Skill-Based or Bubble-Based Wage Differentials?

Arindrajit Dube says there’s a paper he wishes to write once the data become available:

Does Mispricing of Financial Assets lead to Mispricing of Human Capital?

Over the late twentieth century, the financial sector grew rapidly, and attracted higher skilled workers at an increasing rate. Existing work attributes this to growth in financial sector productivity, which raised the marginal product of higher skilled workers. In this paper, we investigate the role of mispricing of financial assets (from asset bubbles) in artificially increasing returns to skill in the economy in the context of a two sector general equilibrium model. A speculative bubble arises from heterogeneous beliefs due to overconfidence and short-sales constraints, and investors perceive an option to resell the stock to others with even greater valuations. If the financial sector is relatively more intensive in the use of skilled workers, this can lead to an inefficiently large portion of these workers going to finance, and an inefficiently high skill-wage differential. Using data from the United States over the 1980 to 2012 period, we show that (1) the growth in asset bubbles were particularly important in increasing the perceived marginal product of higher-skilled workers; and (2) with the sharp retrenchment of the financial sector following the 2008 financial crisis, perceived marginal products and wages of higher skilled workers fell substantially. Our evidence shows that a large part of the “skill biased technical change” identified by earlier researchers actually represents a mispricing of human capital due to inefficiencies in the financial market.

Comments

[Bruce Wilder]

We'll save our fares!
I've a cozy little flat in
What is known as old Manhattan
We'll settle down
Right here in town!
We'll have Manhattan
The Bronx and Staten
Island too.
It's lovely going through
The zoo!
It's very fancy
On old Delancy
Street you know.
The subway charms us so
When balmy breezes blow
To and fro.
And tell me what street
Compares with Mott Street
In July?
Sweet pushcarts gently gli-ding by.
The great big city's a wonderous toy
Just made for a girl and boy.
We'll turn Manhattan
Into an isle of joy!

[kthomas]

duh....

[robertdfeinman]

The whole area of productivity really needs to be reexamined in a post manufacturing era.

Obviously one knows how to determine productivity on an assembly line, but measuring productivity by how much business a stock trader does is problematical.

Even using some coarse measure like economic activity of a firm divided by number of employees makes little sense when one is dealing with intangible products.

At a minimum one should treat productivity trends for blue collar and white collar workers separately. If we did it would be easier to see if there has been any real productivity increase in the sector of the society that has seen its earnings stagnate. I would guess not, the last big gain in efficiency for these sorts of firms was due to the adoption of information technology tools.

Many areas like health care and other social services can't really improve productivity unless they lower the degree of service provided. Do we want overcrowded schools and nursing homes so firms can brag about "productivity" gains?

At some point a society matures and the amount paid for standard work has to stabilize in real terms. The idea that the economy will continue to grow and so will wages seems a bit idealistic.

[quantumfields]

Einstein wasn't productive as a patent clerk, though while he was condemned to sit at a desk he figured out the photoelectric effect which broke the ground for semiconductors.

People who go in to business generally speaking don't have a clue... and they aren't going to get a clue anytime soon.

[jfb2252]

robertdfeinman wrote:
Many areas like health care and other social services can't really improve productivity unless they lower the degree of service provided.

I will comment about health care. Based on morbidity and mortality figures, most first world economies are half again more efficient in health than the US. Administrative costs and the types of services, preventative vs acute, are primary sources of the efficiency difference.

Technology is another way to improve or hurt productivity. I'm sure you saw the recent British study showing that having one radiologist and a program reading a mammogram was as effective as having two radiologists read the mammogram. In the US one radiologist reads the mammogram and the false positive fraction is about 90%. If the false positive fraction can be cut to 80% with the software the cost of unnecessary biopsies is cut over half. (Assume 100 real cancers in 1000 mammograms for 90% false positives. With 80% false positives, 100 cancers in 500 mammograms. Unnecessary biopsies drop from 900 to 400.) What can hurt productivity? If MRIs are not much better than mammograms, they will not stop many biopsies and will add a large cost, for net decrease in productivity.

