Financial Innovation?

Gerard Magliocca

Gerard N. Magliocca is the Samuel R. Rosen Professor at the Indiana University Robert H. McKinney School of Law. Professor Magliocca is the author of three books and over twenty articles on constitutional law and intellectual property. He received his undergraduate degree from Stanford, his law degree from Yale, and joined the faculty after two years as an attorney at Covington and Burling and one year as a law clerk for Judge Guido Calabresi on the United States Court of Appeals for the Second Circuit. Professor Magliocca has received the Best New Professor Award and the Black Cane (Most Outstanding Professor) from the student body, and in 2008 held the Fulbright-Dow Distinguished Research Chair of the Roosevelt Study Center in Middelburg, The Netherlands. He was elected to the American Law Institute (ALI) in 2013.

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3 Responses

  1. Adam says:

    I think you’re comparing apples and oranges. Bankers hours came from the fact that bankers spent a lot of time in the community, and made their money over time as the community prospered.

    There’s no reason to think that innovative products are at odds with that. Farm futures were an innovation, as were reverse mortgages.

    The key is for compensation to be tied to the period of risk plus a little for margin of error. Align bankers interests with a stable banking system. If they’d then like to work long hours, go ahead.

  2. Frank Pasquale says:

    Two thoughts:

    Before the 1970s, “Trading in options and futures had been met with “instinctual hostility” for generations by the Securities and Exchange Commission (SEC). Speculation on stock options, in particular, had been held responsible for the Wall Street Crash of 1929; such derivatives markets were held by many regulators to be the moral equivalent of gambling. (One SEC chairman “compared options to ‘marijuana and thalidomide’.”)” [Joel Isaac’s description of Donald MacKenzie’s findings in An Engine, Not a Camera: How Financial Models Shape Markets (Cambridge, MA: MIT Press, 2006).]

    But even if we accept this older view of financial innovation, we run into Juicy Whip and moral utility issues, eh?

  3. bill says:

    To be fair, Juicy Whip was not actually hurting anyone. Your beverage apparently tasted just as good, it just wasn’t coming from the reservoir that was displayed.

    Financial “innovation” of the past two decades that is harmful to end users might be more like Massengill’s Elixir Sulfanilamide.