Saturday, February 21, 2009

Brad DeLong & Stakeholder Theory

Brad DeLong comments on Larry Kudlow's comments that Obama's plan will benefit Fannie and Freddie by saying that "Larry Kudlow is as stupid as he is ugly".

Kudlow is as stupid as he is ugly? That's really low, even for DeLong. As for Professor Brad, I won't comment on whether or not, so to speak, it is likely that people frequently thinks that his last name is Pitt and not DeLong as that is not really relevant and as I as a straight man don't care about other men's appearance. I will however say that his intellectual abilities (or alternatively intellectual honesty) don't appear to be as good as you should expect from a professor.

The argument that it is stupid to say that the plan will benefit Fannie & Freddie is that they are now wholly owned by the federal government, and so it is absurd to say that the plan can benefit them. Paul Krugman echoed that theory, though without the kind of crude ad hominem attacks that DeLong used.

But this really shows who are stupid in this case. It is true of course that subsidies s at this point in time from the government to Fannie & Freddie won't benefit any private (or state, local or foreign governmental for that matter) owners.

But owners aren't the only ones with a stake in a company or other form of organization. This may not be something that was taught at any of the universities where DeLong and Krugman have been active, but there are other so-called stakeholders, including most relevantly in this case management and other employees. They will as a result of the expanded funding get greater power and possibly also greater pay, and possibly also a greater number of co-workers, something which they clearly like, making it very much accurate to say that these Fannie & Freddie stakeholders will benefit, and as they are part of Fannie & Freddie, it is also accurate to say that Fannie & Freddie will benefit. And that is of course exactly what Kudlow meant.


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