Sunday, December 11, 2011
This week in MarketWatch: worthless stock, brainy economics, and a system of taxation with no basis in reality.
These stocks have no resale value and reap no dividends. No investor can profit, yet no one can claim a deduction. Not one share confers traditional ownership that could be bought and sold on a stock exchange. What kind of crazy investor would want this stock?
Much of modern economic and financial theory is based on the assumption that people are rational, and generations of economists have based their research on the assumption of rationality. John Maynard Keynes thought that most economic decision-making is driven by something in the mind, not understood by economists. Could advances in neuroscience advance some of the core concepts of economics by linking them to specific brain structures?
According to a professor at Columbia Law School, “Derivatives have been used to game every aspect of our tax system.” A former Treasury Department official concurs, “The ability to toggle in and out of capital treatment allows tremendous flexibility in planning your taxes.” A partner at Cadwalader, Wickersham & Taft goes so far as to say, “Our system of taxation has no basis in the reality of economics.” What do U.S. lawmakers say?