most of the discourse on my dash rn seems to be not only assuming that investment banking is evil, but maybe assuming that everyone knows and agrees on this including investment bankers?
1) do people know what investment banking is? I sort of don’t but my impression is that most of it is like, helping companies issue securities and structure mergers and acquisitions. do you think that any existing publicly traded company is good for the world? guess how it raised money? with the help of investment bankers! (unless it’s Spotify or something idk)
2) honestly if a sector of the economy is large and profitable my prior is just that they’re providing value
3) I’m being kind of flippant but I do think most people are not operating from the premise that the basic functions of investment banking are crucial to the operation of an advanced economy
the cotton sector of the Southern economy was large and profitable
My issue was with #2 as well, though my pithy answer would have been “Well that or rent seeking.”
(Because it’s rent seeking.)
also it wasn’t the basic functions of investment banking that almost destroyed the global economy
Some points:
1) Goldman Sachs only comes up in the news when it does something bad. It does things all the time that I assume are pretty good, e.g. “underwrite the Microsoft IPO.” Sometimes it does bad things like “steal a ton of money from Malaysia.” Unsurprisingly, the evil and illegal thing gets a lot more press coverage.
But not only was stealing money from Malaysia illegal, it also seems like quite a bad business decision in retrospect! You have to think that they will train their next intern class to super extra please please don’t steal money from Malaysia. And this is the sort of thing you can avoid doing if you go to work in banking and are either non-evil or somewhat intelligent or both.
2) Okay, but wasn’t the global economy created by Goldman et al. in the first place?
I guess maybe you think something like:
finance, defined as the packaging up of time and risk and the intermediation between parties with different preferences w.r.t. these to facilitate trade, can be good; at its best, it enables mutually beneficial trades to allow investment and promote economic growth. however, packaging these up too cleverly leads to people taking on risks they don’t realize, making the financial system fragile and prone to blowups. individuals in the financial sector are incentivized to obfuscate their packaging and it’s hard to align these incentives correctly. therefore, the whole “finance” thing isn’t worth it.
(this is my guess/steelman, not an actual quote)
This argument makes sense to me, but seems pretty hard to evaluate. You weigh up all the good stuff finance has done over the past few decades against all the bad stuff?
(Not to say that this isn’t an important question. Just that I am super not an economist and I don’t feel qualified to evaluate it.
I scrolled through IGM to see if there was anything that seemed helpful. Not exactly; on whether we should break up the big banks, people seemed completely uncertain; on whether the general concept of finance is good people strongly agreed.)
3) I can see that the banking sector is problematic and has done some bad things! But it seems weird to think of working in banking as obviously evil and compare it to the SS and slavery when like, the economy is complicated and banking does a lot of good things as well.