The main speaker at yesterday’s Commencement was Paul Volcker, the former Federal Reserve Chairman (the guy before Alan Greenspan) and current chair of President Obama’s economic advisory council. As you would expect from somebody of his background, the bulk of the speech was about the current economic crisis. The full speech is online, but the relevant-to-ScienceBlogs bit is this:

The past couple of decades have been seen as a triumph of finance – new and more complex financial instruments, a huge growth of financial institutions, enormous compensation for traders, speculators, and finance executives out of line with all previous experience. At one point, profits of financial institutions accounted for 40 percent of all the profits of American corporations, way above any previous relationships.

I think we know now it has been a hollow victory. The real income of average workers barely rose. Chronic deficits in our foreign trade have been the order of the day as our manufacturing became less competitive. In some industries our technological lead has been threatened. Professional analysis bears out what we feel in our daily life: our roads and bridges are decaying; our airports and air control are challenged; our water supply and waste management is threatened.

It seems to me that the current big recession is one big wake up call. It can be and it must be the start of a corrective process. We are forced to reorient our economic priorities, national and personal, reorient them for the better. Right now the priority is to get our private debt under control. Happily, the infrastructure is beginning to get attention.

In the broadest terms, I think we have to move, we are moving, for an emphasis on finance toward science, toward technology, toward engineering – real engineering not the financial engineering that has failed to live up to its promise.

I don’t really have anything to add to that– I didn’t get to meet Volcker, though I was asked to pretend to be him.

(Because I can’t just leave that line hanging, the story is this: The College has a tradition of bringing the honorary degree recipients to the platform in the 1916 model electric car owned by one of the famous professors in Union’s history, Charles Steinmetz. The car is fairly small (Model T-ish), and Volcker is a big guy– 6’7″-ish, 300-ish pounds.

(Thus, there was some concern about whether he would fit in the car. As one of the two biggest members of the faculty (there’s a Mechanical Engineering professor who’s a bit taller than I am, but not as heavy), I was asked to go sit in the car (actually, both me and the ME professor), to confirm that there was enough room for Volcker. The car turned out to be surprisingly roomy.)

(Of course, after all that, I don’t think they actually used the car. I’m not certain, but I didn’t see it in action.)


  1. #1 NJ
    June 15, 2009

    Now that would be an interesting line on your CV:

    2009: Stunt double for Paul Volcker.

  2. #2 Jonathan Vos Post
    June 15, 2009

    It’s not that the Financial world lacked ex=Physicist, Mathematicians, and Computer Scienists. It’s that they stubbornly persisted in ignoring reality, and adding bells and whistles to analytical models debunked decades (and several Nobel Prizes in Economics) ago.

    “As computers have grown more powerful, academics have come to rely on mathematical models to figure how various economic forces will interact. But many of those models simply dispense with certain variables that stand in the way of clear conclusions, says Wharton management professor Sidney G. Winter. Commonly missing are hard-to-measure factors like human psychology and people’s expectations about the future, he notes.”

    “Among the most damning examples of the blind spot this created, Winter says, was the failure by many economists and business people to acknowledge the common-sense fact that home prices could not continue rising faster than household incomes.”

    “In a highly critical paper titled, ‘The Financial Crisis and the Systemic Failure of Academic Economists,’ eight American and European economists argue that academic economists were too disconnected from the real world to see the crisis forming.”

  3. #3 Uncle Al
    June 15, 2009

    the current big recession is one big wake up call

    No, not any more than 1929 was. There remained distributed dilute but vast monies still to be stolen by stock and government manipulation in 1929. By 1931 value-backed finance was disappeared at all levels. 1933 killed Prohibition and even crime did not pay.

    The wakeup call is that any centralized management of vast domains – including crimes like Welfare, healthcare, education, environment, energy – are mathematically inevitable disasters.

    US finance and manufacture are now socialized, US farms are collectivized (maize pimp Archer-Daniels-Midland). The BIG wake up call is perhaps two years distant when nothing private sector remains to be stolen, embezzled, or confiscated by jackbooted State compassion.

    “What is good for General Motors is good for America,” GM Chairman and CEO, Charlie Wilson, 1955. “Three rousing rahs and a few hussahs and a hip-hip-hip hooray! What is good for General Bullmoose is good for the USA!,” Li’l Abner, Broadway, 1956. Do you love Jubilation T. Cornpone? You’d better.

  4. #4 Andrew Njeru
    June 16, 2009

    The engineers were many in the field of economics, they introduced their abstract concepts to the art of finance.
    Finance and economics are simply about the human behavior. Human beings will always alternate between two extreme states. one of euphoria characterized by irrational exuberance(As Allan Greenspan puts it) and on the other hand, panic, leading to crisis like the current ones;
    This tendency affects policy making: Politicians drive the growth and spending agenda.
    Booms and bursts are here to stay; ANY ONE STANDING IN THE WAY OF GROWTH AND SPENDING WILL BE THROWN OUT OF OFFICE LIKE Jummy varter (from presidency)and PAul Volker(from the Fed):

  5. #5 Eofhan
    June 16, 2009

    I’ve thought, for some time, that the U.S. economy was largely coasting on the end of WWII. After the war, there was no other industrialized country. That generated an enormous surplus. Like the stereotypical “trust-fund baby,” we spent until the interest couldn’t cover the bill, and then tapped the principal.

    I think being awash in money contributed to many ills, not just financial ones. “Little Jimmy” doesn’t read or calculate well? With all that money, there’ll still be an employer to hire him! Need to get re-elected? Spend some of all that money to gold-plate your home district! Cater to extremists — after all, they’ll actually vote! Rather watch TV than exercise? No problem! We’ve got all that money to pay for your heart attack!

    If I’m right, we’re doubly-screwed. Our society/culture/economy depends on the infrastructure we’ve built since WWII. If we built it using money we’ll never see again, it’s going to be difficult to repair that infrastructure. Throw in environmental catastrophe and well-educated, impoverished, hungry competition? Lead by people more terrified of revolution than ecology, and literally willing to kill their own workforce? . . . well, call me pessimistic.

  6. #6 heinzgitz
    January 23, 2010

    Paul Volcker vater coming from Germany, Austria or Switzerland?

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