Behavioral Economist
Widening The Gap
The issue of wealth inequality in the United States is now, more than ever, dominating public conversation across all sectors. Many academic economists have been at the forefront of the of the argument (such as Stiglitz and Mankiw, among countless others), though taking there word as absolute truth on the subject would be naive. No one discipline has an academic monopoly on the subject, as it is relevant in economic, political, sociological, psychological and philosophical realms. What effects does concentrated wealth have on democratic government? Is the current economic system fair? What is a fair economic system? The list of issues and questions goes on and on, criss-crossing multiple subjects as it goes.
There have been many proposed policy prescriptions to fix the current issue, which is reaching levels that have never been seen before. From admittedly Utopian global wealth taxes to better financial educations, the ideas and possibilities are endless. Despite the breadth of conversation that is ongoing, I find that most arguments or opinions on the matter neglect the other factors contributing to wealth inequality. Most importantly, much of the origins and aspects of said inequalities involve a much wider scope of academic disciplines.
Why You Shouldn't Trust Malcolm Gladwell
When I tell other students here that I plan to study behavioral economics, one of the first things they say to me is, "Have you heard of Malcolm Gladwell?" And usually I respond, "How could I not have heard of him?" He has entrenched himself as one of the most recognizable authors in recent memory. His popularity and perceived know-how have allowed him to command $45,000 in speaking fees per appearance, most notably at Bank of America (and if you were wondering how BOA has been doing recently...). He was also given an award by the American Sociological Association for his excellence in "disseminating sociological research," so academics have endorsed him as well.
Certainly, I have read many of his books at the recommendation of many peers. Just like they said, most of his work centers around topics in social psychology, a key component in many business and economic threads. I have found his books to be well written; mesmerizing at times, as he skillfully and effortlessly glides from topic to topic, story to story. His writing style is unique and captivating. Unfortunately, rather than nonfiction, professional, business-level books, I have found his writings to be full of simple stories that do nothing more than stir up a generalized interest and allow the author to engage in vague theorizing.
The Economics of Depression
When people see depression and economics in the same sentence, they assume that the writer is talking about a severe, costly economic downturn, much like the one in the 1930s. Well, the economy is isn’t in a depression–it is suffering from depression. The evidence is right in front of our eyes, and costs us untold billions.
Clinical depression is one of the most common afflictions among college students and people of working age, and has made its far share of headlines here at Harvard. About one in 10 adults at any given time exhibits symptoms of major depressive disorder, which include lack of motivation, suicidal thinking, decreased concentration, and persistent feelings of sadness and low self-esteem.
A Safer Wall Street
According to Bloomberg Magazine, over 15 percent of the class of 2013 went to work for Wall Street, down from an incredible high of almost 50 percent in 2007. Goldman likes their Ivy Leaguers, and so they should. Anyone smart enough to get into Harvard can beat the market, right? Well… not really. The lure of money on Wall Street was, and still is, simply overpowering. Any educated psychologist knows how devastating gambling addiction can be, but no one really thinks of the people in the perfectly-tailored suits and shiny leather shoes as possible sufferers. Most societies view investing as the most socially acceptable form of gambling, and a job in the finance sector carries significant social prestige and signifies a high level of education. When people think of gambling, we imagine nine-to-fivers wasting away their life-savings at the blackjack table.
However, there is not much that separates stock-trading for profit from horse-racing. Based on past experience and performance, one chooses what he thinks will be the best option and bets money on it in hope of monetary gain. Even the smartest bankers are not impervious to the perils of money addiction. Multiple studies have shown that those addicted to money show similar brain damage to those addicted to cocaine. In an even more disturbing study, psychiatrists in Switzerland took day traders from major banks and clinical psychopaths and had them take the same personality tests. Surprisingly, bankers showed the exact same destructive traits that characterized psychopaths. Extreme competitiveness, aggression, lack of empathy–it was all there. In an editorial earlier this year in the New York Times, former Goldman-Sachs millionaire Sam Polk wrote about his years on Wall Street, and came to one simple conclusion, declaring, “I see Wall Street’s mantra — ‘We’re smarter and work harder than everyone else, so we deserve all this money” — for what it is: the rationalization of addicts.” As Nobel Prize-winning behavioral economist Daniel Kahneman said, people don’t realize when they are acting irrationally. That is, we are blind to our own blindness. And in Wall Street’ case, money blocks out the Sun.