In a recent post, “Does Finance Deserve Its Earnings?” Scott Sumner writes:
Many economists (even some relatively free market economists) have begun to question the high returns flowing to the financial industry in recent years. It’s not that people don’t understand that finance is important, or that it plays a critical role in our economy, but rather the claim is that finance is much more generously rewarded than in the past, and that those extra earnings are at least partly unmerited.
Today I’d like to defend finance….[E]ven in the absence of policies such as Too Big To Fail, you would expect the share of income going to finance to be rising sharply, as compared to earlier decades.
Now I’ll be honest: I thought I was going to be able to pounce on Sumner for this one. I mean, Scott has refused to admit–even though I’ve asked him point-blank twice (I believe)–that accountants serve a purpose in a market economy. I know, I know, you think I am exaggerating, but please go re-read my exchanges with Scott when he says that the very concept of “income” is useless.
As I say, I was getting ready to level a back-breaking blow; how the heck can Scott say financiers are useful, if he thinks accountants don’t really do anything? But then I saw his elegant escape hatch: Scott is talking in this post about “earnings” and “share of income.” Two meaningless concepts, if we are to believe his earlier posts.
Hence, Scott Sumner has performed the macroeconomic equivalent of Jesus’ famous, “Render unto Caesar what is Caesar’s.” The man is a force of nature. Look what he did to the last guy who tilted at the Sumnerian Worldview a bit too recklessly.