OVERMIGHTY FINANCE LEVIES A TITHE ON GROWTH

OVERMIGHTY FINANCE LEVIES A TITHE ON GROWTH

By Benjamin Friedman 2009-09-02

The protracted debate over how to clean up after the financial crisis – and how to reform our accident-prone financial system to prevent another such episode – is stuck on the problem of how to regulate markets without undermining the benefits they bring.

What is sorely missing is any real discussion of what function our financial system is supposed to perform and how well it is doing that job – and, just as important, at what cost.

The crucial role of the financial system in a mostly free-enterprise economy is to allocate capital investment towards the most productive applications. The energetic growth and technological advance of the western economies suggest that our financial system has done this job pretty well over long periods. The role of start-up companies in this process – Apple, Microsoft, Google and many others – testifies to the success not just of our entrepreneurs, but our financial markets, too. The financially triggered Great Recession of 2008-? blemishes this record but does not wipe it away.

Aside from the recession, it is important to ask what this once- admired mechanism costs to run. If a new fertiliser offers a farmer the prospect of a higher crop yield but its price and the cost of transporting and spreading it exceeds what the additional produce will bring at market, it is a bad deal for the farmer. A financial system, which allocates scarce investment capital, is no different.

The discussion of the costs associated with our financial system has mostly focused on the paper value of its recent mistakes and what taxpayers have had to put up to supply first aid. The estimated $4,000bn of losses in US mortgage-related securities are just the surface of the story. Beneath those losses are real economic costs due to wasted resources: mortgage mis-pricing led the US to build far too many houses. Similar pricing errors in the telecoms bubble a decade ago led to millions of miles of unused fibre-optic cable being laid.

The misused resources and the output foregone due to the recession are still part of the calculation of how (in)efficient our financial system is. What has somehow escaped attention is the cost of running the system.

One part of that cost is especially apparent just now as students return to universities. For years, much of the best young talent in the western world has gone to private financial firms. At Harvard more than a quarter of our recent graduates who have taken jobs have headed into finance. The same is true elsewhere. The extent to which employees in the US financial sector are more likely to have college educations than other workers has more than tripled over the last three decades.

At the individual level, no one can blame these graduates. But at the level of the aggregate economy, we are wasting one of our most precious resources. While some part of what they do helps to allocate our investment capital more effectively, much of their activity adds no economic value.

Perversely, the largest individual returns seem to flow to those whose job is to ensure that microscopically small deviations from observable regularities in asset price relationships persist for only one millisecond instead of three. These talented and energetic young citizens could surely be doing something more useful.

The fact that they are not is itself a waste of resources. But the reason they are not – what provides the incentive that attracts so many of our best students into finance – also bears on how well our financial system is serving our economy.

In the US, both the share of all wages and salaries paid by the financial firms and those firms' share of all profits earned have risen sharply in recent decades. In the early 1950s, the “finance” sector (not counting insurance and real estate) accounted for 3 per cent of all US wages and salaries; in the current decade that share is 7 per cent. From the 1950s to the 1980s, the finance sector accounted for 10 per cent of all profits earned by US corporations; in the first half of this decade it reached 34 per cent.

These wages and profits – and the office rents, utility bills, advertising and travel expenses – are all parts of the cost of running the mechanism that allocates our economy's capital. To recall, what makes a new fertiliser a good deal for the farmer is not just that it delivers greater production per acre but that the added production is sufficient to buy the fertiliser and increase the farmer's own return.

What makes a more efficient financial system worthwhile is not just that it allows us to achieve greater production and economic growth, but that the rest of the economy benefits. The more the financial system costs to run, the higher the hurdle. Does the increased efficiency our investment allocation system delivers meet that hurdle? We simply do not know.

Economic decisions are supposed to turn on weighing costs and benefits. It is time for some serious discussion of what our financial system is actually delivering to our economy and what it costs to do that.

