Twofish's Blog

February 28, 2009

We are all losers now……

Filed under: academia, finance — twofish @ 11:47 am

http://delong.typepad.com/sdj/2009/02/the-forest-of-outstretched-arms-looking-for-work-grows-thicker-and-thicker.html

Emerson: Someone said somewhere that the schools with big endowments were going to start spending part of their endowment on education, but that unlikely rumor turned out to be false.

What endowments? University endowments are getting crushed by the market collapse, and that’s the lucky universities. The unlucky ones have found that they they were investing with the likes of Madoff, and a few universities have found that they have no money at all.

There is a deeper problem in that the financial structure of academia forces universities to create a Ponzi scheme. In order to support the salaries of the tenured faculty you have to have lots of money coming in through tuitions and grants which require large numbers of teaching assistants and research assistants. However the only way you can get large numbers of TA’s and RA’s is by promising them tenured faculty jobs, and in most cases these promises are lies. They are lies because the economics of the situation forces them to be lies.

This creates very perverse incentives for academia, because they only way any decent human being can deal with this is not to think about the problem, which is particularly a problem for academia whose job it is to think about these problems.

This is part of an even deeper problem which is that we’ve created a society of winners and losers. Winners get money and power by taking it from losers, but this causes problems because eventually the losers realize that they are getting shafted, and then overthrow the winners.

So the solution is to create a large middle class of people that *think* that they will be winners someday, and tell the “almost winners” that the losers deserve what they get. You see this in academia, if you don’t get the job, you didn’t work hard enough, and you are a *loser* you don’t *deserve* to be a winner. The fact that your work and efforts allow the system to exist as it does is irrelevant.

You don’t deserve tenure, go work at a community college as an adjunct with all of the other academic losers, where you get to teach all of society’s other losers, and not any of the winners that get to go to elite universities. The only people that deserve money, power, or respect are winners, and you aren’t one of them.

The trouble with this system is that it requires people identify with winners more than losers. One good thing that is coming out of this is that people are realizing that the system isn’t rational, and that you have a much higher chance of ending up a loser than a winner.

With the result economic collapse, it turns out that we are all losers now…..

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3 Comments »

  1. This reeks of MBA thinking. Universities shouldn’t teach people to be derivative traders. They should teach people to be people and have some common sense about things like gravity, financial or otherwise. There is also a clear correlation between education and lifetime earnings, so I am struggling to see your point. Mean reversion….it means most people end up middle class. So what? To paraphrase a dead economist, the mere posession of money is not in itself a meritorious act. I learned that in university.

    Comment by Cochin Loco — March 2, 2009 @ 9:05 am

  2. Good thing you not be a professor, otherwise you be a loser, I guarantee it.

    Comment by Moumou — March 5, 2009 @ 5:18 am

  3. Twofish, I’m posting here to avoid getting deleted as off topic. Brad Setser doesn’t actually, REALLY care how much Treasuries, Agencies etc are held by who in which country. The only point he has to make is the “foreign hand” hypothesis. China’s purchases of Treasuries caused the mortgage bust, the European banks contributed their major efforts to it, yada, yada, yada.
    All kinds of lies are disguised with “flows versus levels” logic and if you raise any pertinent info against the “foreign hand” ideology,
    you get either no response or get deleted.

    Comment by Indian Investor — March 20, 2009 @ 6:21 am


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