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Grunting and Snarling in Tennis and Economics

Last night I held a panel at Columbia about the economic system and the principles that should govern it. One interesting question raised but not answered by Prof Bhagwati was: Why are the returns to the finance industry so great? No one had a really good explanation but two reasonable ones were: the existence of cartels, and secondly, that financial firms’ outsize returns are periodically wiped out by risks they weren’t paying adequate insurance for.

I find the whole thing surprising from another angle. There are so many rich unknown people on Wall Street, people worth tens to hundreds of millions for being part of an industry but you can’t quite say what they did. Someone pointed out to me the wealth in the entertainment and sports industries, and in technology companies, but that’s different. In tennis the riches come mostly from endorsements and they fall off very quickly with ranking. The 100th best player in the world probably makes a difficult living, and the 300th best certainly struggles. But in either case, when someone tells you their name you can say what they did, whether it’s play football or write code at Microsoft. There’s a product, a song, a skill you can name that’s associated with them. What’s surprising about financial services is that you can be anonymous, make lots of money, and no one is quite sure what you did that got you the cash.

Speaking of principles and tennis: I liked the old days better, when people didn’t act up on the court as though tennis were professional wrestling. Borg, Edberg, Wilander, Sampras all played stoically and seriously, and didn’t grunt. Federer is more or less in their category, but even he has disappointingly taken to a little fist-pumping and animal snarls (above). I think some of this has to do with the corporate backing and endorsement money.

A proposed solution to the Serena Williams/line judge foot-fault disqualification. It could best be settled by President Obama, who should invite them over to the White House for a beer. There are many fruitful areas where jawboning could be employed in place of regulation.

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