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© Z/Yen Group 2010
“New Learning”
Z/Yen Group Limited
90 Basinghall Street
London EC2V 5AY
tel: +44 (0)20 7562-9562
email : [email protected]
Gresham College
Risk, Equality and Opportunity
The Roles For Government Finance
Professor Michael Mainelli
Emeritus Gresham College Professor of Commerce, Fellow & Trustee
and Executive Chairman, Z/Yen Group
4 December 2013
© Z/Yen Group 2010
A Role for A Rôle?
[Source: http://bmmoejackson2.files.wordpress.com/2012/09/leadv2.jpg?w=600]
© Z/Yen Group 2010
♦ Outcome profiles &
success measures
♦ Benefactor
♦ Enterprise
♦ Guarantor
♦ Investor
♦ Sorcerer’s Apprentice
Outline
“Get a big picture grip on the details.”
Chao Kli Ning
© Z/Yen Group 2010
Framework for Government Finance
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation Enhancement Happiness
Volatility
Reduction Policies Standards Quality Cohesion
Risk
Avoidance Research Prevention Benefits Welfare
© Z/Yen Group 2010
Risk
Reward
Likelihood
Communitarian
Service
Delivery
Changing
Systems
Expanding
Frontiers
Outcome Profiles
© Z/Yen Group 2010
Success Measures
© Z/Yen Group 2010
Dirty Dozen
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation Enhancement Happiness
Volatility
Reduction Policies Standards Quality Cohesion
Risk
Avoidance Research Prevention Benefits Welfare
© Z/Yen Group 2010
Communitarian
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation Enhancement 3 - Happiness
Volatility
Reduction Policies Standards Quality 2 - Cohesion
Risk
Avoidance Research Prevention Benefits 1 - Welfare
© Z/Yen Group 2010
Government as Benefactor
© Z/Yen Group 2010
Service Delivery
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention Transformation
6 -
Enhancement Happiness
Volatility
Reduction Policies Standards 5 - Quality Cohesion
Risk
Avoidance Research Prevention 4 – Benefits Welfare
© Z/Yen Group 2010
Government as Enterprise
[Source: http://www.imf.org/external/pubs/ft/gfs/manual/]
© Z/Yen Group 2010
The Balance Sheet Of Prosperity & Happiness
[source: adapted from Stiglitz E., Sen A., Fitoussi J.P. et al, “Report by the Commission on the Measurement of Economic
Performance and Social Progress” (2009)]
© Z/Yen Group 2010
Who Owns The Capital?
© Z/Yen Group 2010
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement Invention
9 -
Transformation Enhancement Happiness
Volatility
Reduction Policies 8 - Standards Quality Cohesion
Risk
Avoidance Research 7 - Prevention Benefits Welfare
Changing Systems
© Z/Yen Group 2010
Government as Guarantor
© Z/Yen Group 2010
Commercial Approach To Risk Finance
Low High Expected Frequency
Expected
Severity
Low
High
AVOIDANCE
(RISK CONTROL)
RISK TRANSFER
(Hedging)
RISK POOLING
(Diversification)
[adapted from Michael R Powers, Acts of God and Man, Columbia Business School Publishing (2012), page 117]
© Z/Yen Group 2010
Government Approach To Risk Finance?
Low High Expected Frequency
Expected
Severity
Low
High
RISK POOLING
(Informal Diversification)
AVOIDANCE
(Private Markets)
RISK POOLING
(Diversification)
[adapted from Michael R Powers, Acts of God and Man, Columbia Business School Publishing (2012), page 168]
© Z/Yen Group 2010
Expanding Frontiers
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement 12 - Invention Transformation Enhancement Happiness
Volatility
Reduction 11 - Policies Standards Quality Cohesion
Risk
Avoidance 10 - Research Prevention Benefits Welfare
© Z/Yen Group 2010
Portfolio Management
Expenditure
Value
Not Worth Exploring
Best Possible
Portfolio
Current Portfolio
Future Current
© Z/Yen Group 2010
Government as Investor
© Z/Yen Group 2010
Monopolies On The Force Of Ideas?
© Z/Yen Group 2010
Money as a System?
Money
Fiat currency
Common tender
Backed
Unbacked
Commodity money
Composite
Baskets
- currencies
- commodities
Representative money
Communities form when people are prepared to
be indebted to one another: basic membership indebtedness
recorded indebtedness
tradable indebtedness
© Z/Yen Group 2010
The Basis Of Trust?
© Z/Yen Group 2010
Government as Sorcerer’s Apprentice
[Source: "Goethe's Werke", 1882, drawing by Ferdinand Barth (1842–1892]
© Z/Yen Group 2010
♦ Self-referential system upon which all our
analysis is based
♦ What does GDP mean?
♦ Are competing currencies good or bad?
♦ Should money be a long term store of value?
Not Too Creative?
© Z/Yen Group 2010
The Rôles of Government
© Z/Yen Group 2010
Government Finance
Role Expanding
Frontiers
Changing
Systems
Service
Delivery
Communitarian
Reward
Enhancement
Lotteries,
prizes, co-
investment
Achievement
funding
Charge, spend
or subsidise
Spend or
subsidise
Volatility
Reduction
Policy
performance
bonds
Standards,
minimum
wages, vice
taxes, tolls
Risk
Avoidance
Research
spend
Insurance/
Reinsurance
Fiat Currency
Investor Guarantor Enterprise Benefactor
Sorcerer’s Apprentice
© Z/Yen Group 2010
Risk, Equality And Opportunity
The Roles For Government Finance
Thank you!
“Get a big picture grip on the details.”
Chao Kli Ning