Alan S. Blinder wrote “What’s the Matter with Eoonomics?” Blinder concludes that except for some right-wingers outside the “mainstream” and politicians’ refusal to accept economists’ recommendations, little is the matter.  However, economists’ thinking, based on an ill-conceived view of human behavior and addressed to the wrong problem, is a powerful force in policy circles.

Blinder’s textbook, written with William Baumol, is the standard for the mainstream. Both are extraordinarily good economists, liberal and not doctrinaire.

Economists, however, have been unable to forecast accurately based on the exposition put forth iby Blinder.  For example, the Federal Reserve Board’s belief in (mostly) efficient markets led to it missing the signs of the Great Recession; as late as June 2006 the Fed raised interest rates fearing that “some inflation risks remain.” For years, the Fed had rejected board member Ned Gramlich’s warnings that the practices of subprime lenders were not consistent with the assumptions of the Fed’s economists.  Mainstream economists did not predict the effects of eliminating Glass-Steagall, thereby allowing large banks to design and sell the products that helped bring about the collapse.

Although recognizing that markets can be flawed, Blinder states that minimum waste “can be achieved extraordinarily well by letting markets operate more or less freely” and that market methods can remedy the few flaws in the market. The role of economists is removing barriers to the markets’ efficient allocation of usually scarce resources (they assume full employment). For the perhaps 200 million unemployed worldwide the more important issue, however, is the chronic underemployment of potential resources. Economists do not build the distribution of income into their models; but 80 percent of the world population lives on less than $10 a day, which surely wastes substantial human resources. A reexamination of the efficiency of markets, especially financial markets, is in order.

More is wrong with economics than a few right wingers. Mainstream economists claimed until the eve of the 2008 catastrophe that they had at last learned how to manage the economy well. This was quite an error of analysis and thinking, and did not principally come from the right. The leaders of this mainstream analysis were centrist Ben Bernanke, the former Federal Reserve chairman, and moderate liberal Olivier Blanchard, chief economist of the International Monetary Fund.

They argued that the stability of the GDP since the 1980s was an indication that the problem of macroeconomic adjustment had been solved. Stability is fine, but over this period debt soared, growth slowed on average, wages stagnated or fell, inequality rose, and there were at least seven American financial crises. Then came disaster in 2008. What were they talking about?

Did  policymakers listen to these ideas? They still do at the Federal Reserve, where foolish bickering over whether inflation will reach 2 percent a year still goes on. Stale, discarded ideas? Hardly.

Say’s Law, an argument for austerity economics and a self-adjusting economy, was defeated by the Depression. Blinder cites a survey showing that most economists agreed that the Obama stimulus was effective. Sure, after the sharpest drop in GDP since the Great Depression. As some facetiously put it, we are all Keynesians in a foxhole.

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood,” wrote John Maynard Keynes in 1936. “It is ideas, not vested interests, which are dangerous for good or evil.”

Does economics explains growth better than other disciplines? Iit reflects the typically narrow focus of a top mainstream economist. Sociology and political history are critical to understanding Chinese economic development, for example. The recently famous Hyman Minsky, who is now cited constantly for his work on speculative bubbles, was more sociologist and psychologist than technical economist.

Even today, seventy-eight years after Keynes taught the world how to end recessions, many politicians in many countries refuse to follow his (now very mainstream) advice. That’s not a good show for“a powerful force in policy circles.”

Vanguard will float the idea of “shareholder liaison committees” in letters to company boards that it plans to send in the new year.

The call is particularly significant coming from Vanguard, a permanent shareholder in every major company and world’s second-largest fund manager. Its power has been growing as investors move capital from active managers to the low-cost tracker funds in which it specialises.

Bill McNabb, Vanguard chief executive, said it was wrong that many directors had never met shareholders in their companies, leaving the task to the chairman or a senior independent director.

“Independent directors are doing a good job but we find they are not as engaged with shareholders as they should be,” he said. “Directors are standing in on behalf of owners — it is an important concept — and there are many independent directors who have never met an investor.”

The Vanguard initiative comes amid a surge in activism by hedge funds and corporate governance campaigners, and increasing demands by long-term institutional investors for greater input.

A growing shareholder movement is trying to make boards more accountable, not just on issues such as executive pay but also on strategy.

Meetings with shareholder liaison committees would allow investors to express their opinions on how a company’s strategy compared with its competitors, or to suggest questions that independent directors should be asking of management, Mr McNabb proposed.

Vanguard’s proposal, which will initially be put to the US companies in which it invests, will feed into an international debate on best practice in corporate governance.

In the UK, an Investor Forum, comprising the country’s leading shareholders, was launched in June to discuss issues such as pay, auditing and company strategy.

Daniel Godfrey, chief executive of the UK Investment Management Association, said: “We are trying to improve communication and engagement between directors and shareholders that will lead to greater focus on long term, sustainable wealth creation in the boardroom. The Investor Forum was a decisive step towards this.”

