch pails, jerseys, and pimping for some business which shouldn't exist at all like McDonald's adds up to almost nothing, and the externalities are huge.
The lawyers are going to cluster at the bottom unless they're doing very big lawsuits. What's a partner in Big Law make? A lot less than a partner at Goldman Sachs. Isn't that right?
This is why finance is such a large percentage of the wealthy, because the value of financial assets has exploded since 1980. As wealth increases, and savings increases, financial assets grow. It's why people can retire, for instance. Before, most people died on the job, leaving their family with no savings. That doesn't happen as often these days. And all of this savings must be managed, hence big salaries for the guys closest to the cash register. This is what happens when you get wealthy. It's a good thing. http://images.flatworldknowledge.com/wright/wright-fig02_006.jpgFor instance, take an LBO firm like KKR, usually considered the most parasitical of financiers. They take a lumpy income stream (the earnings of an auto supplier, for instance) and split it into debt and equity. The retirees buy the debt for income and the youngsters buy the equity to get rich. It's why retirees can live on dividends and interest income instead of investing in a nephew's gas station. Finance: it's getting bigger because we're getting richer!
Be interesting to see some international stats so that we could tell if this was just U.S. comparative advantage.
$10m is more or less the theoretical max. compensation for a BigLaw partner. The practical max. at most firms is probably closer to $3m. Average is probably in the neighborhood of $1m (give or take $400k). It depends on how you define "BigLaw," obviously.Of course, the MDs clearing $3m could probably fit on one side of a sheet of loose-leaf paper. How the mighty have fallen. For what it's worth, the general mantra in both fields is that the "glory days" are very much in the past.
What these graphs show makes me feel naive. How often have I believed the Reason/Cato kind of smart blog posts in which they kept telling everyone that the rich are taxed the most. These people are bought and paid for, tools for the rich.
There's no reason that both can't be true - Reason/Cato are bought and paid for *and* the rich are taxed the most.
Yeah, but that's exactly it, isn't it? These journalism outfits frame the truth in such a way that there's no downside, they only tell you that big corporations and 1%ers are taxed a lot. That's not lying, but it's not telling the truth either. They'll never tell you that the resultante of forces, which swings into play because of laissez-faire policies, enriches only the financial sector, while it creates tremendous risks that could harm everyone else. The high taxes are a burden the rich can handle, it's sort of necessary cost (government buy-off) for an even bigger profit. It's hard to see what libertarians get out of this.. is the legalization of marijuana really that important to them? Now I know that they'd tell me that this isn't really capitalism -- "we said, let the banks go bankrupt! That's real capitalism." -- but corporatism. However, denying the inevitability of (mild) corporatism is a mental sickness only found in people under 30, too little life experience. We all know, we'll always have government and we'll always have big business; they will always meet up one day. It is almost impossible to prevent the rich from using their wealth to becoming even more wealthy and thus creating more corporatism. This is what happened in the financial sector. It's not just a few 'evil' ones like Goldman Sachs either, it's systemic. It's worldwide and we all know it.These things can hardly be changed, but they can be put to the public view. Let the masses know who made their life difficult and who's helping them. I say
Mmm, but do we know that the influence-purchasing rich make the lives of the masses difficult? I think one problem with exposing the truth to the public is that the academy has failed to produce a decent theory of economics so we don't really know what to tell them. If we are in a recession is it a good idea or a bad idea to raise taxes on the rich?
"Mmm, but do we know that the influence-purchasing rich make the lives of the masses difficult?"Well, I take it you must not think of obvious observations such as lobbying efforts or corporate lawyers?I also know there are a whole lot of (especially young) people in Southern Europe and the US who have a hard time finding jobs (let alone fitting ones), because these economies are in a lot of trouble. They are in a lot of trouble because of high government debt and over-leveraged firms; banks sure pushed this model when the times were good.If by 'good and bad' you mean pragmatic terms -- not lefty moral ones -- I have to say I'm in doubt. The current system led to high influence of the financial sector; this is something which undermined our economies while it benefited the management of these top companies. It's also true that socialism and/or anti-rich revanchist taxation don't make an economy, or a weak one, grow again. OTOH, in the 70s taxes were a lot higher in the Western world, things didn't go very good back then but stagflation wasn't as big a bug as the current great recession. But then again, in the 70s the work force was a lot different than that of today.As I wrote, these things can hardly be changed. I'd like to see more Madoffs being named. Most of these top bankers can't be convicted technically -- it wasn't illegal to over-leverage or trade CDS's -- but it would be nice to have these people defend their actions. I'm sick of anonymous misnomers such as 'banksters' or 1%ers, let's name names and let's judge their actions. Make them feel some shame for what they did.
I know of no such thing as banks pushing for larger government debt - always the contrary. But all else you say I agree with 100%. I especially agree, and I feel anger, that more individuals are not held to blame - more individuals not prosecuted. I feel shame that what was done in the last bubble (and all the preceding ones too) was not a crime ... that people like Chris Dodd authored so-called bank reform after having personally been on the take for years and left us with a half-trillion dollar bill for bailing out fannie and freddie.However, I also think that a whole lot of (especially young) people in the Southern Europe and the US have made no effort to accumulate skills to make themselves productive in a global economy. Why does the U.S. grant college tuition aid to people who want to study sociology, history, Spanish, English lit, etc ...? These degrees are great, but they are indulgences - like treating oneself to a good seat at a ball game, or reading that great novel. The taxpayer should not be funding Americans to study Shakespeare and then importing aliens with CS degrees on H1's to actually do the paying jobs. The masses need to know this too. Why should we forgive college loans that people too out not to get jobs, but just to enjoy themselves for four years?All these are themes of individual responsibility. I do love Buffet's suggestion that no member of congress be allowed to stand for re-election while unemployment, or the deficit, etc... is over some threshold.
What western economies really seem to demand is crushingly stupid communications and entertainment. What studies prepare people for success in those fields? Does it matter?
Anyone else notice that non-financial executives share of occupation declined while their share of income went up. In fact, that concentration per person was more pronounced than the financial occupations. Incentives lead most people to concentrate money to themselves. What has changed is the relative opportunity to capture more wealth by these top executives, financiers, and lawyers.(BTW, the layers have a bigger growth in wealth compared to growth in percentage of the top 1% -- take that as you may).
Even "stupid communications and entertainment" create a big demand for college graduates with STEM degrees (pixar, facebook, disney?). As any kid who spends 1/2 hour in the career development room of a local high school can learn, the correlation between more remunerative employment and getting a STEM degree is nearly 100%. It matters.
Excellent pieces. Keep posting such kind of information on your blog. I really impressed by your blog. Vee Eee Technologies|Vee Eee Technologies|
Here;s a really cool NYT map of the top 1%'s jobs: http://www.nytimes.com/packages/html/newsgraphics/2012/0115-one-percent-occupations/index.html?ref=business
Post a Comment