These days, they prefer to use Excel. Slightly more user friendly, and less sharp edges.

More seriously, I don’t think, as long as collective endeavours involve human beings, and not immortal altruistic blobs of gooey protoplasm, that there’s an easy solution to this problem. As alluded to above, in professional partnerships, ownership and management are one and the same (albeit highly distributed), and the need to pay out all of the profits earned in a year to the constituent partners of the firm in that year is the paramount goal of such firms…

I’m not sure it’s really the kind of thing Akerlof was talking about at all, I just hate financial wizarsry as such.

Not to brag, but without any knowledge of economics, just by reading the newspapers and letting the peasant wisdom do its work, I’ve thought something like what Akerlof and Romer were talking about was happening ever since about the time they wrote the paper.

About ten years ago a widely admired whiz kid financier in Portland Oregon was sent to jail for looting a union pension fund, etc. I did not understand his methods, which seemed to involve making money out of nothing by exploiting tiny differences in rates between various sorts of debts and investments, and I don’t think that his admirers did either. It was like he was a magician. His crimes were committed after his kingdom collapsed, I think, but I ended up believing that if he’d been only a bit luckier he eventually would have been able to do the same things on a much larger, national scale. And he did manage to protect most of his own money.

And here we encounter a sentence whose meaning is critically dependent on the idiolect of English being spoken.

I’m suprised nobody’s chucked Schumpeter into the mix – ‘creative destruction’ and all that. (Actually, TBH, ‘creative destruction’ is pretty much the ‘all that’ that I know.)

I wrote a couple of articles about how these undeniable facts about the incentive effects of crushing debt burdens can be used to explain “governance problems” in Africa and the rest of the third world, but they were if anything even less influential than the bonuses one.

“If so the normal economics of maximizing economic value is replaced by the topsy-turvy economics of maximizing current extractable value, which tends to drive the firm’s economic net worth deeply negative. Once owners have decided that they can extract more from a firm by maximizing their present take, any action that allows them to extract more currently will be attractive – even if it causes a large reduction in the true economic net worth of the firm. A dollar in increased dividends today is worth a dollar to owners, but a dollar in increased future earnings of the firm is worth nothing because future payments accrue to the creditors who will be left holding the bag. As a result, bankruptcy for profit can cause social losses that dwarf the transfers from creditors that the shareholders can induce. Because of this disparity between what the owners can capture and the losses that they create, we refer to bankruptcy for profit as looting.

You, sirs, are in the process of reinventing the Bureaucrat. From the first eunuchs of Babylon and Chin Shir Huang Ti to the Chartered Accountant, they’ve all dreamed of becomin’ Lion Tamers.