Economists Do It With Models

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Random Link(s): Damn It Feels Good To Be A…Hedge Fund Manager?

April 1st, 2010 · 5 Comments
Finance · Just For Fun · Random Links

I am not a huge fan of April Fools’ Day- given that a large part of my existence is reading and interpreting the news, I would hope you can imagine how frustrating it is to not know whether the stories are real or fake. So far, I’ve come across:

So I am now hiding under the bed and waiting for this day to be over. Here’s a card that’s more appropriate for me:

Anyhoo…while under the bed, I came upon the following fun graphic, courtesy of Econompic Data:

What you see here is the income of the top five hedge fund managers plotted alongside the net income of some of the world’s largest corporations. Clearly I chose the wrong career path.

The original post makes a comment about the flow of capital from “productive means” to “goods for the rich.” The reality of the situation is that goods for the rich ARE productive, since making luxury yachts and planes and diamond-encrusted bottles of Cristal employs people in ways that other people are willing to pay for. A market-based economy is all about giving people what they are willing to pay for, not necessarily allocating resources to the “most useful” goods and services.

We just have to hope that not everyone is like Montgomery Burns:
Smithers: “What are you going to do with your million dollars?”
Burns: “I dunno…throw it on the pile, I suppose.”

I would hope that Mr. Burns would at least put his money in a bank account so that others could borrow it for productive uses.

Hedge fund managers aren’t really bankers, but I couldn’t help but think of this video made my students at Columbia Business School a few years ago:

Tags: Finance · Just For Fun · Random Links

5 responses so far ↓

  • 1 Braden // Apr 1, 2010 at 4:05 pm

    I would hope that Mr. Burns would at least put his money in a bank account so that others could borrow it for productive uses.

    “Who exactly gets those goods? That depends on how you save. Put a dollar in the bank and you’ll bid down the interest rate by just enough so someone somewhere can afford an extra dollar’s worth of vacation or home improvement. Put a dollar in your mattress and (by effectively reducing the money supply) you’ll drive down prices by just enough so someone somewhere can have an extra dollar’s worth of coffee with his dinner.”

    –Steven E. Landsburg, “What I love about Scrooge

  • 2 econgirl // Apr 1, 2010 at 4:12 pm

    In the latter case, the price decrease is a sustained effect that is coupled with a (theoretically temporary) decrease in employment, so I would argue that that aspect of the strategy takes a bit away from the notion of “productive uses.”

  • 3 Lucille Melley // Oct 23, 2011 at 5:38 pm

    Have you ever thought about creating an ebook or guest authoring on other blogs? I have a blog centered on the same ideas you discuss and would really like to have you share some stories/information. I know my visitors would enjoy your work. If you’re even remotely interested, feel free to shoot me an e-mail.

  • 4 Investasi Emas // Nov 22, 2011 at 1:17 pm

    Thats some great basics there, already knew some of that, but you can always learn . I doubt a

  • 5 Andre // Jan 20, 2015 at 11:21 pm

    I love hedging in Forex trading, it is an ideal option for me in many different situations like if I am confused I just hedge my position while if there is any big news or major event I do the same and lastly all credit goes to OctaFX for allowing me to do hedging smoothly since their terms and conditions are so easy where we can use any technique that includes scalping, hedging, news trading and even EA’s if we like to.

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