Showing posts sorted by relevance for query grandes ecoles. Sort by date Show all posts
Showing posts sorted by relevance for query grandes ecoles. Sort by date Show all posts

Tuesday, October 12, 2010

Les Grandes Ecoles Chinoises

Note Added (2022): Wikipedia has a long entry on this topic.

The American intellectual elite are endlessly fascinated by the French Grandes Ecoles, which employ a rigorous examination system for admissions. See example below from today's NY Times.

In the past I'd read that the British and French based their civil service and educational examination systems on the much older Chinese model, but was not sure to what extent it is true. See here for an interesting discussion.
... Brunetiere believed that French education was really based on the Chinese system of competitive literary examinations, and that the idea of a civil service recruited by competitive examinations undoubtedly owed its origins to the Chinese system which was popularized in France by the philosophers, especially Voltaire. This definite conclusion that the French civil service examination system came from China is adopted by several authors ...
Summary of the case of Britain and colonial India can be found here. Amusingly, 19th century British writers opposed to the new system of exams referred to it as "... an adopted Chinese culture" (p. 304-305).

NYTimes: ... Born out of the French Enlightenment, the grandes écoles have long been the cradle of the governing class. “Normaliens” (graduates from École Normal Supérieure, whose 12 Nobel laureates include Henri Bergson and Jean-Paul Sartre), “Gadzarts” (from École Nationale Supérieure d’Arts et Métiers, like Jean-Lou Chameau, president of the California Institute of Technology), “X-iens” (from École Polytechnique, including the physicist Sadi Carnot, the philosopher Auguste Comte and the mathematician Benoît B. Mandelbrot), and “Enarques” (from École National d’Administration, including almost all recent prime ministers) occupy a place in French national life similar to Oxbridge graduates in England or the Ivy League in the United States.

Internationally, however, these institutions have far less clout than their Anglo-American counterparts.

... The grandes écoles run along very different lines. Admission is selective, with candidates generally required to complete a grueling two-year preparatory course. This “prépa” includes intensive study in mathematics, economics, philosophy and literature, plus at least two foreign languages. Of 1,079 candidates who took the entrance exam for the business school HEC in 2009, only 50 were offered places, and most of those already held master’s degrees from other institutions. The competition for science places is even tougher.

... Yet he, too, alluded to the new reality of global competition: “When I was a student we spoke of ‘le défi américain’ — the American challenge. Now we speak of ‘le défi asiatique’ — the challenge from Asia.”

How will France face this challenge? Dr. Tapie pointed out that while France “has only 1 percent of the world’s population, we make up 33 percent of Fields medalists,” the mathematics equivalent of Nobel laureates.

It was Cédric Villani, a 37-year-old professor at Lyon who won the 2010 Fields Medal, who gave the most spirited reply to France’s critics. Calling himself “a pure product of the French system,” Mr. Villani, a Normalien who has often taught in the United States, said that while American academic salaries were higher “and it’s easier to make big projects,” France also has particular strengths: “Our tradition, our quality of life, our social cohesion. My big problem in Princeton was finding a place to buy a decent cheese.”

Sunday, February 17, 2008

Les Grandes Ecoles

This Times article on the elite world of French business has some interesting facts about Ecole Polytechnique and Ecole Nationale d'Administration (ENA). In physics, we typically encounter graduates of Ecole Normale Superieure ("normaliens"), which boasts 9 Fields Medalists and at least 8 Nobel Laureates in physics. 15 years ago a normalien friend complained to me that the ENArques were getting the upper hand, but it appears from the article the polytechniciens are hanging tough! The greatest polytechnicien of all time might be Poincare, but then again there are also Cauchy and Ampere and Poisson and Navier...

An earlier post on Les Grandes Ecoles. I must say, these schools, with their strictly meritocratic admissions policies, sound a lot more like Caltech than like Harvard.

NYTimes: ...AT least half of France’s 40 largest companies are run by graduates of just two schools, the École Polytechnique, which trains the country’s top engineers, and ENA, the national school of administration. That’s especially remarkable given that the two schools together produce only about 600 graduates a year, compared with a graduating class of 1,700 at Harvard.

...Rather than a rigid class system, it was Mr. Fourtou’s and Mr. Bébéar’s admission into the École Polytechnique that assured their place in the elite. And that is one of the great ironies of the French establishment: while it enjoys the privileges associated with the elites of the United States, entry is, if anything, much more rigorously meritocratic, based on exams and ever-narrowing selection from an early age.

Indeed, getting into Harvard, which accepted 9 percent of its applicants last year, is a breeze compared with getting into the École Polytechnique.

Out of 130,000 students who focus on math and science in French high schools each year, roughly 15 percent do well enough on their exams to qualify for the two- to three-year preparation course required by the elite universities. Of those who make it through that, 5,000 apply to École Polytechnique, which is commonly called simply “X,” and just 400 are admitted from France.

Admission is based strictly on exam grades; there isn’t even an essay requirement or interview. And there are no legacy admissions, sports scholarships or other American-style shortcuts for getting into X.

“You can be the president’s nephew and it won’t help you get in,” says Bernard Oppetit, a 1978 graduate of X who later worked for BNP Paribas before starting Centaurus Capital, a London investment fund with $4 billion under management.

The École Polytechnique was founded in 1794, during the French Revolution, to train the country’s military engineers, and it officially remains under the umbrella of the French ministry of defense. Not only is the school free, but students also receive a stipend from the government to cover their expenses.

“We call it l’élitisme démocratique,” says Pierre Tapie, dean of Essec, a leading French business school. “These are places where you meet extraordinary people who are there because they worked hard and are among the most brilliant of a generation.”

Although the school teaches high-end fare like physics, engineering, and computer sciences, its broader goal is to create a leadership cadre that shares an ordered, prioritized view of the world, says Xavier Michel, the president of the École Polytechnique and an active-duty general in the French armed forces.

In France, this is known as the Cartesian system, after the mathematician and philosopher René Descartes, and Mr. Michel says the school encourages its students “to modelize” the world. And when they eventually become chief executives, he says, “they understand what are the capabilities of their companies. They understand what they can do and what they can’t do.”

Until, of course, models run off the rails — as they so often do in the business and financial worlds, regardless of what country devises them.

Tuesday, January 19, 2010

Vive les Grandes Ecoles (AIG-Goldman edition)

Did negotiators from French banks save Goldman from a haircut on its AIG CDS contracts? Or did Goldman save the French banks with its, um, connections to Paulson and other high places?

WSJ: The Federal Reserve's decision to pay billions of dollars to Goldman Sachs Group Inc. and other big banks as part of its bailout of American International Group Inc. has spawned criticism and conspiracy theories. Treasury Secretary Timothy Geithner, who presided over the New York Fed at the time, was summoned to Congress to explain why AIG paid off the $62.1 billion in soured derivatives in full, far more than they were worth in the market.

One element of the decision hasn't been well explored—how the Fed agreed to the full-payment demands of France's bank regulator and two of AIG's largest creditors, Société Générale SA and Calyon Securities, a unit of Crédit Agricole SA. The French banks and their regulator, it now appears, masterfully outmaneuvered the Americans to avoid discounts, or "haircuts," on their securities.

The French won the day by using a legal argument that some leading French scholars and corporate attorneys variously described in interviews as highly dubious and lacking real legal ground.

The banks and the regulator, known as the Commission Bancaire, said bank executives could be criminally liable for accepting a discount on their contracts, according to a November report of the inspector general of the Troubled Asset Relief Program.

While true in the abstract, "their argument was very overstated," said Pierre-Henri Conac, a University of Luxembourg law professor and a director of France's oldest corporate-law review. "Banks give haircuts every day."

French banks aren't always the best negotiators, Mr. Conac added, but this time "the French were very good."

...

The Fed and AIG finally seized on a plan, according to the inspector general's report. Step one: Let the banks keep $35 billion of collateral already posted by AIG. Two: Purchase the banks' underlying securities, which were derivatives tied to low-grade mortgages. Three: Cancel the contracts. Over one frenzied weekend in early November, Fed and AIG officials struggled with the final step: What should they pay for those securities? By contract, the banks were guaranteed full payment.

