What jobs are available for Astrophysicists?

[TheJoninator]

I live in the UK. I'm planning on becoming an Astrophysicist. I was wondering, where could I work and what is the salary like? By the way, I live in the UK but feel free to talk about America. Can I work in Universities?

 

[eri]

In the US, astrophysicists work for colleges and universities, national labs and observatories, and NASA. You'll need a PhD in astronomy, astrophysics, or physics. There are more PhDs than there are jobs for them, so many people leave the field each year. Most jobs require 2-6 years of postdoc experience before you can apply for a more permanent position; postdocs typically pay in the 35k - 55k range, and a starting position somewhere would pay between 40k (most colleges and universities starting salary for a professor is 40k - 70k) and 120k (NASA civil servant). Most astronomers don't make 100k a year before they retire.

 

[twofish-quant]

In the US, astrophysicists work for colleges and universities, national labs and observatories, and NASA.

They also work for investment banks.

Most astronomers don't make 100k a year before they retire.

Starting salary for a Ph.D.-level quant at an IB is $150K.

 

[jspenuk]

They also work for investment banks.



Starting salary for a Ph.D.-level quant at an IB is $150K.

Anybody seriously thinking about this type of job should first see the universally acclaimed documentary:

http://www.rottentomatoes.com/m/inside_job_2010/

There are not many (pseudo-)jobs that are more damaging to society.

 

[TheJoninator]

Anybody seriously thinking about this type of job should first see the universally acclaimed documentary:

http://www.rottentomatoes.com/m/inside_job_2010/

There are not many (pseudo-)jobs that are more damaging to society.

Well, thanks for ruining my career choice...

 

[twofish-quant]

There are not many (pseudo-)jobs that are more damaging to society.

So the movie claims. Some of us disagree with it.

The thing about finance is that it has a pretty major impact on the world. Personally, I don't think that there are more crooks and incompetents in finance than in other industries, but if you have bad people in finance the consequences are huge. But it also works the other way. One reason I like my job is because I can see what I'm doing making the world a better place.

You can really screw up the world if you do finance wrong. That makes it more important to find people that can do it right.

 

[twofish-quant]

Well, thanks for ruining my career choice...

You *should* see that movie and talk to a lot of people that thing that bankers are the scum of the earth. Then talk to people with different views, and then figure out what you want to do.

Personally, I happen to be very much of a socialist and a fan of Karl Marx, and I don't think that banks can function properly without heavy government regulation, and I'm quite worried that the US is heading for a rich/poor society, in which the rich get everything and most people get nothing. Laissez-faire capitalism just doesn't work.

The problem is what to do about it, and there you get into interesting and difficult questions.

If someone offered me a decent job as some sort of university professor or high school teacher, I'd quit and do that. The trouble is that those jobs are not out there, and starving myself aren't going to make them appear.

You can say a lot of bad things about Wall Street, but one good thing about it is that it keeps rather large numbers of astrophysicists doing something technical until society figures out something more useful to do with us.

Personally, I'm all for taxing bankers more so that you have more money for high school teachers and graduate students, but I'm finding it odd that so many people seem to disagree with me on this. Barring that, my career plan is to save enough money so that in about five to ten years, I can retire early and then do astrophysics for the rest of my life.

If you are trying to argue that there is something basically wrong with the financial system and with society, I'll agree with you. One of the reason that Marx is such an interesting person is that he points out the obvious fact that people with money and power will use said money and power to get more money and power. The big problem with Marx and his successors is that the solution they offered "i.e. shoot the bankers" doesn't work. If you shoot the bankers you end up with a lot of economic destruction, and worse yet, you don't solve the problem since you end up with a new class of people who use their money and power to get more money and power. Calling for a mass uprising of the people, doesn't work because it turns out that people need leaders, and if all of the leaders are within the power elite, then they aren't going be rocking the boat.

I'm not sure how to fix this problem. So getting to the "smaller question" of what *I* should do, I've figured that it does no one any good if I just refuse to take the money and live in a cardboard box. I think I'm doing less social good than if I were to be working as a professor, but I'm still doing some good.

