We need young people, instead of a smart kid coming out of school wanting to be an investment banker, we need them to decide they want to be an engineer, a scientist, a doctor or a teacher. If we are rewarding those kinds of things that actually contribute to making things and making peoples' lives better, that's going to put our economy on solid footing. We won't have this bubble and bust economy we've been caught up in in recent years.
I hope this meme takes off! I've made this kind of argument in the past, for example here in a 2006 post on financier pay, where I wrote
I'm anticipating reactions like "Well, of course they deserve it, their decisions have disproportionate impact on the economy, allocating massive resources. The market is efficient, after all!" All well and good if you can show that the 173,340 people (2006 BLS) working in investment banking really do produce better decisions than the people who would occupy those jobs in return for lower compensation. If not, there are some rents or inefficiencies hidden here :-)
Today in 2009 it should be abundantly clear that the market doesn't always know best :-(
Earlier related posts:
The best and brightest
Is the finance boom over?
A reallocation of human capital
A new class war
Some related comments from Brad DeLong below. I don't agree in detail with everything he writes, but you can see the same sentiment at work.
The engineers of Silicon Valley startups are significantly smarter and work a lot harder than do the traders of Wall Street. Some of the engineers of Silicon Valley make fortunes: they are compensated with relatively low salaries and large restricted equity stakes in the startup businesses they work for, and so if the businesses do well they do very well indeed--in the long run, in the five to ten years it takes to assess whether the business is in fact going to be a viable and profitable going concern. And the engineers of Silicon Valley have every incentive to use all their brains and all their hours to make their firm viable and successful: they get their cash only at the end of the process. They don't get big retention bonuses if they stick around until the end of a calendar year. They don't get big payouts if they report huge profits on a mark-to-market basis.
The traders of Wall Street, by contrast, get their money largely up front. If the mark-to-market position is good, they get paid--even though it is almost surely the case that nobody has tried to actually sell the entire position to somebody else. If the strategy produces short-run profits, they get paid--even though not nearly enough time has passed for anybody to be able to assess what the risks involved in the strategy truly are.
