Must Do Better

Donald MacKenzie

Sometimes, the most important – and perturbing – insights make their way into the world without fanfare. As yet, few have picked up on an analysis by the New York University economist Thomas Philippon of the history of the unit cost of financial intermediation. The unit cost is a measure of the efficiency of the financial system, and Philippon tracks its level in the United States since 1884, the time of pens and paper ledgers, when a ‘computer’ was still a human being, equipped at best with a mechanical calculator. Remarkably, Philippon finds that despite more than a hundred years of technological innovation, the efficiency of US finance hasn’t improved since the 1880s.

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