One Place Where Mankiw Makes Absolutely No Sense at All

In his Defending the One Percent paper, Greg Mankiw is rather grudgingly acknowledging rent-seeking (and -getting) in the financial industry, and the allocation of top talent to that industry. He sez:

The last thing we need is for the next Steve Jobs to forgo Silicon Valley in order to join the high-frequency traders on Wall Street. That is, we shouldn’t be concerned about the next Steve Jobs striking it rich, but we want to make sure he strikes it rich in a socially productive way.

Talk about turning straightforward logic on its ear. The whole point is that if somebody makes their money by financial-industry rent-seeking, they by definition will not be the next Steve Jobs.

So yes: we should be concerned if lots of people are striking it rich in the financial industry, because the lure of those rent payments will prevent potential Steve Jobs from creating real value in real businesses. Incentives matter.

Cross-posted at Angry Bear.