Confronting inequality

Jason Furman reviewing  Confronting Inequality: How Societies Can Choose Inclusive Growth “On the substance, the book finds that, on average, inequality results in less sustainable growth and lower growth. Redistribution has no direct adverse impact on growth and by reducing inequality actually helps it. Structural reforms (like deregulation) generally increase growth and inequality. Fiscal austerity hurts both growth and especially inequality, with the authors suggesting that it does not generally pass a cost-benefit test because the benefits of less debt are outweighed by the cost of getting to less debt. Monetary expansion reduces inequality.“

the book presents the IMF authors work it doesn’t argue the other side but makes a case against fiscal austerity...

Economist Jason Furman makes a much better summary review than me.  

amazon link here 

Long-term impacts of exposure to high temperatures on human capital

Long-term impacts of exposure to high temperatures on human capital and economic productivity:

“Weather anomalies have a range of adverse contemporaneous impacts on health and socio-economic outcomes. This paper tests if temperature anomalies around the time of birth can have long-term impacts on individuals' economic productivity. Using unique data sets on historical weather and earnings, place and date of birth of all 1.5 million formal employees in Ecuador, we find that individuals who have experienced in-utero temperatures that are 1 °C above average are less educated and earn about 0.7% less as adults. Results are robust to alternative specifications and falsification tests and suggest that warming may have already caused adverse long-term economic impacts.”

Paper link here

Ram Fishman, Paul Carrillo, Jason Russ (2018) (Journal of Environmental Economics and Management)

Comment: the falsification test does mean that spurious patterns are a less likley explanation, there could be other causal effects as correlation is not causation, but the finding is provocative.

It chimes with a recent paper by Isen et al. (2017) finds evidence for a simila r association among 30-year individuals in the U.S. born between 1969 and 1977.  (Relationship between season of birth, temperature exposure, and later life wellbeing).

What is Davos like?

Billionaire, Ray Dalio says this on Davos:

“Many people have asked me to share what Davos is like so here goes. It’s a gathering of people from all over the world who are sitting in very important seats in all sorts of subject areas (government policy makers, tech/philanthropy/science and most other specialties). These are not theoretical people; they are people who are actually in the seats of having to wrestle with the world’s most challenging and exciting problems. They interact by exchanging thoughts in 1) one-on-one meetings, 2) small gatherings, 3) through panel discussions and speeches and 4) after hours parties—so one can dive into whatever one is interested intensely with some of the smartest, most immersed, and nicest people in just about any area one is interested in. I personally start at about 7:30am and end at about 11pm each day and spend about 80% of my time in about a dozen one-on-one meetings and do all of the other stuff in small doses. I still regret missing out on so much other great stuff. I mostly focus on economic and geopolitical topics and a bit on ocean, nature conservation, and AI. I end the day with more energy than I start it because it’s so exciting to learn, help others understand, and come up with things to do that have big beneficial impacts.” (From his LinkedIn blogs) 



Summary notes on IASB meeting on management commentary

From Kris Peach, Australian Accounting Board Chair and CEO:

“2nd meeting of IFRS Management Commentary panel broadly supportive of performance, position and progress proposals.

Key issues discussed included verifiability of information, location of management commentary as part of the financial report, how to reconcile neutrality with ‘through the eyes of management’, importance of understanding purpose and components of alternative earnings measures (similar to performance reporting project proposals), conciseness and linkage.

Some concern about asking for management compensation disclosures only when related to performance measures, given all management compensation impacts performance, and suggested disclosures only tiny piece of performance aspect of the compensation.

Support for asking for forecast disclosures where forecast has been made externally. Some wanted more aspirational recommendation to have forecasts. Discussed need guidance on whats in financial statements & whats in mgt commentary (eg some climate change info should be in financials and some in commentary).

Noted need for more explicit consideration of intangibles in management commentary, particularly if not recognised on balance sheet. Also noted importance of discussing what risks eventuated in current year that were noted in prior years. “

Follows on from first panel, which had discussion on purpose amongst other things which is going to back pack in panel 3. Details on the consulting process on IFRS management commentary here.

The Power of Shareholder Votes: Evidence from Uncontested Director Elections

Abstract: This   paper asks whether dissent   votes in uncontested director   elections have consequences for directors.We  show that,contrary to popular belief based on  prior studies, shareholder votes have power and result in negative consequences for directors. Directors facing dissent  are more likely to depart boards, especially if they are not lead directors or chairs of important committees. Directors  facing dissent who do not leave are moved to less prominent positions on boards. Finally, we find evidence that directors facing  dissent face reduced opportunities in the market for directors.We also find that the effects of dissent votes go beyond those of proxy advisor recommendations.

Comment: This suggests that any amount of dissenting vote is an important signal, not necessarily the win/lose results. To me, this shows that shareholders (especially if you are voting on behalf of others) need to carefully consider how they should vote on directors even if that vote looks certain to pass.

Link to paper here:

Aggarwal, Reena and Dahiya, Sandeep and Prabhala, Nagpurnanand, The Power of Shareholder Votes: Evidence from Uncontested Director Elections (March 22, 2016). Robert H. Smith School Research Paper No. RHS 2609532; Georgetown McDonough School of Business Research Paper No. 2609532. Available at SSRN: or

Are Energy Executives Rewarded For Luck?

In an influential paper, Bertrand and Mullainathan (2001) show that energy executives are rewarded for high oil prices, which they term pay-for-luck. Almost twenty years later, performance-based pay as a portion of executive compensation has nearly doubled; total executive compensation has also nearly doubled; and new disclosure laws and tax rules have changed the regulatory landscape. In this paper, we examine whether their results and their interpretation continue to hold in this changing environment. We find that executive compensation at U.S. oil and gas companies is still closely tied to oil prices, indicating that executives continue to be rewarded for luck despite the increased availability of more sophisticated compensation mechanisms. This finding is robust to including time-varying controls for the firms' scale of operations, and it holds not only for total executive compensation but also for several of the separate individuals components of compensation, including bonuses. Moreover, we show there is less pay-for-luck in better-governed companies, and that pay-for-luck is asymmetric – rising with increasing oil prices more than it falls with decreasing oil prices. These patterns are more consistent with rent extraction by executives than with maximizing shareholder value.

Are Energy Executives Rewarded For Luck? Lucas W. DavisCatherine Hausman (2018)

Link to paper here.