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Krugman: Iron Men of Wall Street
Iron Men of Wall Street
Greg Mankiw has written another defense of the 0.1 percent — and this one is kind of amazing.
Before I get to the amazing part, however, can I say enough with the movie stars. Yes, a handful of media stars make a lot of money. But they are a trivial part of the story (pdf):
The upper tiers of the income distribution are overwhelmingly occupied by executives of one kind or another — corporate, finance, real estate, and lawyers who are surely more corporate than Perry Mason. And even the biggest names in media aren’t real players. Remember, the 40 top-paid hedge fund managers and traders made an average of more than $400 million each in 2012.
Which brings me to the amazing part of the column. Mankiw invokes the strong role of financial fortunes in U.S. inequality to argue that the incomes are deserved:
Has Greg been living in a cave since 2006? We’re now in the seventh year of a slump brought on by Wall Street excess; the wizardly job of “allocating the economy’s investment resouces” consisted, we now know, largely of funneling money into a real estate bubble, using fancy financial engineering to create the illusion of sound, safe investment. We also know that there is a real question whether hedge funds, in particular, actually destroy value for their investors.
- more -
http://krugman.blogs.nytimes.com/2014/02/16/iron-men-of-wall-street
Greg Mankiw has written another defense of the 0.1 percent — and this one is kind of amazing.
Before I get to the amazing part, however, can I say enough with the movie stars. Yes, a handful of media stars make a lot of money. But they are a trivial part of the story (pdf):
The upper tiers of the income distribution are overwhelmingly occupied by executives of one kind or another — corporate, finance, real estate, and lawyers who are surely more corporate than Perry Mason. And even the biggest names in media aren’t real players. Remember, the 40 top-paid hedge fund managers and traders made an average of more than $400 million each in 2012.
Which brings me to the amazing part of the column. Mankiw invokes the strong role of financial fortunes in U.S. inequality to argue that the incomes are deserved:
A similar case is the finance industry, where many hefty compensation packages can be found. There is no doubt that this sector plays a crucial economic role. Those who work in banking, venture capital and other financial firms are in charge of allocating the economy’s investment resources. They decide, in a decentralized and competitive way, which companies and industries will shrink and which will grow. It makes sense that a nation would allocate many of its most talented and thus highly compensated individuals to the task.
Has Greg been living in a cave since 2006? We’re now in the seventh year of a slump brought on by Wall Street excess; the wizardly job of “allocating the economy’s investment resouces” consisted, we now know, largely of funneling money into a real estate bubble, using fancy financial engineering to create the illusion of sound, safe investment. We also know that there is a real question whether hedge funds, in particular, actually destroy value for their investors.
- more -
http://krugman.blogs.nytimes.com/2014/02/16/iron-men-of-wall-street
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