[Bruce Wilder]

robertdfeinman, I agree we need to get more serious and sophisticated in thinking about productivity.

Unit output per worker in direct labor was a seductively clear concept, but we've moved beyond that. The accounting custom of calculating direct labor in factory production, and then ladling overhead on top of that, like a layer cake, broke down more than a generation ago.

Many of the everyday products of our daily lives are fantastically cheap at the unit margin, even though markups disguise that fact.

Calculating unit output productivity is less important than figuring out whether we really need all that overhead, funded by the markup.

I would not suggest that it is all superfluous. Not for a moment. The enormous sunk cost investments made in research, design, production systems, marketing and distribution schemes have been important contributers to driving unit costs so low that unit output productivity is increasingly meaningless.

But, it remains true that we don't really have any good idea about whether the effort and investment we make in sunk cost overhead pays off. More than half the population is involved in salesmanship of one kind or another. Could we be better off, if we just dialed it all back.

At a time, when real incomes are declining on average, this becomes a more urgent question: could we intervene in ways that reduced nominal incomes, but increased real incomes? Is there a Pareto-opportunity available?

Increase paid vacation time across the board. Enact usury laws for credit cards. Tax advertising more heavily.

These kinds of measures, to put pressure on the hot air balloon, which is a large part of the economy not involved directly in production, might pay large "productivity" dividends.

[jm]

Designing financial instruments sufficiently complex as to seemingly transmute lead into gold, and crafting accounting and legal opinions that will support plausible deniability for the alchemists' claims that they were justified in believing that they had truly accomplished that magic, requires combinations of intelligence and deep mendacity (or capacity for self-delusion) rarely found. As the rewards are so enormous, this rare form of "skill" will be highly compensated.

[lark]

I was at one of the best technology companies for over a decade as an engineer and I've watched appalled as our economy has become more and more finance dominated. I've seen the tech companies hollow themselves out in response to the screeches from Wall Street. R&D budgets are slashed, even in good times. Outsourcing climbs the value chain.

The financials have been leeches on the productive economy, as well as a tsunami of bulls**t advice.

We're crashing because the financial infrastructure is no longer supported by a credible store of value. This by design, not by accident. We've spent a decade focusing on what Wall Street told us to focus on, and as a result hitting the skids.

[ken melvin]

jm - Thanks for that.

[anne]

"I was at one of the best technology companies for over a decade as an engineer and I've watched appalled as our economy has become more and more finance dominated. I've seen the tech companies hollow themselves out in response to the screeches from Wall Street. R&D budgets are slashed, even in good times."

Please explain what this actually means, if possible.

[lark]

"Please explain what this actually means, if possible."

For starters, HP recently chopped the budget of HP Labs. Commentary:

When Hewlett-Packard early this year reorganized its HP Labs research center, abandoning more than 100 projects to focus efforts on fewer than 30, executives acknowledged "angst'' among scientists. HP Chief Executive Mark Hurd insisted that "blue sky'' research was still a priority — provided there was a clear path to the marketplace.

HP's strategy may please Wall Street, but Silicon Valley technologist Judy Estrin says the shift is also symptomatic of a national crisis: the short-shrift given to fundamental scientific research.

This neglect, Estrin says in her new book "Closing the Innovation Gap," has created a kind of "root rot'' in the valley and the nation as a whole. Estrin, co-founder of several tech start-ups and former chief technology officer of Cisco Systems, argues that America's political and corporate leadership needs to quickly cultivate greater basic scientific exploration — or the world will be hurting for solutions when it needs them most.

link http://www.siliconvalley.com/news/ci_10394292

anne if you are not aware of this trend, you should broaden your reading. it's a commonplace in tech circles.

[Populist]

"Einstein wasn't productive as a patent clerk, though while he was condemned to sit at a desk he figured out the photoelectric effect which broke the ground for semiconductors."

