….In a recent article titled
“What Do Banks Do?,”
which appeared in a collection of essays devoted to the future of finance,
Turner pointed out that although certain financial activities were genuinely valuable,
others generated revenues and profits without delivering anything of real worth
—payments that economists refer to as rents.
“It is possible for financial activity to extract rents from the real economy rather than to deliver economic value,” Turner wrote.
“Financial innovation . . . may in some ways and under some circumstances foster economic value creation,
but that needs to be illustrated at the level of specific effects:
it cannot be asserted a priori.”
Turner’s viewpoint caused consternation in the City of London,
the world’s largest financial market.
A clear implication of his argument
is that many people in the City and on Wall Street are the financial equivalent of slumlords or toll collectors in pin-striped suits.
If they retired to their beach houses en masse, the rest of the economy would be fine,
or perhaps even healthier.