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Actively traded mutual funds appear to be a swindle. They also represent a relatively small subset of the financial sector. I guess you're saying they're illustrative of the rest of the sector? My prior is still that a voluntary transaction is mutually beneficial, and I don't see the evidence that other financial activity is unproductive.






I guess you're saying they're illustrative of the rest of the sector?

No, I just think that your question may not have a simple answer.

The first problem is the definition of “real value”. Do voluntary transactions that give clients short-term gratification but have negative long-term consequences produce real value? Depending on the answer, a significant part of financial sector profits would have to be reclassified.

The second problem is the government. Government regulations may sometimes make legitimate transactions needlessly complicated, allowing middlemen (financial sector) to make bigger profits. Is there a way to estimate which part of the profits is actually justified by value creation and which is due to government interference? On the other side, when financial sector activities result in resource misallocation (e.g., the recent mortgage crisis), how much of the value loss can be blamed on the government which encouraged such activities?
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melian
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