Katarina Juselius, professor of economics at the University of Copenhagen, says that governments need to change their incentive systems in regard to funding new and alternative economics projects. Interviewed by Peter Leyden at King's College, April 2010.
Comments
There is an ally in this effort to attract funding for new and alternative economic projects that INET needs to recruit. That is the Institutional Investment community: Insurance, Endowments, Pensions and Annuities; the experts who advise these Institutions, especially in the construction and operation of their investment policies and practices; and the government agencies that regulate these activities.
This community, at least in the US, has emerged as the new stewards of our private wealth, and they manage our wealth for us programmatically. Insurance provides protection against catastrophic losses. Endowments help us take care of people and causes we care about. Pensions and Annuities give us the ability to keep spending after we stop earning as we go (retirement).
These Institutions like to invest our money for us programmatically, in ways that align with their core programmatic values. Their preferred structure for investment is the Institutional Investment Partnership, which brings Investment directly into Enterprise, without the intermediation of an Exchange. This is de rigeur in Real Estate and also in Energy and Infrastructure Project Finance (an innovation in finance that has emerged over recent decades, powered by the computer and new technologies for information and communication directly, in real time, from remote locations). These Institutions are major investors in the Exchanges, but they even favor the profit-sharing partnership model as their preferred way of investing in the Exchanges: they partner with Fund Managers who do their trading over the Exchanges for them, sharing in cash flows generated as profits earned on portfolio transactions between Management (the GP) and Investors (the LPs). Where the Exchanges turn cash flow into assets, these Institutional Investment Partnerships are used to then turn assets back into the cash flow the Institutions need, programmatically, to support their programmatic purposes. Kind of an odd twist, don't you think? Why all this turning of cash into assets, and assets back into cash? Why not just start with cash flow, and stay with cash flow?
These new stewards of private wealth value the liquidity of the Exchanges, but they also value the sustainability of direct participation in profits generated by Enterprise. I think they will support economic thinking that supports them in sharing in cash flow as a primary strategy for realizing investment returns; balancing liquidity and sustainability in their investment programs, instead of always pressuring them to invest in the public markets, because that is how investment is done (according to conventional economics).
These Institutions value sustainability, because they are the real source of much of the money invested by Bankers over the Exchanges, and as such they suffer, directly, from the hyperbole, volatility and instability (think: other people's money) that is the price we all pay for the liquidity we get from the Exchange-based architecture for directing Investment into Enterprise, indirectly.
Their values echo the values of INET. Their partnership investment model is a proven, competitive alternative to the Exchange. Competition always works better than regulation. We need to add them to the debate, both as part of the solution, and contributors to the discussion.
I think they will like it. I think it will help. But they have to be asked.
I am doing what I can to extend the invitation, but I am a "non-credentialed economic thinker[] using the methods of other disciplines", so my influence is not what it needs to be. Perhaps INET will help.
Tim MacDonald
Principal Partnership Architect
Stone Bridge Partnership Architects
www.stonebridgepartnerships.com
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