Looting, Quants and Fairness: Why 'Liberal Arts' Education Isn't a Waste

So the big guys at AIG will get their bonuses but the workers in the auto industry will get cut backs? Come on, that simply isn’t fair!

The New York Times has had some very illuminating stories in the last few days about the greed which was the evil genius behind this mess we’re in. One is a review of an interesting paper published 16 years ago called Looting by economists George Akerlof, who would later win a Nobel Prize, and Paul Romer. In it they detail, the way corporate pirates competely ripped companies apart during the 1980s, banking (quite literally) on the fact that they couldn’t be allowed to go broke because they were so big. The other, "They Tried to Outsmart Wall Street" is a long story on the mathematical wizards that invented the exotic financial “products”and “models” whose manipulation fueled the markets.

The first case is an example of willful ignorance on the part of regulators, who should have been watching what was going on. The second is one of people being far too smart for their own good. A lot of the guys in the second group switched over from theoretical physics or arcane mathematical theory. As one commented anonymously, there are a thousand physicists on Wall Street: “They sold their souls to the devil.”

The story notes that the move from academe to Wall Street began when research funds were drying up. What will be the effect down the line of cuts in universities this time around? Certainly worrying about string theory would seem to be less harmful that quantifying finance.

And the sorry situation also brings up the possible results of cutting back on support for what used to be called a "liberal arts education" in the US, and in other countries provided the backbone for what might be called basic higher education. Where else are people to get a broad view of what civilization is and what our responsibilities are to each other? Specialization, be it for business or deep science, should be accompanied by exposure to ethics, history and the many deeply engaging stories people have been telling each other for years. Dr. Faustus, any one?