Ducks and Economics

My brother, George, is a superbly accomplished, brilliant person. In 2000, he won the National Spelling Bee and took 2nd place at the National Geography Bee. His high school career included him becoming an Eagle Scout and valedictorian. He was accepted to Harvard and to my knowledge graduated with degrees in Chemistry and Russian, presumably with honors.

His intention was to eventually end up in medical school and follow my father into the medical profession. My father, also named George, is a Ph.D. biochemist who went to medical school at 42 and currently practices endocrinology in St. Louis. My father and I have deep differences in personality and ideology but beyond that I have a deep and profound respect for his work. As a physician, his work is profoundly and immediately meaningful in the lives of many, many people. Many have lived where they might have died and learned to live well because of his choice to practice medicine.

My father is well compensated, of course. He works 14-hour days even as he approaches 70. If in my life I am capable of doing a tenth of the good he has done, I will be surprised. A good physician is one of our world’s most valuable real assets.

My brother and I have never really gotten along, but I was proud that he went to Harvard hoping to be a physician. When he graduated, however, he’d lost that dream. He is now an investment banker, working for William Blair, a Chicago-based investment company.

This I think is one part of the story of this economic recession. Brilliant minds converged at the world’s best educational institutions and got blinded by the money they could find in the financial sector. Here is Joseph Stiglitz, the recipient of the 2001 Nobel Memorial Prize in Economics, whose words ring all too true for me:

Finally, I have emphasized how our financial sector failed in its essential societal roles, especially with respect to the allocation of capital, and how the sector’s’ incentive structures may have contributed to that failure. But there is another misallocation of resources that resulted from the sector’s compensation policies, one whose effects are graver and longer lasting, and one which, as a teacher, I have felt intensely. There was a misallocation of scarce human capital, as some of America’s most talented young succumbed to the lure of easy money—brilliant minds that, in another era might have made real discoveries that enhanced our knowledge or real innovations—that would have enhanced societal well being. In earlier decades, our best students went into a variety of areas—some into medicine, many into research, still others into public service, and some into business. Each found fulfillment of their potential at the same time they served their communities in one way or another. At Amherst College, where I serve as a trustee, we talk of helping our youth live lives of consequence. In this modern era of a finance-dominated economy, unfortunately, a disproportionate share of our most talented youth went into finance, lured by the outsized compensation. The costs to our society of this misallocation are incalculable.