Josh Lerner and Peter Tufano have a new paper (I can’t find an ungated copy) on a research agenda on the welfare implications of financial innovation that involves considering counterfactual histories in which the innovations never occurred.
I’m not sure what to think of this as a research agenda, but there are some interesting case studies in the paper itself, which consists largely of narrative analysis. The inspiration comes from Robert Fogel:
Just two years later [1964], Robert W. Fogel, a future Nobel laureate in economics, published his masterpiece Railroads and American Economic Growth. In it, Fogel advanced a method, now used in history, political science and economic history, to consider counterfactual histories.
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Fogel combines counterfactual reasoning with empirical estimates of development. He compares observed GDP increases with three counterfactuals: no railroads at all, an extension of internal navigation (canals), and the improvement of country roads.
They believe that the impact of venture capital on social welfare has generally been positive, citing statistics on innovation, product market strategies, startup outcomes, as well stock market outcomes:In late 2008, 895 firms were publicly traded on U.S. markets after receiving their private financing from venture capitalists … By late 2008, venture-backed firms that had gone public made up over thirteen percent of the total number of public firms in existence in the at that time. And of the total market value of public firms ($28 trillion), venture-backed firms came in at $2.4 trillion—8.4 percent.
They also believe that mutual funds, index funds and ETFs were beneficial to investors, while evidence on the benefits of securitization, compared to plausible counterfactuals, seems to be much more mixed.