Arnold Kling throws out
If you believe the Recalculation Story, then a lot of future profits are in businesses that do not exist today. There firms that turn out to be valuable years from now may not be the ones with shares outstanding at the moment.
- I have been meaning to mention that I hope Arnold keeps recalculation alive. This debate should keep going
- I don’t know how far you have to go into recalculation per se, to believe this though. Maybe it’s a cohort thing but the idea that most of future profits are in firms that don’t exist seems perfectly natural to me.
- There is also the issue that an increasing number of new profits will be held in private equity. I don’t know that this is bad from an efficiency point of view, but it makes the 401(k) pyramid scheme worse. If all retirees hold are stocks in dead companies there will be hell to pay . . . oh yeah and taxes. Broke old people just doesn’t play well.