The hard part is figuring out what to do with it. One of the problems with society is that there are fewer options for astrophysics Ph.D.'s than they should be, and even fewer that offers a way to change the world for better or worse the way that finance does.

One of the things that I find fascinating about finance is that you end up with hard problems. A lot of those problems turn out not to be technical but moral and ethical. Am I a bad person for working in Wall Street? I can come up with reasons why not, but as you can see, I'm not completely sure. There's part of me that really worries that I am a bad person for taking the money. On the other hand, being a little worried is not enough for me to go into my bosses office and resign. If you want me to quit my job, then you have to do a lot more to convince me that I'm doing Satan's work.

 

[twofish-quant]

One other way of thinking about it is that working in finance is a post-post-post doc.

One thing that I figured out in college was that everything turns out to be about money. Given that money is so important, it's logically to be somewhere that you can be educated about how money works.

 

[chiro]

One other way of thinking about it is that working in finance is a post-post-post doc.

One thing that I figured out in college was that everything turns out to be about money. Given that money is so important, it's logically to be somewhere that you can be educated about how money works.

twofish, I have a lot of respect for you and your insight and advice you give to other members including me, but I have to ask you how you think you are helping society out when the following is happening (or has happened):

1) Mortgage-backed securities
(a) Were made to people that could given their circumstances upon entering into a legally binding agreement, would never ever pay off the debt (especially after the teaser interest rates expired)
(b) Were solved to investors from financial institutions, while those some institutions took out insurance that bet that the same investments would go belly up
(c) The paper work on these securities was in a large number of cases simply non-existant or outright forged
(d) Was rated AAA: For christ sakes only people like Oil Companies and stable governments get AAA ratings!
(e) Were sold to investors in a deceptive manner (ie outright fraud)

2) Derivatives
(a) Completely unregulated
(b) Allows people to obtain contracts that are naked and short
(c) Has an estimated value of 1.5 quadrillion dollars (1500 trillion). The worldwide GDP is what 80-100 trillion? How the hell is it legal to make products that are more than 15 years of total GDP?
(d) A lot of which do not serve any social purpose at all. As an example the insurance that most people are familiar with like life insurance or car insurance or income insurance serves a social need: A husband dies and his widowed wife still has a roof over her head and can feed her children. Nowadays you can get derivatives that have a contract to claim funds on things that the holder of the contract DOES NOT EVEN OUTRIGHT OWN. How the hell does this benefit anyone and how the hell is it even legal?

One pointer to derivatives. A hedge fund known as Long Term Capital Management was started by the guys who created the framework for derivatives. So what happened to them? Wall street had to bail them out. The one firm with probably the highest collective IQ in finance got bailed out. But we still use models based on their work. If that doesn't indicate something I don't know what does.

4) Financial law

There used to a be a law that was a kind "antitrust law for financial institutions". It was abolished. Now look at what has happened. It wasn't created for no reason you know.

3) Accounting standards
(a) They can be deceptive and do not always reflect the true numbers. Look at what Enron did.

Now I'm not completely pessimistic despite my above comments. There are a lot of businesses out there like banks that do good things for different segments of society and there are a lot of people in finance that have a conscience, but the truth is that there are players (and they are big ones) that have gotten laws changed, have used business practices that have destroyed large parts of society (even entire countries), have committed outright fraud (call it whatever you want, fraud is fraud), and have for the most part gotten away with it.

I don't know your exact function twofish or in what capacity it entails, but I think you would be naive to think that these people who are above the law really give two hoots about Joe Q public and its prosperity.

 

[EntropicLove]

One other way of thinking about it is that working in finance is a post-post-post doc.

One thing that I figured out in college was that everything turns out to be about money. Given that money is so important, it's logically to be somewhere that you can be educated about how money works.

From your perspective it's understandable and from any subjective perspective given the nature of the current system (we all have to survive). I've always reasoned it ends up being about providing value to society that then is made liquid by consumers (good or service) rather than simply knowing about how to hack system(law/policy, machination, "cooking the books", instruments etc). I've seen time and time again, in Wallstreet, the incentives are so high, that people buckle and exploit system--far too complex open-system to be transparent. Maybe there needs to be another Elliot Spitzer haha. In reality, I could be inaccurate in my interpretation of the system since my main focus has been physics.

