The intrinsic value of a certain job

[MojoMan]

Given the financial meltdown, this little article http://www.thebigmoney.com/articles/making...ve-back-bonuses , and "outrageous" behavior with regard to private jets, posh getaways, and bonuses we're reading about now, I have a question for discussion.

 

What is the intrinsic value of certain jobs, especially in the financial services sector?

 

Certain jobs, to my myopic view, have value.

 

For instance, a construction worker is paid to perform certain physical labor that results in a tangible outcome. There is quantifiable value to that.

 

A doctor evaluates and treats 20 patients in a day. Assuming that he's competent, there is value in that.

 

An IT worker maintains a network to ensure the smooth running of an attorney's office. Yeah, that has value.

 

A cook at Denny's makes my eggs and pancakes. Ditto.

 

However, I am hard pressed to understand how certain financial services jobs actually have intrinsic value.

 

I can understand how an old-school banker is performing useful work by taking deposits, paying a low rate of interest and loaning that money out for people to buy houses/build businesses, etc. That is productive, instrinically valuable work for which s/he should be compensated commensurate to the amount of skill and work it takes.

 

However, some of the financial sector jobs, to me, seem useless and, if anything, counterproductive to society.

 

For example, I understand that there are some arbitrage guys who exploit different interest rates or currency exchange rates in various parts of the world to make money. Where is the value in that? I think this is counterproductive because if that guy is that anal-retentive and smart, he should use those strengths to do something productive. Or, am I so ignorant that I am missing the value in what he's doing?

 

Discuss.

[SheikYerbuti]

The hottest and most trendy job of the last 20 years (well, up until this year) is "Investment Banker", a job that creates nothing.

[driveby]

Day trader.

[driveby]

Lawyers in general, personal injury lawyers in particular.

 

[dmarc117]

i have discussed this with many of my peers, but we are not investment bankers. we either trade our own money or the firm we work for. and at the end of the day, our success is based only on much money weve made(or lost). its actually very shallow if you look at what we provide the world. i guess you could say we provide a market for others to trade with. and we pay taxes so we do provide something to the community. as an investment banker, you def have value to your investor.

[wiegie]

Theoretically, all of the finance guys should be creating value by decreasing risk, lowering information asymmetries, lowering the transactions costs involved in matching up savers and borrowers, increasing the liquidity of assets, and by helping to ensure that funds flow to the most deserving projects--all of which should lead to higher economic growth.

 

Obviously, there have been HUGH failures in many of these aspects over the last few years, but, overall, the financial sector does indeed contribute to higher economic growth (as much research, including some of my own, has found).

[MojoMan]

Theoretically, all of the finance guys should be creating value by decreasing risk, lowering information asymmetries, lowering the transactions costs involved in matching up savers and borrowers, increasing the liquidity of assets, and by helping to ensure that funds flow to the most deserving projects--all of which should lead to higher economic growth.

 

Obviously, there have been HUGH failures in many of these aspects over the last few years, but, overall, the financial sector does indeed contribute to higher economic growth (as much research, including some of my own, has found).

 

weigie,

 

I knew that you would respond in a reasonable and well-reasoned fashion. In a book I read about the meltdown, I finally understood how some of the "paper pushing" finance jobs do facilitate investment and credit and the movement of money and how that is productive to society.

 

However, with regard to my specific example of arbitrage, is there any value to society in that? And, is there any evidence that allowing money to move around easily is commensurate with the salaries and bonuses these guys were getting?

[westvirginia]

weigie,

 

I knew that you would respond in a reasonable and well-reasoned fashion. In a book I read about the meltdown, I finally understood how some of the "paper pushing" finance jobs do facilitate investment and credit and the movement of money and how that is productive to society.

 

However, with regard to my specific example of arbitrage, is there any value to society in that? And, is there any evidence that allowing money to move around easily is commensurate with the salaries and bonuses these guys were getting?

 

I can't tell you about your specific example in the dollars and cents way I'm sure weigie can, but I'm betting that the arbitrage guys are like the pro athletes. What those guys do has zero "intrinsic" value as far as I can see. They have a value because we are willing to sit through TV commercials, buy the spamshirts, etc. I would think arbitrage works the same way - these guys have value because the currency transactions they do make more money for the company than they're being paid by the company. The same reason any employee is kept, really.