Secular Stagnation (Or Corporate Suicide?)

Robert Ayres and Michael Olenick, INSEAD


We advanced the null hypothesis that stock buybacks will have a positive impact on the market value of a business over a five-year horizon. We find that there is a negligible chance for this to be true (with a two tail heteroscedastic p=.000023).

We find that the more capital a business invests in buying its own stock, expressed as a ratio of capital invested in buybacks to current market capitalization, the less likely that company is to experience long-term growth in overall market value.

Our findings, for US firms worth more than $100 million, suggest that long-term investors, such as pension funds, should be wary of investing businesses that have engaged in significant cumulative stock repurchases (i.e. 50% or more of current market cap.)

We find that excessive buybacks in the past decades are a significant cause of secular stagnation, inasmuch as they effectively reduce corporate R&D while contributing, instead, to an asset bubble that creates no value.

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Urban agriculture: Another Win-Win for China?



Report from China: Robert Ayres

In my last post I explained why (private) investment the automobile industry was a huge win-win for the US in the early years of the 20th century, for reasons that do not apply to 21st century China. In fact, there are strong arguments that the overall impact of still more cars (and highways) in China will be more nearly a lose-lose proposition, the only winners being the foreign auto manufacturers.

However, I think there is another investment opportunity, still in its infancy, that – if pursued intelligently – can be a true “win-win”.

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China’s Lose-Lose Love Affair with the Modern Motor Car

Report from China: Robert Ayres

In December I travelled to the city of Kunming, in Yunnan province, China. The occasion of the trip was to attend a conference on planning and give a talk on economics at that conference. The host was the newly appointed provincial Governor, who is also the Communist Party Chairman for Yunnan. The organizer was the former chief planner for Singapore, and the attendees were academics and civil servants in the urban planning departments from all of the major cities of  organizer was the former chief planner for Singapore, and the Yunnan province. I was invited on short notice (only two weeks) and I was asked to provide a copy of my talk in advance, without much detailed information about the actual situation. What I did know about China was more applicable to Beijing and Shanghai than to Kunming. So, I had to “punt”, as they say.

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Op-Ed: Extreme Inequality not Driven by Merit, but by Rent-Seeking and Luck


From an article in Evonomics by Didier Jacobs,special advisor to the president at Oxfam America. Full text at Based on an interview by  Sam Pizzigati, veteran labor journalist and Institute for Policy Studies associate fellow

Defenders of our deeply unequal global economic order had to put in a bit of overtime last month. They had to explain away the latest evidence — from the global charity Oxfam — on how concentrated our world’s wealth has become. A challenging task.

Back in 2010, Oxfam’s new stats show, the world’s 62 richest billionaires collectively held $1.1 trillion in wealth, far less than the $2.6 trillion that then belonged to humanity’s least affluent half.

Now the numbers have reversed. The world’s top 62 billionaires last year held $1.76 trillion in wealth, the bottom half of the world only $1.75 trillion.

Jacobs: Put simply, economists define rent as the difference between what people are paid and what they would have to be paid to do the work anyway. In other words, a rent is excess income, income that does not generate any effort.  So if your farmland happens to be more fertile than surrounding farmland, you get more production out of it for the same effort, and that extra income you get is a rent. Rent-seeking entails getting hold of wealth produced by others. Lobbying government to obtain a subsidy is an example.

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Cornucopians versus Doomsters: On Julian Simon’s Refutation of Global 2000 (and the Club of Rome)

man-chart-growth-copernius-viewRachel Carson’s landmark book “Silent Spring” was published in 1962. It, alone, of the important environmental best-sellers of that era, had a significant impact: it led to the banning of DDT (at least in the Western world) and major shifts in agricultural practice.

Paul Ehrlich, a noted American biologist, best known for his warnings about the consequences of population growth and limited resources,  was the author of a famous book “The Population Bomb” (1968), in which he claimed (as Malthus had claimed in 1798) that increasing population – demographic catastrophe — would inevitably outstrip food and resources, and that hundreds of millions of people would starve to death in the 1970s.

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