Much of the US economy depends on services and the argument was that labor was merely migrating to other means of generating returns as our society got efficient in allocating capital. However, much of the high-end human talent pool that would have gone on to work in nuclear power plants, hydro-electric dams, neonatology, and particle physics was aspiring to work at Lehman, Goldman and Bear Sterns. Intrinsically, there was no problem with it as long as we had a sizeable pool, portions of which did other things as well. "Creating" things not merely "conjuring" things.
I am quoting Mr.Friedman from the Times,
As a country, too many of us stopped making money by making "stuff" and started making money from money — consumers making money out of rising home prices and using the profits to buy flat-screen TVs from China on their credit cards, and bankers making money by creating complex securities and leverage so more and more consumers could get in on the credit game.
I remember reading somewhere that much of the value in the last few decades has been created because of better management techniques and I partly agree with it. The idea might have been oversold but much of the complex global financial landscape has been made possible by innovation in management techniques. However, what has resulted in the guise of financial innovation is merely "hiding" risk and passing the buck than managing it. The simple marketing principle of keeping the customer at the center of the business has been discarded for the sake of financial returns. Most firms have forgotten that if they delight the customer, and do it better than others that is the surest path to success - not hiding behind the greeks. AIG is a classic example where the firm went looking for superior returns via areas that it did not directly understand. Who were its customers? And, What was it really doing? As Mr. Bernanke put it - it was a hedge fund riding on the back of an insurer. The customers where on the insurance side of its business - so what was it doing hedging risk? Hedging risk might be a good thing - but if you are in business only to do that, then who will drive my taxi?