 

[twofish-quant]

twofish, I have a lot of respect for you and your insight and advice you give to other members including me, but I have to ask you how you think you are helping society out when the following is happening (or has happened)

Because I'm doing my job right (or at least trying to). When all hell was breaking loose in 2007, I was thinking to myself, "things could be worse." You had massive chaos and destruction, but there were areas in which things didn't fall apart, and that kept the world financial system from totally imploding.

1) Mortgage-backed securities

Without mortgage-backed securities, it would be impossible for *anyone* to get *any* mortgage loans. The idea behind the MBS is that you package mortgages into bundles that are easy to sell. Now the problem was that people made getting mortgages too easy and a lot of people that got mortgages shouldn't have gotten them, but the solution to that is to tighten regulation at the retail level, and not make it effectively impossible to issue mortgages at all.

Your bank has about 20% of your money in MBS. The reason banks hold MBS rather than straight mortgages is that if you go to an ATM and you want your money, it's hard to sell a mortgage. If you put the money into an MBS, then when the bank runs low on cash, it can immediately sell the MBS it has. Also pension funds and insurance companies put a lot of their money into MBS (the good kind).

Now during the crisis, people suddenly got scared, and one thing that happens when you think that something is worthless is that it becomes worthless. People suddenly looked at every MBS, and thought sell, which was a problem since 20% of a bank's money is in MBS (70% is in straight loans and 10% in cash). Once you burn through the 10% cash, if you have MBS's and loans which no one will buy, then banks start failing.

So what the government did was to buy up MBS, wait until people calmed down, and it's been able to make a small profit selling them back. People are trying to figure out what to do about mortgage-backed securities, but it's not a obvious how to get rid of them, and not obvious that we should even try.

(d) A lot of which do not serve any social purpose at all. As an example the insurance that most people are familiar with like life insurance or car insurance or income insurance serves a social need: A husband dies and his widowed wife still has a roof over her head and can feed her children. Nowadays you can get derivatives that have a contract to claim funds on things that the holder of the contract DOES NOT EVEN OUTRIGHT OWN. How the hell does this benefit anyone and how the hell is it even legal?

Because an airline wants to be able to lock in the price of oil in one year, and so he buys a contract of oil futures. The airline hasn't purchased the oil, but he buys a contract to stabilize the price of oil. Similarly a farmer that wants to lock in the price of wheat will buy futures. He doesn't own any wheat yet (because it hasn't been grown). There's also currency futures and options. Interest rate futures and options.

Also in many countries, derivatives function like mutual funds. Rather than buy a mutual fund with a basket of N stocks, you buy a derivative contract that targets the price of the stock. The US has rather restrictive laws on who can buy derivatives, which is why most of the stuff gets sold in London.

Derivatives are largely unregulated in the United States, because it's illegal to sell more derivatives to retail investors, and people who can buy derivatives (and you need a million+ dollars to be an accredited investor) presumably know what they are doing (although we can question that). The theory is that if you have a million dollars, then you don't need government protection since you can hire your own people to protect you. There are weaknesses in that theory.

The one firm with probably the highest collective IQ in finance got bailed out. But we still use models based on their work. If that doesn't indicate something I don't know what does.

No we don't. No one has used Black-Scholes directly since 1987. The models that are in use a lot of the ideas of Black-Scholes, but they all have corrections for the very serious known problems. Also for risk management, it's questionable how well Black-Scholes works as a framework at all, so people use other things.

It should also be pointed out that what got LTCM in trouble had nothing to do with Black-Scholes. LTCM was also not heavily invested into derivatives.

Also, common sense and humility are more important than IQ.

There used to a be a law that was a kind "antitrust law for financial institutions". It was abolished. Now look at what has happened. It wasn't created for no reason you know.

Glass-Steagall. It was an American law that prevented US banks from being both commercial banks and investment banks. Personally, I don't think that it had much of a real impact because:

1) It's an American law. One reason that it was repealed was that most other countries (chiefly Germany) never had anything like that. Also some countries in which did well (chiefly Canada) repealed Glass-Steagall like restrictions around the same time that the US did. The only two countries that have these banking restrictions are China and Israel.

