So, this "debate" started when I was catching up with Lisa, and I discovered that she was very skeptical of the finance industry. It was a very good convos, and I think I personally learned a lot from the other side. Here are some of my key points from that, which I've reinforced a bit:
What is the meaning of life? Grand question perhaps, but I think it is necessary to establish this before we judge any societal function because if standards are inconsistent, judgements will be inconsistent. The idea put forth is that life and survival is where it starts. It's what apes were designed to do. It is what the rest of the animal kingdom was designed to do. Eat, survive, fuck, die. Hence, our work as a society is to achieve that end through collective means. Apes form family groups to hunt together and gather food together, so that each member can better feed themselves than if they were doing it alone. This efficiency of scale concept is quite intuitive to understand. Our economy, therefore, should promote activities so that our standard of living improve - in terms of shelter, food, etc.
However, when we look at the implications of this hypothesis, we see that it is quite incomplete, to say the least. It does not explain why the only industries we employ are the farming, housebuilding, and prostitution sector (basically, why Communism failed as a social institution) It does not explain the purpose of religion within societies. Or art. Point being, it is quite clear that societies work towards not only ensuring their members survive per se, but working towards creating value for its members: whether it is life (Aquafina), subsistence (KFC), aesthetic (Picasso), pleasure (Porn), spiritual (Scientology). I think creation of individual value is what societal organizations do try to achieve, and hence it's definitely a good criterion in judging societal organisms. Lisa should agree with me up to this point in principle...lol?
However, there are huge problems with applying this definition, which is why I find that is often abused in application. First of all, I've highlighted some of the possible sources of value, but that is certainly not an exhaustive list. Not only have I not included knowledge, I haven't even gotten started on metaphysical knowledge. Whether it is interpreting the past, or hypothesizing on the future, a crucial point I want to make is that value not only comes from things we know we know, but also from things we know we don't know, and even things we don't know we don't know. Sorry for pulling a Rumsfeld, but it's true. The latter thing is actually one of the most valuable things to us as a society - why do you think innovation and productivity are such important factors in economic growth? why do you think we pour billions in R&D even though theoretically, the probability of average success is an infinitesimally small, unknowable number? And don't dispute this one - the fact is, the probability of another Einstein, another groundbreaking theory, does not come in a quantifiable probability, every so number of years. This chaotic nature of human discovery has huge value, and is something none of us individually have the authority to quantify. The second problem with application, is that individuals have different preferences for different values. So what is valuable to one is complete garbage to another. Can we reconcile that with an economic system? Or should it be that if I find all asian pop complete aesthetic bullshit, I can then judge asian pop singers to be a waste of societal resources?
And this comes to the crux of my argument against Lisa's. Money does attempt to "measure value" as efficiently as possible. It's not very good, and yes, the link between money and "producing something valuable" is lost upon the minds of most people. The fact that I have to write this long on the philosophy of finance speaks to that fact, I think, that the overall nature of financial institutions is hard to conceptualize. But first all, I don't think it matters if people don't make that mental connection during every transaction. As long as the money connects in proportion to value, money will do the invisible thinking for humans.
So the issue of is whether money does connect in proportion to value. This is where I take issue. Lisa primed her judgement of value with the "life and survival" quote. It presupposes the value is only derived from survival of self. I'm pretty sure you agree with me when I say that is definitely not the only value we need to judge upon. Which is why individuals should not be making that judgement anyways. In case you object to the fact that an inanimate object is doing the thinking of us, when the judgment of value is collectivized, we reach a fair conclusion of value that takes into all of our own judgements, as well as values from sources that we might not have thought of yet, or might have undervalued. It is a democracy of knowledge and information, in essence. And empirical evidence seems to show that despite how stupid people are most of the time, collective action is better than elitist judgment.
So, let's take my standards and apply it to the finance industry, whom I know we all love. :) Now, I'm guessing we're gonna talk about proprietary trading and speculation, because that's what everyone likes to bitch about. And a little a bit about financial engineering? I'll leave out investment banking, fund management, and sales for simplicity. Ok let's say financial instruments are used exclusively for speculation rather than hedging, because everyone is greedy and risk-loving. Then on a theoretical basis, it is zero-sum to the parties involved. One person's gain is another's loss. They gain nothing on average because their risk preference is exactly the same. You can argue that it is a casino then, with no entertainment value to society. However, it is not. Back to my rumsfeld point: a casino involves discrete, knowable, probabilities. These people make money off of unknowable probabilities...of the future! However, by buying and selling these assets, they are unwillingly disclosing information to a broader system, one that benefits society greatly. In that regard, the value from speculation is the externality to society in terms of information - it provides insight into that dark abyss of unknowable knowledge. Why do you think the stock market is touted as a 7 month leading indicator of over economic activity? And because of options, now we can quantify society risk tolerance based on an options index - no more looking at historical data bullshit. In that case, a purely zero-sum game does have societal value: it is a hybrid between a gladatorial game and a van Gogh, a work of art. To the parties involved, it is you win/I lose. To us though, it provides amazing insights into what we as a society are about. And we can throw rocks at them too when we hate them. And just as well known artists are compensated well for their brilliant/mediocre creations, I think financial engineers should be too.
So in conclusion, does the financial industry add much to the world? In real terms, no, it doesn't. In other words, Shakespeare is just your average bullshit playwright. Picasso is just some random ADHD doodler. Van Gogh is just your 18th century emo motherfucker. And your university is definitely not worth all the hype and research money dumped in its puzzling endeavours. But I think when we value human contribution is such simplistic terms, when we don't quantify future, unknowable benefits; when we stress upon current, deterministic, discountable, tangible benefits, we risk making our own minds a bit more asinine.
Yes, physics and biology and stats are all interesting, but you're assuming everyone has the same preference to each field based on challenge. The fact is, finance involves larger risk, and larger payoffs. And it is a field where you always have to question the value of your contributions, instead of taking it for granted. I realize everyone is different, but this is something that I prefer, and I'm fine if noone else is. Feelings are not something I can trust.
Regards.
It has become hard to use this tool to blog. Or rather, to blog in general.
I need a change of pace.
I am still in the stage of sharing from others. So for...
15 years ago
