Skip to main content

The FT had a timely article over the week-end about Short Long (pdf), a recent research paper on the irrational discounting of the long term by markets:

Andy Haldane and Richard Davies of the Bank of England show clear evidence of increasing short-termism in the pricing of companies’ shares across all industrial sectors. In their words, “myopia is mounting”. Their paper is not for the faint-hearted – it is stuffed with equations and complex charts. But what it shows is that investors place irrationally low values on the returns from long-term investment projects. Cash flows more than 30 years ahead from investments made today (...)  are scarcely valued at all.


Mr Haldane and Mr Davies rightly conclude that this short-termism is a market failure of a sort that raises big issues of public policy. It leads to investment being too low, especially in those long-term infrastructure and high-tech projects on which future growth depends.

In other words, markets (as they are structured today) are unable, on their own, to fund infrastructure and other similar public goods which underpin our prosperity. This has been hidden for a long time because the post WW-2 generations embarked in a massive infrastructure investment binge which still serves us to this date, and allows us to believe that infrastructure investment is not that critical. We see it's slowly fraying at the edges in various places.

But big infrastructure can only be done by public authorities, and since the mantra today is that whatever public authorities today is wrong, such projects no longer take place, or they happen in ways that ensure that the priority is financial investors making money today - thus the craze for PPPs and PFIs and other similar schemes, which end up costing more money to governments (but it's "rents" and not public "debt," so it's less visible), further reinforcing the notion that such projects are inherently wasteful while enriching a whole new world of parasites (including yours truly) - bankers, accountants, lawyers, consultants, which assess, fund, document and manage these big projects with the purpose of making money now rather than providing a service to all for the long term.

And that means building gas-fired power plants rather than renewables, new roads rather integrated public transport and private clinics rather than public hospitals - to the extent anything gets built, of course, because it also means, naturally, the privatisation of existing infrastructure, typically at startingly low prices (because you look at generating private-sector type returns from direct income rather than public-sector returns which take into account the positive externalities of infrastructure). In other words, profiteering rather than investing.

Originally posted to Jerome a Paris on Mon May 23, 2011 at 04:51 AM PDT.

Also republished by Global Expats.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Meteor Blades, Tookish, JekyllnHyde, paradox, Ed in Montana, Joe Bob, Mimikatz, PrahaPartizan, Odysseus, jam, copymark, teacherken, ORDem, Subterranean, AaronInSanDiego, Detlef, mickT, Geenius at Wrok, Nina Katarina, Danno11, Powered Grace, madmsf, RunawayRose, wytcld, tommurphy, Shockwave, wu ming, TJ, cotterperson, Victor, hyperstation, LEP, rhubarb, oysterface, eeff, Mnemosyne, xynz, ManfromMiddletown, frisco, ZAPatty, RFK Lives, MarkInSanFran, opinionated, bronte17, TracieLynn, EricS, cskendrick, BlackGriffen, whenwego, ask, bluesteel, KMc, liberaldregs, chuckvw, cosmic debris, Paradox13, Nate Roberts, Chrisfs, dksbook, Eddie C, wader, psnyder, Moody Loner, Ryvr, TexDem, mrkvica, wordene, gmb, susie dow, HeyMikey, chrismorgan, Pohjola, cevad, walkshills, zerelda, side pocket, mungley, Steven D, Josiah Bartlett, bibble, J Orygun, BDA in VA, Gowrie Gal, Julie Gulden, rapala, jabney, marina, ManOnTheBench, denise b, rimstalker, JanetT in MD, unclejohn, disrael, Lying eyes, chimene, irate, sc kitty, Superpole, run around, frandor55, basquebob, i m bobo, drewfromct, Brooke In Seattle, Sara R, LABobsterofAnaheim, Burned, Kayakbiker, LucyandByron, neroden, LivesInAShoe, dsteffen, Cory Bantic, doe, mightymouse, ChuckInReno, fhcec, xaxnar, Jim P, Nowhere Man, Born in NOLA, Paul Ferguson, Patriot Daily News Clearinghouse, ainwa, Kingsmeg, tobendaro, The Wizard, New Rule, dewey of the desert, NBBooks, global citizen, A Siegel, Dissentinator, NearlyNormal, CA Nana, profh, doingbusinessas, Dianna, fiddlingnero, goinsouth, shaharazade, kurious, Hedwig, OHdog, cpresley, DBunn, seabos84, lams712, One Pissed Off Liberal, RWood, Loudoun County Dem, SpecialKinFlag, camlbacker, leema, ColoTim, aravir, yoduuuh do or do not, Calvin Jones and the 13th Apostle, DWG, Unbozo, Strabo, US Blues, letsgetreal, bobswern, jnhobbs, Bronx59, Moderation, jhop7, GeorgeXVIII, janatallow, TomP, cville townie, MKinTN, mconvente, Edger, spacejam, Fossil, bythesea, lineatus, jamess, monkeybrainpolitics, Calamity Jean, senilebiker, Cassandra Waites, dewley notid, mofembot, banger, the new, Gemina13, petulans, Uncle Bob, BYw, pelagicray, binkycat, nb41, marketgeek, angelino, squarewheel, LaFeminista, csaw, McGahee220, J M F, greengemini, be the change you seek, dark daze, Partisan Progressive, DefendOurConstitution, IreGyre, Thutmose V, Little Flower, Skex, citisven, Leftcandid, French Imp, Larsstephens, Words In Action, BigVegan, brooklyns finest, rb137, klompendanser, plankbob, tellthestories, samanthab, DailyDrew, Egalitare, nickrud, Betty Pinson, farbuska, Oh Mary Oh, Onomastic, sostos, implicate order, swale44, FarWestGirl, Wolf10, dle2GA, tardis10, Gabriel D, Sark Svemes, peregrine kate, pensivelady, Strange New World, Miggles, Ezekial 23 20, RLMiller, Regina in a Sears Kit House, Dom9000, IowaBiologist, brown and blue all over, AZ Independent, Flying Goat, greenbastard, foucaultspendulum, dance you monster, Joieau, a2nite, Trotskyrepublican, kait, belinda ridgewood, supercereal, TBug, radical simplicity, ObsidianTK, absolute beginner, Maikeru Ronin, katiec, Phoebe Loosinhouse, frankenstein monster, GoGoGoEverton

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site