2) if you look at the banks, the ones that got into big trouble (Lehman and Bear Stearns) were stand-alone investment banks. Same with Washington Mutual. WaMu had no investment bank operations. By contrast, Bank of America and JPMorganChase were is relatively good shape pre-crash.

One good/bad thing about different countries is that different countries have radically different financial systems. In the US, people in the 1930's believed that the cause of the depression were that banks were too big, and so the laws that came into effect made sure that the banks stayed small. Conversely Canada believed that banks were too small, so they set up their laws to favor a few big banks. Personally, I don't think that it matters that much.

3) Accounting standards
(a) They can be deceptive and do not always reflect the true numbers. Look at what Enron did.

Sure. Sometimes to figure out the true situation you almost need a Ph.D to figure out what is going on. Which is why people hire Ph.D.'s.

The truth is that there are players (and they are big ones) that have gotten laws changed, have used business practices that have destroyed large parts of society (even entire countries), have committed outright fraud (call it whatever you want, fraud is fraud), and have for the most part gotten away with it.

True enough. However, if you want to have effective regulation, you have to know the industry. This creates a problem called regulatory capture in which the people that can talk intelligently about an industry are all employed by said industry. I'm not sure really how to fix the problem.

Finance can do a lot of damage, but it can also do a lot of good. Bad finance has destroyed economies, but good finance has created them.

I don't know your exact function twofish or in what capacity it entails, but I think you would be naive to think that these people who are above the law really give two hoots about Joe Q public and its prosperity.

There are people who do, and people who don't. You have a choice as to who you work for, and I've chosen to work with and for people that I think really worry about the consequences of our actions, which is perhaps why we did less badly than other companies when the hammer fell.

One thing that you very quickly figure out when you study finance is that no one is an island. If someone gets into financial trouble, even if they were stupid, it impacts you. Conversely, if the average person makes more money, it's good for you if you work in finance since you have more money to manage.

Personally, I'm terribly, terribly worried about the direction that the US is heading. I don't think that the US is spending enough money on infrastructure, there's too little money going into research, elementary school teachers should make more money and investment bankers should make less. You can fix the problem by taxing investment bankers and giving the money to public schools and graduate students, but Congress isn't listening to me.

But I don't think anything is going to be helped if I quit my job.

 

[twofish-quant]

\I've always reasoned it ends up being about providing value to society that then is made liquid by consumers (good or service) rather than simply knowing about how to hack system(law/policy, machination, "cooking the books", instruments etc).

One reason that physicists and computer programmers get hired by banks is that physicists tend to be good at looking at a very complex system and figuring out how to "hack" it. You can hack the system to do bad things, you can hack the system to do good things.

One thing about the finance system is that like any complex system it came about by a system of ad-hoc evolution than by any master design.

I've seen time and time again, in Wallstreet, the incentives are so high, that people buckle and exploit system--far too complex open-system to be transparent.

So change the incentives. Also any system which assumes that people will be saints is just not going to work.

Maybe there needs to be another Elliot Spitzer haha.

Politicians have their own agendas. Spitzer and Cuomo and every other politician is after power and sometimes that involves putting together a show in which you punch a banker. Being power-hungry is not necessarily a bad thing if you are in a system in which lust for power can be focused into doing social good.

In reality, I could be inaccurate in my interpretation of the system since my main focus has been physics.

Curiously, I ended up finding finance fascinating for the same reason that I found physics fascinating. Money influences my decision making, but it's not the primary motive. If someone gave me a lot more money, but I'd have to spend my day putting together powerpoints, I wouldn't be interested.

The reason I find finance fascinating is because the world financial system is this horrendously complex system that no one fully understands, so the part of my that wants to figure out the big bang or supernova also gets interested in figuring out how the system (or various parts of the system) work.

You put a card into an ATM, colored piece of paper come out, and then you can exchange those pieces of paper for goods and services. That's really, really weird. So what happens behind the ATM? Where does that paper come from, and when the ATM says that I have $X in my account, what does that really *mean*?

