Thoughts at Random

The main idea: bailouts that make creditors whole but wipe shareholders and the firm itself are a great improvement over the current practice.      0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 03.01.2022, and the current version may have been updated several times from its original form.   1.1 When it comes to entities alleged to be “too big to fail” which are nevertheless teetering on the edge of failure, you usually get two options: let them go, or bail them out. But there is a third beyond the two that have been known since Lombard Street. 1.2 OK, say you buy that these are too big to fail. What does the treasury or central bank do whilst still limiting moral hazard and not completely breaking market discipline? 1.3 Step one. Order a stop to all sales or any other activity except as required to service liabilities already incurred. This involves letting go of all staff not required to service these. All ex

The main idea: a corporatist system where only corporations of a certain minimal market cap would be allowed to operate any economic activity at all would be a great improvement over straight socialism. 0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 26.09.2022, and the current version may have been updated several times from its original form.   1 The system 1.1 The efficient implementation of a truly corporatist economic system requires publicly-listed firms acting as clearinghouses of their own shares, as discussed previously . 1.2 Now that one’s market cap is an actionable datum, you can put all the weight of the world on it. Only firms of at least X value are allowed to operate and serve the market. The X would be such as to allow the operation of no more than a couple dozen firms in the whole country. The end. 1.3 X would be enforced by establishing the appropriate lower limit to the price the firm is a

The main idea: allowing the private provision of some public services by peculiarities in contract design.  0. Posts on this blog are ranked in decreasing order of likeability to myself. This entry was originally posted on 27.11.2022, and the current version may have been updated several times from its original form. 0.1 This is an expanded and translated version of what I’ve written elsewhere for the specific application of city parking. I think it generalises pretty well. 1 The problem 1.1 Assume you wish to provide a service that is beleaguered by positive externalities to the degree that no private provider would ever fund the service, as they could only capture a small part of the true value it would provide. 1.2 An immediate example would be a rail line between two major cities, which increases the property values in both by orders of magnitude more than you can ever charge by way of ticketing. As I’m using this as just an example, ignore the obvious solution of selling th