For three years I've been writing a regular feature for Research magazine on financial history, for an audience of financial advisors but often with material that has broader interest. In the December issue I have some thoughts based on this work: "Excavating Finance's Past." Excerpt:
In the wake of the Great Meltdown, financial innovation is viewed with great suspicion. Some innovations turned out to be duds, or at least to have problems and exposures that were poorly disclosed and understood. The auction-rate securities market is effectively dead, for example, and few would argue these days that its benefits justified its risks.Whole thing here.
The history of financial innovation, however, is not some one-sided litany of duds and debacles. Rather, many products and techniques that were cutting-edge for their time have done much good. One wonders, for instance, how companies would have coped with floating exchange rates without the currency futures pioneered by Leo Melamed at the Chicago Mercantile Exchange in the 1970s with inspiration from Milton Friedman.