I got interested in physics when I was very, very young, and I got fascinated by the question "what is time?" and "what is space?" Around the time I was in college, I noticed that whenever I had a question about why we could or couldn't to something people always seemed to mention this "money" thing. So I got curious and starting thinking about "what is money?" You'd think that the answer is "money is that colored piece of paper that you have in your wallet." But that doesn't work, because I've been able to "exchange money for goods and services" by swiping a piece of plastic. I'm not sure what money really is, just like I'm not sure what space is or what time is or what gravity is.

 

[twofish-quant]

From your perspective it's understandable and from any subjective perspective given the nature of the current system (we all have to survive).

One point here, I'm doing a lot better than surviving. I have enough money, so that if my boss ordered me to shoot kittens, I could quit. One reason moral and ethical issues come up is that I can't claim that I'm doing what I'm doing because I'm forced to do it.

But morality and ethics turn out to be a bit tricky. If my boss came up to me with a gun and ordered me to shoot kittens, then you'd have an obvious bad situation, in which it's clear what is going on. Most real situations are a lot less clear, and it's pretty easy to come up with a situation where you can confuse the issue. It *could* be that I'm making the world a worse place by doing what I'm doing, and I should quit. However, you can also argue that by quitting, I'm making the world a worse place. I've managed to convince myself that the latter is the situation, but of course I'm hardly unbiased about this.

But just because I have a strong financial interest in convincing myself that I'm helping the world doesn't mean that I'm wrong

 

[Delong]

I got interested in physics when I was very, very young, and I got fascinated by the question "what is time?" and "what is space?" Around the time I was in college, I noticed that whenever I had a question about why we could or couldn't to something people always seemed to mention this "money" thing. So I got curious and starting thinking about "what is money?" You'd think that the answer is "money is that colored piece of paper that you have in your wallet." But that doesn't work, because I've been able to "exchange money for goods and services" by swiping a piece of plastic. I'm not sure what money really is, just like I'm not sure what space is or what time is or what gravity is.[/QUOTE]

That's interesting because it reminds me of why I started getting interested in biology. The same mind in me that found astronomy and math interesting was also the same mind that wanted to understand ecosystems and evolution and how life works. It seems to me that whatever money is it has something to do with what society values most at the moment. Whoever is making the most money (sustainably) is whoever that is making the greatest contribution to society. I once heard Albert Einstein say that we should strive not to be a success but to be of value. And I want to be of value to society, I want to make a contribution that will increase the quality of this world. Making money is important but I think what is the even more important thing that lies at the heart of making money is doing something of genuine value to all people. Something that will impact their lives in a genuine way. Wherever the money flows is where I think society values or needs the most at the point.

So I think money in many ways is a system humans have made that motivates and inculcates people to produce and distribute things of value. (This is all pretty obvious but I'm just thinking to myself)

And I want to make the world a better place, it's something I have wanted since I was a kid. I wanted to do it through science. So I hope I can :P.

 

[chiro]

Thanks for the detailed response two-fish, very much appreciated.

I should point out that when I was talking about the industry, I wasn't targeting you specifically even though the way I said it, it did heavily imply that I was and for that I must apologize.

I agree with you that there are people in finance that have a conscience and think about what they are doing. Like you have said before in previous posts the financial industry is quite large and for every JPMorganChase there are dozens and dozens of small banks serving local communities and other institutions that aren't the mega-size that your JPMorganChase or HSBC are.

Also I should have made clear when I talked about the mortgage backed securities I was referring specifically to mortgages that were created with contracts that were unrealistic and fraudulent (ie no deposit, bad or non-existent credit history, mathematically impossible to pay once you get past the teaser rates and so on). Financially if a contract is made that is clear and concise, non deceptive, and under the terms is reasonable for both parties, then I have no qualms about that contract and the fact that it is legally binding. On the other hand if one of these elements is missing, then legally the contract should be void. I don't know the specifics of contract law even in my own country for contracts to be legally binding, but I hope I've outlined at least some of the basics.

I'm glad you corrected me on the use of black-scholes model, so thank you for the heads up.

Also like I said I'm not saying the entire industry is bad and I don't think you should quit your job. You do a lot of good on this forum giving good advice and being brutally honest and that has made you an invaluable contributor to this community, which is why I have a lot of respect for you regardless.

