QuoteYou've been spending too much time in universities. The basic argument is that group X stands to lose $X if the policy passes. Group Y may gain $Y. If group X and Y can both vote, then we have an interesting fight on our hands. If Group X can vote and Group Y can't, then Group X will screw Group Y. In politics, that's the only argument that matters. Since people in the United States can vote and people outside can't, people outside will get screwed. This is not the issue. The issue is that protectionist policies are bad for the common good even when you on;y consider the domestic aspects. Yet protectionist policies like this one are chosen over and over again. It is because those who benefit from a given intervention are more effective at getting their voice heard than are those who lose (both domestic groups with the right to vote).The fact is that if a government policy is only going to cost me a few dollars a year, I don't care that much about it, especially if the mechanism is not blatantly obvious. I'm not going to organize an advocacy group or even make my voting decision based on it. So even though a given policy may cost tens or hundreds of millions of people a few dollars each their concerns will be outweighed politically by the few who benefit greatly from the policy.The economic argument is that protectionism costs the country as a whole. The benefits to the few (those who produce what is being protected) are outweighed by the costs to the many (those who consume it). That this is true is wonderfully demonstrated by the argument which compares foreign trade to a technology which reduces costs. I humbly suggest that people here read about the Iowa car crophttp://faculty.tamu-commerce.edu/dfunderburk/428/readings/The%20Iowa%20Car%20Crop.htmThe politics comes in when we study exactly why it is that politicians seem so intent on choosing bad policy when it comes to things like immigration and trade. I've already mentioned the public choice argument. Another, less generous view, is that much of it is due to simple xenophobia.Either way: protectionism = bad. Whether in the market for goods, services or labor. Does a H1-B hiring restriction at banks help me, personally? Yes, but I guess that I've still got enough of the idealist in me to oppose it knowing that it does vast harm on the whole.

QuoteOriginally posted by: MatthewMThe fact is that the government ends up taking all sorts of actions which detract from the common good.The problem is how do you aggregate good? If one person makes an extra $150,000 and everyone else loses $1, then by what criterion is this not in the common good?QuoteSmall rent-seeking groups with well-developed lobbying structures can overwhelm consideration of the interests of everybody else.Yes. Your point being?QuoteAgain, economists are literally almost UNIVERSALLY opposed to tariffs and other trade barriers (and have been since the time of Adam Smith!). They are also almost universally opposed to wage/price controls. Yet trade barriers just won't die! Rent control still lives on in NYC!I think you haven't read many economists. There are entire schools of economic thought (Marxism, the American School, and import substitution theory) that are highly supportive of tariffs and opposed to wage/price controls. Yes, it turns out a lot of Marxism is destructive non-sense, but so is a lot of neo-liberal theory and those of the Chicago school. You may have a point that in 2000, the vast majority of economists in the United States were neo-liberals, but the vast majority of economists in the Soviet Union in 1925 were Marxists. Now you can argue that Marxism and import substitution are wrong and discredited, but I'd argue the same with neo-liberal policies.QuoteDon't get me wrong; I'm not in favor of a technocracy of economists. I cherish the right to vote and to have my voice heard. But democracies systematically choose certain bad policies in a startlingly consistent way.Define "bad." From the point of view of someone that benefits from rent-seeking behavior, policies that make them rich at the expense of everyone else are hardly "bad" in their view of the world. My experience is been that people work from self-interest. They first figure out what policies will make them rich, and then construct ideologies to defend those policies. So you have people actively advance capital mobility, but not labor mobility.You have to be careful because the wrong policies would leave you much worse off. If you are a small third-world control and first-world economists talk about the wonders of free markets, they barriers they will have you remove first of those that benefit the first world, and not your country.QuoteProtectionism is one of those policies.And so are immigration controls. If you point out that immigration controls make life worse for Mexicans, most people will nod their heads and say "so what?" If you point out to the shopkeeper that they are making things more expensive for everyone else, then they will also probably respond "yes, so what?" They'll define "public good" as "whatever is good for shopkeepers."QuoteFor those of you who haven't thought much about this sort of issue, might I suggest you read Alan Blinder's "Hard Heads, Soft Hearts" (you can skip the chapter on Keynsianism vs monetarism vs rational expectations vs supply-side economics).The basic reality is that I have a lot more money than I really deserve, and in any just and fair world, I'd be making one tenth of the amount that I do. I make as much money as I do not because I'm smarter or work harder than other people. It's just that my parents got lucky, and I ended up being born were I was. I really don't deserve my income, and quite frankly neither than practically all people living in the United States.But does that mean that I'm going to give it all away. No. Does that make me a cold heartless and selfish bastard, absolutely, but it does mean that I look at the world and who I am for what they are rather than run away from unpleasant truths.