Einstein was extraordinarily productive as a patent clerk. In the first place, he could evaluate patents at least twice as anyone else, so he could do his official job in half his workday. And in the other half he produced breakthroughs in physics. How much productive than that do you expect someone to be?

[Intellectual Property Observer]

I looked at this:
http://www.siliconvalley.com/news/ci_10394292

It seems in important ways naive to me. She seems to attribute e.g. the cutbacks in basic research at Bell Labs to a failure of vision. I would say rather that Bell can no longer capture enough of the benefits of basic research to make it economically justifiable. When they were a monopoly, any telecom-related developments in physics benefitted only them (at least, in the USA). Now, that is far from true. The same happened at IBM; the days of IBM's labs winning Nobel Prizes are over.

This is a loss to society overall, but it won't be fixed by exhorting people to vision.

Anne: hollowing-out also often refers to the loss of manufacturing capacity, often e.g. to China. No research, no physical production; all that's left is marketing and possibly some design functions. Many doubt this is a sustainable position.

[Patricia Shannon]

http://www.sciencedaily.com/releases/2008/10/081002172441.htm

ScienceDaily (Oct. 3, 2008) — Not only are doctors, nurses, and firefighters essential during a severe pandemic influenza outbreak. So, too, are truck drivers, communications personnel, and utility workers. That's the conclusion of a Johns Hopkins University article to be published in the journal of Biosecurity and Bioterrorism.

The report, led by Nancy Kass, Sc.D, Deputy Director of Public Health for the Johns Hopkins Berman Institute of Bioethics, provides ethical guidance for pandemic planning that ensures a skeletal infrastructure remain intact at all times. Dr. Kass says, “when preparing for a severe pandemic flu it is crucial for leaders to recognize that if the public has limited or no access to food, water, sewage systems, fuel and communications, the secondary consequences may cause greater sickness death and social breakdown than the virus itself.”

The authors represent a wide-range of expertise in several areas of pandemic emergency planning both at the state and federal levels. After examining several accepted public health rationing strategies that give priority to all healthcare workers and those most susceptible to illness, the authors propose a new strategy that gives priority to a more diverse group. “Alongside healthcare workers and first responders, priority should be given to the people who provide the public with basic essentials for good health and well-being, ranging from grocery store employees and communications personnel to truck drivers and utility workers,” says Dr. Kass.
...
Similarly, individuals and families who can afford it should do their best to prepare for any disaster. The paper notes, the more initiative the general public exercises in stockpiling several weeks' worth of food, water, paper goods, batteries medicines, and other needed supplies, the less vulnerable they will be to a break in the supply chain. In fact, the report emphasizes, it is important for leaders to communicate to the middle class and the wealthy that it is their responsibility to prepare for self-sufficiency in order to free up scarce supplies and allow first responders to direct their attention towards those too poor or vulnerable to prepare themselves.

The article lays out a set of ethics rules and principles to help guide and frame a pandemic response strategy that is evidence-based, transparent, fair, and recognizes the burdens the public may face. Dr. Kass points out the “consideration of ethics are critical not only in having respectful and inclusive discussion and engaging with the public fairly, but it also improves the likelihood of public health and medical success through increased cooperation and understanding of government plans.”

[melvin]

The recent release of government funds can only increase the ability to lend, but those with a lack of confidence in the future will refuse to borrow. A media campaign might trick potential consumers into believing that things will soon get better resulting in a jump start for the economy. But The public has been frightened by reports of banks going under and a depression looming on the horizon. Ordinary people are now in a panic and are holding onto their money like a shipwrecked sailor holds onto a life raft. It is difficult to cure a person that has been tramutized by the fear of becoming homeless and then forced to stand in a soup line. The economy will remain depressed until consumers regain confidence through time or the help of a good psychiatrist
.