Again thanks for your response.

 

[mayonaise]

That's interesting because it reminds me of why I started getting interested in biology. The same mind in me that found astronomy and math interesting was also the same mind that wanted to understand ecosystems and evolution and how life works. It seems to me that whatever money is it has something to do with what society values most at the moment. Whoever is making the most money (sustainably) is whoever that is making the greatest contribution to society. I once heard Albert Einstein say that we should strive not to be a success but to be of value. And I want to be of value to society, I want to make a contribution that will increase the quality of this world. Making money is important but I think what is the even more important thing that lies at the heart of making money is doing something of genuine value to all people. Something that will impact their lives in a genuine way. Wherever the money flows is where I think society values or needs the most at the point.

So I think money in many ways is a system humans have made that motivates and inculcates people to produce and distribute things of value. (This is all pretty obvious but I'm just thinking to myself)

And I want to make the world a better place, it's something I have wanted since I was a kid. I wanted to do it through science. So I hope I can :P.

I'd say *sometimes* money does not go to the person who creates the most value, and here's some cases:

Say, you work for a company and find your boss gets paid 5 times as you. Is he creating 5 times the value you create? Probably true, but not necessarily. It turns out that by paying your boss more money than he creates, employees like you are motivated to work harder because you want to be promoted to the boss's level. Now imagine you're a post-doc and your boss is full professor, and think scientific productivity vs wages/contract lengths.

Also as mentioned the people with power/money will use said power/money to gain more power/money. It is likely that the society's value is not considered in this case.

 

[Delong]

I'd say *sometimes* money does not go to the person who creates the most value, and here's some cases:

Say, you work for a company and find your boss gets paid 5 times as you. Is he creating 5 times the value you create? Probably true, but not necessarily. It turns out that by paying your boss more money than he creates, employees like you are motivated to work harder because you want to be promoted to the boss's level. Now imagine you're a post-doc and your boss is full professor, and think scientific productivity vs wages/contract lengths.

Also as mentioned the people with power/money will use said power/money to gain more power/money. It is likely that the society's value is not considered in this case.

Interesting point which I suppose I should consider. Often money simply goes to people who are crafty and smart and not necessarily people who are productive and hardworking. But I'm not crafty and smart and I think it's safer for me to do something valuable than to seek money. It may not be as rewarding but as long I have enough I think I will be ok. I guess money can also be a motivator for people to do productive things instead of as an afterthought reward. I guess that works as well too. I guess people mostly care more about spending power than making a world a better place but if we can use that desire to make the world a better place than well that's pretty neat.

 

[twofish-quant]

Like you have said before in previous posts the financial industry is quite large and for every JPMorganChase there are dozens and dozens of small banks serving local communities and other institutions that aren't the mega-size that your JPMorganChase or HSBC are.

Also I don't see much of a correlation between conscience and the size of the bank. There are people in the biggest Wall Street banks that are pretty decent, and people in small mom and pop banks that will take your money and run.

Financially if a contract is made that is clear and concise, non deceptive, and under the terms is reasonable for both parties, then I have no qualms about that contract and the fact that it is legally binding.

I do.

One problem is that most people really don't understand what they are signing. Most financial contracts are written so that you need a team of lawyers to figure out what the contract really says, and if you don't like the terms, you aren't in a position to renegotiate. The only reason that the system sort of works is that the government requires contracts to have some standard terms, so that you really *don't* have to understand the whole contract before signing it.

The other problem is that a contract affects third parties. A bank loan manager issues a loan to someone that clearly has no intention of paying it back. The loan manager gets a commission. The person that does the loan gets the cash. It works well for both of them except that they happen to be playing with my money, and I wasn't part of the contract.

On the other hand if one of these elements is missing, then legally the contract should be void. I don't know the specifics of contract law even in my own country for contracts to be legally binding, but I hope I've outlined at least some of the basics.

But you have a problem. I give the bank $500. That bank then loans it out to someone that can't pay it back. You might be able to void the contract, but the problem is that I'm now owned $500. If the account is federally insured, then the government has to find a way of getting me my $500, but then who pays the government?

