A dossier of short-termism

Notes in brief on the human condition that could undermine the economy, or civilisation why not

Definitely one for the reading list: Saving Capitalism from Short-Termism by Alfred Rappaport.
According to reviews, this book is strong on the problem: Investment managers and company mangers are short-termist because their incentives and careers depend on it. It’s weaker on the solutions. Long-term incentives, overhauling financial reporting, and better investing sound interesting to me though.

Economic mismanagement could be fixed by changing politician’s incentives, according to Warren Buffett in 1993.
The gravest threat to a politician’s re-election is a vote in favour of higher taxes or lower spending, hence we borrow too much. Buffett proposed to limit growth in the national debt to roughly the rate of growth in the economy by reversing the incentives and exempting politicians from re-election if in any year of their terms the budget deficit is more than 3% of GDP, a constitutional amendment he called The Deficit Limitation Amendment.

We’ll survive peak-oil. Shortages of metals, water and fertiliser are more intractable. Soil, though, that’s the biggie.
Malthus was right in all but his timing says the investment manager Jeremy Grantham, profiled in the New York Times. Malthus was wrong-footed by the industrial revolution, which increased our limits but not indefinitely. We can reach ‘planetary sustainability’, though if we overcome our focus on short-term growth and profits, which “is likely to cause suffering on a vast scale”. For short-termists that means this time it really is different, the commodity bubble is no bubble, and high commodity prices are here to stay. “Whether the stable population will be 1.5 billion or 5 billion,” for long-termists, “the question is: How do we get there?”

And, just in case you were thinking of buying farmland, high up, and defensible, as suggested in jest by Grantham’s interviewer, prices are sky high…

Farmland is better than gold, but it’s still a risky financial asset according to Lex.
Negative real interest rates make all tangible assets attractive. Farmland lasts forever (like gold) and offers a yield (unlike gold). The problem is the price of farmland has risen so high, that yield is only 1.8%. While farmland might be the safest of assets, its price makes it risky.

Unless, perhaps, you’ve got your long range specs on and are thinking in Malthusian terms.