There were some factors to suggest a lower, negotiated price was in order. The securities' market value had fallen significantly. And absent the extraordinary U.S. bailout, AIG would have been in bankruptcy, potentially leaving counterparties with zero.

...

"To say that these people would have gone to jail if they cut a deal and signed the same agreement as Goldman Sachs is really pushing beyond what goes on in France," said Christopher Mesnooh, a partner at Paris's Fields Fisher Waterhouse who has authored a book on French corporate law.

"There is no clear-cut provision that would have prevented SocGen or Calyon" from negotiating a discount, said one of Paris' top lawyers, who asked not to be named because he works for the banks.

More information may shake loose as Congress continues its study of AIG. At the upcoming hearings, one can only hope the French role is carefully examined. There may well have been compelling reasons for making good on the $20.8 billion owed the French banks. But —as is now clear—not for the legal reason that the Fed and the French banks claim.

Related links: AIG bailout , Societe Generale , Les Moines-Soldats , Les Grandes Ecoles

Tuesday, September 15, 2020

Schrodinger's Cat and the Normaliens


Yesterday I had cause to look something up related to macroscopic superposition states ("Schrodinger cat states") in Serge Haroche's book Exploring the Quantum. Curiosity led me to Haroche's 2012 Nobel Lecture and autobiography, which I found fascinating. 

One wonders how long an elitist, highly meritocratic and undeniably productive system like the French Grandes Ecoles can continue to function in the current political climate. Quel dommage.
... I was fascinated by astronomy and by calculus, the notion of derivatives and simple differential equations which describe so directly and so well the laws of dynamics obeyed by moving bodies. This was the time of the first artificial satellites, the sputniks which orbited the earth and launched the American-Soviet race to the moon. 
I marveled at the fact that I was able, with the elementary calculus I knew, to compute the escape velocity of rockets, the periods of satellites on their orbits and the gravitational field at the surface of all the planets … I understood then that nature obeys mathematical laws, a fact that did not cease to astonish me. I knew, from that time on, that I wanted to be a scientist. For that, I embarked in the strenuous and demanding “classes préparatoires” of the famed Lycée Louis-Le-Grand, one of the preparatory schools which train the best French students for the contest examinations leading to the “Grandes Ecoles.” They are the engineering and academic schools, which since the French Revolution, have formed the scientific elite of France. These were two years of intensive study where I learned a lot of math and of classical physics. I eventually was admitted in 1963 to the Ecole Polytechnique (ranking first in the national examination, to the great pride of my parents) and at the Ecole Normale Supérieure (ENS). I chose to enter the latter because, at that time, it offered a much better opportunity to embark in a scientist career. 
The years as a student at ENS (1963–1967) have left me wonderful memories, contrasting sharply with the strenuous training of the preparatory school. Here, in the middle of the Latin Quarter, I was free to organize my time as I wished, to meet and discuss with students working in all kinds of fields in science or humanities and to enjoy all the distractions and cultural activities Paris has to offer. And I was paid for that, since the “Normaliens” as the ENS students are called, are considered civil servants and receive a generous stipend! These were my formative years as a scientist. Coming so to speak from the physics of the 19th century which was taught in the classes préparatoires, I was immediately thrown into modern physics and the quantum world by the classes of exceptional teachers. Alfred Kastler gave us a lyrical description of the dance of atomic kinetic moments, and gave atoms and photons a near poetic existence. Jean Brossel brought us back to Earth by describing the great experiments thanks to which quantum concepts were established, instilling in us the austere passion for precision. And Claude Cohen-Tannoudji revealed the theory’s formalism to us with extraordinary depth and clarity. I still remember three books I read avidly at the time: Quantum Mechanics by Albert Messiah, where I truly understood the depth and beauty of the quantum theory; Principlesof Nuclear Magnetism by Anatole Abragam, who introduced me to the subtle world of atomic magnetic moments; and Feynman’s Lectures on Physics, which was a revelation.
See also 

Tuesday, April 04, 2006

Vive les grandes ecoles

I guess the US is not the only country with an increasingly elitist economy and education system.

Economist: One of the arresting features of the current student movement is how little it has touched France's grandes écoles. Sciences Po, a feeder college for these elite schools, has seen nothing of the violence or forced blockades of nearby Paris universities, such as the Sorbonne. Nor have most of the country's top undergraduate business or engineering schools, such as Polytechnique, HEC or ESSEC. Students at such places, taught the latest in finance and economics, understand the price France will pay if it refuses to change. These are the well-trained graduates snapped up by banks in London and New York which are only too happy to benefit from what France does best, and by those French companies now busy exploiting globalisation with such aplomb.

These two faces of France are separated early in the country's two-tier higher education system. At the top, the grandes écoles cater to a small minority and are highly selective: would-be pupils spend at least a year in a preparatory class just to take the entrance exam. While the Ecole Nationale d'Administration (ENA) is the best-known (and arguably the least well-adapted to the global economy), it recruits only a tiny share of the total. The rest are autonomous, and highly specialised in areas such as engineering or business. And employers pay a premium to hire their graduates. A recent study by Le Nouvel Observateur magazine showed that 96% of graduates from top engineering schools were placed two years later in permanent jobs, earning an average of €30,400 ($36,600). By contrast. only 45% of university psychology graduates had found permanent jobs by the same stage, and their average income was €19,000.

Friday, October 07, 2016

Where Nobel winners get their start (Nature)

Nature covers some work by Jonathan Wai and myself. See here for a broader ranking of US schools, which includes Nobel, Turing, Fields awards and National Academies membership.
Where Nobel winners get their start (Nature)

Undergraduates from small, elite institutions have the best chance of winning a Nobel prize.

There are many ways to rank universities, but one that’s rarely considered is how many of their graduates make extraordinary contributions to society. A new analysis does just that, ranking institutions by the proportion of their undergraduates that go on to win a Nobel prize. [ Note: includes Literature, Economics, Peace, as well as science prizes. ]

Two schools dominate the rankings: École Normale Supérieure (ENS) in Paris and the California Institute of Technology (Caltech) in Pasadena. These small, elite institutions each admit fewer than 250 undergraduate students per year, yet their per capita production of Nobelists outstrips some larger world-class universities by factors of hundreds.

“This is a way to identify colleges that have a history of producing major impact,” says Jonathan Wai, a psychologist at Duke University in Durham, North Carolina, and a co-author of the unpublished study. “It gives us a new way of thinking about and evaluating what makes an undergraduate institution great.”

Wai and Stephen Hsu, a physicist at Michigan State University in East Lansing, examined the 81 institutions worldwide with at least three alumni who have received Nobel prizes in chemistry, physiology or medicine, physics and economics between 1901 and 2015. To meaningfully compare schools, which have widely varying alumni populations, the team divided the number of Nobel laureates at a school by its estimated number of undergraduate alumni.

Top Nobel-producing undergraduate institutions

Rank School                Country               Nobelists per capita (UG alumni)
1 École Normale Supérieure France       0.00135
2 Caltech                               US             0.00067
3 Harvard University            US             0.00032
4 Swarthmore College          US             0.00027
5 Cambridge University       UK             0.00025
6 École Polytechnique          France       0.00025
7 MIT                                   US              0.00025
8 Columbia University         US              0.00021
9 Amherst College               US              0.00019
10 University of Chicago     US              0.00017

Small but mighty

Many of the top Nobel-producing schools are private, and have significant financial resources. Among the more surprising high performers were several very small US liberal-arts colleges, such as Swarthmore College in Pennsylvania (ranked at number 4) and Amherst College in Massachusetts (number 9).

“What these smaller schools are doing might serve as important undergraduate models to follow in terms of selection and training,” says Wai, who adds that, although admission to one of the colleges on the list is no guarantee of important achievements later in life, the probability is much higher for these select matriculates.

To gauge trends over time, Wai cut the sample of 870 laureates into 20-year bands. US universities, which now make up almost half of the top 50 list, began to dominate after the Second World War. Whereas French representation in the Nobel ranks has declined over time, top-ranked ENS has remained steady in its output.

