J. Bradford DeLong
High finance, which enables us to save, accumulate, and diversify our wealth, is based on the delusion that our investments are secure and liquid. Moreover, that delusion is what makes possible another purpose of high finance: indulgence of our love of gambling.
BERKELEY – No one questions the usefulness of “low” finance: the ability to use checks, banknotes, and credit cards rather than having to cart around chests of silver, scales, and reagents to assay purity, and needing armed guards to protect the silver – and more guards to watch the first set of guards – has obvious efficiencies. So does the ability of households to borrow and lend in order not to be forced to match income and expenditure every day, week, month, or year.
But what use is “high” finance?
Economists’ conventional description depicts high finance as providing us with three types of utility. First, it allows for many savers to pool their wealth to finance large enterprises that can achieve the efficiencies of scale possible from capital-intensive modern industry.
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