The Social Value of a Wall Street Career

A student who regularly reads and comments on this blog asks me for career advice, from a social point of view:

How does someone like Warren Buffett contribute to the economy? It seems investing in old line industrial businesses is more of a rent-seeking activity. I take it that people on Wall Street are in some sense parasitical ... yes? Do you still think it makes sense for me to go to work on Wall Street and be, say, an investment manager at a hedge fund? Can one improve an economy's productivity gains by working on Wall street?

I believe it is wrong to view investors, including long-term investors like Buffett and short-term investors like hedge fund managers, as parasitical rent-seekers. Yes, they are motivated by self-interest, but by buying undervalued securities and selling overvalued ones, their actions bring the prices of capital assets closer to fundamental value. Those asset prices govern the allocation of investment resources, which in turn is paramount for the success of the economy. So, while making themselves rich, investors make the economy more productive for everyone--as if led by an invisible hand.