[dd]

Yet another example of mis-priced financial assets transferring wealth of productive knowledge workers to over-paid financial workers: Einstein lost most of his Nobel prize money in a failed bond investment:
"The newly released papers reveal that he (Einstein) invested three-quarters of the money, about $24,000, in long-term bonds via the Ladenburg and Thalmann Bank in New York....But the value of the bonds was wiped out in the Depression of the 1930s...."
http://www.boston.com/news/world/middleeast/articles/2006/07/11/einstein_letters_reveal_a_turmoil_beyond_science/

[Patricia Shannon]

Thank you dd.
It shows the falsehood of judging people by their wealth.

[Dickeylee]

Yea Bruce!! Usury! Hell, I'm even leaning towards jubilee!

says...

Einstein was considered a 'poor worker' while he was working as a patent clerk.

He probably would have also been a terrible 'quant'.

[save_the_rustbelt]

Watching the Congressional hearing yesterday and today I would say we have some issues with senior executive compensation design.

We no longer value people who make things or do services so much, we place the higher values on those who shuffle money.

Some interesting fall out --- some lawyers are big winners the past few weeks, some are big losers.

And the top 20 MBAs who had the ticket to the top are now more than a little apprehensive.

The herd is shuffling.

[ken melvin]

Been there, done that - When ours was a production based economy, engineers ruled; finance, as it exist was kind of new; but even then they hated engineers. Engineers, being dumb asses, couldn't tell them, the finance types, how long it would take or how much it would cost to bring a new system/product on line and if they wouldn't/couldn't how in the hell were the finance types to know? With off shoring of production and engineering, by say 1985, engineers were as powerless as could be. Piled up everywhere looking for a job; you could hire them for a dime a dozen.

Before finance, BF, and when production was still onshore; the battle was with the bean counters, AKA, accountants (some say accountants are the genetic antecedents of finance types). The bean counters would convince mgmt. that the Company could save 2 cents per unit by using cheaper screws, not furnishing a manual, .... and this would amount to $2million/yr). Then, the problem was, the customer, having rather payed a little more for the better screws and the free manuals, found a new supplier and the Company went broke.

[cm]

Following up on lark:

One thing I have been told has been happening in several "tech" companies' research labs/depts is that researchers have been directed to work more closely with the product groups, effectively taking a larger role in productizing their research and/or prototypes, and perhaps even ongoing product development, while the product staff whose nominal role this is focuses more on product maintenance, support, and in cases helps with customer service. Obviously this is at the expense of research.

This shifting and redefining of job responsibilities goes hand in hand with cost cutting, hiring restraint, and ineffective offshoring models (where applicable) in manufacturing/service delivery and customer serving functions.

To some degree this is probably motivated by tech products becoming increasingly complex so that only highly experienced product staff or even the product/technology designers themselves can figure out subtle issues (and once the researchers are making the product, they are in the sole position to investigate). Another aspect is increasingly shorter product (revision) lifecycles (compare also rat race) not allowing most in the "value chain" to actually penetrate the product's features.

But the net effect is nonetheless job role overloading at the expense of "higher level" and forward-thinking job roles at every level.

In related news, employers asking ever increasing credential levels even for mundane jobs. It's related to the job overloading.

[Robert Edele]

The productivity of the our recent robber-baron style of finance is negative, much like casinos. No real wealth is created, but there sure is a lot of overhead involved in operating a casino or an investment bank.

The functions of a bank that are useful, such as being a safe place to store valuables or a way to make deposit-backed loans to sound borrowers, were the ones invented long ago. I cannot fathom any recent bit of 'financial innovation' that has had a positive effect on our society.

[dd]

ken melvin,
Thank you for reminding me of the Ford Pinto where the financial types had calculated the potential losses from tort suits versus the retooling costs of moving the gas tank to an impact resistant location. The financial calculations were correct. The actual monetary cost of the human life "value" and injury was indeed less than retooling and so the Pinto was not re-engineered. The first cases the defense was "human" failure; not gas tank failure (but oh my, the pictures of the victims required a very strong stomach). In fact the tort losses were not material to the financial statements; but of course very material to trust. It took awhile for Ford to recover the damage to image that was not factored into the original comparative estimates.

