Why Has The US Financial Sector Grown So Large?

Tim Taylor reviews a recent published study that attempts to answer that question.  It also raises a more difficult question for economists.  Has the growth of the financial sector been good or bad for society?  The study that he reviewed argues that growth in the financial sector has made the economy less stable.  Taylor, like most economists, is uncomfortable dealing with moral questions.  Many believe that economic efficiency is good, and that a more efficient economy is good for everyone.  The path to efficiency, however, has moral social consequences that should not be ignored by economists.  An efficient and larger financial system may not be a public good.  It was deregulated in order to increase efficiency.  Most of the benefit from deregulation went to bankers, and the public has paying for those benefits for some time.