2010-12-15 12:28![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
digitaldiscipline
digitaldisciplinehttp://motherjones.com/kevin-drum/2010/12/why-are-bankers-so-rich
I know there are some folks who are smarter about economic theory on here than I am (Yes, I'm looking at you in particular,![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
katestine), because I'm left scratching my head in exactly the same way as Kevin Drum is.
This has always been one of the central mysteries of modern finance: Why is it so damn profitable? We're talking about an industry that's global, largely commoditized, and highly competitive. Profits should have been under extreme pressure for the past few decades. And yet, somehow, just the opposite was true. Against all theory, banks were able to consistently charge excessive prices; consistently take the better side of financial bets; and consistently persuade every other actor in the business that mispriced risk was, in fact, correctly priced. The result has been wild profitability and huge bonuses.
I know there are some folks who are smarter about economic theory on here than I am (Yes, I'm looking at you in particular,
katestine), because I'm left scratching my head in exactly the same way as Kevin Drum is.This has always been one of the central mysteries of modern finance: Why is it so damn profitable? We're talking about an industry that's global, largely commoditized, and highly competitive. Profits should have been under extreme pressure for the past few decades. And yet, somehow, just the opposite was true. Against all theory, banks were able to consistently charge excessive prices; consistently take the better side of financial bets; and consistently persuade every other actor in the business that mispriced risk was, in fact, correctly priced. The result has been wild profitability and huge bonuses.