Hsu and Wai had previously performed two similar, but broader, analyses of the rate at which US universities produce winners of the Nobel prize, Fields Medal (in mathematics) or Turing Award (in computer science), as well as members of the US National Academies of Sciences, Engineering, and Medicine. These studies produced rankings of US institutions that are similar to the new, global Nobel rankings.

Lessons learned 
Santo Fortunato, a theoretical physicist at Indiana University Bloomington who has researched trends in Nobel prizewinners, deems the analyses “quite interesting”, but cautions that the methodology cannot produce a highly accurate or predictive ranking. “There is a high margin of error due to the low numbers of prominent scholars,” says Fortunato. [ See here for a broader ranking of US schools, which includes Nobel, Turing, Fields awards and National Academies membership. ]

Wai and Hsu agree that there are statistical uncertainties in their rankings, owing to the small number of prizes awarded each year. The two are confident that the ENS and Caltech lead the pack, but statistical fluctuations could change the order of schools placed from third to ninth, Hsu says.

The researchers say that their findings suggest that more attention should be paid to the role that undergraduate institutions have in their graduates’ outstanding accomplishments. They also argue that quantifiable achievements are a better gauge of the quality of universities than factors such as reputation, graduation rate, faculty and financial resources and alumni donations.

Says Wai, “Our findings identify colleges that excel at producing impact.”
Regarding statistical fluctuations, if one takes the data as an estimator of a school-related probability for each graduate to win a Nobel, then at 95 percent confidence level ENS and Caltech are the top two schools, but fluctuations could (for example) change the order among #3 (Harvard) through #9 (Amherst). In other words, we can't be >95 percent confident that Harvard grads have a higher probability than Amherst grads, although the central value of the estimated probability is higher for Harvard.


Regarding ENS and their elitist method of selecting students, see below. Two years of preparation for the entrance exam! Also: Les Grandes Ecoles Chinoises and The Normaliens.
Wikipedia: The school, like its sister grandes écoles the École Polytechnique and the École Nationale d'Administration, is very small in size: its core of students, who are called normaliens, are selected via either a highly competitive exam called a concours (Baccalauréat + 2 years) ... Preparation for the "concours" takes place in preparatory classes which last two years ... Most students come from the prépas at the Lycée Louis-le-Grand, the Lycée Henri-IV, and a few other elite establishments in France. Two hundred normaliens are thus recruited every year ...
Lycee Henri-IV is in the Latin Quarter on the left bank, one of my favorite parts of Paris. The book shops and cafes are filled with serious looking young students. Vive la France! :-)

Wednesday, May 20, 2015

Imperial exams and human capital

The dangers of rent seeking and the educational signaling trap. Although the imperial examinations were probably g loaded (and hence supplied the bureaucracy with talented administrators for hundreds of years), it would have been better to examine candidates on useful knowledge, which every participant would then acquire to some degree.

See also Les Grandes Ecoles Chinoises and History Repeats.
Farewell to Confucianism: The Modernizing Effect of Dismantling China’s Imperial Examination System

Ying Bai
The Hong Kong University of Science and Technology

Imperial China employed a civil examination system to select scholar bureaucrats as ruling elites. This institution dissuaded high-performing individuals from pursuing some modernization activities, such as establishing modern firms or studying overseas. This study uses prefecture-level panel data from 1896-1910 to compare the effects of the chance of passing the civil examination on modernization before and after the abolition of the examination system. Its findings show that prefectures with higher quotas of successful candidates tended to establish more modern firms and send more students to Japan once the examination system was abolished. As higher quotas were assigned to prefectures that had an agricultural tax in the Ming Dynasty (1368-1643) of more than 150,000 stones, I adopt a regression discontinuity design to generate an instrument to resolve the potential endogeneity, and find that the results remain robust.
From the paper:
Rent seeking is costly to economic growth if “the ablest young people become rent seekers [rather] than producers” (Murphy, Shleifer, and Vishny 1991: 529). Theoretical studies suggest that if a society specifies a higher payoff for rent seeking rather than productive activities, more talent would be allocated in unproductive directions (Acemoglu 1995; Baumol 1990; Murphy, Shleifer, and Vishny 1991, 1993). This was the case in late Imperial China, when a large part of the ruling class – scholar bureaucrats – was selected on the basis of the imperial civil examination.1 The Chinese elites were provided with great incentives to invest in a traditional education and take the civil examination, and hence few incentives to study other “useful knowledge” (Kuznets 1965), such as Western science and technology.2 Thus the civil examination constituted an institutional obstacle to the rise of modern science and industry (Baumol 1990; Clark and Feenstra 2003; Huff 2003; Lin 1995).

This paper identifies the negative incentive effect of the civil exam on modernization by exploring the impact of the system’s abolition in 1904-05. The main empirical difficulty is that the abolition was universal, with no regional variation in policy implementation. To better understand the modernizing effect of the system’s abolition, I employ a simple conceptual framework that incorporates two choices open to Chinese elites: to learn from the West and pursue some modernization activities or to invest in preparing for the civil examination. In this model, the elites with a greater chance of passing the examination would be less likely to learn from the West; they would tend to pursue more modernization activities after its abolition. Accordingly, the regions with a higher chance of passing the exam should be those with a larger increase in modernization activities after the abolition, which makes it possible to employ a difference-in-differences (DID) method to identify the causal effect of abolishing the civil examination on modernization.

I exploit the variation in the probability of passing the examination among prefectures – an administrative level between the provincial and county levels. To control the regional composition of successful candidates, the central government of the Qing dynasty (1644-1911) allocated a quota of successful candidates to each prefecture.3 In terms of the chances of individual participants – measured by the ratio of quotas to population – there were great inequalities among the regions (Chang 1955). To measure the level of modernization activities in a region, I employ (1) the number of newly modern private firms (per million inhabitants) above a designated size that has equipping steam engine or electricity as a proxy for the adoption of Western technology and (2) the number of new Chinese students in Japan – the most import host country of Chinese overseas students (per million inhabitants) as a proxy of learning Western science. Though the two measures might capture other things, for instance entrepreneurship or human capital accumulation, the two activities are both intense in modern science and technology, and thus employed as the proxies of modernization. ...
From Credentialism and elite employment:
Evaluators relied so intensely on “school” as a criterion of evaluation not because they believed that the content of elite curricula better prepared students for life in their firms – in fact, evaluators tended to believe that elite and, in particular, super-elite instruction was “too abstract,” “overly theoretical,” or even “useless” compared to the more “practical” and “relevant” training offered at “lesser” institutions – but rather due to the strong cultural meanings and character judgments evaluators attributed to admission and enrollment at an elite school. I discuss the meanings evaluators attributed to educational prestige in their order of prevalence among respondents. ...

Wednesday, January 27, 2010

100 cents on the dollar

IF AIG (credit rating) Downgrade,
THEN collateral provisions trigger in derivatives (CDS) contracts,
THEN AIG bankruptcy,
THEN systemic meltdown.

So the AIG counterparties played chicken with the Fed and got 100 cents on the dollar for $60 billion in derivatives contracts. Paid for by you and me and our kids :-/

If I have any of this wrong, experts please correct me -- I'm just trying to understand how the world works.

WSJ: ... The implicit deadline looming was Nov. 10, 2008, the day AIG was scheduled to report its third-quarter financial results. Fed officials knew the company's anticipated $25 billion quarterly loss wasn't going to be greeted favorably by major credit-rating firms, according to a person familiar with the matter.

Another downgrade would force AIG to pay out billions more to its counterparties and could give banks the right to terminate contracts and keep the collateral—moves that would likely send the insurer spiraling toward bankruptcy.

On Nov. 5, the New York Fed received a presentation, a 44-page analysis put together by a unit of BlackRock Inc., saying that the banks had significant bargaining power with AIG and had little incentive to cancel the contracts unless they received par, or 100 cents, on the dollar.

The next two days, Fed officials negotiated with executives at AIG's trading partners. [Goldman, foreign banks, ...]

"The concession negotiations did not go favorably…we've given up," Mr. Bergin wrote in an email to New York Fed colleagues at 7:11 p.m. on Nov 7.

The Fed decided to pay off the banks in full, viewing that as the quickest way to get them to agree to tear up the contracts.

