Tuesday, January 11, 2011

How Big Is It?

I'm getting acquainted with my corporate finance class this week. They seem to be a bunch of engaging young people, bright and inquisitive, yet obviously inexperienced at this kind of thing or they wouldn't be wasting time with me. Anyway, I was riffing on how the financial sector has grown by "a lot" these last few years--how big, I asked on impulse, do you think it is, as a percentage of gross domestic product? Nobody professed to have anything like an informed opinion; the guesses ranged from 34 to 51 percent. The correct answer is closer to eight percent (see an excellent Wiki discussion here).

Proves nothing, I know, and I doubt I would have got it anywhere near right had a not been a careful student of Paul Krugman. But maybe it does suggest that--forget about the details, they know banking is pretty dam big.

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