Sunday, 14 May 2017

The emergence of the corporate form

An interesting new article from the Journal of Law, Economics and Organisation -- Volume 33, Issue 2 May 2017: 193-236.
The Emergence of the Corporate Form
Giuseppe Dari-Mattiacci; Oscar Gelderblom; Joost Jonker; Enrico C. Perotti
We describe how, during the 17th century, the business corporation gradually emerged in response to the need to lock in long-term capital to profit from trade opportunities with Asia. Since contractual commitments to lock in capital were not fully enforceable in partnerships, this evolution required a legal innovation, essentially granting the corporation a property right over capital. Locked-in capital exposed investors to a significant loss of control, and could only emerge where and when political institutions limited the risk of expropriation. The Dutch East India Company (VOC, chartered in 1602) benefited from the restrained executive power of the Dutch Republic and was the first business corporation with permanent capital. The English East India Company (EIC, chartered in 1600) kept the traditional cycle of liquidation and refinancing until, in 1657, the English Civil War put the crown under strong parliamentary control. We show how the time advantage in the organizational form had a profound effect on the ability of the two companies to make long-term investments and consequently on their relative performance, ensuring a Dutch head start in Asian trade that persisted for two centuries. We also show how other features of the corporate form emerged progressively once the capital became permanent. (JEL: G30, K22, N24).

Friday, 12 May 2017

Daniel Griswold on the basics of trade

From David Beckworth’s podcast series, Macro Musings comes this audio of an interview with Daniel Griswold on the Basics of Trade.
Daniel Griswold is a Mercatus Center Senior Research Fellow and Co-Director of the Program on the American Economy and Globalization at the Mercatus Center at George Mason University. He joins the show to discuss the theory of trade, dating back to Adam Smith, and his work on current US trade policy. Daniel and David discuss some of the misconceptions surrounding trade and why Americans should embrace free trade instead of protectionism.

Tuesday, 9 May 2017

How to make trouble

These guys really know how to make trouble .........

Replicating Anomalies
Kewei Hou, Chen Xue, Lu Zhang
NBER Working Paper No. 23394
Issued in May 2017
The anomalies literature is infested with widespread p-hacking. We replicate the entire anomalies literature in finance and accounting by compiling a largest-to-date data library that contains 447 anomaly variables. With microcaps alleviated via New York Stock Exchange breakpoints and value-weighted returns, 286 anomalies (64%) including 95 out of 102 liquidity variables (93%) are insignificant at the conventional 5% level. Imposing the cutoff t-value of three raises the number of insignificance to 380 (85%). Even for the 161 significant anomalies, their magnitudes are often much lower than originally reported. Out of the 161, the q-factor model leaves 115 alphas insignificant (150 with t < 3). In all, capital markets are more efficient than previously recognized.
The behaviourists will not be happy!

Wednesday, 3 May 2017

Oliver Hart, incomplete contracts and control

From the 2017 Royal Economic Society Conference comes this video of the talk by Oliver Hart, the Winner of the 2016 Nobel Prize in Economics, which is an extended version of his Prize Lecture.

Watch it and actually learn something worth learning!! An usual thing in economics these days. And no, not a regression anywhere.

Friday, 28 April 2017

Josh Zumbrun on the challenges and angst facing the economics profession

From David Beckworth’s podcast series, Macro Musings comes this audio of an interview with Josh Zumbrun on the challenges and angst facing the economics profession.
Josh Zumbrun is a national economics correspondent for the Wall Street Journal. David and Josh discuss what seems to be the diminished status of economists in a populist era and what role economists will play in the Trump Administration. Josh also shares his thoughts on life as an economics journalist in the digital age.

Wednesday, 26 April 2017

82 copies sold

Today I received a note from my publisher telling me that the greatest book ever written has sold a total of 82 copies! Ok a few fewer than you might expect from a new Harry Potter book, but a (small) step towards being a millionaire.

Thanks to the 82 of you out there.

As for the rest of you ...... shame!