In the US, a majority of companies combine the roles of chairman and chief executive but increasing criticism of the practice has seen more create the role of lead independent director to act as a conduit for shareholder concerns.

Would more women on board help corporatee governance standards?

Caroline Fairchild writes: Women occupy just 16.9% of Fortune 500 corporate board seats today, and progress has been slow. A new report from the Committee for Economic Development outlines how we can increase the rate of change.

After years of making the business case for diverse boards via research and panel discussions, it’s time for a different approach.

Despite all of the studies showing corporate boards with female directors perform better than all-male peers, women occupy only 16.9% of Fortune 500 corporate board seats today. In the last decade, that percentage has grown by just 3.3%.

“We don’t need any more studies, we get it,” says Janice Ellig, the co-CEO of executive search firm Chadick Ellig. “There is a pipeline out there of very talented women running major divisions at companies or law firms or working in science and they should be sitting on boards.”

To accelerate change, the Committee for Economic Development, a business-oriente  public policy group, plans to go directly to nominating committees of prominent corporate boards to engage them in a dialogue on the issue. By making some simple changes in the way that they think about recruiting new board directors, the CED believes the U.S. can achieve 30% female representation on corporate boards by 2018.

“You get a lot further by talking with people rather than talking at them,” says Debra Perry, the co-chair of CED’s women’s economic contribution subcommittee. “There is a vast amount of research and public relations efforts that have been underway, but there still has been very little progress.”

To get to the goal of 30% female representation in four years, every other board seat that becomes available between now and 2018 will have to be filled by a woman. While the goal might sound impossible given how slowly things are currently moving, the CED suggests in a new report that expanding the criteria for qualified directors will go a long way to getting results. Nominating committees typically draw up an excessively narrow list of qualifications for directors.

Former or current CEOs are considered to be the ultimate prize for elite companies searching for board members. Only 5% of CEOs at Fortune 500 companies are women, so this narrow definition of qualified candidates considerably shrink the talent pool. Yet if nominating committees more aggressively recruited slightly lower ranking leaders – divisional presidents, law firm partners, financial service executives and entrepreneurs – a lot more women would be eligible.

The CED is not recommending the U.S. consider government-mandated quotas for women on boards. While several European countries such as France, Spain and Norway have increase the diversity of their boards this way, the CED believes this is an intrusive regulation that will make people view female appointees differently by their male peers on the board.

Qualified female candidates also need to step up. Gerri Elliott, a director Whirlpool Corporation WHR 0.95% , Bed Bath and Beyond BBBY -0.51% and Charlotte Russe, has a combined 34 years of senior executive experience at tech business like IBM IBM -1.38% and Microsoft MSFT -0.83% . Yet when she decided over a year ago to look for her first seat on a public board, she had a hard time finding the right opportunity.

“The CED report outlines well how we need to increase the diversity of our boards for good business reasons,” says Elliott, a CED trustee. “We haven’t moved the needle fast enough. But it’s also up to women to help themselves by aggressively getting a plan in place to make it happen.”

The CED’s call to bring in one woman for every man that gets a new board seat in the next four years, will hopefully change the current approach.

Daniel Altman writes: Investing is international and here are six factors that now count:

1.  Cheap money doens’t respect national borders.  When Abe’s policy cause decine in the yen’s value it effects markets worldwife.

2.  Stocks and bonds no longer move in opposite directions.  One reason is that overall demand for dollar-based assets does not differentiate beween stocks and bonds.

3.  The stock market and the labor market are no longer in sync.

4.  Americans are looking to invest at home because the US markets have been strong. This was not so true prior to 2010.

5.  You can buy index funds or exchange traded funds for almost anything.

6.  The average non-instituional invesor is at a disadvantage because because investment and pension funds trade in larger quantities and faster.

Allen bankrolled 20 shorts called “We the Economy.”  Adam McKay, who made Anchorman, parodied My Little Pony to explain income inequality.  That Film about Money, made by James Schamus, one of the founders of Good Machine, explains how bank’s leverage money.  Maarshall Curry has made an animated film about Debt and Deficits and has fun breaking down the differences betwen John Maynard Keynes and Friedrich Hayek.

Hollywood Reporter writes:  The films will be released on more than 50 digital, cable, TV and mobile platforms, including Android and iPhone custom apps, CNBC, YouTube, Twitter, Facebook, Hulu, iTunes, Netflix, Yahoo Screen, Vimeo, Dailymotion, Amazon Instant Video, AOL’s On Network, CBS News, Conde Nast Entertainment’s The Scene, Crackle and Comcast, Time Warner Cable, Cox and Verizon VOD services. Landmark Theatres is also hosting a one-night-only theatrical sneak preview on Oct. 20 at 7 p.m. in 20 cities nationwide.

“The unique distribution model for We the Economy is all about audience access,” Vulcan Productions general manager and creative director Carole Tomko said in a statement. “There’s not enough accessible, bite-size information that’s easy to digest about the economy. We wanted these short films to help people understand the fundamentals of the economy, and in order to reach the widest audience, we decided to make them available across as many channels as possible, and at no cost. There’s an appetite for this entertaining, informative short-form content, and we know that our extensive group of distribution partners guarantees that everyone in this country with a computer, a smartphone or a television will have access to the series.”

