Is finance dumbing us down?

Gerald Crabtree’s scary paper on “Our Fragile Intellect” (h/t Paul Kedrosky) has only one sentence about finance, but it is a damning one:

Needless to say a hunter gather that did not correctly conceive a solution to providing food or shelter probably died along with their progeny, while a modern Wall Street executive that made a similar conceptual mistake would receive a substantial bonus.

I have absolutely no idea whether Crabtree’s speculations about the genetic fragility of human intelligence are correct or not, but I am certain that the problem of moral hazard in finance is a real one.

Meanwhile, finance students who complain about the technical complexity of modern finance may do well to ponder Crabtree’s claim that “life as a hunter gather required at least as much abstract thought as operating successfully in our present society”. Computing the right way to hedge a complicated derivative is hard, but as Crabtree would say “non-verbal comprehension of things such as the aerodynamics and gyroscopic stabilization of a spear while hunting a large dangerous animal” is probably as hard or harder.

Posted at 1:35 pm IST on Mon, 26 Nov 2012         permanent link

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