Why Do Elite Harvard, Princeton, and Ivy League College Students Still Go Into Finance?

These days, some people are worried about the affordability of college. The concern is that rising college prices are turning high education into a recycling plan for privilege, ensuring that the children of those who were successful in the past will continue to be successful in the future. But if college is the source of meritocratic angst, then Wall Street is its distilled essence because Wall Street is where the privileged go to most directly cash in on the economic benefits of going to a good school.

To get an idea of how prevalent finance careers were, and still are, one needs to look at the acceptance rates for these jobs from top universities. In 2008, 28% of Harvard graduates went into finance, and though that number is now down to 17% (of those going into a full-time job) in 2011, the number from Princeton is still a shocking 35%. People are going into finance like crazy, but what is the allure?

Ezra Klein puts forward the idea that finance hungry undergrads are the product of a failed liberal arts education, which does not prepare them with any meaningful job skills. Confused undergrads then, in their junior and senior years, realize that they need a job, but are ill-prepared for most positions and so rush into finance. On top of this basic educational argument, Klein layers a sociological explanation as well. Finance jobs can be obtained through a predictable and rigorous application process with prestige awaiting for those who run the gauntlet effectively. Since Harvard kids are familiar with applications – the theory goes – they are easily entranced by a complex application process that yields riches and prestige. 

I disagree with both claims. It's not about the seductive ease of the application process, and it's not that a liberal arts education fails in virtue of not offering job skills. Instead, it's about the way students and our society understands the value of a liberal arts education, and the rise of narcissism.

There is something to the idea that applications are appealing, but it doesn't have anything to do with applications per se, but with the safety they represent. Plenty of fields like academia (I know, I just submitted applications) have paths well-marked by hordes of questionnaires and personal statements, and not many people go into academia.

The fact that students feel compelled to follow well-marked career paths is a failure to understand that a liberal arts education is not training to do any one thing, but a way to approach all things, even one's own life. Learning to take ownership of ideas is supposed to train students to take ownership of their lives, not to just serve as a tool to win arguments with other people in government and business.

Plenty of people defend a liberal arts education on the grounds that it makes people better critics of their social environment, but it's not enough to question one's environment, one must question one's own motives and desires as well. The reason this doesn't happen is because of a society-wide concern with the self-esteem of young people. The self-esteem movement has made lucky college kids into egomaniacs who rarely question the validity of what they want. This isn't me trying to slur my peers, but a well-documented fact. People are becoming much more narcissistic. When that happens, the interrogation of our most basic direction ceases and we're more vulnerable to the easy road or to snap judgments.

Notice though that I'm not saying that finance is a dirty or bad industry. I don't think it is. There was a bubble in the finance sector that had been building since the 1980s (see here, pg. 62), and people got into it. There are many good reasons to be a financier, but the rise of narcissism in young people perfectly matched the bubble in financial services and the result was that finance was the outlet.

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