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The alchemy of finance

Daniel Gross reports from an event in Davos where people gathered to hear a very rich man -- in this case, George Soros -- say very conventional things. And this was one of the better sessions.

While copies of his new book, The Soros Lectures, were available, the experience got me thinking about another Soros volume, The Alchemy of Finance. It struck me that the difference between banality and profundity is generally a few billion dollars: The real alchemy of finance is to endow those skilled at finance to wield authority in adjacent or even unrelated areas. That's the general theory of Davos, bankers sharing their theories about nonbanking subjects. Stick around and you'll hear a lot of conventional wisdom on globalization, climate change, poverty reduction, financial crisis, but it somehow sounds deeper and more weighty because it's delivered by an extraordinarily wealthy CEO, a private equity executive, or hedge fund manager rather than by a journalist.

By Ezra Klein  |  January 28, 2010; 10:22 AM ET
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The emphasis on journalists in the last line makes the whole thing seem more like sour grapes than it might otherwise.

Posted by: adamiani | January 28, 2010 11:03 AM | Report abuse

Soros understood the basics of behavioral finance decades before most others, as made clear by The Alchemy of Finance. That doesn't turn into models of bubbles, but neither do current ideas from cognitive science. Soros was inspired by Karl Popper and, as he says in Alchemy, Hegel--for the constructive or "constitutive" perspective on market value. Recently, the philosopher John Searle has focused on this construction of social reality, with money, as a symbolic medium, being a prime example. Soros is hard to follow, and never improved much on his basic formulations in Alchemy, but his overall philosophical and cognitive approach is basically what others are now making more accessible, and the general populace implicitly accepting, with the experience of the dot-com and subprime bubbles.

Posted by: jkadvany | January 28, 2010 11:19 AM | Report abuse

Nobody goes into banking because they have a love of the banking system. They go into banking because they want to make lots of money and use that money to buy influence over and to fund their other, real interests.

They figure that making lots of money and hob-nobbing at Davos beats doing field work on development issues as a Ph.D. student for several years and then slaving away as an assistant professor.

Posted by: constans | January 28, 2010 12:09 PM | Report abuse

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