Thanks for the plug, Jim. At another point in the manuscript, I mention in passing the role of Frank Knight in developing the distinction between risk and fundamental uncertainty. Knight's claim was that entrepreneurship is the specialty of people with an abnormal tolerance for plunging into the unknown. The system depends on the supply of such entrepreneurs who will put their (or other folks') money on the line, even when accountants haven't a clue what's going on. In the case of Enron, however, the murky accounting appears to have been deliberate. All debate over Knightian entrepreneurship aside, there is no evidence of it here. (The more that comes out, the more the whole business begins to look like a vast, interconnected Ponzi scam. Look at the story in the NYT today about the "secret" investment fund marketed on Wall St., which paid dividends out of all proportion to the actual underlying returns.)
Peter "Devine, James" wrote: > reading a manuscript, I came upon the "precautionary principle," defined as > saying that "when an activity raises threats of harm to the enviornment or > human health, precautionary measures should be taken even if some cause and > effect relationships are not fully established scientifically" (from the > "Wingspread statement" of 1998). (pen-l's Peter Dorman had an interesting > paper on this subject at the recent URPE@ASSA conference.) > > The Enron and dot.con melt-downs suggest that a similar principle should be > applied to accounting (in the face of new corporate forms that stretch > traditional accounting norms). > > But can capitalism -- which centers on the aggressive accumulate-to-compete > or compete-to-accumulate principle -- ever follow any precautionary > principle without strict governmental restrictions? > > Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