This is also why I'm worried about student loans. If you take out $100K in student loans and you can't pay it back, then we've got a problem since it's my money that I'm not seeing.

Also like I said I'm not saying the entire industry is bad and I don't think you should quit your job.

The problem is that I don't think the basic issue is "bad people." It would be nice if it were that easy, but it isn't.

Also, there are things that seriously bother me. One thing that bothers me is that, we lost about $4 trillion in wealth spending money on useless real estate. If we had spent a fraction of that money (say $100 billion) putting someone on Mars or building maglev trains, I think society would be better off.

 

[twofish-quant]

Say, you work for a company and find your boss gets paid 5 times as you. Is he creating 5 times the value you create? Probably true, but not necessarily.

Define value. I can make a statement like that tauntologically true. If I define value in terms of the amount of money that someone makes, then tauntologically you boss is five times as valuable as you are, because that's how you've defined value

It turns out that by paying your boss more money than he creates, employees like you are motivated to work harder because you want to be promoted to the boss's level. Now imagine you're a post-doc and your boss is full professor, and think scientific productivity vs wages/contract lengths.

The problem with this is that you have to lie to someone. For this to work you have to convince everyone that they will hit the jackpot, and the people that get attracted to this sort of system are likely to be people that can't realistically calculate odds.

Now, if you have a bunch of people who can't realistically calculate odds in charge of the financial system, you'd expect that people would have unrealistically high expectations of what their return should be, and unrealistically low expectations of the risks they are taking.

Which explains a lot...

Also as mentioned the people with power/money will use said power/money to gain more power/money. It is likely that the society's value is not considered in this case.

What will happen often is that once you have money and power, you will use said money and power to convince people that it is a good thing that you get more money and power. If you have enough money and power, you start *defining* what societies values are.

 

[elfboy]

jobs: rocketscientist
scientist
astro scientist

go on monster.com and see who is hiring

 

[chiro]

Also I don't see much of a correlation between conscience and the size of the bank. There are people in the biggest Wall Street banks that are pretty decent, and people in small mom and pop banks that will take your money and run.

I do agree with your analysis, but like you said in a previous post if things go belly up it can be really bad and for some reason (as contradictory or outlandish as this might seem) I'd rather a really small player be the culprit rather than someone that is highly intertwined into the global economy. I don't know if that is even possibly nowadays but I hope you know what I'm getting at.

I do.

One problem is that most people really don't understand what they are signing. Most financial contracts are written so that you need a team of lawyers to figure out what the contract really says, and if you don't like the terms, you aren't in a position to renegotiate. The only reason that the system sort of works is that the government requires contracts to have some standard terms, so that you really *don't* have to understand the whole contract before signing it.

The other problem is that a contract affects third parties. A bank loan manager issues a loan to someone that clearly has no intention of paying it back. The loan manager gets a commission. The person that does the loan gets the cash. It works well for both of them except that they happen to be playing with my money, and I wasn't part of the contract.

Great points, but to me that begs the question: Based on these types of scenarios, could some form of regulation be brought into help take care of these scenarios? Maybe some kind of disclosure to inform the real holders of wealth what is being done with their wealth in certain classes of financial products? I know that might be a lot of red tape but maybe it would give people a choice. Maybe this already exists, I don't know.

But you have a problem. I give the bank $500. That bank then loans it out to someone that can't pay it back. You might be able to void the contract, but the problem is that I'm now owned $500. If the account is federally insured, then the government has to find a way of getting me my $500, but then who pays the government?

Again I think that kind of thing is a prime example for discourse that could lead to regulation. Its very hard to create regulation in an environment where everything is right. The real value of regulation is when it comes when everything goes wrong, and the past couple of years have showed scenarios where things went bad. Maybe not as bad as they could have been, but certainly there are a lot of scenarios where people got hurt really bad, and its those examples that I think should spark discourse, debate and perhaps new forms of regulation.

This is also why I'm worried about student loans. If you take out $100K in student loans and you can't pay it back, then we've got a problem since it's my money that I'm not seeing.

I definitely agree with you. I read figures somewhere that student loans are at a figure of $1 trillion (with a t) in the united states. Quick google search confirms this: http://www.notolawschool.com/2011/01/one-trillion-in-student-debt.html .

