Letters to the editor

A firm’s long-term interests

Schumpeter’s recent column on corporate short-termism suggests that “the solution is to prod incumbent firms to invest vast amounts and insulate their managers from investors” (February 18th). On the contrary, the solutions should be much more targeted to how capital markets really work.

We are exploring two such solutions. One is rethinking the quarterly guidance process to engage managers with, rather than insulate them from, investors in their long-term strategic thinking. The second solution is to change the relationships and incentives between asset owners and fund managers to ensure that the long-term needs of savers and beneficiaries are best served in the investment process.

Short-termism is a real issue that limits investments in human, intellectual and physical capital. Rebalancing the focus away from short-termism towards long-term goals isn’t easy, but making investments that drive innovation, job creation and savings certainly is not, as Schumpeter believes, “a distraction”.

SARAH KEOHANE WILLIAMSON
Chief executive officer
FCLT Global
Boston

Floating bubbles

Buttonwood confounds two questions that need to be asked separately: whether it is possible to recognise a bubble in real time and whether one can avoid the big losses typically associated with a crash (February 11th)? Presumably, recognising the bubble would help investors predict and thereby avoid a crash. But not every bubble needs to end in a crash, just as not every price collapse needs to be preceded by a bubble.

The column also illustrates the importance of defining a bubble. If you define a bubble, as William Goetzmann does, partly by its demise, then it becomes logically impossible to use it as a warning signal. The bubble can, by this definition, only be recognised after the event. And if one were to allow the possibility that bubbles can be negative too, the rise “by more than two standard deviations” used by GMO, a fund-management group, could reflect the readjustment of the price to fundamentals rather than portend a crash. Much hinges on the precise meaning of the term. Alas, how to define a bubble has proved so vexing to the profession that Eugene Fama of the University of Chicago unsubscribed from your newspaper in exasperation because of the vague use of the term.

Answering the questions Buttonwood asks is not possible before we become more clear about what exactly constitutes a market bubble.

HYUN-U SOHN
DIDIER SORNETTE
Chair of entrepreneurial risks
ETH Zurich

Leaving has wide support

It is misleading to say that Scots are being dragged out of the European Union “by the English” (“Sliding towards Scoxit”, February 18th). The referendum was held across the United Kingdom. We may be dragged out of the EU by the Leave votes of other individuals across the UK, but that includes the more than 1m people in Scotland who voted to Leave. Many of us who voted Remain in Scotland still support Scotland’s place in Britain, and we do not want another divisive independence referendum. More nationalism is not the answer.

MARTIN REDFERN
Edinburgh

Banking and the elderly

As a 69-year-old with the temerity to think she still has all her marbles, I fear becoming the victim of financial “mass-marketing scams” far less than I fear becoming the victim of paternalistic bank staff who have received training “in how to spot dementia and signs of financial abuse” (“Not losing it”, February 11th). This is especially the case if “changes in spending patterns” are seen as warning signals of cognitive decline in the elderly. The “expert on Alzheimer’s” who thinks old people would like to have banks “identify older people who are at risk and refer them to doctors or social workers” should know that not all old people are alike. Why not let each old person indicate in advance whether he wants his bank to perform this function? I bet I’m hardly the only one who will say no.

FELICIA NIMUE ACKERMAN
Professor of philosophy
Brown University
Providence, Rhode Island

The people left behind

I read your piece on the complex political and social past of northern Alabama’s yeoman farmers (“The little man’s big friends”, February 11th). I would add that the same peoples who settled in the pine woods of Alabama’s mountains, also settled in similar areas of Mississippi. In her book “The Free State of Jones”, Victoria Bynum outlined the history of the Scottish immigrants who settled the mountains of North Carolina, participated in the pre-revolutionary Regulator Movement and later migrated to Georgia and then to Alabama and Mississippi.

Like Winston County in Alabama, Jones County in Mississippi also “seceded” from the Confederacy. Unfortunately, these yeoman farmers and their descendants have been ignored and even despised by politicians, liberal and conservative. American culture has characterised them as hopelessly ignorant and backward. As Ms Bynum says, “Northerners’ indifference and sometimes outright contempt ultimately encouraged white Unionists to move closer to the southern conservative coalition, which actively courted them with racist appeals to manly honour.” Not much has changed since then.

DAVID PERASSO
Seattle

Save the green belt

Bagehot put the entire blame for Britain’s housing crisis on the “insensitive” green belt (February 11th). This presupposes the problem is caused by a lack of new build housing supply. Yet in 2011 there were 1.1m vacant homes in Britain. Empty Homes, a charity, estimates that more than 200,000 were empty over the long-term, most of them because their owners could not raise sufficient capital to refurbish their property. This is not surprising given that government policy favours the building of new houses over the more logical option of refurbishing existing houses (tax is charged on the latter).

Add to this the latent housing stock that could be regenerated from unused commercial space within our cities, and the potential supply of new homes already built is enormous. That would spare us building on the green belt, which is an important bulwark against urban sprawl.

RICHARD WALKER
Chester

* The green belt is an administrative device not a sacred cow. It can and should be reviewed on the basis of evidence and consultation at a city region level—this is happening in Greater Manchester. Your attack on the concept throws out the green baby with the grey bathwater. Green belts and town planning have stopped urban sprawl and kept British cities compact, helping to support mass transit and the recycling of used land and buildings.

Despite its problems, where would you rather live, in London…or Detroit?

IAN WRAY
Visiting Professor
Civic Design Department
University of Liverpool

Going down the pan

Your review of “Why Time Flies” by Alan Burdick pointed out that humans are “poor judges of the duration of time” (“Clock-watching”, February 11th). As someone once said: life is like a roll of toilet paper; the closer you get to the end of the roll, the faster it goes.

W. TATE IV
Ewing, New Jersey

* Letters appear online only