See earlier post Les Grandes Ecoles: AIG and Goldman edition.

Friday, April 14, 2017

The Rise and Fall of the Meritocracy (BBC podcast)


British socialist Michael Young coined the term meritocracy in his 1958 dystopian satire The Rise of the Meritocracy. He realized even then that a system which rewarded individuals fairly, based on ability and effort, would likely lead to genetic class stratification, due to the heritability of traits. His son Toby, a journalist for the Spectator, explores this topic in an excellent BBC podcast, featuring researchers such as Robert Plomin and me.

In the future, will we redistribute genetic wealth as well as material wealth?

Toby Young's six problems with meritocracy

The Rise of the Meritocracy is a dystopian satire written almost sixty years ago by pioneering sociologist Michael Young. It imagined a modern society uncannily like our own and coined the term meritocracy.

Michael Young's son Toby, a journalist for the Spectator, has been asking if his asks if his father's dark prophesy is correct. Here are Toby Young's six problems with a meritocracy.

1. Where meritocracy came from

The word ‘meritocracy’ was coined by my father, a left-wing sociologist called Michael Young, to describe a dystopian society of the future. In his 1958 book The Rise of the Meritocracy, he imagines a 21st Century Britain in which status is determined by a combination of IQ and effort. He acknowledged that this was fairer than an aristocratic society in which status is simply passed on from parents to their children, but it was precisely because meritocracy gave a patina of legitimacy to the inequalities thrown up by free market capitalism that he disapproved of it.

2. Is a meritocratic society fairer?

The political philosopher John Rawls pointed out that a meritocratic society isn’t necessarily fairer than an aristocratic one. After all, the qualities that meritocracy rewards – exceptional intelligence and drive – are, for the most part, natural gifts that people are born with. Since successful people have done nothing to deserve those talents, they don’t deserve the rewards they bring any more than they deserve to inherit a fortune.

3. Complete equality of opportunity

For a society to be 100% meritocratic, you need complete equality of opportunity. But the only way to guarantee that is to remove children from their parents at birth and raise them in identical circumstances. If you don’t do that, the socio-economic status of a child’s parents will inevitably affect that child’s life chances.

4. Is it in the genetics?

According to the political scientist Charles Murray, meritocracy inevitably leads to a genetically-based caste system. Why? Because the traits selected for by the meritocratic sorting principle are genetically-based and, as such, likely to be passed on from parents to their children. Genetic variation means some highly able children will be born to people of average and below average intelligence, but the children of the meritocratic elite will, in aggregate, always have a competitive advantage and over several generations that leads to social ossification.

5. Noblesse oblige

One of the things my father disliked about meritocracy was that it engendered a sense of entitlement amongst the most successful. Because they regard their elevated status as thoroughly deserved, they’re not burdened by a sense of noblesse oblige. At least in an aristocratic society, members of the lucky sperm club are afflicted by guilt and self-doubt and, as such, tend to be a bit nicer to those below them.

6. Is America the most meritocratic country?

Americans like to tell themselves that they live in the most meritocratic country in the world but, in fact, it may be one of the least. In most international league tables of inter-generational social mobility, which measure the chances a child born into one class has of moving into another over the course of their lifetime, America is at the bottom.

[ Of course, lack of mobility could also result in a society that is both meritocratic and already somewhat stratified by genetics. See Income, Wealth, and IQ and US economic mobility data. ]
I wonder whether even Michael Young was aware that the British implementation of meritocracy through competitive civil service and university entrance examinations (a century before his book The Rise of the Meritocracy) was a deliberate adoption of Chinese ways.
Les Grandes Ecoles Chinoises: ... the British and French based their civil service and educational examination systems on the much older Chinese model ...

... French education was really based on the Chinese system of competitive literary examinations, and ... the idea of a civil service recruited by competitive examinations undoubtedly owed its origins to the Chinese system which was popularized in France by the philosophers, especially Voltaire. ...

Summary of the case of Britain and colonial India can be found here. Amusingly, 19th century British writers opposed to the new system of exams referred to it as "... an adopted Chinese culture" (p. 304-305).

Thursday, March 02, 2023

Prof. Gilles Saint-Paul (Ecole Normale): the Yellow Vests, French Politics, and Hypergamy (Manifold #31)

 

Audio (podcast only)


Gilles Saint-Paul is Professeur à l'Ecole Normale Supérieure. He is a graduate of Ecole Polytechnique in Engineering and received his PhD from MIT in Economics. Gilles and Steve discuss the French elite education system, the Yellow Vest movement, French politics and populism, and Saint-Paul's paper on marriage markets and hypergamy. 

0:00 Introduction 
1:43 Gilles Saint-Paul's background and education 
6:31 French and American elite education - Les Grandes Ecoles 
14:44 The Yellow Vests 
41:46 Mating and Hypergamy 

Links: 

On the Yellow Vest Insurrection 

Genes, Legitimacy and Hypergamy: Another Look at the Economics of Marriage https://ideas.repec.org/p/ide/wpaper/9118.html

Monday, September 07, 2015

Meritocracy and DNA

Read Toby Young's new article The Fall of the Meritocracy. The adoption of civil service and educational placement examinations in England and France in the 19th century was consciously based on the Chinese model (see Les Grandes Ecoles Chinoises). Although imperfect, exams work: we have no better system for filtering talent. But few are willing to acknowledge this basic fact.
Quadrant Magazine: In 1958, my father, Michael Young, published a short book called The Rise of the Meritocracy, 1870–2023: An Essay on Education and Equality. It purported to be a paper written by a sociologist in 2034 about the transformation of Britain from a feudal society in which people’s social position and level of income were largely determined by the socio-economic status of their parents into a modern Shangri-La in which status is based solely on merit. He invented the word meritocracy to describe this principle for allocating wealth and prestige and the new society it gave rise to.

The essay begins with the introduction of open examinations for entry into the civil service in the 1870s—hailed as “the beginning of the modern era”—and continues to discuss real events up until the late 1950s, at which point it veers off into fantasy, describing the emergence of a fully-fledged meritocracy in Britain in the second half of the twentieth century. In spite of being semi-fictional, the book is clearly intended to be prophetic—or, rather, a warning. Like George Orwell’s Nineteen Eighty-Four (1949), The Rise of the Meritocracy is a dystopian satire that identifies various aspects of the contemporary world and describes a future they might lead to if left unchallenged. Michael was particularly concerned about the introduction of the 11+ by Britain’s wartime coalition government in 1944, an intelligence test that was used to determine which children should go to grammar schools (the top 15 per cent) and which to secondary moderns and technical schools (the remaining 85 per cent). It wasn’t just the sorting of children into sheep and goats at the age of eleven that my father objected to. As a socialist, he disapproved of equality of opportunity on the grounds that it gave the appearance of fairness to the massive inequalities created by capitalism. He feared that the meritocratic principle would help to legitimise the pyramid-like structure of British society.

In the short term, the book achieved its political aim. It was widely read by Michael’s colleagues in the Labour Party (he ran the party’s research department from 1945 to 1951) and helped persuade his friend Anthony Crosland, who became Labour Education Secretary in 1965, that the 11+ should be phased out and the different types of school created by the 1944 Education Act should be replaced by non-selective, one-size-fits-all comprehensives. Crosland famously declared: “If it’s the last thing I do, I’m going to destroy every f***ing grammar school in England. And Wales and Northern Ireland.” Today, there are only 164 grammar schools in England and sixty-eight in Northern Ireland. There are none in Wales.

But even though my father’s book helped to win the battle over selective education, he lost the war. The term “meritocracy” has now entered the language, and while its meaning hasn’t changed—it is still used to describe the organising principle Michael identified in his book—it has come to be seen as something good rather than bad.[1] The debate about grammar schools rumbles on in Britain, but their opponents no longer argue that a society in which status is determined by merit is undesirable. Rather, they embrace this principle and claim that a universal comprehensive system will lead to higher levels of social mobility than a system that allows some schools to “cream skim” the most intelligent children at the age of eleven.[2]

We are all meritocrats now

Not only do pundits and politicians on all sides claim to be meritocrats—and this is true of most developed countries, not just Britain—they also agree that the principle remains stillborn. In Britain and America there is a continuing debate about whether the rate of inter-generational social mobility has remained stagnant or declined in the past fifty years, but few think it has increased.[3] The absence of opportunities for socio-economic advancement is now seen as one of the key political problems facing Western democracies, leading to the moral collapse of the indigenous white working class, the alienation of economically unsuccessful migrant groups, and unsustainable levels of welfare dependency. This cluster of issues is the subject of several recent books by prominent political scientists, most notably Our Kids: The American Dream in Crisis (2015) by Robert Putnam.