The writer is an economics professor at Harvard University and author of The Moral Consequences of Economic Growth

金融业繁荣的代价

作者：哈佛大学经济学教授本杰明•弗里德曼(Benjamin Friedman)为英国《金融时报》撰稿 2009-09-02

金融危机过后该如何收拾残局？应如何改革我们易出事故的金融体系，使类似事件不再发生？这场持久辩论卡在了如何监管市场而不致损害市场所带来好处的问题上。

我们极度缺失的是有关下列问题的严肃讨论：我们的金融体系理应执行哪种功能，其完成效果如何，以及同样重要的是，成本有多高。

在一个主要基于自由企业的经济体里，金融体系的关键作用在于将资本投资配置给最具生产力的领域。西方经济体充满活力的增长和技术进步表明，在很长时 期内，我们的金融体系在这方面做得相当出色。苹果(Apple)、微软(Microsoft)、谷歌(Google)及其它众多初创公司在此过程中的作 用，不仅证明了企业家的成功，也证明了我们的金融市场的成功。由金融领域触发的2008年大衰退(Great Recession)给这项记录蒙上了污点，但并不能将其彻底抹去。

除了衰退，询问一下这个曾备受称赞的机制的运作成本也很重要。如果一种新式肥料有可能让农民提高农作物产量，但肥料价格、以及运输和施肥的成本高于额外产出在市场上的收益，对于农民而言，这个买卖就不划算。配置稀缺投资资本的金融体系亦是如此。

有关金融体系成本的讨论，大多聚焦于金融体系最近所犯错误的纸面价值，以及纳税人必须拿出多少钱来进行紧急救助。美国抵押贷款相关证券的亏损估计高 达4万亿美元，这不过是表象。在这些亏损背后，是由资源浪费造成的实际经济损失：对抵押贷款错误定价，致使美国建造了过多的房屋。10年前，电信泡沫中类 似的定价错误，让美国铺设了数百万英里的闲置光纤电缆。

在计算我们金融体系的效率时，被滥用的资源和因衰退而放弃的产出仍是其中的一部分。没有引起人们注意的是这一体系的运作成本。

目前，随着大学生开始返校，其中一部分成本体现得尤为明显。多年来，西方世界最优秀的年轻人才中，大多供职于私人金融公司。哈佛大学 (Harvard)最近就业的毕业生，有四分之一以上流入了金融业。其它学校的情况也是如此。过去30年来，相对于其他行业，美国金融业员工受过高等教育 的可能性提高了两倍以上。

从个人层面讲，谁都无权指责这些毕业生。但从总体经济层面上看，我们正在浪费我们最宝贵的资源之一。尽管这些毕业生做的部分工作有助于更有效地配置我们的投资资本，但大部分工作都没有增加经济价值。

有悖常理的是，最高的个人回报似乎流向了这样一些人：他们的工作是确保资产价格关系与可观察到的规则性的细微偏差只会持续千分之一秒，而不是千分之三秒。这些才华横溢、精力充沛的年轻人，本可以做一些更有用的事情。

他们没有这样做，本身就是一种资源浪费。但他们没有这样做的原因——为吸引我们这么多最优秀学生进入金融业提供了动机——也与金融体系为我们经济服务的好坏有关。

在美国，金融公司支付的薪资总额以及赚取的利润在总体经济中的比例，最近几十年都有大幅提升。上世纪50年代初，“金融”业（不包括保险和房地产 业）占美国薪资总额的3%；而本世纪以来，这一比例为7%。从50年代至80年代，在美国企业赚取的所有利润中，金融业占10%；而2000年至2005 年间，这一比例达到34%。

这些薪资和利润——以及写字楼租金、水电费、广告费和差旅费——都属于我们经济资本配置机制的运作成本。回到上文的问题上，要让一种新化肥对于农民来说很划算，它不仅要能提高单位产量，增加的产出还要足以购买化肥，并提高农民自身的收入。

一个更有效的金融体系要想有价值，不仅要让我们能够获得更高的产出和经济增长率，还要让其它经济部门获益。金融体系的运作成本越高，障碍就越大。我们的投资配置体系所提高的效率，能够跨越这一障碍吗？我们真的不知道。

经济决策理应权衡成本与效益。我们是时候展开一些严肃的讨论了，看看我们的金融体系到底给经济带来了什么，以及这样做付出了什么代价。

译者/何黎

本文作者是哈佛大学经济学教授，著有《经济增长的道德后果》(The Moral Consequences of Economic Growth)