New on the website

I’ve put up my article, ‘Fairy gold’ turns to debt from the Fin of 10 April. Here’s the conclusion.

as long as financial innovation is seen to be good in itself, politicians will continue to pursue these [Public Private Partnership] schemes, not as a method of optimally allocating a complex set of risk, but as a source of fairy gold, from which valuable public assets can seemingly be spun out of thin air. Of course, just like fairy gold, this illusion will disappear in the light of day, leaving a mountain of debt and poorly-structured projects.

One thought on “New on the website

  1. SLightly off the topic, but still on financial practices, John Derbyshire poked fun at me on a discussion group for using the archaic term “rentier”. He seemed to think it was the sort of term that only hairy-nostrilled Marxist academics used. But my impression is that financial agencies have radically increased their share of GDP over the past generation, mainly through “churning” – high frequency administration of high volume transcation flows.
    Buffet says that 1/3 of the profits of the Fortune 500 are taken in financial charges and transaction costs = US $100 bill pa.
    Mostly dead weight loss, I expect.
    Also, has the overall share of “rentier” income going to non-labour factor owners (interest on capital and rent on land) gone up in the OECD over the “financialist” generation?
    Strictly speaking, profits (either retained as capital gain, or distributed as dividends) are rewards to risk-rewarding entrepreneurship, other than those going to assets with monopolistic-inelastic supply curves (eg land & collectibles).
    In short, profits good, rentier bad, although neo-classical economists do not like profits – they think they are a sign of monopoly. In a sense they are right, as someone has to have a good idea first.

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