Many economists, bankers and policy-makers like to think of financial innovation as something like the innovation that occurs in engineering, consumer goods, or public services: an endless process of improving the quality or decreasing the cost of the goods and services that we enjoy. However, the financial crisis has cast a shadow over recent financial innovations, in particular those that claim to eliminate risk. The apparent failure of innovations such as credit default swaps, or credit insurance, has put into doubt the usefulness of financial innovations. The development of new financial instruments, in particular financial derivatives, was such a notable feature of the long financial boom from the end of the 1970s that financial innovation came to be associated with financial expansion, just as it is now associated with opaque credit devices of dubious value. Well-known figures in the world of finance, such as George Soros and Warren Buffett, have denounced financial derivatives. As the policy debate turns to the reregulation of the financial markets, the functions and social use-value of financial novelty is under scrutiny.

In their hey-day, the purveyors of financial innovations liked to advertise themselves as engineers, namely highly educated practical men (for they were almost universally men) who could design better machines or constructions. In fact, machines usually have a useful function, whereas financial innovations have negligible or no intrinsic use-value to anyone outside the financial markets.