One problem I think is that we not only live in a debt economy, but it is encouraged. Also things like having near-zero interest rates do not encourage people to save, but instead encourage people to borrow.

The problem is that I don't think the basic issue is "bad people." It would be nice if it were that easy, but it isn't.

There's a lot of different people pointing the finger at a lot of different people for different reasons and I agree that simply pursuing that line of action won't really fix much.

In saying that though, this kind of thing happens in any major disaster, be it something like a bridge collapsing as the result of a lot of problems, or be it in the case of an economic crash. The two are no different in a lot of respects especially when it gets to the initial stages of finger pointing.

One thing though that I want to make clear is that the people who sign up as authority figures need to take their authority seriously and admit if they had any responsibility in an activity that lead to whatever disaster that came about. If someone made decisions and had the authority to do something that helped cause the certain disaster, then they need to be held accountable for it.

The hard part of course is, as in the case of bridge collapse scenario, there are usually lots of different interconnected things that cause a catastrophe. Even still, if someone helped participate in a major way and also had the authority to do so, then we need to see how things screwed up instead of just yelling "incompetence", because that doesn't resolve anything.

 

[twofish-quant]

I do agree with your analysis, but like you said in a previous post if things go belly up it can be really bad and for some reason (as contradictory or outlandish as this might seem) I'd rather a really small player be the culprit rather than someone that is highly intertwined into the global economy.

I'm not so sure. First of all, everyone is intertwined in the global economy. The money for your mortgage came from some peasant in China (seriously it did).

Also, the problem is that you can end up with lots of bad things happen with lots of small players, and if you have a lot of small players, you can't get everyone in one room and say "this is insane, what can we do do stop it?" which is more or less what happened in 2007.

Based on these types of scenarios, could some form of regulation be brought into help take care of these scenarios?

Sure. Now arguing what type of regulation is necessary is something that people will argue endlessly over.

There is also something called "regulatory capture." Put simply, I'm willing to read through dozens of pages of boring legislation because my paycheck may depend on it, and you have people who get paid to do nothing except go through thousands of pages of legislation and regulation because their paychecks depend on it.

You don't have the time or interest to do something like that. That means that when a Congressman asks for ideas, some bank is going to come up with a very detailed, very through proposal for what Congress should do, and you aren't.

Maybe some kind of disclosure to inform the real holders of wealth what is being done with their wealth in certain classes of financial products? I know that might be a lot of red tape but maybe it would give people a choice.

The trouble is that you end up with "pseudo-choices." If you ask my in-laws whether they would like their money into REIT's or MBS's, it's not a real choice because they don't have any information to make that sort of choice. Also life is short. When I put money in my checking account, I just care that I get it back. I really would prefer not to spend my time being a bank regulator.

Maybe not as bad as they could have been, but certainly there are a lot of scenarios where people got hurt really bad, and its those examples that I think should spark discourse, debate and perhaps new forms of regulation.

Sure. But people don't care any more. If you are unemployed, bank regulation is not the first thing on your mind. People might have been angry in 2007, but anger doesn't last very long.

One problem I think is that we not only live in a debt economy, but it is encouraged. Also things like having near-zero interest rates do not encourage people to save, but instead encourage people to borrow.

Stagnant wages also don't encourage people to save.

In saying that though, this kind of thing happens in any major disaster, be it something like a bridge collapsing as the result of a lot of problems, or be it in the case of an economic crash. The two are no different in a lot of respects especially when it gets to the initial stages of finger pointing.

There's actually a very will developed system for stopping catastrophes. It works pretty well in airplane crashes.

http://www.slate.com/blogs/blogs/thewrongstuff/archive/tags/aeronautics/default.aspx

If someone made decisions and had the authority to do something that helped cause the certain disaster, then they need to be held accountable for it.

The problem with this is that you then will evolve into a system in which "stuff happens" but no one has authority or responsibility to stop it. It's not hard to create those systems.

Even still, if someone helped participate in a major way and also had the authority to do so, then we need to see how things screwed up instead of just yelling "incompetence", because that doesn't resolve anything.

It gets people elected.