Unlike my father, I’m not an egalitarian. As Friedrich Hayek and others have pointed out, the difficulty with end-state equality is that it can only be achieved at too great a human cost. Left to their own devices, some men will inevitably accumulate more wealth than others, whether through ability or luck, and the only way to “correct” this is through the state’s use of coercive power. If the history of the twentieth century teaches us anything, it is that the dream of creating a socialist utopia often leads to the suppression of free speech, the imprisonment of a significant percentage of the population and, in some extreme cases, state-organised mass murder.

Having said that, I recognise that a lack of social mobility poses a threat to the sustainability of liberal democracies and, in common with many others, believe the solution lies in improving our education systems. There is a consensus among most participants in the debate about education reform that the ideal schools are those that manage to eliminate the attainment gap between the children of the rich and the poor. That is, an education system in which children’s exam results don’t vary according to the neighbourhood they’ve grown up in, the income or education of their parents, or the number of books in the family home. Interestingly, there is a reluctance on the part of many liberal educationalists to accept the corollary of this, which is that attainment in these ideal schools would correspond much more strongly with children’s natural abilities. [4] This is partly because it doesn’t sit well with their egalitarian instincts and partly because they reject the idea that intelligence has a genetic basis. But I’m less troubled by this. I want the clever, hard-working children of those in the bottom half of income distribution to move up, and the less able children of those in the top half to move down. ...
Young follows the meritocracy and social justice argument where it ultimately leads: to DNA.
... However, there’s a problem here—let’s call it the challenge posed by behavioural genetics—which is that cognitive ability and other characteristics that lead to success, such as conscientiousness, impulse control and a willingness to defer gratification, are between 40 per cent and 80 per cent heritable.[5] I know that many people will be reluctant to accept that, but the evidence from numerous studies of identical twins separated at birth, as well as non-biological siblings raised in the same household, is pretty overwhelming. And it’s probable that in the next few years genetic research scientists will produce even more evidence that important aspects of people’s personalities—including those that determine whether they succeed or fail—are linked to their genes, with the relevant variants being physically identified. The implication is that a society in which status is allocated according to merit isn’t much fairer than one in which it’s inherited—or, rather, it is partly inherited, but via parental DNA rather than tax-efficient trusts. This is an argument against meritocracy made by John Rawls in A Theory of Justice (1971): You’ve done nothing to deserve the talents you’re born with—they’re distributed according to a “natural lottery”—so you don’t deserve what flows from them.[6]

It’s worth pausing here to note that Rawls accepts that not all men are born equal, genetically speaking. Some do better out of the “natural lottery” than others and that, in turn, has an impact on their life chances. This is far from universally accepted by liberal commentators and policy-makers, most of whom prefer to think of man as a tabula rasa, forged by society rather than nature. ...

... The reason liberals are so hostile to the concept of IQ—and particularly the claim that it helps to determine socio-economic status, rather than vice versa—is because they have an almost religious attachment to the idea that man is a piece of clay that can be moulded into any shape by society. After all, it’s only if human beings are infinitely malleable and not bound by their inner nature that the various utopias they dream of can become a reality, from William Morris’s Earthly Paradise to the New Jerusalem of my father’s Labour Party. ...

... But the new technologies thrown up by genetic research will mean they no longer have to deny this obvious truth. If it becomes possible to select human embryos according to their possession of genes associated with certain character traits, such as intelligence, the Left’s utopian political projects can be resurrected. Margaret Mead was right after all: human nature is almost unbelievably malleable, you just have to start a lot further back. It is not through changing the culture that we will be able to solve the chronic social problems besetting the advanced societies of the West, but through changing people’s genes. ...

Saturday, July 27, 2019

Brainpower Matters: The French H-Bomb


Michel Carayol, father of the French H-Bomb.

The article below illuminates several mysteries concerning the French development of thermonuclear weapons. Why did it take so long? Did the French really need help from the British? Who had the crucial idea of radiation compression?

The original inventors were Ulam and Teller. In the USSR it was Sakharov. The PRC inventor was Yu Min (see Note Added at bottom).

Without men such as these, how long would it have taken to develop breakthrough technologies that defined the modern age?

See also Les Grandes Ecoles, One hundred thousand brains, and Quantum GDP.

THE REAL STORY BEHIND THE MAKING OF THE FRENCH HYDROGEN BOMB

Nonproliferation Review 15:2 353, DOI 10.1080/10736700802117361

Based on the first-person account of coauthor Pierre Billaud, a prominent French participant, this article describes for the first time in such detail the history of the development of the French hydrogen bomb in the 1960s and the organization of military nuclear research in France. ...
On November 1, 1952, the United States conducted its first thermonuclear test, ‘‘Ivy Mike,’’ seven years and three and a half months after its Trinity test. It took the Soviet Union four years (August 29, 1949 -- August 12, 1953) and the United Kingdom four years and seven months (October 3, 1952 -- May 15, 1957) to achieve thermonuclear capacity. And in the following decade, China did it, with its sixth test, in fewer than three years (October 16, 1964 -- June 17, 1967). Yet after Gerboise Bleue it took France eight and a half years to reach the same landmark, detonating its first thermonuclear device on August 24, 1968. Why such a long delay, especially since the French were pioneers in nuclear research?

1965: What We Knew About the Technical Aspects

From 1955 to 1960, as we prepared for the first French atomic test, we were also pondering thermonuclear weapons. But the prospect of hydrogen weapons seemed so far into the future that we did not work seriously on it. ... Li6D was commonly considered the best fuel for thermonuclear weapons, but we did not have any idea about how to burn it. All the problems with the thermonuclear bomb can be summarized by this question: how to discover the process that will allow the Li6D to undergo a fusion reaction?

... Compared to our American colleagues in 1948, French scientists had many advantages: we knew that hydrogen bombs existed and worked and that they used Li6D, and we understood the reactions at work. We also had powerful computers, of U.S. origin, which were not available in the late 1940s. And we knew, more or less, the dimensions and weights of the nuclear weapons deployed at NATO bases in Europe and their yields. ...

De Gaulle: It’s taking forever! ... I want the first experiment to take place before I leave! Do you hear me? It’s of capital importance. Of the five nuclear powers, are we going to be the only one which hasn’t made it to the thermonuclear level? Are we going to let the Chinese get ahead of us? If we do not succeed while I am still here, we shall never make it! My successors, from whatever side, will not dare to go against the protests of the Anglo-Saxons, the communists, the old spinsters and the Church. And we shall not open the gate. But if a first explosion happens, my successors will not dare to stop halfway into the development of these weapons.


... In January 1967, I published a voluminous report wherein I presented and developed my idea from late 1965, left idle since, explaining why the current studies were going in the wrong direction and producing a ridiculously low thermonuclear efficiency. I proposed a scheme with two consecutive steps: a cold Li6D compression increasing the density, from the normal value of 0.8 g/cm3, by a factor of at least 20, followed by a sufficient temperature increase (the ignition). In this report, I also gave orders of magnitude of the energies involved in each step... [[ One can make the (flawed) analogy of Billaud to Ulam (multi-stage insight, but no mechanism for compression), and Carayol to Teller (proposed the right mechanism for compression, although in Teller's case he may have learned of it from von Neumann and Fuchs!!!). ]] 
In early April 1967, Carayol had the idea that the x-rays emitted from the fission explosion could transport the fission energy to the thermonuclear fuel chamber to induce the necessary compression. He published a brief paper wherein he presented, and justified mathematically, his architectural idea. This was the key to the solution for an efficient thermonuclear explosive device, consistent with the current data about U.S. hydrogen weapons. Carayol had rediscovered the radiative coupling concept first introduced by Americans Stanislaw Ulam and Edward Teller in January 1951.

