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Comments on: Self interested story of the day? http://www.tvhe.co.nz/2011/09/07/self-interested-story-of-the-day/ The Visible Hand in Economics Thu, 08 Sep 2011 22:42:14 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Matt Nolan http://www.tvhe.co.nz/2011/09/07/self-interested-story-of-the-day/#comment-34157 Thu, 08 Sep 2011 22:42:14 +0000 http://www.tvhe.co.nz/?p=6205#comment-34157 In reply to Royal Albert Ross.

Hi,

In order to justify additional capital deepening we require an externality – that needs to be proved.  When I say that I haven’t seen sufficient evidence that this has been shown that is essentially the way I’m thinking about things.

A sharemarket is undeniably important insofar as it helps people who want to invest meet with people who can offer profitable investment opportunities – in many ways the banking system does the same thing.

However, what is the justification for trying to “force” people to undertake additional investment through the sharemarket channel?  Unless we can identify an externality, or a tax wedge, the very idea doesn’t seem to make any sense to me – and if we can identify those things, we should deal with them directly instead of aiming for policies that “force savings” or “force investment through a specific vehicle”.

]]> By: Royal Albert Ross http://www.tvhe.co.nz/2011/09/07/self-interested-story-of-the-day/#comment-34156 Thu, 08 Sep 2011 22:36:54 +0000 http://www.tvhe.co.nz/?p=6205#comment-34156 Could you expand please, or point to anything else you have (or somebody likeminded) has written to do so?  I totally take your point about the self-interest of an investment banker saying such things, but do you not agree that

“the importance of a sharemarket in an economy is easy to understate – it plays a really important role in growing businesses and helping businesses into new markets”? 

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