QuoteOriginally posted by: MatthewMThe issue is that protectionist policies are bad for the common goodThat's only if you define the common good in a certain rather technical way. The problem that I have is that you seem to insist on defining "good" and "bad" in a certain way. An autoworker (or banker) that benefits from trade protection is not going to accept your definition of "good" and "bad." So you can point out that something is happening, get them to agree that it is happening, and in the end it still happens, because they define "good" and "bad" in ways that are different than economists do.QuoteEither way: protectionism = bad. Whether in the market for goods, services or labor. Does a H1-B hiring restriction at banks help me, personally? Yes, but I guess that I've still got enough of the idealist in me to oppose it knowing that it does vast harm on the whole.And you are not going to win political fights like this, because if you take these arguments to their logical conclusion, you end up with definitions of "good" and "bad" that people just will not accept, and if people reject your definition of the "common good" then you've lost.What you need to do to win a fight is to take the excess wealth that gets generated by removing trade barriers and then somehow spread it around so that it because obvious to people *individually* that they benefit from it. Also, arguing about H1-B restrictions is a mere and to me unimportant detail. The fact that you have *ANY* immigration restrictions at all is problematic from the standpoint you are taking. The economic arguments against H-1B restrictions in banks apply to *ANY* immigration restrictions, at some point people are not enough of an idealist to take the arguments to their logical conclusion.At this point you need to figure out what fights you can win, and what alliances and trade-offs you have to make to win those fights. If you go totally ideological and point to every single example of protectionism as bad and evil, then you aren't going to have the political alliances to get anything useful done.

Quote Yes, it turns out a lot of Marxism is destructive non-sense, but so is a lot of neo-liberal theory and those of the Chicago school. You may have a point that in 2000, the vast majority of economists in the United States were neo-liberals, but the vast majority of economists in the Soviet Union in 1925 were Marxists. Now you can argue that Marxism and import substitution are wrong and discredited, but I'd argue the same with neo-liberal policies.Neoliberalism is a political movement, not truly an economic one. As was the American school. As for Marxist economists, I have to simply roll my eyes.Dude, you work in an area which is premised on the basic fact that the market finds efficient ways of doing things. Trade gives net benefits because if it didn't it wouldn't occur.If you think that command economy style decisions are a good idea when it comes to international trade then I don't understand why the argument doesn't also extend to the domestic economy. And if that's the cases, why are you working in finance?This is NOT a political discussion. Freedom to trade increases welfare both domestically and externally. That's an economic fact. No serious economist disputes it now, none has really disputed it for the last century, and even prior to that it was the majority opinion.Bringing up "the Chicago school" is a red herring. Alan Blinder, whose book I suggested, is among the more "liberal" (read pro-government intervention) mainstream economists around. Yet he, like almost every other serious economist is pro-trade liberalization. I don't make the mistake of believing that economic principles can be proved in the same rigor as physical theories can be, but this is one of the few areas where economists basically speak with one voice. The figures I've heard are that ~98% of professional US-based economists basically oppose all trade barriers. The figures are likely substantially similar throughout the developed world. Consensus like that doesn't develop because trade liberalization is a fad.To reiterate, I truly do find it hard to fathom that somebody who's expressed a belief that his career in finance does social good (which I believe as well, by the way) doesn't also believe that the free movement of goods, services and labor is a large net positive.Anyhow, this will be my last post in this thread on this subject. I fear that continuing will lead the discussion further astray.

