Harvard financial consultant Ben Friedman isn't first to suggest the finance sector does some significant damages to the rest of the economy by siphoning off the most gifted graduates and putting them to work "ensur[ing] that microscopically little deviations from observable regularities in asset price relations endure for only 1 millisecond rather than three. But he is taking it a stage further and implies, though doesn't quite say, this drag may mean that "the increased potency our investment grant system delivers" fails to outweigh the expenses of running it.

I wish to believe this. It fits with a lot of my biases. But I suspect folks need to think about the counterfactual here. These Ivy League graduates are not being conned into finance. They are tending to move towards cash and standing -- even at the price of hideous hours, upsetting roles and that curious hollow feeling which comes after you trade your dreams of being a useful person for a pleasant flat in Midtown.

If the monetary sector is somehow shut down, or radically shrunk, they will just go to the following most moneymaking industry. Doctors get paid a lot, but there are pointed restraints on supply, so you'd just have more competitive medical schools, versus more doctors. We will have more counsels. Plenty more management experts. Probably more engineers and analysts, though those gigs require specialised graduate education -- often in the hard sciences -- and I'd imagine there's not that much overlap between varsity youngsters enthusiastic about organic chemistry and university children who finish up in finance at twenty-three.

Which is all to claim, it isn't apparent that we would have a unexpected in-flow of proficient folk doing helpful things for society. Having said that, we might be able to test this theory shortly enough. If there's not already a major study inspecting Ivy League graduates in a year when the finance sector opportunities dried up, 2009 is going to supply some good information for anybody enthusiastic about writing one.