I don't know where you get that "little value to society" nonsense from. Asset allocation is a non-trivially hard problem, and the alternative to doing it our way is Five Year Plans and the like, which tend to result - and this is actual, historical fact - in tens of millions of people starving.
You seem to be confusing what is difficult with what is beneficial to society. But if how hard a problem is would be an indication of how beneficial then there are plenty of jobs that is grossly underpaid.
You also seem to be assuming that there can be only two possible solutions to this problem.
No - my point is that countries that have sophisticated financial services industries have historically been extremely unlikely to make catastropic errors of asset allocation resulting in famine, etc.
If we had a group - let's call it The Party - deciding what to invest where, and they ballsed it up, then you get the Great Leap Forward (30M starving to death is half the population of the UK).
I'd rather live in a country with lots of lawyers and bankers than none. And some of these lawyers and bankers are, without question, very valuable to society.
People who look favorably on these industries would probably describe the rent-collection or wealth-destroying activities of these sectors as the regrettable but minor (and maybe inevitable) byproduct effect of an activity that is, on the balance, very positive. We all have these types - high tech has patent trolls (er, innovative technology development partnerships), but nobody would say that the tech sector is a rent-collecting segment of the economy (though many would say that patent trolls are part of the legal industry, not the high tech industry).
Other people like Wooley at the LSE (quoted in the article) take a far dimmer view:
“The amount of rent capture has been huge,” Woolley said. “Investment banking, prime broking, mergers and acquisitions, hedge funds, private equity, commodity investment—the whole scale of activity is far too large.” I asked Woolley how big he thought the financial sector should be. “About a half or a third of its current size,” he replied"
I think there are more than 2 alternatives to the Asset Allocation problem. There's no need to polarise the debate by saying that the alternative to Banker Bonuses (and the rest of the system) is millions of people starving.
John Cassidy wrote a piece for the New Yorker titled "what good is wall street?" that takes a dim view of the economic usefulness of the financial sector (1)
It's a long article, but this is probably the strongest case for banking as rent-collection (or even worth, wealth-destruction) you'll read in the mainstream press (ie., as opposed to academic journals).
(1) not an opposition to banking per se, which he sees as immensely valuable
Yea it's definitely a non trivial problem to rip people off with as much success as the likes of Goldman. IBs are completely socially useless, excessively criminal, and for the most part just exploit clients through front-running etc. I used to work for one, now I work for a startup that actually makes stuff. Happy days.