QuoteOriginally posted by: MatthewMNeoliberalism is a political movement, not truly an economic one. As was the American school. As for Marxist economists, I have to simply roll my eyes.You can't separate politics from economics. You really do need to read Marxist economists, because they come up with very good reasonable sounding arguments for their beliefs which turned out to be all wrong. Also Marxists have some very good insights on the nature of power.QuoteDude, you work in an area which is premised on the basic fact that the market finds efficient ways of doing things.Sometimes. I also work in an area where people oversell the benefits of markets so that they make more money. I think most economists in academia are too detached from the real world to say anything useful. In particular, working near markets gives me a lot of experience and personal insight in ways in which markets *don't* work and sometimes are *bad* things. It also gives me insights in how economic models are sometimes laughably imprecise approximations of what goes on. Just to give one obvious example, most corporations are classic command economies internally.QuoteIf you think that command economy style decisions are a good idea when it comes to international trade then I don't understand why the argument doesn't also extend to the domestic economy. And if that's the cases, why are you working in finance?Because it's not either or. I work enough in finance because money matters, and I want to learn about how things work, and people often vastly oversell markets. QuoteI don't make the mistake of believing that economic principles can be proved in the same rigor as physical theories can be, but this is one of the few areas where economists basically speak with one voice.It doesn't mean that they are right. Probably about 80% of economists in 1940 believed that free trade was a horrible thing for developing nations, and you really need to read their arguments. Truth is not determined by majority vote or even by consensus. In any event, if 99% of economists argued that the sky was pink, I'd wouldn't hesitant in saying that they were all wet, and economists often say things about markets that I find totally ridiculous because they contradict what I see in front of me.The thing I find annoying about economists is how few of them have any real exposure to markets. How many tenured economists have actually tried to run a business? Part of the good thing about working in markets is that it gives you real world insight. I don't care if 100% of the world's economists say that the sky is pink. It looks blue to me.QuoteTo reiterate, I truly do find it hard to fathom that somebody who's expressed a belief that his career in finance does social good (which I believe as well, by the way) doesn't also believe that the free movement of goods, services and labor is a large net positive.Generally it does, but like anything you can go totally ideological and take it too far. I think markets are generally a good thing, but you can take good things too far. There are dozens of ways in which markets can be abused and mis-structured to create major social problems. Once reason I have relatively little respect for traditional academia or academic economists is that a lot of them have spent all their lives in the university writing papers that are reviewed by other people that have spent all their lives in universities, and when they start talking about markets, sometimes utter non-sense comes out.

Well, as Dominic pointed out, the monopoly rents which have long been realized by Western civilizations is about to be ended with the free flow of information.Nevertheless, the British financial institutions have already been pseudo-nationalized.Having said that, the British HSMP program is a far more effective program than the bonded-labor H1-B work permits which is prevalent in the USA.

Also it's just not true that every economist since Adam Smith thinks that free trade is a good thing. Start with the wikipedia articles for import substitution and dependency theory, and you will end up with tons of economists that believed that free trade is a very bad thing. The idea that protectionism was a very good thing was sort of the economic orthodoxy until the 1960's when you had East Asia rise while Latin America fell apart.The other thing is that it is important to understand *why* markets are supposed to be a good thing, and my ideas on this are very heavily influenced by Janos Kornai and Ludwig von Mises. Markets are good because they allow for hard budget constraints and economic calculation. However, the problem is that you end up in situations that look like markets but in which there are no budget constraints and economic calculations (subprime mortgages). Also it's not clear to me how any of this economic theory works when you take into account risk, information costs, transaction costs, and agency effects.The other thing is that I really am not a fan of public choice theory since it makes a value judgment that "special interests" are "bad" which I think runs counter to the ideas of Pierre Bourdieu in which wealth and capital exist within social networks.

