Venture Capital

[mike777]

I suppose an implicit contract isn't worth the paper it's not written on, but there truly can be issues.

 

I am receiving a pension from the University of Maryland, where I worked for 37 years. They offered several pension plans, I chose one, I paid the premiums. Now I feel entitled to the pension. Is there a contract? I would think so. I don't think I have a sheet of paper somewhere that says "Contract". I have heard speculation that in fact there is no contract. To me this is nuts. I can't take my car into a shop, select the $30 oil change, and then say that since we have no written contract I don't have to pay. They offered a selection of pension plans, I chose one, I paid the premiums, I want the pension.

 

The thought that I, and others, might end up in court trying to enforce an "implicit contract" is not appealing.

 

 

Do not be worried, I am sure there are legal agreements or if you prefer a contract.

 

If you prefer something written I would think there are plan documents on the internet but for sure there are written documents sitting somewhere in the pension office. I am sure that 37 years ago you signed some paper documents

 

Of course underfunded public "defined benefit" pension plans are a hot button right now. The money has to come from somewhere or benefits must be reduced.

 

I work for a company that handles most univ. pension plans. These plans are for the most part not defined benefit plans.

[barmar]

At some point you must have filled out a form where you said how much money to withhold from your paycheck, to pay the premiums. That document probably served as the implied contract.

 

BTW, I'm a little surprised at your mention of paying premiums. I've never been covered by a traditional pension plan, only 401k plans. I thought the big difference was that pension plans are funded by the employer, while 401k plans are primarily funded by the employee (but with the possibility of employer matching contributions).

[mike777]

At some point you must have filled out a form where you said how much money to withhold from your paycheck, to pay the premiums. That document probably served as the implied contract.

 

BTW, I'm a little surprised at your mention of paying premiums. I've never been covered by a traditional pension plan, only 401k plans. I thought the big difference was that pension plans are funded by the employer, while 401k plans are primarily funded by the employee (but with the possibility of employer matching contributions).

 

 

Most teachers, univ. are covered under 501c.

 

They work alot like a 401K w ith the univ kicking in a lot of the contribution.

 

 

What is causing alot of the current state problems are defined benefit plans that are underfunded by the goverments(city, county, state).

 

Most private companies no longer have defined benefit programs and the older companies such as Kodak and GM have problems.

[mgoetze]

Implicit contracts?

 

I don't understand what you are saying, Phil. Are you asking what an implicit contract is? I'll give you an example: when we both sit down at the same table on BBO, we are making an implicit contract with one another that we will trying and play decent bridge and stay until at least the end of the hand. Don't tell me you wouldn't be at least a bit upset if I suddenly bid 7NT and logged off.

 

I bet you didn't actually read the article (by Shleifer and Summers), did you? ;)

[blackshoe]

The government told us we'd get a "benefit". Now they're telling us we may not get it. What else is new?

[Phil]

@Mgoetze. No, but I will. Googling now.

 

I've read enough Krugman to disagree with him regularly, so I will be surprised if anything in the full text sways me.

[cherdano]

Great..Krugman...

Nice that we agree that Krugman is great :)

[benlessard]

With low nterest rates and many companies in the ditch im sure VC are having fun right now. People see investments as risk taking, stealing or aristocratic dominance.

 

For me investment is mostly creating wealth by the placement of workers. IMO there is nothing more productive for a society than putting ineffecient worker into a efficient position. This can be done by restructuring a business (killing the top floor) , by downsizing (killing the bottom floor) or by backing 1 horse rather than the other and by education. The tough part to accept is that sometimes efficients workers are no longer effecient because of a temporary market unbalance (too much houses on the market, cars have higher life expectancy etc). VC are of course able to maximize taxes and laws loopholes but the worse IMO is when they managed to redistribute the risks to governement (getting subsidies or special advantages).

[y66]

inane comment deleted

[phil_20686]

Nice that we agree that Krugman is great :)

 

Krugman was recently very wrong very publicly. For those who dislike his snarkiness, it makes for fun reading over at scot sumners blog (moneyillusion). Sumners has managed to convince pretty much everyone (karl smith@modeledbehavior, noah smith@noahpinion, typler cown@marginalrevolution, etc etc, karl smith is particularly good imo) that he is right and krugman and brad de long are wrong about their argument against cochrane. Of course, Cochrane was still wrong, just not for the reasons that krugman said. :)

 

My blog list ordered by favourite economists is now:

 

Scot sumner@money illusion

Karl smith@modeled behavior

tyler cowan@marginal revolution

somebody@interfluidity (mostly financial stuff, rarely more than once a week)

krugman

 

I dont even read brad de long any more.

[phil_20686]

For me investment is mostly creating wealth by the placement of workers. IMO there is nothing more productive for a society than putting ineffecient worker into a efficient position.

 

Yes, that is true, but its fair to say that trading in stocks is only indirectly responsible for this. Afterall, a changing stock price does not change any fundamentals in the company. The only thing it does is give access to capital markets. Useful, but i'm not sure it really equates directly to your definition.

 

Imo, the most important aspect of the stock market is that it shares risk. If you are a bank, lending to a publicly traded company, you have some insurance on your debt, as the company can issue more shares to pay it mack if the venture it is funding turns out to be a disaster. Of course there are limits to this, but it should not be discounted. The dot com bubble breaking destroyed much more wealth than the housing crash, but the equity markets spread it among millions of investors, whereas the housing market was concentrated in a few strategically important players. Thus the housing crash caused a much more severe recession than the dot com bubble.