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Thursday, January 2, 2014

After Economics: Wall Street Education

Posted by on Thu, Jan 2, 2014 at 8:49 AM

Much noise has been made about the revolving door between Wall Street and Washington, but an equal amount of noise must also be made about "the nexus of [Wall Street] and academia":

Do financial speculators and commodity index funds drive up prices of oil and other essentials, ultimately costing consumers? Since 2006, Mr. [Craig Pirrong, a professor of finance,] has written a flurry of influential letters to federal agencies arguing that the answer to that question is an emphatic no. He has testified before Congress to that effect, hosted seminars with traders and government regulators, and given countless interviews for financial publications absolving Wall Street speculation of any appreciable role in the price spikes.

What Mr. Pirrong has routinely left out of most of his public pronouncements in favor of speculation is that he has reaped financial benefits from speculators and some of the largest players in the commodities business, The New York Times has found.

But any professor who teaches orthodox economics (who goes on about general equilibrium, efficient market hypothesis, random walks, the representative agent, and all the rest of it) is essentially the same as this professor Pirrong—being paid by Wall Street. You only got your teaching position because neoclassical theories systematically provide justification for the interests of those who rule and extract wealth from the financial markets. These are your one and only representative agents.

 

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fletc3her 1
You don't need higher math for this equation. Every dollar earned by speculators was a dollar paid by the consumer of the commodity which did not go to the provider of the commodity.

The commodities market exists to shield consumers from provider fluctuations by smoothing the cost. The consumer trades being able to take advantage in dips of the commodity cost for insurance against spikes in the commodity cost.

When the market allows rampant speculation the whole thing goes haywire and the speculators are able to reap large profits simply by selling commodities to one another to raise the price, ultimately borne by the consumer of the commodity.

Nearly 70 percent of trades in oil are now by speculators. The cost of oil has increased greatly with expensive operations like fracking driving the provider cost up, but something like 25% of the current oil price goes to speculators.
Posted by fletc3her on January 2, 2014 at 9:23 AM · Report this
2
To make a point, and reinforce Mr. Mudede's point, take a look at ONLY the academia members of the Bretton Woods Committee, the lobbyist group for the international super-rich (then, if you have time, take a look at the entire members list at the site below). The BWC doesn't communicate with members of the US Congress, they only and specifically communicate with the senate majority leader and the speaker of the house.

http://www.brettonwoods.org/page/committ…

Academia members of the Bretton Woods Committee:

Dr. Reena Aggarwal Georgetown University

Dr. Vinod K. Aggarwal University of California, Berkeley

Dr. Jörg Bibow Skidmore College

Dr. Alan S. Blinder Princeton University

The Honorable David L. Boren Oklahoma University

Mr. Robert Bowie Harvard University

The Honorable John Brademas New York University

Dr. James B. Burnham Duquesne University

Prof. Kent Calder Johns Hopkins University School of Advanced International Studies

Dr. Charles W. Calomiris Columbia University

Dr. Ashton Carter Harvard University

Mr. William M. Chace Emory College

Dr. Richard N. Cooper Harvard University

Dr. David A. Deese Boston College

Dr. Guilain P. Denoeux Colby College

Mr. David Dodge Queen's University

Dr. Michael P. Dooley University of California, Santa Cruz

Mr. Richard Erb University of Montana

Dr. Niall Ferguson Harvard University

Dr. Jendayi E. Frazer Carnegie Mellon University

Dr. Jeffrey S. Hammer Princeton University

Mr. Cornelius K. Hurley Boston University

Dr. Miles Kahler University of California, San Diego

Mr. Shigeo Kashiwagi Keio University

Professor Joan Alice Katen Pace University

Dr. Danny Leipziger George Washington University

Dr. Barrett L. McCormick Marquette University

Dr. Helen V. Milner Princeton University

Dr. Bessma Momani University of Waterloo

Ambassador John Norton Moore, Esq. University of Virginia School of Law

Dr. Theodore H. Moran Georgetown University

Dr. Peter Morici University of Maryland

Prof. Ambler H. Moss, Jr. University of Miami

Dr. José Antonio Ocampo Columbia University

Professor Luis San Vicente Portes Montclair State University

Professor Arturo C. Porzecanski PhD American University

Dr. Donald J. Puchala University of South Carolina

Dr. Riordan Roett Johns Hopkins University

Dr. Kenneth Rogoff Harvard University

Professor Hilton L. Root George Mason University

Professor Hal S. Scott Harvard University School of Law

Dr. Harold T. Shapiro Princeton University

The Honorable George P. Shultz Stanford University

Dr. Dorothy Meadow Sobol Johns Hopkins University School of Advanced International Studies

Dr. T.N. Srinivasan Yale University

Dr. Lawrence H. Summers Harvard University

The Honorable John B. Taylor Stanford University

Dr. Robert L. Thompson University of Illinois at Urbana-Champaign

Dr. Marta Tienda Princeton University

Mr. Stephen J. Trachtenberg George Washington University

Ms. Ruth Wedgwood Johns Hopkins University

Dr. Marina Whitman University of Michigan

Ms. Amy M. Wilkinson Harvard University
More...
Posted by sgt_doom on January 2, 2014 at 10:50 AM · Report this

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