Lord Robert Skidelsky said humans serve money when money should serve us (Reuters)

The accumulation of wealth, rather using money as a tool to facilitate a comfortable life, is the reason for our "immoral" financial system, says a leading economic historian..

Lord Robert Skidelsky, who is also a biographer of economist John Maynard Keynes, said that society faces a challenge to create a social system that is both economically and morally efficient.

"We serve money, rather than money serving us. Our interests and passions are shaped by money," said Skidelsky at a St Paul's Institute event on Tuesday evening, which debated the role of the City of London and the common good, in the City's grand cathedral.

Society must work out what 'good' money is, said Skidelsky, who posited that it cannot be good "unless it is directed towards good ends".

"We may all agree that a financial system which is completely honest and efficient and is satisfying demand for pornography is producing bad money, but we are unable to agree on what good money is and therefore prefer to leave it to advertisers to shape our wants," he said.

Skidelsky blamed "human insatiability" for the ascent of money, a theory he lays out in How Much Is Enough? Money and the Good Life, a book he wrote with his son Edward.

"We want more stuff. Not because we need it, but because others have it. Or it makes us feel superior to others. And in order to get more stuff, we need more and more money," he said.

"Money has become the measure of almost anything. For example, leisure time is seen as costly, because every extra hour enjoyed chatting to one's friends is one hour less earning money. We increasingly think of activities not devoted to money making as carrying opportunity cost.

"To paraphrase Marx, we increasingly think of goods in terms of their money value rather than their use value. Houses no longer places to shelter, but an investment for the future. Art no longer to be enjoyed, but something to sell on."

Skidelsky cited survey data that shows that GDP growth, above a certain level, does not make humans happier.

"We know that it doesn't, so why are we still on that track?" he asked.

The Legatum Prosperity Index is based on a study of 142 countries comprising 96% of global population. It showed that per capita GDP, basically how rich a nation is, some of the highest have some of the unhappiest populations.

Paul Sharma, deputy head of the Bank of England's Prudential Regulation Authority, the newly crowned financial watchdog, was also speaking at the event.

Sharma said that too often people think of the monetary system as similar to that of past centuries, when we are in a new age of monetary economics because of technological advances.

"Today, each one of us self-manufacture virtually nothing of what we consume. Money has assumed the economic importance that it has because we have moved over a period of several thousand years to the primacy of trade as the basis of our economy," he said.

"There is a point about money that it is a powerful tool. Like many powerful tools, it has the potentially to be used very significantly for the good and very significantly for the bad.

"What is perhaps a little underappreciated in respect to money, is the extent to which the monetary system now is a tremendous technological innovation as compared to the system even a generation ago.

"If this were a different type of technology, there would have been a very significant moral and theological debate about the ethical consequences of that innovation of technology.

"If this were human cloning or genetics, if this were nuclear technology or technological progress in one of the physical sciences … there would have been a very considerable debate about how that technology can be used for good, but also about the new opportunities that that technology gives rise to."