Does anyone know after the banks returned TARP money, are all hiring restrictions lifted immediately?

QuoteOriginally posted by: twofish Markets are good because they allow for hard budget constraints and economic calculation. H.What does that mean?

QuoteOriginally posted by: QuantVaderWhat does that mean?Why won't central planning work?von Mises - Without a pricing system, it is impossible to make economic decisions. If you want to decide whether to build a road over a mountain or around a mountain there is no basis on which ti make that decision in a centrally planned system because the situation changes too quickly.Kornai - Central planning will not work because the decision makers do not have "hard budget constraints." Suppose you are a central planner, and you want to build a road. Everything is fine. Now you want to build two roads. There is nothing keeping you from ordering another road to be built. The trouble is that then everyone orders roads, tractors, tennis shoes, etc. to be built, and so you end up with shortages. In a market economy, people have "hard budget constraints" you can't buy everything so you have to make choices.Note that none of these reasons have anything to obviously to do with the notion that protectionism is necessarily a bad thing. For that you have to go to welfare economics. There is a mathematical theorem that says that given some assumptions, and some definitions of "efficiency", "market", "equilibrium," that the market determined price leads to the maximum social good. The trouble like all simple models of the universe is trying to apply that model into a particular situation. There is a huge temptation to simplifying things to easy formulas like "Markets ALWAYS GOOD!!!!" "PROTECTIONISM ALWAYS BAD!!!!" but you find that in doing so, you lose the underlying mathematical rationale for what is going on.

TI was overly harsh... TwoFish - you do need to be a bit less mercenary.

QuoteOriginally posted by: MartingaleBusterTI was overly harsh... TwoFish - you do need to be a bit less mercenary.Why?It all depends on what you want out of life, and I want to die knowing that I lived. Mercenaries end up in some interesting places. Money isn't hugely important to me, but what I want is adventure and excitement, and I've gotten it. Mopping floors and cleaning toilets may not sound like much, but imagine mopping floors at the White House during the Cuban Missile Crisis, or cleaning the toilets during the Crash of 1929, and knowing that because you did your job, you changed a bit of history, and hopefully did something small to help save the world.I've very brutal with ideas, because ideas matter. I have (like everyone else) have it in my power to help save the world or to help destroy it, which is why it is important to just get it right, and to study history to make sure that we can figure out as much as possible from people before us that got it right, and got it wrong. It's an amazing time to be alive, and an amazing time to be in finance, because most of what we thought we knew about the world was just dead wrong, and right now we are bit by bit creating a new world from the ashes of the old. It's exciting, and it's also scary as hell, because once you realize how much power and control you really have, then the frightening thought comes up about what happens if you get it wrong. Bad finance can kill millions of people, and I don't want that on my conscience.A lot of the questions on this forum end up being "how do I beg." Please, please give me this job. Please, please admit me into this school. Please, please like me. I'll do anything, say anything, be anything, if you let me in. If that is how people want to live their lives then fine. At one point in my life, I just got tired of begging and pleading, and I found out that I really didn't have to do it. But once you figure out that you don't have to beg and plead, and that you really do have control over your own life, that you can often tell the committees and the bosses to go to hell because they need you more you need them, once you figure that out, then it's scary because you have to ask yourself what you really want.

QuoteOriginally posted by: twofishQuoteOriginally posted by: MartingaleBusterTI was overly harsh... TwoFish - you do need to be a bit less mercenary.It's exciting, and it's also scary as hell, because once you realize how much power and control you really have, then the frightening thought comes up about what happens if you get it wrong. Bad finance can kill millions of people, and I don't want that on my conscience.As long as what your intentions are good it doesn't matter what is the end result.You did the best that you could do, so there shouldn't be any guilty conscience.Would anyone punish a student if he flunks even after trying his best.One may feel bad or powerless that all the effort went in vain but life is not about feeling good.Even pain sometimes add depth to life and this is the attitude we need to have to face the crisis.

