Questioning the Value of Financial Innovations

Last week, The Wall Street Journal reported some striking remarks from former U.S. Federal Reserve Board Chairman Paul Volcker. In his comments reported by The Wall Street Journal, Volcker questioned the value of financial innovations in recent years and, in particular, said that "the most important financial innovation that I have seen [in] the past 20 years is the automatic teller machine," an innovation which, he said, "really helps people."

Volcker also said that he'd like to see "some shred of neutral evidence about the relationship between financial innovation recently and the growth of the economy." He isn't the only one to raise this overall concern; for example, this past summer MIT Sloan School professor Simon Johnson and James Kwak wrote in an article in Democracy about the importance of distinguishing between beneficial and nonbeneficial financial innovation.

What do you think? How should we as a society distinguish between beneficial and potentially harmful financial innovation? Is financial innovation generally beneficial to society?