One of the advantages of growing old and bitter is that I remember things which our unhistorical managerialist class forget. Reading attempts to defend bonuses reminded me of this.

The thing is, the City has always paid bonuses, originally for reasons more intelligent than Ms Leadsom thinks. Stockbrokers and merchant banks used to pay them simply because their revenues were volatile - being dependent upon M&A activity and share prices and turnover - and so they needed a flexible cost base. Variable bonuses were a better way of achieving such flexibility than regular hiring and firings.Broking firms were practicing the share economy long before Martin Weitzman and James Meade thought of it.

What such bonuses were not, however, were "incentives." I doubt if many partners were daft enough to think that money alone was an incentive. They used other methods as well. One was direct oversight. Business owners worked alongside employees; in my first job at a middling sized brokers, graduate trainees sat a few feet from senior partners. And on top of this there were social norms, the threat of being ostracised socially and economically if one misbehaved and - to be honest - family ties and nepotism. These restraints upon poor performance have (largely) disappeared now.

In this sense, investment bankers' bonuses are a curious example of path dependency. They have continued even though the nature of their business in other respects has completely changed.

The problem is that whereas they were once a way of stabilizing businesses, they have now become a force for destabilizing them - as they incentivized bad risk-taking - and a means whereby a powerful few extract rent from taxpayers and shareholders, under the cloak of ideological guff about incentives.

You might object here that I'm romanticizing the old broking firms. Maybe. But many of them survived for decades, so they were doing something right. And if what I've described is an ideal type, then so too is the neoliberal notion of homo economicus, crudely motivated only by the cash nexus.

My point here is a simple one. There's nothing intrinsically wrong with bonuses. The problem with banks is that the institutional and cultural framework in which they made sense has disappeared. And simplistic talk of incentives and "rewarding success" ignores this.