Joe Stiglitz is the most effective and influential critic of the efficient markets hypothesis and its variants, such as the ‘Washington consensus’. Here is an interview with Salon, also a plug for his new book Globalization and its discontents

Business 2.0 confirms all my prejudices, asking What’s an MBA Really Worth?, and concluding that it’s a waste of $US 100 000 and two years. The article isn’t perfect. For example, it argues on the one hand that the MBA may have screening benefits by signalling that you are bright and ambitious, then questions statistical estimates finding no (statistically significant) difference between MBA’s and non-MBA’s by arguing that the two populations may be different. In fact, if you argue that entering students are more likely to be bright and ambitious, the implication is that the program actually has negative value. Also, it’s argued that MBA’s have too much theory and not enough practical stuff, but, I’d say that the place to get practical experience is the real world. The big problem with most MBA problems is that the theory is a grab-bag without the internal coherence of a discipline-based degree.

A big welcome to Kim Weatherall and Weatherall’s Law. Kim has joined the trend for Australian academics to set up weblogs, and also the minitrend for aqua-themed sites like this one, and that of Jason Soon.

Since I slammed The New Republic last week, it’s only fair to link to this piece by Gregg Easterbrook, rather unimaginatively titled Greed Isn’t Good, but very well-argued. My piece in tomorrow’s Financial Review will cover similar issues – I hope to put up an a bloggerised version (links and all) here, but this may take a while.

The S&P 500 and NASDAQ indexes fell back to their 1998 levels today. Taking inflation into account, they are back around 1997 levels. That is, as judged by the stockmarket, the boom of the last five years was an illusion. Along with the news that the gigantic WorldCom fraud goes back at least as far as 1999 this calls for some interesting reflections in the blame game. First, as Jason Soon points out, George Bush is well and truly off the hook for this one, though not for some earlier misdeeds. Political blame must be assigned to Clinton, Gore and the Congressional leaders of the day. Special mentions in this respect must go to Phil ‘Special Interest’ Gramm and ‘Holy Joe’ Lieberman. Gramm led the way in freeing corporate interests from those pesky regulations, while Lieberman was the leader defender of dodgy accounting practices, such as the non-expensing of stock options.

But the real point of interest is in the relationship between bubbles and frauds. A lot of commentary has suggested that the fraud epidemic is the result of the lowering of standards that always takes place in a boom. But now it looks as if the fraud came before the boom, or at least before the height of the boom. Importantly, it was only in the last few years of the boom that any positive benefits (reductions in poverty, higher real wages for middle-income and low-income workers, substantial reductions in crime) flowed through to ordinary people. If the gains of the last five years are lost, working-class Americans will be left little better off than they were in the 1960s, but the top 20 per cent will still be immensely better off.

A political aside: To the extent the 1990s boom is discredited, this must be bad news for Gore’s status as Democratic nominee-presumptive. I’d say that this in turn is good news for the Democrats and bad news for Bush.

Postscript: 4 July: White House Defends Bush’s Actions as Corporate Executive Apparently, the paperwork was lost in the mail.

David Morgan gets the prize for reporting that Boris Frankel’s title, From Prophets the Deserts Come is a play on the line ‘If from deserts the prophets come”, from A.D. Hope’s classic poem Australia, and bonus points for the fact that this line was used by Geoffrey Serle as the title of his cultural history of Australia.

A Beautiful Mind was a good movie, but I found it disappointing that there was no attempt to get across the real nature of the kind of work John Nash was actually doing. It’s not impossible, as this exposition of the Riemann Hypothesis shows.

Virginia Postrel makes some interesting points on Microsoft, Chicken Delight and Antitrust Policy, drawing on the work of Paul Joskow. Postrel argues that transactions cost analyses will often give different answers to the game-theoretic approaches that dominate modern literature on industrial organization. She is reasonably convincing in her defence of Chicken Delight, a franchise operation that required franchisees to buy all supplies from the parent company, a requirement that was found to be an illegal tie-in. She says:
“But, Professor Joskow notes, the franchisees didn’t have to sign up with Chicken Delight in the first place. There was plenty of competition. ”
But this argument, and transactions cost economics, go the other way in the case of Microsoft. Microsoft does not have anything like “plenty of competition” And, given sufficient market power, the deliberate creation of even modest transactions costs (e.g. of switching web browsers) can from the basis of big monopoly profits.
The same thing was seen in the California electricity crisis where market power came from the fact that demand was almost totally inelastic (unresponsive to prices). Hence, Enron and others could make big profits by creating and relieving, spurious congestion.

David Morgan weighs in the question of whether the fact that John Malkovich is a well-known (and very good) actor means that it would be stupid to take seriously his death threats against George Galloway and Robert Fisk. Picking up my allusion to the initials OJS, he says ‘if Malkovich has been through a violent marriage and an acrimonious divorce with either Fisk or Galloway, I agree they have something to worry about. ‘ So, it seems that it’s only political threats that should be ignored.

My bonus question to David – how about the initials JWB?

To put my position seriously, once more. Any political death threat, whether or not there is any intention of carrying out, is an attack on democracy, and should be condemned unequivocally. Someone who uses such a threat to score points at the expense of the recipient, as The New Republic did, is little better than the person who made the threat in the first place.