Misallocation costs

The (forthcoming) research by Baker, Epstein and Montecino show how the finance curse has inflicted several trillion pounds’ worth of cumulative damage on Britain’s economy, relative to how things might have been with an optimally-sized financial sector, serving its useful roles.

One of the main components of this research is so-called “misallocation costs” – which are the price of diverting resources away from non-financial activities and into finance, through lost productivity and lower investment (in Research & Development intensive areas in particular).

Featured articles

Sept 2018Who are UK banks lending to?

Manufacturing made up just 3.5 percent of all business lending by UK banks in 2017. By contrast, finance, insurance and real estate made up over 75 percent.