Q2: Can we manage with(out) markets?

Fall 2007

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Dialogs

Can we manage with(out) markets?

How should you sell a public good?

The airwaves are a precious commodity. More than 200 million cell phone subscribers in the U.S. alone chat and bat text messages across the wireless spectrum. When Reed Hundt was chairman of the FCC, he implemented the first auctions of this resource, opening the way for industry development and raising revenue for the government. Hundt recently talked with Professor Barry Nalebuff, describing what he learned about auction markets and how he might use an auction to save the environment. Of course, they spoke via cell phone.

Do markets need integrity?

For almost 40 years, Professor Michael C. Jensen has been a leader in elucidating the complex system of incentives and limitations that underlies business trends. Dean Joel Podolny spoke with Jensen about the market for corporate control, agency theory, and the benefits of integrity.

What is a long life worth?

A document from 1787 Holland lists the names of girls whose income from government annuities was pooled and securitized, allowing investors to essentially bet that the girls would live a long time. Yale SOM Professors Will Goetzmann and Geert Rouwenhorst discuss how this novel financial device functioned and how it fits in the story of the development of more and more sophisticated securities.

What does it take to create a market?

Creating a new market is different from developing a new product or service — it requires convincing an array of customers, partners, and other constituencies to see the world differently. And the effects can be far reaching, as markets are capable of taking on a life of their own. A media and technological innovator, a leader in the use of finance to address social problems, and a creator of housing futures discuss the risks and rewards of attempting the trick.

Can markets change society?

Professor Zhiwu Chen has been watching what’s happened as China adopts such financial instruments as mortgages and mutual funds. He was born in a rural village in China, and when he goes back, he says, he sees a country that’s being remade by markets.

Can we fix discrimination in markets?

Studies and anecdotal evidence suggest that 40 years after the civil rights era, African Americans still find themselves under scrutiny in retail stores and women pay higher prices at car dealerships. How can we ensure fair treatment in markets?

Can markets help the poor?

A loan might allow you to buy a bike to commute to a new job or to nurse your business through an unexpected setback. But billions of people around the world have little or no access to financial markets. Microfinance is one potential solution to this dilemma.

Essays

What is trust worth?

Steve LaVoie founded Arrowstream to improve supply-chain management in the restaurant business. He discovered that the benefits of trust in markets have been overlooked, in part because of an overemphasis on individual actors as opposed to relationships. He also learned that building and maintaining trust is hard work.

Are markets always efficient?

Legendary investor Martin Whitman describes the factors that push markets toward efficiency — and how inefficiency presents opportunities for investors.

How can directors become truly independent?

Joseph S. Fichera proposes an innovative way to make corporate directors more independent and effective by providing them with better information.

Vignettes

How do you face the unknown?

Nature abhors a vacuum. Air invades emptiness. Water floods open space. What happens when a wall is breached and markets are allowed to enter countries where they’d previously been banned? In the 1990s, Rosemary Ripley participated in the infusion of private enterprise into former command economies.

Are markets local or universal?

A market is a place (virtual or tangible) where buyers and sellers meet. Markets exist everywhere people do. But each market has its particular customs, as simple as a handshake or as intricate as a 40-page contract.

What moves markets?

Markets bend to forces on the immense scale of macroeconomics. But they’re also nudged, poked, and even redirected by the individuals who work in them. In a 20-plus-year career, Teresa Barger has hit nearly every financial sector and every continent.

One Last Question

How do markets work in your industry?

Read all articles about markets.