So much of our national "brain power" is siphoned off into finance where nothing of value is produced and rent seeking on already exsisting assets extracts a high cost on the rest of society. Yale Professor Robert Shiller sums it up pretty well.
To some people, the question is a moral one. Trading against others is regarded as an inherently selfish pursuit, even if it might have indirect societal benefits. But, as economists like to point out, traders and speculators provide a useful service. They sort through information about businesses and (at least some of the time) try to judge their real worth. They are thus helping to allocate society’s resources to the best uses – that is, to the most promising businesses.But these people’s activities also impose costs on the rest of us. Indeed, a 2011 paper by Patrick Bolton, Tano Santos, and José Scheinkman argues that a significant amount of speculation and deal-making is pure rent-seeking. In other words, it is wasteful activity that achieves nothing more than enabling the collection of rents on items that might otherwise be free.
We hear people defend these predator rent-seekng finance capitalists all the time. Just turn on Fox News or listen to resident CNBC idiot Joe Kernan gush about "producers" and why they should be taxed less and regulated less. It's bullshit.
Shiller hits the nail on the head. Read the full article here.
