What is the state of Franco Modigliani's reputation in the economics profession these days? It seems that several of the pillars on which his mighty rep depends are looking a bit wobbly. The life cycle hypothesis doesn't match a lot of empirical observation; the Modigliani-Miller thesis on capital structure not mattering looks to have been refuted by the adventures in leverage of the 1980s; and his late-1970s assertions that the stock market was undervalued because investors were mispricing inflation seems refuted by the fact that it took the Volckerian disinflation of the early 1980s to start a fire on Wall Street. [A footnote to the capital structure neutrality debate: Modigliani wrote some op-ed pieces in the late 1980s saying that leverage still didn't matter, just before the world of leverage came apart. My friend John Liscio, then a columnist for Barron's, interviewed FM at the time, and told me that Modigliani's voice sounded nervous even as he was uttering soothing words. Subjective and journalistic, for sure, but not without interest.] Doug -- Doug Henwood Left Business Observer 250 W 85 St New York NY 10024-3217 USA +1-212-874-4020 voice +1-212-874-3137 fax email: <[EMAIL PROTECTED]> web: <http://www.panix.com/~dhenwood/LBO_home.html>
