An intriguing post on the topic looking at how cultural economics can help understand what changes people’s minds:
Archive for May 4th, 2012
Thomas Philippon of NYU in this amazing paper points to another paradox of financial industry.
Paul Volcker had famously quipped that the most important fin innovation is ATMs! And BTW, ATMs is more of a technological innovation to deliver cash without going to a bank.
Just extending Volcker’s thoughts to general finance, one would imagine cost of fin intermediation might have declined with rise in technology. So financial innovations like CDS, CDOs etc may not be innovative per se, but atleast we should be seeing costs of intermediation declining over a period of time. Right?
Wrong. Philipon shows that cost of financial intermediation has been going up despite all these technologies: