Re: Krugman.........faux Schumpeterian

["Ian Murray" <seamus2001@xxxxxxxxx>]

----- Original Message -----
From: "Devine, James" <jdevine@xxxxxxx>

I don't know that line, but PK sounds more like the growing
view (e.g., of
Stiglitz) that capitalism needs a lot of supporting
institutions (e.g., good
accounting) to keep it going.

===============

Right, a kind of neo-Polanyian argument appropriated by
mainstreamers for their own purposes. Didn't JS just write
a new intro to another reprint of 'The Great
Transformation"?


> It's in that sense it seems Krugman flirts with the need
> for the creative destruction of the those institutional
> arrangements that have led to the debacle but he, of
> course, doesn't take that logic to it's conclusion. Hence
> the reformism that will simply displace the problems
> created by the managerial class in the design of
incentives
> and rewards vis a vis the ownership class.

wasn't Schumpeter in favor of reform?
=================

Of course.


> ... For me this statement really points out a
contradiction:
>
> "But Enron isn't a person; the evildoers here were Enron
> executives, who collectively walked off with at least
$1.1 billion."

I believe PK is referring to the common "principal/agent
problem" in which
the agent (Ken Lay and the other crooks) get out of control
of the principal
(the stockholders).

JD

=============

Well that's precisely where lefties need to make a stink,
eh? Changes to who shall be principals if everyone is
always already an agent. Legal Realism helps alot with
these issues. The corporation is designed by law to
facilitate only a tiny fraction of the possible forms of
principal agent relations for enterprises, one that favors
oligarchical outcomes in the wealth dimension and hierarchy
in the organizational dimension. The arguments of Hale,
Klare and others are that there are a much larger set of
arrays for organizing principal-agent relations that would
not lead to the oligarchy-hierarchy problems we've got in
the economy now while still maintaining the virtues of
markets when and where they are necessary.

In Doug's book there's "[m]anagers, Jensen and Meckling
argued, would manage in the interest of the outside
claimants if they held bigger stakes in the companies.
Executives debt and stock holdings should be evenly
balanced, to assure they never try to reward or screw one
class of holders at the expense of others. [287]

Doesn't Enron discredit the whole Jensen-Meckling-Monks
approach to shareholder control of the board if that
approach thinks the best set of incentives to give the
board is to allow them to own shares and thereby align
themselves with the interests of outside shareholders?
Isn't that just asking for asymmetric information problems
bigtime!? What forms of ownership-governance would reduce
the asymmetries of information witholding/diffusion both
intra-firm and the larger community?

Ian