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How Much Will Wall Street Shrink?

Today's Journal story on the declining allure of a finance career has some interesting numbers:

Although the biggest banks are showing a revived appetite for risk taking and certain exotic instruments such as credit derivatives, many of the vanished jobs aren't expected to be back soon. The White House Council of Economic Advisers expects finance and insurance jobs to decline to 4.1% of the work force in 2016 from 4.8% at the end of last year, a point at which many were already gone. ...

Harvard's 2009 graduating class shows the shift in career directions. Those entering finance and consulting tumbled to 20% of graduates this year from nearly twice that in 2008 and 47% the year before, according to a survey by the university's newspaper, the Crimson. ...

Forty percent of U.S. workers are open to considering federal careers, up from 24% in 2006, according to an April Gallup poll conducted for the Partnership for Public Service, a nonprofit.

Also, a useful statistic on why the allure of Wall Street increased so much in the first place: 

The earnings of an engineer and someone in finance with the same level of postgraduate degree were roughly the same in 1980, but by 2005, the finance professional earned 30% to 40% more, on average, Mr. Philippon found.

And then there's this about the broader economic effects of a downsized financial sector:

When smart people become entrepreneurs, "they improve technology in the line of business they pursue, and, as a result, productivity and income grow," said a study by economists Kevin M. Murphy, Robert W. Vishny and Andrei Schleifer in 1990. By contrast, they said, allocation of talent to professions such as finance and law -- where returns come from distribution of wealth from others rather than wealth creation -- leads to lower productivity growth, fewer technological opportunities and slower economic growth.

"Some professions are socially more useful than others, even if they are not as well compensated," the economists said.

Which means there must be some big externality issues here, right? That is, certain entrepreneurs are creating social benefits they can't entirely capture, which is why their pay isn't as high as their social-value added. Conversely, certain bankers and lawyers are imposing social costs we can't bill them for, which is their pay is so much higher than their social value-added. Kind of a bummer, isn't it?