QuoteOriginally posted by: AbhiJAs long as what your intentions are good it doesn't matter what is the end result.I think that's bull crap. I don't believe that claiming good intentions will save me from damnation.If I was alive in 1965, I would have likely joined the Red Guards out of youthful idealism, and participated in the destruction of a nation. Being in banking in the early 1990's, I would have been involved in destroying Russia and setting the stage for the emerging markets crisis. Looking back over the last few years, there are some things that I could have done differently. Even now, I have political and economic views that make me indirectly responsible for the torture and mistreatment of political dissidents in China.The problem with "good intentions will save you" is that it encourages people to be stupid and passive. The best way of keeping a clean conscience in a world where "good intentions" is a defense is to be stupid and passive. If you don't ask any questions and you stay passive, then you don't find out how *you* are responsible for the mess, and how *by your inaction* you have made the world a worse place. The dangerous and disturbing thing about asking questions is that once you start asking questions, you find out how *you are responsible* either by your action or inaction for a lot of the bad things in the world. I look at my hands, and there is some blood and dirt on them that I'd like to get rid of.Part of the reason that getting a Ph.D. is irrational is that knowledge is a curse. Once you bite into the apple in the tree of knowledge then you must leave the Garden of Eden. Once you become educated and curious, you can no longer use the excuse "I meant well."If someone wants to live their life with eyes shut, thinking that they really can't change things and that a lot of the bad things that happen just aren't there fault, then that's a reasonable choice. But there are costs to that. Once you've convinced yourself that you really can't change the world, you end up begging and pleading a lot, and the curious thing is that you really *don't* feel better about yourself.The other thing is that if having a guilty conscience makes you sit back and avoid situations in which you end up making decisions that make you feel awful, then the people end up making those decisions will be sociopaths without conscience. At a grand level, you see this with Stalin and Mao, and at a lower corporate level, you see "little Stalin's" and "little Mao's" come to power. If you don't feel bad about laying people off and ruining people's lives, it's *much* easier for you to advance in the corporate and academic hierarchy, and one reason I choose to pursue money and power, is that there are some really scary and nasty people I'd like to keep out of power.QuoteYou did the best that you could do, so there shouldn't be any guilty conscience.Because I *didn't* do the best that I could do, and if I claim that I did, I'd be lying to myself. One rule of thumb that I have is that if I don't feel guilty about some part of a decision that I made, then I didn't understand the full ramifications of it.QuoteWould anyone punish a student if he flunks even after trying his best.I'm an intellectual masochist, remember. I *like* it when people punish me, because I'm not smart enough. I'm never smart enough. If I pass a test with flying colors, it was too easy. Give me a harder one. One reason that I like the world of business is *trying is not good enough*, it's about succeeding. I'm usually the dumbest person in the room, because if I'm not, then I need to leave and move to another room. The Ph.D. program is all about being locked up with people, whose job is to tell you how dumb you are, so that you internalize it and keep telling yourself how dumb you are. One other rule of thumb that I have is that the smarter you are, the dumber you feel, so if you feel smart, then you need to look some more to see what you are missing.QuoteOne may feel bad or powerless that all the effort went in vain but life is not about feeling good.I can choose to feel powerless or I can choose to feel guilty. I choose to feel guilty, because feeling powerless is a worse feeling for me. Also, one thing that I believe is that as long as you've learned something, or as long as you've added something to the collective knowledge of mankind, it's not a total loss. If you spend a lot of effort, and it blows up, well at least you've learned not to do that again, and if you write down what you've learned (like revolutionary centrally planned economies tend to put psychopaths in power) so that people can avoid making the same mistake, then you end up with some progress.QuoteEven pain sometimes add depth to life and this is the attitude we need to have to face the crisis.So if avoiding guilt leads to pain anyway, what's the point in trying to avoid guilt? Part of the reason I ended up in a position where I can either help save or destroy the world, is *that's what I wanted*. That's why I can't use the defense of *I didn't know what I was doing could destroy the world*.