Simon Wren-Lewis says that "finance gets away with so much partly through a process of mystification", and that economists must help to cut the sector back to size. This is an important point.

One of the great ideological tricks of bankers has been to present their own vested interests in the language of economic logic, thus giving an apparently technocratic justification for what is in reality mere rent-seeking. Not only have politicians fallen for this, but so too have some on the left. They've looked at bankers' misuse of economics, and inferred that economics is an ideological subject used to justify inequality. This, though, throws out the baby with the bathwater. It deprives the left of one of their potentially most useful tools - the fact that conventional economics undermines the self-regard of the financial sector.

I mean this in six senses.

- Economics tells us that actively managed funds are a rip-off. Most of them under-perform (pdf) the market, but charge extra fees for doing so. The efficient markets hypothesis says that investors would be better off in tracker funds. And in this context, it is correct.

- Bankers claim that policies to make banks safer, such as higher capital requirements, would reduce lending. As Anat Admati and Martin Hellwig have (pdf) shown, such claims are false and self-serving.

- Many economists, such as John Kay support "narrow banking" - the separation of retail from "casino" banking. Bankers oppose this not so much because it is insufficient to ensure financial stability, but because financial conglomerates suit them well. As John says, the retail deposit base "carries an explicit or implicit government guarantee and can be used to leverage a range of other, more exciting, financial activities."

- Banks get a huge subsidy from the government because the implicit promise to bail them out in bad times reduces their borrowing costs. As the Bank of England points out, much of this subsidy ends up in the pockets of senior employees. Whatever else explains bankers' pay, it is emphatically not "free market ideology".

- Econ 101 says that people respond to incentives. And as William Black says, the incentive structures in banks - generated by asymmetric information and principal-agent failures - favoured criminal activity, such as fraudulent lending in the run-up to the 2008 crisis and PPI mis-selling. As John Quiggin says, it's plausible that banks make at least $500bn a year from anti-social activity such as tax dodging and market rigging.

- From customers' point of view, the financial sector has not increased efficiency for decades: Thomas Philippon points out that the costs (pdf) of financial intermediation in the US, measured by gaps between borrowing and lending rates, haven't changed since the 1880s, and Guillaume Bazot shows that they have risen in Europe since the 1950s. If technical change has made banking more efficient, those gains have flowed to bankers rather than to customers.

- The financial sector is hopeless at beneficial financial innovation. There are countless potentially useful products (such as the macro markets advocated by Robert Shiller) which should exist but don't, at least in a significant or low-cost form. What innovation the industry has practised in recent years has - except for some ETFs - generally been dangerous, such as credit derivatives or high-charging funds. In most sectors, there's a gap between the private and social returns to innovation - but this is especially high in finance.

My point here is not just that the financial system is deeply dysfunctional and serves the interests of state-subsidized rent-seekers much better than those of customers. It's also that this fact is evident through the lens of standard economics. Conventional economics is not only correct in same ways, but can serve a radical purpose.