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A correspondent asked for comment on the new ESG trend among asset managers. For example, BlackRock , and the recent Exxon upheaval with two new green directors ( here , but cautionary WSJ coverage here , pointing out how empty the whole Exxon affair really is).  I'm sad to see even Vanguard (which has a lot of my money) going along on this...trend.  Could you offer some thoughts about the trend of asset managers voting more critically this year? Are the big fund firms like BlackRock getting too far removed from the wishes of their customers? Other analysts say that BlackRock and other ESG-minded fund firms are only following the wishes of their younger investors who care more about those themes, maybe that makes it all ok? My answer:  As a private property fan, if the owners of a company want to spend its money on pointless virtue signaling, or important but unprofitable save-the-planet and cure-racial-injustice initiatives (depending on your point of view), ...

  Source. My correspondent provides the answer:  5bps: IVV (column #3) (iShares Core S&P 500 ETF) 15bps: ESGU (column #1)  (iShares ESG Aware MSCI USA ETF)  30bps: LCTU (column #2) (BlackRock U.S. Carbon Transition Readiness ETF) “Sea change” quote from BlackRock here   I have not independently checked, though the answer hardly matters. The fees and portfolios tell the story. Obviously any claim that this ESG portfolio will outperform after fees is ... strained.  When I did my Senate testimony on financial regulation and climate change, someone (I forget who)  suggested that financial regulators need to really crack down on ESG, carbon, diversity, and other virtue claims by investment managers and large corporations. I heartily agree. Of course, we have different motivations.  I got the sense that the person suggesting it wanted to make sure companies really did keep all their virtuous promises. I think that being forced to document thei...

Jason Crawford's "Roots of Progress" blog on what happened to nuclear power is an important read for many reasons, among them economic growth, climate, and regulation. It's a review of Why Nuclear Power Has Been a Flop  by Jack Devanney which goes on my must-read list.  Perhaps the important economic question of our time is this: Is growth over? Are we running out of ideas? Or is our decades-long growth slowdown the result of an increasingly sclerotic, over-regulated, crony-capitalist rent-seeking political system? Nuclear power offers an interesting case study.  Through the 1950s and ‘60s, costs were declining rapidly. A law of economics says that costs in an industry tend to follow a power law as a function of production volume: that is, every time production doubles, costs fall by a constant percent (typically 10 to 25%). This function is called the experience curve or the learning curve. Nuclear followed the learning curve up until about 1970, when it inverted an...

 I did a few fun video conversations last week.  This is a conversation with Ryan Bourne, Megan McArdle, and Alex Tabarrok on economics and the year of covid. Direct link  if the above embed doesn't work.  The conversation  is occasioned by the publication of Ryan's excellent book Economics in One Virus .  I am often asked for recommendations of general readable economics books. (i.e. no equations.) This is a gem.  Then I had a nice conversation with Mike Hartmann at The Giving Review , link here with transcript , (slightly edited, please refer to that if you want to quote me. The above is just a screenshot, you have to go to the link).  We explored my view that the US should eliminate the whole non-profit business, most of all the tax deductibility of contributions to non-profits, but also (less importantly) the non-profit corporate form. While many non-profits do a lot of good (my employer!) the system has become obscenely perverted, mostly as...

Greg Ip has a great column in the WSJ on Bidenomics.   It's not long, it's so well written that it's hard to condense the good parts, and you should really read it all.  There is an intellectual framework to Bidenomics, and with that a scarily more durable move on economic policy.  There used to be  "certain rules about how the world worked: governments should avoid deficits, liberalize trade and trust in markets. Taxes and social programs shouldn’t discourage work." By contrast President Biden's (really his team's) "embrace of bigger government" is founded on different economic ideas. To wit, abridged:  Growth Old view: Scarcity is the default condition of economies: the demand for goods, services, labor and capital is limitless, their supply is limited. ...faster growth requires raising potential by increasing incentives to work and invest. Macroeconomic tools—monetary and fiscal policy—are only occasionally needed to deal with recessions and i...

Secretary of the Treasury, and ex Federal Reserve Chair Janet Yellen recently hosted an important meeting of the Financial Stability Oversight Council .  This is the highest level body overseeing financial regulation in the US. It matters.  Her remarks start smoothly but critically, as one expects of a habitually well-prepared pro. A lot went wrong last year, from the treasury markets to another mutual fund bailout, and so forth. Bravo, it is time to get past celebrating how another bailout blowout saved the world and see if we can avoid another one.  And then,  We must also look ahead, at emerging risks. [To the financial system, the FSOC's purview.] Climate change is obviously the big one. It is an existential threat to our environment, and it poses a tremendous risk to our country’s financial stability. We know that storms will hit us with more frequency, and more intensity. We know warming temperatures might disrupt food and water supplies, leading to unrest arou...

Update : An expanded and improved version of this post is at city journal , or here (pdf on my webpage )  I had the honor of testifying at the Senate Committee on Banking, Housing and Urban Affairs, on Protecting the Financial System from Risks Associated with Climate Change  Full video at the link, I start at 48:30 with slightly abridged version of these remarks.  Testimony of John H. Cochrane to US Senate Committee on Banking, Housing, and Urban Affairs  Chairman Brown, Ranking Member Toomey and Members of the Committee: Thank you for the opportunity to testify today.  I am John Cochrane. I am an economist, specializing in finance and monetary policy. My comments do not reflect the views of my employer or any institution with which I am affiliated.  Climate change is an important challenge. But climate change poses no measurable risk to the financial system. This emperor has no  clothes. “Risk” means unforeseen events. We know exactly where the clima...