[ken melvin]

Thanks cm. Few seem willing to accept the reality of the employment situation, or understand the selection process to which you alluded. Race, age, education, ..., all are being used as the need for workers decreases. Still we have commenters hereon who think education will solve the problem of offshoring and automation, when the choice being made is whether to hire the highscholl grad at $11/hr or the Matsters Degree at $45k/yr.

says...

At this point a good education might include raising chickens and how to patch your clothes.

[cm]

ken melvin: Selection processes and discrimination in hiring were not my primary focus, but they certainly exist, and are a mirror image of apparently sufficient worker supply. Although from my vantage point the selection criteria are not as simplistic as race or age, but look more like a combination of a certain credential level/profile, "cultural affinity" (perhaps the modern day version of race and social group exclusion -- or perhaps the very same phenomenon?), and certain preferred "personality traits" considered desirable in a corporate environment. (Much of my information comes from that general background.)

Certainly the widespread acceptance of multiple overloaded job roles as well as accepting workloads below nominal credentials as well as additional "operational" workloads is not a hallmark of worker leverage. It looks like title inflation, but I'd say it's to a larger extent than acknowledged more easily measured and enforced "mundane" work assignments crowding out the more fuzzy "higher level stuff" for which there is no clearly defined standard, and the absence of which is not easily detected, more so when the "business administrators" have neither understanding nor interest in the subject matter.

With contracting credit supply and presumably accelerating cost pressures throughout the tech and consumer/business product supply chains, I don't expect this will improve but rather get even worse.

The only thing that I would expect would help is extensive (government?) spending programs creating enough demand to clear the "primary" labor markets.

[cm]

ken melvin: PS: of course some of those "selection criteria" correlate quite well -- positively or negatively -- with the criteria you named.

[Dwight]

I have wondered whether, in the US, the lag in wage levels for engineers and scientifically trained staff (0-15 years seniority) since 1990, as compared to wage levels of comparably trained (in terms of years of education) workers in other fields has not been the result of the former being paid wages established in an unsheltered global salary structure and the latter enjoying the benefits of a local bias. In other words, a 30 year old mortgage broker with an MBA in suburban Seattle was making better money than a Boeing engineer the same age with a master's in mechanical engineering. The former was serving a local market that paid a higher tariff while the latter was working for a corporation with global sourcing.
With respect to foot soldiers in the army of global finance, the salary structure was a construct of the urban developed world, even though the tenacles of the empire stretched worldwide. And I suspect many of those foot soldiers are about to find themselves as anachronistic as the condotierri.

[Roger Chittum]

Gee, I had a completely different interpretation of the ink blot. Here’s mine.

We’ve told ourselves that skills and education are what make the difference in economic growth and personal incomes. But over recent decades, the data show that’s less and less true. Still, we focus on education levels because we have those data, and we don’t have data that would enable us to explore other hypotheses.

Dube suggests that high and growing incomes are associated with hot industries, and folks in declining or cash cow industries get lower or stable incomes because we’re moving toward a global wage level. In financial services, they dared more leverage and more obfuscation of risk and thereby created huge gobs of money, revenue, and income. The industry expanded at a great rate and required many more people quickly, requiring it to pay up to hire good people away from other jobs; this raised wage levels in financial services from CEO to mail room, but of course mostly not in the mail room. The distribution of the massive earnings increases was largely limited to within the industry, including closely tied firms like law firms. (You don’t have to be the smartest guys in the room to avoid letting it trickle down.)

Like Dube, I don’t have the data, but I suspect this is a large part of the explanation for increasing income disparities. It’s not all JDs, MBAs, and Ph.D.s, just those in the hot industry, who have been the big gainers from what has happened in financial services. Dube wants to see the 2008-2012 data to see what retrenchment in financial services will do to the kinds of income data that are available. I’m more than curious also.

