A Clean Desk

It’s easy to clean a desk. Just wipe everything off the top and shove it in a drawer. But a truly clean desk is not merely organized on top, but below, where we can not see. Unfortunately, people forget to look deeper when looking at other metrics like employment. Presumably, if the government hires people that counts just as much as if private company does in our employment data. Indeed, for decades economists thought that one big advantage of the socialist economies was they were always using all their workforce, whereas the capitalist economies often suffered from inadequate aggregate demand and so operated at less than full employment. Yet it makes a big difference what a government worker actually does, as while many add value most do not, and they get paid either way.

I know someone who works for a small bank of about 10 people, and he was telling me about once a year, about 6 people from the FDIC come in for a week and go over their books. He says they work always with an eye on the clock, and if you are talking to them at 11:30, you can expect them to leave mid-sentence because they take breaks, show up and leave like union regulars. Of course, they don’t highlight anything useful to the bankers, or society, in their annual exercise (remember, pre 2007 regulators were mainly critical that banks lent too little to historically underserved homeowners).

I know people who have jumped from industry to regulators and I don’t see this as sustainable. These regulators are truly a zero, if not negative. Do you remember CAMEL ratings on banks? That was a way, after the Savings & Loan crisis of the 1980’s, that regulators would identify troubled banks. It has always been a complete waste of everyone’s time.

Washington D.C. has one of he lowest unemployment rates in the country. It is hiring a lot of people, many quite talented, and paying them well. It is also turning them into part of the overhead of this country without getting anything in return other than ‘Keynesian stimulus’. Further, these people know their jobs aren’t about producing anything useful. As the joke about faculty politics implies, people become mean and petty when the stakes are low. That makes for a stressful environment, because nothing causes more stress than working day in and day out at a place where nothing you do matters.

About Eric Falkenstein 136 Articles

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

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