Is there nothing the liberals on Capitol Hill will not throw money at? MIT Professor Andrew Lo testified before the House Oversight Committee last week on the increasing gap between pay for finance and engineering graduates (hint, there is money in finance kids!).

Not content to let high salaries solve this Econ 101 conundrum, Lo offers an imaginative fix: “government funding to support finance PhD students” … just like the engineering guys already get.

Lo is jealous, it seems, because MIT graduates 2-300 Ph.D. engineers every year and only about 4 Ph.D.s from his own Sloan School of Finance.

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If the government is short of cash just now, Lo has a solution for that as well, a derivatives user fee:

“A miniscule surcharge on, say, credit default swaps, could support enough finance Ph.D. students at every major university to have a noticeable and permanent impact on the level of financial expertise in both industry and government.”

Not to ask embarrassing questions, but who got us into this mess? Andrew Lo is also Chief Scientific Officer of AlphaSimplex Group, LLC: a hedge fund.

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