Saturday, February 20, 2010

Moral Hazard and selection

Mark Thoma puts together an excellent item on moral hazard and natural selection. The banks do not even have to believe that what they are doing is risky. So long as the most successful continue to rise and the relative failures throw in the towel, risk will increase. There is also a good point about the nature of beliefs and the way that they are only over-turned after sufficient weight of contrary evidence.

Robin Hood Tax

A nice example from Tim Harford of the risk that Tobin tax increases volatility.
The tax would certainly be attractive if, like a tax on carbon dioxide or congestion, it reduced destructive activities. But would it? James Tobin and John Maynard Keynes both proposed taxes on financial transactions and each believed that the tax would reduce financial volatility. This is possible but far from obvious, when you realise that the tax might encourage bigger, more irregular financial transactions. An analogy: if I have to pay a charge whenever I use a cash machine, I make fewer, larger withdrawals and the amount of money in my wallet fluctuates more widely. Bear in mind, too, that the most bubble-prone asset market is for housing, which is bought in very lumpy, long-term chunks

Thursday, February 18, 2010


John Lewis vs EasyJet. Below the political rhetoric is an interesting argument over the nature of governance. Labour plans to concentrate on mutualism with people paid to participate; the Conservatives aim for pick-and-mix services.

Labour is planning to rebrand one of its local authorities as Britain's first "John Lewis council", offering council tax rebates to residents in exchange for helping to run services, in a direct challenge to the Conservatives' pioneering "easyCouncil".

Saturday, February 06, 2010

Rights issue

This is a very good overview of rights issue regulations around the world from the FT.

Thursday, February 04, 2010