Michel Carayol, the Genuine Father of the French H-Bomb

Michel Carayol was born in 1934 and died in 2003. His father was an industrialist and his mother a teacher. He entered Ecole Polytechnique in 1954, graduated in 1956, and joined the Armament. In 1962, he was part of the DEFA assigned to CEA-DAM at Limeil. In 1967, Carayol was part of the advanced studies branch.

... Soon after, in April 1967, Carayol wrote a brief report describing his proposal for a cylindrico-spherical case in dense metal, containing a fission device on one side and a thermonuclear sphere on the other. The report showed that the photons radiated by the primary *still very hot* in the X-ray frequency range, swept into the chamber rapidly enough to surround completely the thermonuclear sphere before the metal case would be vaporized. Carayol had discovered independently a scheme equivalent to the concept developed by Ulam and Teller in the 50s.
But Carayol's insight was ignored! It was British assistance that alerted project leadership to the value of Carayol's ideas. It is not enough for some isolated genius to make a breakthrough -- the people in charge have to understand its value.
... During the first months of 1967, Viard had told me, ‘‘A British physicist is showing some interest in what we do.’’ At several embassy parties, a first-rate British atomic scientist, Sir William Cook, former director during the 1950s of thermonuclear research at Aldermaston, the British center for atomic military applications, had approached the military attache´ at the French Embassy in London, Andre´ Thoulouze, an Air Force colonel, and had hinted to our nuclear research program. Thoulouze had previously been in charge of an air force base and knew Rene´ David, who would later work at the DAM. For this reason, instead of contacting the French main intelligence services, Thoulouze directly contacted our information bureau at CEA, the BRIS, where David was working at the time. In analyzing the fallout from the French tests, the Americans, the British, and the Soviets knew that we had not made any real progress on the thermonuclear path. In 1966 and 1967 we had tested some combination of fission with light elements. Cook told Thoulouze that we had to look for something simpler.

Two weeks after the Valduc seminar, on September 19, and while the work resulting from the Valduc decisions had not yet concretely gotten under way, Thoulouze came from London bearing information from this qualified source. Jacques Robert immediately convened a meeting, in the DAM’s headquarters in Paris, to debrief this information. Only three other people attended the meeting: Viard, Bonnet (DAM’s deputy), and Henri Coleau (head of the BRIS). The information, very brief and of a purely technical nature, did not consist of outlines or precise calculations. Nevertheless, it allowed Bonnet to declare immediately that the Carayol design, proposed unsuccessfully as early as April 1967, could be labeled as correct.23 Had this outline not already been in existence, we would have had a difficult time understanding the information and might have suspected an attempt to mislead us. In fact, this was a reciprocal validation: Carayol’s sketch authenticated the seriousness of the source, while the latter confirmed the value of Carayol’s ideas. Without realizing it, as very few were aware of Carayol’s discovery (and surely not Cook), he had given us a big tip and unexpected assistance, as this information also freed us from the ministerial harassment to which we had been constantly subjected. From that moment, things moved briskly.
Encyclopedia Britannica:
Physicist Michel Carayol laid out what would be the fundamental idea of radiation implosion in an April 1967 paper, but neither he nor his colleagues were immediately convinced that it was the solution, and the search continued.

In late September 1967, Carayol’s ideas were validated by an unlikely source, William Cook, who had overseen the British thermonuclear program in the mid-1950s. Cook, no doubt at his government’s behest, verbally passed on the crucial information to the French embassy’s military attaché in London. Presumably, the British provided this information for political reasons. British Prime Minister Harold Wilson was lobbying for the entry of the United Kingdom into the Common Market (European Economic Community), which was being blocked by de Gaulle.

Sakharov sketch:


Note Added: Perhaps someone can translate part of this paper, which gives some details about the Chinese thermonuclear step, credit to Yu Min. Did they invent a mechanism different from Ulam-Teller? I can't tell from this paper, but I suspect the initial Chinese design used U-T. There are claims that Yu Min later developed, in the pursuit of miniaturization and improved safety, a qualitatively different design.

Yu Min was a student of Peng Huanwu (also a key figure in the bomb effort), who was a student of Max Born. Yu Min only recently passed, in early 2019!


Thursday, October 30, 2008

Is the finance boom over?

At least for a while. Note the dip after the great depression -- is that where we are headed?




This data comes from papers by Thomas Phillippon (MA in physics, Ecole Polytechnique, PhD in economics, MIT -- vive Les Grandes Ecoles!). See here and here; via Zubin Jelveh.

From 1900 to the mid-1930s, the financial sector was a high-education, high-wage industry. Its workforce was 17% more educated and paid at least 50% more than that of the rest of the private sector. A dramatic shift occurred during the 1930s. The financial sector started losing its high human capital status and its wage premium relative to the rest of the private sector. This trend continued after World War II until the late 1970s. By that time, wages in the financial sector were similar to wages in the rest of the economy. From 1980 onward [deregulation!], another shift occurred. The financial sector became a high-skill high-wage industry again.

The figure below (click for larger version) shows the relative incomes of engineers and financiers over time. The data on the right is for those with postgraduate degrees. Perhaps the collapse of the finance bubble will reallocate human capital back into more "productive" activities?




Friday, January 25, 2008

L'Affaire Kerviel and a rogues' gallery of rogue traders

Societe Generale's L'Affaire Kerviel is unbelievable, and I suspect we'll be learning some interesting details in the coming days. A unique aspect of his case is that he started in the back office before making it to the trading desk, and used his knowledge of SocGen's systems to mask his positions. But why did he do it? If his trades had been successful I don't see how he could have profited personally. As a junior trader he couldn't walk up to his boss and say "See, I made you 4 billion Euros, where is my bonus?" -- he would have been fired right away for taking the positions in the first place. And, despite his back office acumen I don't see how he could have gotten the profits out of the bank without anyone knowing. It almost seems as if his goal from the beginning was to bring down the bank.

NYTimes: A Spiral of Losses by a ‘Plain Vanilla’ Trader

PARIS — On the elite trading floors here, where France’s brightest minds devise some of the most complex instruments in global finance, few people noticed Jérôme Kerviel.

He was lucky to be there at all. Many of his colleagues had been plucked from the prestigious Grandes Ecoles — the Harvards and M.I.T.’s of France — and wielded advanced degrees in math or engineering. Mr. Kerviel arrived from business school and started out shuffling paper in the back office.

But on Thursday the world came to know Mr. Kerviel, 31, as the most dangerous accused rogue trader ever, a young gambler who found himself sucked into a spiral of losses that left a $7.2 billion hole in Société Générale, one of France’s largest and most respected banks.

While Société Générale executives maintained that he had acted alone, many questioned how that was possible given the scope of the losses.

“There are plenty of excellent brains at Société Générale, consequently I find it hard to believe the risk management systems and all the auditors did not indicate anything at any level,” said Hélyette Geman, a professor of mathematical finance at ESSEC, a leading French business school, as well as professor at the University of London.

It is a remarkable turn of events for Société Générale, which since the mid-1980s has built itself into a global powerhouse in trading derivatives like futures and options.

“In France we considered Société Générale a magic bank,” Ms. Geman said.

Until now Société Générale, unlike many Wall Street banks, had seemingly sailed through the turmoil in the financial markets with its reputation intact. The January issue of Risk, a monthly magazine about risk management and derivatives, named the bank its “Equity Derivatives House of the Year.”

But Mr. Kerviel, described by bank executives as a shy junior trader, did not fit the mold at Société Générale. The bank lures its top talent from the country’s premier science and engineering schools in Paris. Mr. Kerviel grew up in Brittany, in western France, and attended the University of Lyon. He joined Société Générale in 2000 as what was effectively a clerk, processing and recording the trades made on the trading floor.

By 2006, Mr. Kerviel had worked his way up to the trading floor, where he specialized in arbitrage, or making bets on small difference between various European stock market indexes such as the CAC in France and DAX in Germany.

A senior banker at Société Générale described Mr. Kerviel “as a very junior trader, not a star.” As far as his superiors knew, this banker said, “he was starting to work on a small portfolio. He’s more of a shy person than an extrovert.”