Post election polls in the US suggest that races which focused on the sex of the candidate did not help the candidate much.  This does not come as a surprise.  It is always the economy and economic matters that drive governance issues.  In the US, post ‘great recession’ issues linger.  Foremost among them are jobs and matching preparedness with available jobs.  Because training people for the workforce is in part the job of education, we will have to wait until the education system catches up with the job market to make better matches between available jobs and available workers.

To this end, W-T-W.org Women and FInanace has proposed a 20-year infrastructure program, at the same time mending the country’s delapidated roads, bridges and educating the workforce for jobs in the new economy.

Women are more interested in families and children than men are.  We are focusing on women’s role in this new and important effort.

The recent election in the US shows that “it’s the economy,” is a battle cry for both sexes.  Women may hae a unique and potentially powerful approach to economic issues.

Sanjeev Sanyal writes: In recent weeks, there has been a chorus of opinion arguing for a sharp increase in global investment, particularly in infrastructure. Former US Treasury Secretary Lawrence Summers asserted that public investment really is a free lunch, while IMF Managing Director Christine Lagarde has argued that an investment boost is needed if the world economy is to “overcome a new mediocre.”

These comments suggest that the world has been under-investing for many years. In fact, according to International Monetary Fund data, the current overall global investment rate, at 24.5% of world GDP, is near the top of its long-term range. The issue is not a lack of overall investment, but the fact that a disproportionate share of it comes from China.

China’s share of world investment has soared from 4.3% in 1995 to an estimated 25.8% this year. By contrast, the United States’ share, which peaked at 36% in 1985, has fallen to less than 18%. The decline in Japan’s share has been more dramatic, from a peak of 22% in 1993 to just 5.7% in 2013.

China dominates global investment because it saves and invests nearly half of its $10.5 trillion economy. But this investment rate is likely to decline sharply over the next 5-10 years, because the country already boasts new infrastructure, has excess manufacturing capacity in many sectors, and is trying to shift economic activity to services – which require less investment. Moreover, China’s rapidly aging population and declining working-age population will reduce long-term investment demand.

Because the current-account balance is the difference between the investment and savings rates, the decline in investment will generate large surpluses unless savings also decline. And the experience of other aging societies, such as Germany and Japan, suggests that domestic investment falls faster than savings rates.

Thus, China can expect large external surpluses to transform the country from the world’s workshop into its main financier. Indeed, the scale of capital outflows could be so large that long-term capital will remain cheap even after the world’s major central banks tighten monetary policy. How the world absorbs those surpluses will define the next period of global economic expansion.

Emerging markets may be able to take some advantage of this low-cost financing. India would undoubtedly benefit, though it is unlikely to absorb a significant portion of China’s excess savings. India’s share of world investment is only 3.4%; and even a large expansion will not compensate for a small decline in Chinese investment. Furthermore, East Asia’s growth model has been sustained ultimately by mobilizing rising domestic savings and pumping out exports. So, although India might initially absorb some international capital, it might ultimately prefer to build foreign reserves by running small external deficits or even a surplus.

Other emerging countries are also unlikely to absorb much of China’s capital. Notwithstanding its advocacy of public investment spending, even the IMF accepts that a sudden increase in public investment is more likely to cause developing-country indebtedness than growth.

That is why calls by the IMF and others to scale up public infrastructure spending are really aimed at developed countries. Yet this, too, may prove insufficient. Germany’s investment-savings gap is so large that, even if it increases domestic investment, the most we can expect from Europe is that it does not add to the global savings glut.

Only a revival in US infrastructure investment can create a sustained global economic recovery. The US has the necessary scale to absorb China’s surplus, and its inadequate infrastructure provides plenty of avenues for fruitful investment.

Ironically, the IMF’s new investment mantra ultimately leads back to large global imbalances. But, far from decrying this as a major failure of global policy coordination, economists should accept imbalances as the natural state of the world and try to manage the resulting distortions.

A core assumption in much of strategic management research is that more accurate forecasts of future competitive actions or the future value of certain business capabilities will lead to strategic success.  Executives have long been exhorted to conduct analyses of internal and external environments and construct scenarios of the future. However, seeing strategy in this way has some serious weaknesses. It assumes that accuracy can be achieved through rigorous analysis and conscientious efforts to overcome individual biases in perception. It also assumes that the process will be relatively frictionless and primarily analytical.

There is an important tension at work here. Because the future is essentially unknowable, leaders must rely on the past for information and insight. Moreover, given that the future is unknown, there are likely to be differences and conflicts within the organization about what that future might hold. Such conflicts can impede progress on the development and execution of new strategies — especially innovative strategies that depart significantly from a company’s current approach to the market.

Studies have pointed to the “abject failure” of most forecasting efforts to attain the desired precision. While strategy researchers tell managers they should project into the future, we tell them little about how to do this.