NEW ROUTES THROUGH CAPITALISM
ML: No. It does address it but not sufficiently. I would say that the Volcker rule is necessary but insufficient. The problem with the Volcker rule is that firms are already finding ways around it. If
effort was thwarted by, shockingly, Wall Street influence in the legislative process. BT: In Lair’s Poker, you describe a world in which students gravitated in droves to-
!"#$%&'"#$(#"%#"%)"%&)(&*"#$(#"+*"$(,*"#$*)*" #--".%/"#-"0(%1"%&)#%#2#%-&)"(#"#$*"$*(3#"-0"-23" 4(5%#(1%)67"8$*"+(9"6(3'*#)"+-3'"%)"#$(#" #$*"/--:":3%,*)"-2#"#$*".(:";"9-2"&**:"#-" $(,*"0(%123*7 you actually could enforce the spirit of wards economics as a path to Wall Street. the Volcker rule and say that these firms Although this trend only accelerated over couldn’t take trading positions of any sort, the ensuing three decades, there are insipithen you would effect significant change. ent signs that students have begun to turn You would essentially be walking into away from banking. Will students abanGoldman Sachs, and the whole part of it don economics for other disciplines that that was involved in financial risk taking may better prepare them for other sectors would have to walk out the door, so you of the economy? Where will the jobs be? would have essentially a financial advisory business left. The firm would divide very ML: When I was at Princeton, this was neatly in two, and it would be a great thing just starting. The Economics Department – but the problem is that this is not what is was acquiring a huge wave of students happening. In practice, the firms are gain- who were using the department not to ing the ability to define trading positions acquire knowledge or understanding as something other than trading positions, about the way the world works but rather so they are still taking the risk. The other to signal to Wall Street that they were part of the Dodd-Frank legislation that willing to sacrifice their education for a would have a meaningful effect – if the Wall Street job. It was kind of a signaling spirit were here too – is that it supposedly device. And I think that was horrible begives the Treasury new resolution pow- cause Princeton is such a rich place, so it ers to unwind one of these firms if it gets just seemed to be an abuse of the instituin trouble. Except you can’t see how that tion, and I had a very hostile reaction that would ever work. I’m not sure they didn’t was unfair at the time towards the Ecoeven have that power in the first place, but nomics Department. I sort of blamed the this is just a fig leaf. Because if, for example, department, but that’s not who I should we woke up tomorrow and there was a run have blamed. I subsequently went and got on Bank of America, and it was discov- a master’s in economics, and I think that ered that it had enormous losses that we it’s actually a wonderful and very interestdidn’t previously know about and that it ing discipline, though it has virtually no was essentially on its way out of business, I connection whatsoever to a job on Wall don’t think that the Treasury would have street. I think it’s very weird that economthe nerve of going through with putting it ics is regarded as preparation for a job on out of business. Because we could be right the financial markets. Financial markets back where we were in 2008, and there are largely salesmanship and not techniwould be a run on all of the other finan- cal expertise. Most Wall Street careers are cial institutions. The world is behaving as built on bullshit, so in any case it was just if all of these institutions are effectively stressing in my mind to have the spirit of government guaranteed, so I don’t think a Princeton education undermined. I still that the Dodd-Frank bill goes far enough. hold the view that it is a misuse of PrincI think that it tries, but I think that the eton for students to come in and treat it -.
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as a trade school. I think that there is incredible value – not just economic value but life value – in a broad, general education. This sounds airy fairy I know, and I know that people have student loans they need to repay and they need to figure out what to do with their lives, but just suspending that anxiety for the few years you are at Princeton makes a huge different to the rest of your life. So again I don’t completely buy the premise of the question because I don’t think that students should be approaching their choice of major with a view to what they are going to do for a living necessarily. They should just be following interests – finding pockets of passion in the university. Having said that, what’s happening now is that there are fewer Wall Street jobs available to students, and the quality of those jobs looks radically lower, so it looks like a less desirable place to work. It probably is, and it probably will be. It looks to me like the Economics Department is going to take a hit because the value of the signal has declined. Where people go? God knows. If I could wave a wand over the place, I would say to go to the places that really light your fire. Don’t go to places that you think are going to make you money when you get out – you can worry about that later. BT: Whereas college campuses were breeding grounds for political activism until relatively recently, students today seem far more politically apathetic than those in the past. If the recent financial crisis is as much a consequence of lack of political will as of economic mistakes, doesn’t the lack of political interest of today’s youth bode ill for the future? ML: Is that true that Princeton students have a lack of political interest compared to generations of previous students? Let me see what it looks like to me. Between the time that I was there and now I have not detected a whole lot of political activity, but when I was there, there was a brief flare-up of political activity in response to South Africa oddly. Students tried to get the university to divest their investments in South African companies, and they succeeded. I think there is probably a pretty strong inverse correlation between the strength of the economy and students’