[Ryan]

BW,

Interesting, I daresay insightful post. This may seem a trifling comment to make, but perhaps that markup and overhead actually has a perceived value that makes it psychologically inseparable from the product itself. Perhaps a part of us enjoys being pitched and marketed to; after all, there are generally generic options to ever major product out there, yet they don’t seem to have nearly the market demand as big brands.

[Gegner]

In as much as a degree is more like a 'pedigree', where you went to school is far more 'valuable' than either your grades or the course you studied.

Case in point, a MBA from Harvard will open the doors to the corridors of power, while the same degree from you local community college is the key to an exciting career in convenience store management.

Ditto for payscales in financial management.

Would you trust large sums of your money to someone that was only making roughly twice minimum wage?

It's a 'perception' issue. The 'big' paycheck is what reassures the customer that the broker/dealer is 'worth it'.

It's the age old question of do you want to be operated on by a 'representative' doctor or the 'best doctor'?

More than somewhat bizarrely, money is the ruler used to measure who is the 'best'...even if they're grossly overpaid.

[a]

"Does Mispricing of Financial Assets lead to Mispricing of Human Capital? "

Of course.

[Charles]

All things being equal, I think that the conclusion of this "prospective" paper should be roughly correct. But it may miss one phemomenon : The reallocation of economic activity to different sectors : the economy can be seen as the production of :
- goods that have high skills contents (example : ipod, drugs)
- goods that have low skill content (example : house)
- services that have low skill contents (hairdresser, fashion designer, gallery manager, personal coaches, spas, all these futile things)
- service with high skill content (medical, education, law and of course, finance !)

If the governments decides to pump up the economy by improving infrastructure, encourage basic research, launch a vast plan to build renewable energies, this is going to be VERY skill intensive, especially on the engineering side. Maybe not the same skills, but a smart person is a smart person is a smart person. So we may end up redistributing the skill based wage differential among different skilled people rather than to non-skilled people.

[save_the_rustbelt]

Look at starting salaries for grads of elite law and MBA schools for say 2002 - 2007 (this trend will slow for a while).

We get more of what we reward.

We reward people who move money, at least until July of 2008.

[ScentOfViolets]

One thing I have been told has been happening in several "tech" companies' research labs/depts is that researchers have been directed to work more closely with the product groups, effectively taking a larger role in productizing their research and/or prototypes, and perhaps even ongoing product development, while the product staff whose nominal role this is focuses more on product maintenance, support, and in cases helps with customer service. Obviously this is at the expense of research.

While I agree with this, I think there is another, more fundamental problem at work. Consider, for example, Big Pharma and it's claims that it costs hundreds of millions to billions of dollars to develop a new drug. Yes, we know that their actions are not consonant with their words, but it's also a fact that new drugs that are improvements over the old are getting harder to develop. There is some thought in these circles that all the low-hanging fruit has been picked, and that further significant advances will require tens to hundreds of billions of dollars (iow, something only a government or quasi-governmental agency can afford.)

The same with Moore's law in all of it's formulations. While everything from speed to memory to cost still seems to be on an exponential curve, most people predict it bottoming out abruptly in no more than ten to twenty years. This also applies to automobile performance, mass manufacturing techniques, speed of personal transport, etc. More generally, it seems that for a period of perhaps half a century, a lot of curves in the technical arts were exponential, and only now and at about the same time (such is the nature of the exponential function) are we entering the declining slope of what is really a sigmoidal curve. To put it another way, all of the easy stuff, stuff that a couple of generations were raised to assume was the product of a natural and typical technological progress, is just about done. Now it gets harder. More and more effort will have to be spent on smaller and smaller increments of change.

Instead of a future of insanely advanced medicine, energy too cheap to meter, extremely long life, easy travel to other planets (or stars), robotic servitors owners can fall in love with, a per capita standard of living that the Sultan of Brunei would envy, most people will end up with a standard of living that won't be too different from the upper middle class of twentieth century America.

