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 Barack Obama, John McCain and Gordon Brown, the British prime minister.

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.