Wall Street likes us to think that bankers are an unusually talented bunch and thus it is part of the natural order of things that they should be paid a lot more than other people. History suggests otherwise. The past 100 years have seen two periods when banks were able to churn out high profits on a sustained basis and bankers were paid exceptionally well—during the 1920s and in the two decades leading up to 2008. It is not a coincidence that both episodes ended in tears.

As in the 1930s, the recent financial crisis has provoked a political reaction, motivated as much by a sense of moral outrage at the behavior of bankers as by economic considerations. Authorities are now clamping down on what banks can do and how much more capital they are required to hold.

These rules will undoubtedly make it tougher for the industry to generate high profits and pay excessive bonuses to employees. Bankers insist that the rules will also harm the economy. Little evidence suggests that this is true. During the 1950s and ’60s, financial institutions were tightly regulated. Bankers did not make money by trading for their own account but instead earned fees for providing advice to their customers and serving as a go-between for companies raising capital. Their goal was to get to know their clients well, understand their problems, and act in their best interests—somewhat like family doctors. They were not compensated absurd amounts. Wall Street was viewed as a place not for high flyers but for sober, cautious people who were perhaps a little boring. Meanwhile, the economy boomed and we had very few financial crises. Let us hope we are heading back to those days.

Next idea: Sell the Pill Over the Counter