Iow, don't look for Progress to bail us out of any more difficulties. What needs to change are people's habits and expectations. And part of that is the realization that achieving real wealth simply isn't feasible for the vast majority of people, that high concentrations of wealth in a minute fraction of the population are not good for _anyone_, and that expectations based on consumerism are unrealistic in the extreme over the long run.

[LJR]

Ummmm. Let me Palinize your argument.

Fresh out of college physics majors without a chance of hell to find good paying employment in their field get overpaid to sit in the back rooms and make up scientific sounding fairy tales for the Dickie Fulds.

These are the schmuckquants who OUGHT to be bringing fusion power to our doorstep.

I fail to see why using one hundred dollar words to explain two bit ideas is worth you or your reader's time.

DUH!

[cm]

ScentOfViolets: Definitely much of the low hanging fruit is picked, and the bar has risen, which pretty much translates to further advances requiring more complexity and more extensive "cross functional" and "interdisciplinary" cooperation, as further progress is beyond the single individual or small group. This is where limits of large social organizations kick in.

At a smallish to medium scale, it expresses itself as infighting, disputes over competency or who's in charge, and failure of "isolated" efforts to make progress, i.e. the hallmarks of corporate politics and stagnation.

OTOH, but on the same topic, there is a substantial body of research/innovation that has been accumulating in drawers over the past decades, and which has not (yet?) been translated into new products and methodologies. To some extent it is because of lack of "need" (existing products/methodologies perceived as "good enough" for current business paradigms and business volumes), but also because of social limits -- failure to reach corporate or industry consensus about new directions, or failure to implement transitions in the face of people with interests and/or careers invested in the current paradigm.

[cm]

BTW the latter phenomenon is not limited to politics or commerce. You can even see this in the supposedly non-commercial "Open Source" movement(s), where projects founder or stagnate at a certain stage, or where fights for leadership or vision lead to split-ups that are occasionally publicized.

[cm]

Second afterthought: I suspect that at least some "advanced" things have complexities of a such a sort that they are beyond the individual or small groups, but also defy decomposition into independent subsets that can be distributed to relatively "loosely coupled" larger groups.

It is then not strictly impossible to do them, but "economically/socially infeasible" usually comes close enough.

says...

Yes.
The important thing is to retain and build upon intangible assets. Financial assets are the last step in the production process. In order to get there, we have to have knowledge, solid working relationships, creativity, our health, etc. We can't lose those things; in fact, we should be on a mission to build them.

http://www.margolin-consulting.com/2008/09/your-financial.html

And get organized. I will be posting that shortly, but the gist is: our financial system doesn't explicitly measure the creation of the building blocks from which financial return is generated.

[Patricia Shannon]

cm
In regards to competition within groups retarding progress.
I used to think this is the way human nature is. Then I started seeing research about differences between cultures, or even between classrooms.
See the book "No Contest: The Case Against Competition", by Alfie Kohn. It didn't tell me a whole lot I hadn't already learned, but was an excellent compilation of various studies.

Those who have studied it say the U.S. has one of the highest rates, maybe the actual highest rate, of interpersonal competiveness among countries studied. Meaning, we think that there must be a single winner, with everybody else losers, and it it very important to be that winner, and very shameful to be a loser.

More cooperative societies may be better equipped to create more complex solutions.

[andthecowgoesmoo]

Hmm, sounds like a really interesting paper, but didn't they just admit they assumed a conclusion before performing the research?

[cm]

Patricia: I grew up in a society where the standard of living was generally adequate but quality of life was overall perceived mediocre, and there was little realistic opportunity to obtain a substantial edge in creature comforts over others, in any which way. As a consequence, there was little competition and a general attitude of "live and let live" -- for a large part letting each other focus on private pursuits and avoidance of hard work. New entrants into the labor market would catch on to this real quick (except, how shall I put it, the "pragmatically challenged").

In the "West", the stakes are much higher - playing the "game" properly, or merely lucking out, will get you a considerable edge in those regards. Conversely, refusing to "play" will largely get you excluded and trampled over.

