A nice thought is that learning something like Latin, Western Civilization, or chess, generates insights one can generalize to many things later in life. Many like to think that solving logical puzzles can help the elderly stave off dementia. Unfortunately, it's hard to find evidence that this works. Bryan Caplan notes that "learning is highly specific." That is, if you want to become a programmer, or derivatives expert, don't waste your time on Classics, rather, get a job in programming or derivatives. Formal education aspires to transfer.
I think it's very important to identify those concepts that transfer most easily. that is, learning to read and write is clearly a good thing useful outside of poetry. Statistics, basic logic, physics, chemistry all clearly essential at some level; number theory, set theory, string theory, not so much.
Economics tried to create a theory with their basic utility function that would dominate all social science, and it had all these nice qualities and was amenable to various mathematics in generating very progressive results. Unfortunately, if they were true, risk premiums would be omnipresent and important, and they are neither.
In finance learning is highly domain specific. An expert on junk bonds is just that, and knows nothing of equities (in general, of course). Same for oil futures option traders, and those trading muni-bonds. Finance has failed because finance PhDs are not preferred to simply 'smart people' in these highly remunerative fields, highlighting that all this education is not concentrated on a transferable toolkit, in contradiction to the field's assumptions.
2 comments:
I don’t know….that’s like saying that government has “failed” –it depends on your perspective. Finance hasn’t failed, it’s been so successful that it now dominates everything! I think the greater theme here is that an emphasis on domain specificity in larger, complex systems creates near-term/micro advantages as it increases longer term, systemic risks and inferior outcomes.
Hyper-specialization and increasingly siloed workflows/responsibilities in the name of efficiency and utility maximization (can’t have expensive doctors performing tasks that technicians could be doing) increase bottom lines but also the potential for bigger catastrophes and failures in big organizations. I think you’ve touched on this before: thanks to the march of human progress we’re long past the point where a single person (like Aristotle) can know pretty much everything there is to know. But even though some of this is unavoidable that doesn’t mean that there isn’t also a lot of misallocated human capital and faith here.
That finance PhDs are not preferred to their less specialized, cognitive peers might imply that, for obvious reasons, finance evolves faster than other systems and is already starting to come out the other end of this phase (although I think math and computer PhDs are still commanding a premium over humanities geniuses on Wall St.).
A companion theme might be: less complex, smaller systems benefit generally (and are generally beneficial) when specialization/domain specificity increases. The Iphone (interface) is simple but has the ability to plug in any number of small, highly specialized apps that do one thing really well. We all (obviously) like that. Yes, it would be nice if higher education swung a bit more toward the older, classical model (which was more or less based on the concept of transference) but at the other end of the spectrum I still think that more, specialized vocational training is the ticket to success for many of the less academically inclined. When trying to develop some wisdom in this area I prefer to study the Great Men of Western Civilization rather than the work of “educational psychologists” thank you very much but now that I follow your link I notice that Caplan’s ode to specialization pulls examples exclusively from the “vocational” end of the occupation spectrum so maybe I’m not far off in my assessment here. Places like France, for all their socialist bluster, are still pretty strict about dividing the student body at a fairly young age into vocational and more advanced tracks. I also have it on good authority that despite its many other shortcomings the US military (which popularized the concept of SNAFU) has (or at least had) excellent training programs, classes and schools which seem to be organized along these principals as well.
I don't know, I'm an oil options trader that started out writing code to defease municipal bonds
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