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Strategies for a discontinuous future.












Friday, March 11, 2005
 


Innovation Killaz

"...But the bill also fits into the broader context of what Jacob Hacker, a political scientist at Yale, calls "risk privatization": a steady erosion of the protection the government provides against personal misfortune, even as ordinary families face ever-growing economic insecurity."

Says Krugman about the new bankruptcy bill. Risk privatization is a nice term that concisely expresses Bushco's strategy - to shift risk from the corporation to the average Joe.

This has the unsurprising effect of, on average, boosting earnings. But it also has a nasty secondary effect: increasing industry concentration, because risk privatization is a monopoly power mechanism. That is, it increases the market power of aforementioned evil corporations as well.

All of which means two things are likely. First, innovation takes an even bigger hit than it already has. If people are heavily penalized for going bankrupt - if they bear proportionally more damage for the same amount of risk - their preferences will become more and more risk averse.

Second, people will arbitrage risk privatization. By this, I mean bankrupt people who want to start over will simply move to India, China, or somewhere with opportunities. God, Bush is so like a 3rd world tinpot dictator it never ceases to amaze me...

-- umair // 11:23 AM //


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