I wrote: > I don't get this title: it's pretty clear that PK is > explicitly rejecting > the fashionable and superficial Schumpeterianism of Lindsey > and O'Neill > rather than pretending to be a Schumpeterian. So how is he > "faux"?
Ian writes: > Because of the contradictory notions that come through in > various paragraphs. > > "The truth is that key institutions that underpin our > economic system have been corrupted. The only question that > remains is how far and how high the corruption extends." > > "Now we have seen a graphic demonstration that the system > that was supposed to provide those assurances doesn't > work." > > "It's also a matter of what it takes to make > capitalism work. Investors must be reasonably sure that > reported profits are real, that executives won't use their > positions to enrich themselves at the expense of > stockholders and employees, that when insiders do abuse > their positions their actions will be discovered and > punished." > > What was Schumpeter's quote about the rationality developed > within capitalism turning against the rationality *of* > capitalism? 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. > 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? > ... 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." > > Under the law Enron does have personhood; that's > *precisely* what the infamous 1 paragraph decision of the > SC in the 1886 Santa Clara case stated. Yet we've heard > nothing about how the whole history of the modern > corporation has followed the same manipulation of the State > as Enron. In this sense there is absolutely nothing unique > about what's going down and lefties need to be pointing > that out to folks. This is why I think one of our weakest > links in thinking through alternatives is in generating a > viable left approach to law and economics that builds on > all the enormous strengths of the Legal Realists. Some of > them absolutely obliterated the public-private distinction > regarding the organization of firms and markets. The > corporation is entirely a creature of the state; the major > loci for opportunities to change the system and shift to a > different structure of ownership-accountability-yaddah > yaddah.... 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
