Wall Street Economists: Are They Worth Their Salt?

By Henry, George B. | Business Economics, October 1989 | Go to article overview
Save to active project

Wall Street Economists: Are They Worth Their Salt?


Henry, George B., Business Economics


Wall Street Economists: Are They Worth Their Salt?

WALL STREET ECONOMISTS: Are They Worth Their Salt? The answer is obvious. "On the one hand . . . , but on the other hand . . ." Perhaps it's not fair to begin an article about economists with an economist joke, but it is certainly in keeping with their image on the Street. A common element in discussions one has with investors is the eagerness with which jokes and disparaging remarks come to their mind. Even when speaking with the economists themselves, one senses almost an apologetic attitude. They know they're working hard at what they do, but they also know it's not always, perhaps not even often, economics that they are doing. One well-known Street economist sums it up this way: Economists and economics on Wall Street? There aren't many and there isn't much.

The problem is that two very different roles comprise the job of the Wall Street economist, and this results in some serious conflicts. Start with the fact that the economist is not a producer; he's pure overhead. At least in his role as an economist, he doesn't trade, nor sell, nor in any other way produce profits for his firm. So what good is he? One answer, increasingly obvious in recent years, is that he's a public relations man. His primary job is to burnish the image of the firm he represents, hopefully by providing forecasts and analyses that prove insightful but, in any event, by keeping himself in the limelight, which means the newspapers and television.

This function contrasts to the situation ten to fifteen years ago when the economist's "other function," producing good economic analysis, was primary. Indeed, according to Albert M. Wojnilower of First Boston Corporation, twenty-five years ago, when he was just getting started, the function of the Wall Street economist was strictly to be an internal advisor to "trading management." In those days the object was to "stay ahead of the clients -- in every respect." The point was simple: Protect each and every insight an economist came up with, and use it for the principal purpose of producing profits for his firm. In those days, an economist might have been fired if his name appeared in the newspaper, says Wojnilower.

INHERENT CONFLICTS IN THE JOB

What are the conflicts between being a good economist and being a good representative for your firm? Perhaps the most important is the self-imposed intellectual isolation. Among economists in the academic world, as well as for those in government, consultation with one's colleagues is standard operating procedure and considered essential to doing good work. Joint articles or books are commonplace, and one will often see footnotes acknowledging the help of a dozen or more colleagues. The contrast on Wall Street is striking. It seems hard to believe, but some Street economists claim not even to know the names of their competitors. There appears to be little or no contact among most of them, (1) professional or social.

The lack of any substantial professional interaction is perhaps understandable in a business where few aspire to expanding the frontiers of the science. (2) Rather, the objective is to interpret and apply the best of received doctrine and, more important yet, to convey clearly and in a timely fashion those tidbits of insight that can produce a profit (hopefully today!). In such an environment, collaboration obviously is inappropriate; the economist is being paid by one firm to produce an individual, proprietary product and must, essentially by definition, work alone.

For example, David Levine, an economist at Stanford C. Bernstein & Co., prefers to receive his intellectual stimulation from other investment professionals at his firm and from clients, rather than from the competition. In this respect, he is typical of most Wall Street economists. Consultation, or even informal get-togethers, among sell-side economists seem to be taboo.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Wall Street Economists: Are They Worth Their Salt?
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?