I think Jim Devine's interpretation of the Roemer model is
pretty far off the mark. The underlying premise of the Roemer (and
Bardhan) model is that a superior solution to the owner/manager
principal agent problem has emerged within capitalism--that is
the "bank-based" financial systems (such as in Japan, Germany, France,
and the East Asian economies). Roemer and Bardhan are saying that
this solution is quite distinct from that of Jensen, so I don't
know how Jim came up with the idea that they were relying on the same
mechanism, i.e. the market for corporate control.
What about social conscience? Roemer obviously isn't claiming
that a bank-based financial system offers that. But the point is
that it does offer a solution to the problem of organizational
efficiency that any socialist or egalitarian economic regime will
have to solve. For Roemer, the point is that once one solves that problem,
you don't need a market for corporate control or big-time capitalist
owners fretting about their profits.
I would urge Jim to look more carefully into the Roemer model
before being so dismissive. I for one have found it very stimulating.
Indeed, it occupies a major place in a new long paper which I have
just written, "Financial Markets and Egalitarian Economic Policy."
My approach is broader, more historical, and more macro than Roemer,
but the Roemer model contributes an important piece to my story.
-- Bob Pollin'd be happy to