All the same, covering the billions in market positions would have taken considerable skill. “Hiding it was a full-time job because you needed to know exactly what do,” this banker said.

The chief executive of Société Générale’s corporate and investment banking unit, Jean-Pierre Mustier, insisted that the bank’s own investigation showed what they termed the rogue trader to have acted without the knowledge or cooperation of his superiors.

“We’ve been going through the positions for four days,” Mr. Mustier said. “The research we have made has not shown any link with anyone else at Société Générale.”

Mr. Kerviel’s bad bets in the markets came to light a week ago. According to bankers familiar with the situation who asked for anonymity because the investigation was continuing, risk control specialists at the bank first discovered the suspicious trades on Friday. After combing through trading records all day Saturday, the executives discovered the extent of the fraud.

Mr. Mustier returned to Paris from London to oversee the investigation at Société Générale’s headquarters over the weekend. Mr. Kerviel was summoned and was questioned there Saturday night.

Among financial veterans of other trading floors as well as financial experts across Europe on Thursday, there was widespread incredulity that a junior employee like Mr. Kerviel could have racked up such huge losses without the knowledge of his superiors.

Like Nick Leeson, the trader who brought down Barings bank by making huge secret bets on Asian markets in 1995, Mr. Kerviel was something of an anomaly on Société Générale’s trading floor.

“I had students who have a hard time getting jobs at top French banks because of this elite system we have in France,” said Ms. Geman. “In the U.K. and U.S., it’s less of a club based on where you went to school when you were 19 or 20.”

According to officials at the bank, Mr. Kerviel’s losses came from bets made on what they termed “plain vanilla products,” relatively simple futures tied to major European stock indexes.

He had made bullish bets, a senior banker said, which were gradually unwound over the first three trading days of this week. The banker insisted that the closing of those positions had not contributed to the huge losses on European bourses Monday and Tuesday.

Adding to the mystery is the conclusion by Société Générale executives that Mr. Kerviel had not profited from his trades.

“We have no explanation for why he took these positions, and we have no reason to believe he benefited from a financial point of view,” the banker said. “We don’t understand why he took such a massive position.”

The Journal has a bit more; looks like a bit of hacking + rogue trading. A new combination?

WSJ: ...Société Générale's computer systems are considered some of the most complex in banking for handling equity derivatives, that is, investment contracts whose value moves with the value of other assets. Officials of the bank believe Mr. Kerviel spent many hours of hacking to eliminate controls that would have blocked his super-sized bets. Changes he is said to have made enabled him to eliminate credit and trade-size controls, so the bank's risk managers couldn't see his giant trades on the direction of indexes.

Mr. Citerne said the bank didn't notice the unauthorized trading until last week because the trader had "intimate and malicious" knowledge of its procedures and knew at what dates checks were conducted. "Each time he took a position one way, he would enter a fictitious trade in the opposite direction to mask the real one," Mr. Citerne said. According to one person familiar with the situation, Mr. Kerviel used the computer log-in and passwords of colleagues both in the trading unit and the technology section.

According to one person familiar with events, the bank's controls did red-flag an outside trading partner of the bank, whose account showed unusually high finance levels. The client, when asked by the bank about the account's finances, denied knowing of it. Pursuing this matter ultimately led to Mr. Kerviel.

Executives called him in for questioning on Saturday, said Mr. Bouton. The interrogation took a good part of the day because Mr. Kerviel had convinced himself that he had mastered a new way to trade stock-index futures, according to a person familiar with the situation. For a while, he went in circles while justifying the trading strategy, this person said, but finally on Saturday night he broke down and admitted the trades.


Wikipedia has an entry on largest trading losses. I don't really think of John Meriwether of LTCM (or even, I guess, Brian Hunter) as a rogue trader, although I suppose their investors didn't know exactly what they were up to.

Name Amount Lost Citizenship Employer Source of Loss Year

Jérôme Kerviel[1] US$7.1 billion France Société Générale European Index futures 2008

Brian Hunter[2] US$6.5 billion Canada Amaranth Advisors Gas futures 2006

Giancarlo Paretti[3] US$5.0 billion Italy Crédit Lyonnais Loans to Hollywood Studios 1990

John Meriwether[4] US$4.6 billion United States Long Term Capital Management Interest Rate and Equity Derivatives 1998

Yasuo Hamanaka US$2.6 billion Japan Sumitomo Corporation Copper futures 1996

Wolfgang Flöttl, Helmut Elsner US$2.5 billion Austria BAWAG Currency- and interest swaps 2006

Robert Citron US$1.7 billion United States Orange County Interest Rate Derivatives 1994

Heinz Schimmelbusch US$1.6 billion Germany Metallgesellschaft Oil Futures 1993

Nick Leeson US$1.4 billion United Kingdom Barings Bank Nikkei Futures 1995

Thursday, January 09, 2014

Meritocrats

An essay by the late historian Tony Judt, composed as he slowly died of motor neuron disease.
Meritocrats

I came up to King’s College, Cambridge, in 1966...

My King’s was the very incarnation of meritocratic postwar Britain. Most of us got where we were by doing well in exams and, to a striking extent, we pursued occupations that reflected our early talents and interests. The cohort of Kingsmen who came up in 1966 stand out in their choice of careers: more than any group before or since, we opted for education, public service, the higher reaches of journalism, the arts, and the unprofitable end of the liberal professions.

It is thus altogether appropriate that the most promising economist of our generation—Mervyn King—should have ended up as the governor of the Bank of England, rather than an investment banker or hedge funder. Before our time, talented Kingsmen doubtless followed similar paths. But a glance at the obituaries of an older generation reveals just how many of them returned to the family business or to the traditional professions of their fathers and grandfathers.

As for those who came after, it is depressing to record how quickly and in what numbers the graduates of the 1970s and since resorted to the world of private banking, commerce, and the more remunerative reaches of the law. Perhaps one should not blame them; in our time, jobs were still plentiful and we could bask in the waning rays of postwar prosperity. All the same, it’s very clear that our elective affinities lay elsewhere.

... I served for a while as a very junior member on the College Fellowship Electors with Williams, John Dunn, Sydney Brenner (the Nobel Prize winner in medicine), Sir Frank Kermode, Geoffrey Lloyd (the historian of ancient science), and Sir Martin Rees (the Astronomer Royal). I have never lost the sense that this was learning: wit, range, and above all the ability (as Forster put it in another context) to connect. 
My greatest debt, though I did not fully appreciate it at the time, was to Dunn, then a very young college Research Fellow, now a distinguished professor emeritus. It was John who—in the course of one extended conversation on the political thought of John Locke—broke through my well-armored adolescent Marxism and first introduced me to the challenges of intellectual history. He managed this by the simple device of listening very intently to everything I said, taking it with extraordinary seriousness on its own terms, and then picking it gently and firmly apart in a way that I could both accept and respect.

That is teaching. It is also a certain sort of liberalism: the kind that engages in good faith with dissenting (or simply mistaken) opinions across a broad political spectrum. No doubt such tolerant intellectual breadth was not confined to King’s. But listening to friends and contemporaries describe their experiences elsewhere, I sometimes wonder. Lecturers in other establishments often sounded disengaged and busy, or else professionally self-absorbed in the manner of American academic departments at their least impressive.

... For forty years, British education has been subjected to a catastrophic sequence of “reforms” aimed at curbing its elitist inheritance and institutionalizing “equality.” The havoc wrought in higher education was well summarized by Anthony Grafton in this magazine, but the worst damage has been at the secondary level. Intent upon destroying the selective state schools that afforded my generation a first-rate education at public expense, politicians have foisted upon the state sector a system of enforced downward uniformity.

... Universities are elitist: they are about selecting the most able cohort of a generation and educating them to their ability—breaking open the elite and making it consistently anew. Equality of opportunity and equality of outcome are not the same thing. A society divided by wealth and inheritance cannot redress this injustice by camouflaging it in educational institutions—by denying distinctions of ability or by restricting selective opportunity—while favoring a steadily widening income gap in the name of the free market. This is mere cant and hypocrisy. ...
See also Defining Merit and Les Grandes Ecoles Chinoises.

