A new study from the Kauffman Foundation argues, quite plausibly, that the financial sector's draw on talent is impeding entrepreneurship and economic growth. Drawing on this study, Time magazine columnist Rana Foroohar sketches out the problem. Why should a highly skilled graduate develop new technologies or life-saving drugs instead of making five times the income modeling the stock market?
I am not one to denigrate the value of an innovative financial sector (and if I did, it would be harder to explain why I continue to work at a financial magazine). I've long admired Alexander Hamilton's emphasis on developing a sophisticated financial system. But he also sought (with less success) to jump-start American industrial manufacturing with the Society for Useful Manufactures. He certainly recognized that the U.S. needed to be adept at more than just managing money.
What's the answer? Foroohar's is that we shouldn't curtail funding for the financial regulatory agencies. That's fair enough as far as it goes, but this is a subject I hope to think and write about more extensively.