[PEN-L:28248] Re: Something strange about this crisis

["Ian Murray" <seamus2001@xxxxxxxxx>]

----- Original Message -----
From: "Chris Burford" <cburford@xxxxxxxxxx>


> From the Guardian July 20
>
> >West is beset by phantom menace
> >
> >One factor in the current downturn is the emergence of assets which
> >accountants don't know how to value
>
>
>
> >Previous slowdowns have been associated with very high and rising levels
> >of unemployment, which the political right tended to blame on mass
> >outbreaks of idleness among the labouring classes. The current slowdown
> >has been marked by dramatic corporate collapses that have enabled the
> >political left to argue that the problem now is a mass outbreak of greed
> >and thievery by the management classes.
>
>
> http://www.guardian.co.uk/recession/story/0,7369,758820,00.html
>
> The article by a long standing UK equity adviser, seems to give half an
> answer: a large proportion of claimed capital values have been in sectors
> that are relatively intangible, especially ones not producing physical
> commodities, and there is doubt about how to value these.



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

>From Michael Perelman's "Steal This Idea"

"What is the role of the firm in standard economic theory? It is a locus of
knowledge, as embodied in a production possibility set. But where is this
knowledge located and in what sense is it characteristic of the firm? Some of
the knowledge that is most important is embodied in individuals...The embodiment
of knowledge in workers contradicts the standard theoretical meaning of a firm.
In the neoclassical model, workers are not part of the firm. They are inputs
purchased on the market, like raw materials or capital goods. Yet they carry the
firm's information base, even though not permanently attached to the firm.
Defining the firm as a locus of productive knowledge leads to a dilemma; what
knowledge is peculiar to a firm?" [Kenneth Arrow]

So if the main intangible assets of a firm are the possibilities of continuing
production of knowledge and information that can be commodified, then for many
firms, even with their intellectual property protections, a deflation of their
stock price represents a massive devaluation of the types of knowledge and
information they are diffusing via markets and a massive reduction in the
expectations that knowledge of equivalent or greater value will be forthcoming.
Reification aside, in a sense knowledge has become a victim of it's success as
well as it's failure. Braverman's paradox [206-208 'old' edition] is becoming
ever more pertinent.

Ian