risk, equality and opportunity · risk pooling (diversification) [adapted from michael r powers,...
TRANSCRIPT
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“New Learning”
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Gresham College
Risk, Equality and Opportunity
The Roles For Government Finance
Professor Michael Mainelli
Emeritus Gresham College Professor of Commerce, Fellow & Trustee
and Executive Chairman, Z/Yen Group
4 December 2013
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A Role for A Rôle?
[Source: http://bmmoejackson2.files.wordpress.com/2012/09/leadv2.jpg?w=600]
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♦ Outcome profiles &
success measures
♦ Benefactor
♦ Enterprise
♦ Guarantor
♦ Investor
♦ Sorcerer’s Apprentice
Outline
“Get a big picture grip on the details.”
Chao Kli Ning
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Framework for Government Finance
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation Enhancement Happiness
Volatility
Reduction Policies Standards Quality Cohesion
Risk
Avoidance Research Prevention Benefits Welfare
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Risk
Reward
Likelihood
Communitarian
Service
Delivery
Changing
Systems
Expanding
Frontiers
Outcome Profiles
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Success Measures
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Dirty Dozen
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation Enhancement Happiness
Volatility
Reduction Policies Standards Quality Cohesion
Risk
Avoidance Research Prevention Benefits Welfare
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Communitarian
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation Enhancement 3 - Happiness
Volatility
Reduction Policies Standards Quality 2 - Cohesion
Risk
Avoidance Research Prevention Benefits 1 - Welfare
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Government as Benefactor
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Service Delivery
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation
6 -
Enhancement Happiness
Volatility
Reduction Policies Standards 5 - Quality Cohesion
Risk
Avoidance Research Prevention 4 – Benefits Welfare
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Government as Enterprise
[Source: http://www.imf.org/external/pubs/ft/gfs/manual/]
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The Balance Sheet Of Prosperity & Happiness
[source: adapted from Stiglitz E., Sen A., Fitoussi J.P. et al, “Report by the Commission on the Measurement of Economic
Performance and Social Progress” (2009)]
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Who Owns The Capital?
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Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention
9 -
Transformation Enhancement Happiness
Volatility
Reduction Policies 8 - Standards Quality Cohesion
Risk
Avoidance Research 7 - Prevention Benefits Welfare
Changing Systems
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Government as Guarantor
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Commercial Approach To Risk Finance
Low High Expected Frequency
Expected
Severity
Low
High
AVOIDANCE
(RISK CONTROL)
RISK TRANSFER
(Hedging)
RISK POOLING
(Diversification)
[adapted from Michael R Powers, Acts of God and Man, Columbia Business School Publishing (2012), page 117]
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Government Approach To Risk Finance?
Low High Expected Frequency
Expected
Severity
Low
High
RISK POOLING
(Informal Diversification)
AVOIDANCE
(Private Markets)
RISK POOLING
(Diversification)
[adapted from Michael R Powers, Acts of God and Man, Columbia Business School Publishing (2012), page 168]
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Expanding Frontiers
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement 12 - Invention Transformation Enhancement Happiness
Volatility
Reduction 11 - Policies Standards Quality Cohesion
Risk
Avoidance 10 - Research Prevention Benefits Welfare
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Portfolio Management
Expenditure
Value
Not Worth Exploring
Best Possible
Portfolio
Current Portfolio
Future Current
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Government as Investor
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Monopolies On The Force Of Ideas?
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Money as a System?
Money
Fiat currency
Common tender
Backed
Unbacked
Commodity money
Composite
Baskets
- currencies
- commodities
Representative money
Communities form when people are prepared to
be indebted to one another: basic membership indebtedness
recorded indebtedness
tradable indebtedness
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The Basis Of Trust?
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Government as Sorcerer’s Apprentice
[Source: "Goethe's Werke", 1882, drawing by Ferdinand Barth (1842–1892]
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♦ Self-referential system upon which all our
analysis is based
♦ What does GDP mean?
♦ Are competing currencies good or bad?
♦ Should money be a long term store of value?
Not Too Creative?
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The Rôles of Government
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Government Finance
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement
Lotteries,
prizes, co-
investment
Achievement
funding
Charge, spend
or subsidise
Spend or
subsidise
Volatility
Reduction
Policy
performance
bonds
Standards,
minimum
wages, vice
taxes, tolls
Risk
Avoidance
Research
spend
Insurance/
Reinsurance
Fiat Currency
Investor Guarantor Enterprise Benefactor
Sorcerer’s Apprentice
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Risk, Equality And Opportunity
The Roles For Government Finance
Thank you!
“Get a big picture grip on the details.”
Chao Kli Ning