Saturday, November 14, 2009

Defining Merit

What should be the goals and responsibilities of a great university? Should it strive to maximize the future contributions of its graduates to humanity? Or should the university define its interests more narrowly, in terms of institutional prestige, social cachet and financial wealth?

Below are more excerpts from Jerome Karabel's The Chosen, an in-depth analysis of admissions at Harvard, Yale and Princeton in the 20th century. All of the excerpts are from Chapter 9: Wilbur Bender and his Legacy, which chronicles the late 1950's confrontation between elements of the Harvard faculty (often idealistic scientists), who wanted to place more emphasis on intellectual merit, and then Dean of Admissions Wilbur Bender, who was more narrowly focused on Harvard's institutional priorities. (If you find this post interesting, I highly recommend a look at the book. At the Google link above all of Chapter 9 is available.)

Although Karabel does an excellent job (see below) of characterizing the two sides of the argument, he does not examine the conflict in fundamental values between the scholar-scientists and Bender: the best and brightest for their future contributions to mankind, or the best for Harvard's future as an institution? To prepare "leaders" who will pursue power (some of which shall accrue, indirectly, to Harvard) or to prepare scientists and scholars who will create knowledge to be shared by all?

See also this earlier post: Creators vs Rulers.

... Brinton, a former Rhodes Scholar with a broad historic and comparative perspective on higher education, posed a sharp question to clarify the issue at hand: "Do we want an Ecole Normale Superieure, a 'cerebral school' aimed solely at preparing students for the academic professions?" Bender's answer was a resounding no. But to Wilson the matter was not so clear: the basic issue was which students "could take advantage of the unique intellectual opportunity which Harvard has to offer." In a barb clearly aimed at Bender, Wilson proclaimed that "he just did not accept potential financial return ... as the basis for showing favoritism to Harvard sons who were less well qualified academically than other admission candidates."

Having been under assault by segments of the faculty for almost two years, at first by Holton, then by Kistiakowsky, and now by Wilson, Bender apparently decided that he had had enough. In a meeting of the committee a month after this testy exchange, he announced his resignation as dean of Admissions and Financial Aids, and stated that he would prefer neither to affix his signature to the final report of the subcommittee nor to withhold his vote of approval. His departure was set for July 1, 1960, and he agreed to continue to meet with the subcommittee until it completed its mission.

It is interesting that Ecole Normale Superieure (ENS) features so prominently in Harvard's internal discussions. Along with Ecole Polytechnique, ENS is at the pinnacle of the strictly meritocratic French system of higher education. (See earlier post: Les Grandes Ecoles.)

The University of Chicago is an example of a school that followed the rigorous, meritocratic path, and suffered a consequential decline in social cachet and financial standing. Idealism damaged Chicago's position in the competition against Harvard and others. As one realistic Harvard commenter noted, one needs to "admit the bottom 10 percent to continue to attract the top 10 percent" -- even the intelligentsia value the social cachet of their alma mater.

... In a pair of letters that constituted something of a manifesto for the wing of the faculty favoring strict academic meritocracy, Wilson explicitly advocated admitting fewer private school students and commuters, eliminating all preferences for athletes, and (if funds permitted) selecting "the entering class regardless of financial need on the basis of pure merit." The issue of athletes particularly vexed Wilson, who stated flatly: "I would certainly rule out athletic ability as a criterion for admission of any sort," adding that "it bears a zero relationship to the performance later in life that we are trying to predict." He also argued that "it may well be that objective test scores are our only safeguards against an excessive number of athletes only, rich playboys, smooth characters who make a good impression in interviews, etc." As a parting shot, Wilson could not resist accusing Ford of anti-intellectualism; citing Ford's desire to change Harvard's image, Wilson asked bluntly: "What's wrong with Harvard being regarded as an egghead college? Isn't it right that a country the size of the United States should be able to afford one university in which intellectual achievement is the most important consideration?"

E. Bright Wilson was professor of chemistry and member of the National Academy of Sciences, later a recipient of the National Medal of Science. The last quote from Wilson could easily have come from anyone who went to Caltech! Indeed, both E. Bright Wilson and his son, Nobel Laureate Ken Wilson (theoretical physics), earned their doctorates at Caltech (the father under Linus Pauling, the son under Murray Gell-Mann).

For Bender, who loved Harvard, and had devoted much of his life to it ... "whether our eventual goal for Harvard is an American Ecole Normale, or the nearest approach to it we can get." In Bender's reading, "it is implied, but not directly stated" that Harvard should emulate this model, which admits students purely on the basis of their performance on an exam and serves as a training ground for many of France's leading academics and intellectuals. Professors, in particular, were especially prone to take this view: "My guess is that many, perhaps most, of the faculty would support such a policy, and many would assume that the case for it was obvious and irrefutable."

To Bender, however, the vision of a freshman class selected solely on the basis of academic criteria was nightmarish. "Would we have a dangerously high incidence of emotional problems, of breakdowns and suicides? Would we get a high proportion of rather precious, brittle types, intellectuals in quotes, beatniks, etc.?" "Do we really want," he continued, "a college in which practically everyone was headed for a career as a scholar, scientist, college teacher or research doctor?"

For his purposes -- the narrow institutional interests of Harvard -- Bender was absolutely right. Filtering purely by intellectual merit (as opposed to using a broader set of criteria, and several categories under which students are admitted) would not maximize Harvard's influence in government or business, or its financial wealth. Again see earlier post: Creators vs Rulers.

Bender also had a startlingly accurate sense of how many truly intellectually outstanding students were available in the national pool. He doubted whether more than 100-200 candidates of truly exceptional promise would be available for each year's class. This number corresponds to (roughly) +4 SD in mental ability. Long after Bender resigned, Harvard still reserved only 10 percent of its places (roughly 150 spots) for "top brains". (See category "S" listed at bottom.)

... To test his hypothesis that Harvard's most brilliant students were not its most "distinguished graduates," he [Bender] carried out his own study of exceptionally successful alumni.

The twenty-six men studied were a veritable Who's Who of the American elite: among them was a former secretary of defense, the president of Commonwealth Edison and Electric Bond and Share, the publisher of the Minneapolis Star and Tribune, the senior partner of Davis Polk, and (not least) the general chairman of the Program for Harvard College. Twenty-two were private school graduates, with St. Paul's (four) and Groton (three) leading a list of the nation's most elite boarding schools. These men had not compiled particularly distinguished academic records at Harvard; the majority of them had relatively poor grades. A casual inspection suggested "a much higher than average participation by the above in athletic and other extracurricular activities" precisely the kinds of students likely to be excluded by the Ecole Normale model.

Harvard much prefers that its graduates ascend to positions of power, in place of graduates of Stanford or Berkeley. But do the differences between these schools have any effect on the actual quality of leadership? Does it matter to the Nation? Whose interests are at stake?

Bender, above all, loved Harvard. Professors like E. Bright Wilson were, for better or worse, much more idealistic: looking far beyond their home institution, they held knowledge itself preeminent.


Typology used for all applicants, at least as late as 1988:

1. S First-rate scholar in Harvard departmental terms.

2. D Candidate's primary strength is his academic strength, but it doesn't look strong enough to quality as an S (above).

3. A All-Amercan‚ healthy, uncomplicated athletic strengths and style, perhaps some extracurricular participation, but not combined with top academic credentials.

4. W Mr. School‚ significant extracurricular and perhaps (but not necessarily) athletic participation plus excellent academic record.

5. X Cross-country style‚ steady man who plugs and plugs and plugs, won't quit when most others would. Gets results largely through stamina and consistent effort.

6. P PBH [Phillips Brooks House] style: in activities and personal concerns.

7. C Creative in music, art, writing.

8. B Boondocker‚ unsophisticated rural background.

9. T Taconic, culturally depressed background, low income.

10. K Krunch‚ main strength is athletic, prospective varsity athlete. [ Sometimes also "H Horse" :-) ]

11. L Lineage‚ candidate probably couldn't be admitted without the extra plus of being a Harvard son, a faculty son, or a local boy with ties to the university community.

12. O Other‚ use when none of the above are applicable.

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