Robert Reich contends in this recent post that the wizards of finance, not of product innovation, rule the U.S. economy today. "Problem is, financial entrepreneurship is becoming more and more dominant in the economy," he says. "Thirty years ago, finance was the handmaiden of American industry. Now industry is run by finance. For every budding Steve Jobs or Bill Gates there are now thousands of aspiring private equity or hedge fund managers."

All that brain power goes into concocting increasingly complex derivatives and other financial instruments, which adds minimal benefits compared with, for example, inventing a faster chip, he further suggests.

No doubt. But as Reich, who obviously knows his economic history, is aware, such financial innovation (or gimcrackery) is itself a recurrent feature of our capital markets. Its underlying ideas — and our attitudes toward them (and Wall Street) — wax and wane with the economic seasons. After tech went south in 2000, for instance, venture capital suddenly didn't look so hot. Then a couple guys from Stanford U. come up with a clever search algorithm, and quicker than you can say Google the seeds of Web 2.0 are planted.

The greater long-term threat to American entrepreneurship, especially in technology, may be a more immutable force: history. Since the Industrial Revolution, technological dominance has spread from Great Britain to continental Europe to the U.S., rippling ever outward across the globe. Now China, India and at least a half-dozen other newcomers are in on the act. So should we, say, raise taxes on private equity income? Probably. But restoring the balance between financial and product entrepreneurs alone is unlikely to sustain America's innovation edge. —Alain Sherter

See post from Robert Reich's blog