(Christianity Today, October 10, 2011.) A sign flashed at the Occupy Wall Street protest reads “People Before Profit.” It is an effective sign. Who could support Profits Before People? Some Wall Street employees have apparently responded sympathetically to the protestors, trying to understand their demands. But part of the power of the protest lies in its ambiguity. Americans are angry about many issues today. In such a climate it may be more strategic to focus on the common anger than on specificities.
The protests are centered on Wall Street because they target political corruption in the finance industry. But the world of finance is very complex. Part of the problem is that it became too complex, so complex that even the financiers themselves couldn’t understand the implications or robustness of the financial derivatives they were trading, or even how to properly price them. (They seemed to be particularly challenged with pricing derivatives of sub-prime mortgages.)
The problems with our financial system are complex; the solutions are complex. Overhauling the incentives within our financial institutions is far more challenging than the protestors understand, or perhaps would admit even if they did. As a graduate student at Berkeley, I was a teaching assistant for Christina Romer, a macroeconomist who arguably understands economic recessions better than anyone on the planet. She and Larry Summers, another brilliant economist, spent two grueling years as President Obama’s chief economic advisors, trying to untangle the mess. Bottom line to protestors: If Christina struggles with it, you don’t understand it.
Like most protests, the Occupy Wall Street folks are better at identifying something that is wrong than identifying a way forward that is right. But even if the protestors don’t understand much about financial economics, they have a clear sense that something is wrong. That something, however, lies deeper than the behavior of a relative handful of Wall Street moguls. That something, I believe, is a sense of material entitlement that has crept into the American psyche. This sense of material entitlement has infected our personal choices, our politics, and our financial system. (Read More at ChristianityToday.com.)
Prophets Against Profits: What Occupy Wall Street Misses
The protests are centered on Wall Street because they target political corruption in the finance industry. But the world of finance is very complex. Part of the problem is that it became too complex, so complex that even the financiers themselves couldn’t understand the implications or robustness of the financial derivatives they were trading, or even how to properly price them. (They seemed to be particularly challenged with pricing derivatives of sub-prime mortgages.)
The problems with our financial system are complex; the solutions are complex. Overhauling the incentives within our financial institutions is far more challenging than the protestors understand, or perhaps would admit even if they did. As a graduate student at Berkeley, I was a teaching assistant for Christina Romer, a macroeconomist who arguably understands economic recessions better than anyone on the planet. She and Larry Summers, another brilliant economist, spent two grueling years as President Obama’s chief economic advisors, trying to untangle the mess. Bottom line to protestors: If Christina struggles with it, you don’t understand it.
Like most protests, the Occupy Wall Street folks are better at identifying something that is wrong than identifying a way forward that is right. But even if the protestors don’t understand much about financial economics, they have a clear sense that something is wrong. That something, however, lies deeper than the behavior of a relative handful of Wall Street moguls. That something, I believe, is a sense of material entitlement that has crept into the American psyche. This sense of material entitlement has infected our personal choices, our politics, and our financial system. (Read More at ChristianityToday.com.)