In short, competition is a function of perceived exclusive gain (or exclusive loss avoidance). If there is no such perceived differential.

[cm]

That should have been "if there is no such perceived differential, nobody will bother to compete". (And in fact, walk the extra mile beyond a minimally required or enforced effort level.)

[Real Person from the Real World]

I've noted this in other threads, but in some HR situations, mention of changing a job to get better pay will lose you the opportunity. "passion" is what counts. And yet when we get to economics, we talk about *wage differentials* Apparently, financial jobs, and professional jobs (doctor, lawyer) are about the money, while everyone else is a commodity working for "passion" or competing for a *good it* based on commodity skills.

To get the chance for an interview, people lie and exaggerate on resumes. Everyone, even someone looking for a flunky job, has a resume (which no one reads). Executives go to headhunters, who do the leg work, and commodity body shops exist where vendors get a cut of crappy to middling wages, but produce a guaranteed product of sorts, based on commodity computer skills testing. VMS systems abound, to try to keep things neutral, while foreign-born vendors chat under the table with compatriots to get an edge. Books on how to ace that interview, or write a better resume abound. As does advice on how to answer the weird weed out questions favored by some HR.

Media sends out alarms that the school system will be in trouble, so colleges scramble to sell course to desperate people who want to change careers and go into teaching, only to find that the schools prefer younger kids out of college who are cheaper, and are into the latest educational fads, not some oldie who learned by rote 30 years ago.

Getting a decent job in the US is getting very difficult indeed. Money for the job is based on the job. Commodity jobs (the vast majority of jobs) get commodity wages. Rock stars at the top end, break the bank, because their cronies vote their pay. And since the Republicans have tried to privatize everything in sight, including health (HSA), and money is god, we paid Wall Street big bucks.

[Patricia Shannon]

cm says...

Patricia: I grew up in a society where the standard of living was generally adequate but quality of life was overall perceived mediocre, and there was little realistic opportunity to obtain a substantial edge in creature comforts over others, in any which way. As a consequence, there was little competition and a general attitude of "live and let live" -- for a large part letting each other focus on private pursuits and avoidance of hard work. New entrants into the labor market would catch on to this real quick (except, how shall I put it, the "pragmatically challenged").

In the "West", the stakes are much higher - playing the "game" properly, or merely lucking out, will get you a considerable edge in those regards. Conversely, refusing to "play" will largely get you excluded and trampled over.

In short, competition is a function of perceived exclusive gain (or exclusive loss avoidance). If there is no such perceived differential.

Thank you for sharing your experience in another culture. As in most areas, this is not a single factor, one way or the other, situation. I do believe that people should be able to do better if they work harder and better. That does not require cutthroat competitiveness. Actually, it does not require competitiveness at all. Different people will natually value different things. People who excel and make breakthrus are usually driven by a passion for their work, or an orientation towards achievement for the satisfaction of achieving. That is not the same as satisfaction because of beating somebody else. We are seeing in the financial sector the results of extreme inter-personal competiveness. It's not good. Also, from personal experience, people who are highly competitive can be harmful to a business because they may sabotage other people to make themselves look better. A member of a sport team who is highly competitive with their teammates will be less valuable than someone with lesser talent who is cooperative with the team. If Simon & Garfunkel weren't so competitive with each other, they would still be making great music together that would be better than each alone.

Consider a healthy family. They will work together w/o being highly competitive with each other.

And I don't consider the U.S. to have a high quality of life. That is related to standard of living, but definitely not the same.

[cm]

Patricia: Competition is always over scarce (actually or perceived) things. Where I'm coming from, people of course competed -- aside the universal competition for the most attractive mates, the best spots on the beach, etc. people went after undersupplied consumer goods/services (going shopping during work hours, using "connections", building relationships or paying bribes to sales/service/warehouse staff etc.), or "competed" at work to get into the most interesting or prestigious projects, by playing office politics or what have you.

But there was little in the way of trying to engineer individual success in business as a vehicle of attaining better circumstances.