View article

Finance has always taken advantage of technological innovation. No sooner had the telegraph been invented than traders were using it to arbitrage the price of stocks across cities. With the telephone, came the first forms of home banking. The introduction of computers transformed stock exchanges from overcrowded and loud pits to silent rooms filled with microprocessors. Yet, for most of the last two millennia, technological innovation has only allowed finance to do roughly what had been done before, though it has allowed us to do the same things better, faster, and more cheaply. The loans granted in the 1990s were not so different from the loans described in the Hammurabi code (1754 BCE) nor was it different the way those loans were granted almost four millennia later.

To be sure, technological innovation in finance has allowed financial transactions to be carried out at scale. At the end of the last decade of the …