Greed is the popular explanation for the financial crisis. The shareholders of failed banks, and now the taxpayers who are bailing them out, have been undone by the greed of bank managers. So say the voters and, unsurprisingly, so say US presidential candidates Barack Obama and John McCain and prime minister Gordon Brown.

This greed theory is only fractionally right. And the policy idea that has flowed from it - that the government should regulate bankers' pay - is wholly wrong.