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Interpreting Tylerian Science Fiction
Earlier this week Tyler wrote:
I was thinking of writing a science fiction story. In this world human capital is incredibly valuable. Even if you lose all your wealth you can earn back lots very quickly, at least if you are talented and well-educated....The level of risk-taking is very high and capitalist enterprise starts to collapse...Production resumes only when a) managers precommit to costly drug addictions, so that they again fear pecuniary losses and b) shareholders find altruistic managers and also initiate charitable contributions to India. They threaten to cut off those contributions if managers perform poorly.
Some of you were perhaps wondering what on earth this means. (Recall my post on Tyler v. Alex.) Perhaps I can help. Here is a recent item from the NYTimes.
BlackRock, the publicly traded asset manager, and a hedge fund firm, Highfields Capital Management, are backing a new company seeking to raise $2 billion to buy delinquent residential mortgages.
Private National Mortgage Acceptance will be run by Stanford L. Kurland, former president of Countrywide Financial Corporation, the largest American home-loan provider, the companies said Monday in a statement.
Posted by Alex Tabarrok on March 27, 2008 at 07:32 AM in Economics | Permalink
Comments
References to Dog/Rush/Hayek (Salma). Alex
Rush the trio? Okay, I heretofore take Alex' side on everything.
Posted by: Andrew at Mar 27, 2008 7:41:54 AM
I like the sound of "Cowenian" better.
Posted by: Jeff Holmes at Mar 27, 2008 9:25:53 AM
try saying it tie-LEE-rian
Posted by: josh at Mar 27, 2008 9:36:07 AM
This is awesome: "I helped create this disaster -- who would better know how to take advantage of it?" There is nothing you can do on Wall Street that will keep you from getting a new job.
Posted by: K. Williams at Mar 27, 2008 9:55:19 AM
This is awesome: "I helped create this disaster -- who would better know how to take advantage of it?" There is nothing you can do on Wall Street that will keep you from getting a new job.
Posted by: K. Williams at Mar 27, 2008 9:55:53 AM
If a person believes that the delinquent mortgages are underpriced, and is willing to provide serious money to arbitrage out the difference, isn't that a useful service in reducing "the disaster"?
The business plan is probably to re-negotiate the terms with the borrowers -- which they will have room for since they will have bought the paper at a discount. I wonder how they can distinguish the mildly distressed mortgages from the real crap on an industrial scale? I also wonder how long it'll take to rehab the mortgages so they're worth close to face value? Possibly only a few years, if inflation takes off.
-dk
Posted by: Dick King at Mar 27, 2008 12:27:48 PM
I was thinking about the preconditions for Tyler's world: Human capital is rare and valuable, so those with it can easily recoup any capital loss.
That looks not like the developed world, but like the developing world. I work with microfinance institutions, which are major consumers of talented people from poor countries, and they'll pay pretty much any price for skilled managers and executives, and sometimes not find it at any price. No one with lots of human capital and willingness to live there will ever be poor or unemployed for long.
Posted by: jb at Mar 27, 2008 5:08:54 PM
That looks not like the developed world, but like the developing world. I work with microfinance institutions, which are major consumers of talented people from poor countries, and they'll pay pretty much any price for skilled managers and executives, and sometimes not find it at any price. No one with lots of human capital and willingness to live there will ever be poor or unemployed for long.
I'm not so sure about this. The deals that I've seen being offered try to sell the deal on the 'benefit' that the cost of living is so low in India or China. Yeah. We're not buying. If I'm moving to China, you're going to pay me significantly more than I make in the United States. So this 'at any price' business doesn't sound right to me. The problem is people who are talented would rather just get jobs in the US, and they can.
Posted by: mpowell at Mar 28, 2008 4:14:43 PM
I'm not so sure about this. The deals that I've seen being offered try to sell the deal on the 'benefit' that the cost of living is so low in India or China. Yeah. We're not buying. If I'm moving to China, you're going to pay me significantly more than I make in the United States. So this 'at any price' business doesn't sound right to me. The problem is people who are talented would rather just get jobs in the US, and they can.
You're not the chosen market. The chosen market is people from those countries, who want to live well there rather than try to make it in the developed world. Since your last sentence is largely true, the pool of human capital is small, so those who stay do fit Tyler's premise quite well.
Since you wouldn't consider retiring to The Gambia, you couldn't be paid enough to spend your career there on a salary handsome for the local market. But someone well-educated and planning on retiring there, and thus willing to work there, will find jobs easy to come by.
Posted by: jb at Mar 29, 2008 12:25:56 AM
