Matt Yglesias highlights some evidence that, contra my item from yesterday, the changes on Wall St. during the last generation aren't just cultural and sociological; the amount of brainpower on Wall St. has increased fairly dramatically.

I don't doubt this is the case. My point is just that the cultural change is as important as the intellectual change, if not more, in creating our dodgy financial system. That is, the problem isn't smart people per se. It's smart people driven to use their brainpower and creativity to outdo the other guy, something even the smart guys from the earlier, inbred era (and there were a few of them) didn't often attempt. It was the creation of a meritocracy, which rewarded intelligence and encouraged competition.

Now, as I said in the previous item, I'm a huge believer in meritocracy and in including previously excluded outsiders. And I think that cultural change had real benefits on Wall St., too. The only problem is that meritocracy can lead to excesses--too many people trying to outdo one another--and excesses can be really, really costly when it's the global financial system you're talking about. So I mention the old lazy, self-satisfied days not to suggest we restore the WASP establishment. But to suggest we rearrange things so there's a smaller premium on entrepreneurialism and innovation in the financial sector.