"not to mention enormous numbers of public employees" The number of military and DOD civilian employees has fallen for some time now. The number of postal employees has fallen dramatically. The number of federal civilian non-defense, non-postal employees is stagnant and has not kept up with population growth with one notablization, the federalization of private sector airport inspectors following 9-11 when GWB created the TSA. The vast majority of government employees work for state and local government, modally public college systems or public K-12 schools, and many of the rest in the direct provision of health care. They are engaged not in regulatory work, but in productive activity that the private sector also employs people to engage in. In many states, Colorado where I live among them, the percentage of funding for public colleges that actually comes from government is modest and dwindling - they are close to being government chartered as much as they are government funded and are subject to a fair amount of market discipline in their operations. The number of K-12 employees has little or nothing to do with federal political decisions making. Diehard Republican Utah has lots of teachers on the payroll. Many other Republican states have few.

Kaplan does a number of things that make me doubt his conclusions. (1) He evaluates board action based on estimated pay, while evalating pay for performance based on realized pay, while failing to note one of the most striking points of the data set: CEO realized pay profoundly exceeds the expected pay that directors were making their decisions upon; moreover, some time periods show widespread naivety on the part of board in making executive compensation decisions (e.g. issuing the same number of options each year rather than the same expected value of options each year). This suggests that CEOs themselves have much better information about the value of their pay packages than the directors who approve them and work hard to make their pay packages look smaller than they are likely to be in fact. It stinks of managerial control. (2) The proportion of CEO turnovers that are due to change of control transactions is quite high in all periods (abot a third) which suggests that there are lots of CEOs whom the market views as necessary to remove that boards do not. The study also makes no effort to distinguish between CEO turnover via a board decision that reflects simply a retirement of someone at the end of their career (the average age of a CEO is not young), and a termination for cause, not does it make any effort to evaluate the impact of golden parachutes on CEO career termination. The 10%-12% tenure change of rate of companies without a change of control in a given year is pretty low considering the average age of the CEOs in question. (3) Kaplan's data demonstrates unambiguously that CEO compensation is highly cyclic, and to a great extent that observation extended to his data on CEO tenure. CEOs reap extraordinary benefits during booms, and realize less income and also are more vulnerable to being fired during busts. But, none of Kaplan's analysis attempts to meaningfully adjust with this known cyclic tendency. The 2000s look relatively modest because it includes data from right after the 2001 Tech Bust, and the 2007 Financial Crisis, while the 1990s were an almost uninterrupted boom. (4) The whole point of the liberal critics of the failings of corporate governance is that the current Soviet style ballots for selecting directors, among other flaws, makes the exercise of democratic control of corporations by their shareholders through their directors a meaningless sham. Evidence that 98% of companies in the S&P 500 manage to get non-binding say on pay resolutions approved is just as easily cast as an example of the failure of the shareholder voting system as it is affirmative evidence that shareholders are happy with CEO pay levels or system. In a functional democratic system that tracked a median shareholder's views, one would a priori expect a close to 50-50 outcome from say on pay votes (just as verdicts in litigated civil trials naturally gravitates towards 50-50 plaintiff and defense verdicts and opposition parties in political democracies naturally adjust their policies to build a more winning coalition). (5) Limiting the comparisons of CEO pay to lawyers and finance executives conceals the very plausible possibility that the pay of these professionals follows CEO pay causally, rather than providing an independent verification of director reasonableness. Outside professionals at big law firms and in investment banks, etc. work for CEOs and as a matter of sociology and economic reality lawyers and financial professionals tend to demand compensation on a par with the professionals who hire them. In a very tangible way, regardless of who is on whose payroll, the CEO, the team of C level managers under the CEO, the partners assigned to the CEO's firm at its main law firms, and the senior executives assigned to the CEO's firm at its main finance firms are all part of a single management team made of near peers who pay each other near peer levels of compensation. The fact that the professions are moving in lockstep is evidence for crony capitalism rather than evidence against it. (6) Kaplan also doesn't seriously engage the literature showing executive compensation in finance or finance related firms growing far more rapidly than executive compensation in publicly held firms in the "real economy". (7) Kaplan notes that CEO pay is better managed in firms with better structural elements like independent directors and large director share portfolios, while outliers involve companies with particular bad structural features. But, he doesn't even mention just what percentage of directors are insiders at typical S&P 500 firms (which is quite high) and provides direct evidence for the possibility of managerial influence. (8) Kaplan creates something of a straw man by arguing that there aren't major recent changes in CEO pay that are not driven mostly by new tax and new financial accounting rules, so directors must not be captured. But, adherents of CEO pay being driven by captured directors do not generally argue that this is a particularly recent phenomena. (9) Kaplan makes no effort to address why CEO compensation in the U.S. is high relative to first world peers in other countries at comparable firms, and he acknowledges, although he doesn't emphasize, the fact that closely held firms systemically differ in their compensation practices and CEO retention practices (in ways that are generally superior to those at publicly held firms) from widely held public companies. Similarly, Kaplan make no meaningful effort to address comparisons of the pay of top level professionals and executives in the public sector (military generals, top judges, cabinet secretaries and political appointees of them) who often do competent work, for a fraction of what private sector companies pay -- this is problematic in a model that sees a competitive bidding market for executive talent rather than are more political and sociological model of how people get hired to be CEOs. (10) Kaplan disregards entirely case study and ethnographic support for the managerially controlled director theory, relying instead entirely on statistics that are arguably cherry picked. A few pages illustrating allegedly aggressively intervening boards in action in particular cases and finding alternative explanations for notorious cases of board failure would have done much to make his presentation more convincing.

I've never met a law professor who lacked legal knowledge sufficient to teach his or her courses. Now, the wisdom that guides you in applying that knowledge in practice is another matter entirely.

The differential between short term and long term Treasury interest rates could simply reflect the fact that while the Fed is intent on keeping interest rates at near zero in the short run, and has said as much, but that interest rates as a result of being near zero now, can only increase, and that sooner or later the Fed will surely allow that to happen.

Colorado's experiment with TABOR, which it still has on the books, has not been a positive one. Colorado has repeatedly come very close to having an overconstrained budget in which it is mathematically impossible to pass a budget consistent with the state constitution and federal law. As passed in Colorado there are multiple parts to it: (1) a popular vote is required for either tax increases or spending cap increases, (2) there is a spending cap based on a pretty narrow formula that "ratchets down" in recessions, and (3) excess revenues must be refunded on a per capita basis. One of the most serious problems is that is had banned creation of a rainy day fund. Another is that the timing situation means that revenue adjustments can't be voter approved except for time periods beyond the ability of legislators to forecast accurately. A third is that constraints on other major line items (e.g. Medicaid matching, already imposed prison sentences, state constitutional minimum funding levels of K-12 education, and earmarked user fee/excise tax revenue for specific programs) have left higher education bearing almost all of the state general fund budget cuts required rather than allowing for shared pain across many programs and revenues alike. Both higher ed spending and K-12 spending are now at Mississippi levels in Colorado. Almost every local government in the state has voted to opt out of TABOR and there have been one or two instances of state ballot issues temporarily overriding it to avoid state government collapse. State business groups have condemned it as a peril to the ability of the state to attract business. It has, however, been instrumental in helping Democrats to get elected since the tax and spend rhetorical device no longer works in Colorado.

"there seems to be no Intrade contract available on the US defaulting on its debt. Why not?" We already have a contract for that. It's the U.S. Department of Treasury bond auction.

The free blogger blog platform allows you to have a blog that is not available for the public to view that tags individual posts and is also searchable by key words. If you wish, you can add collaborators or assistants in as co-authors of the blog. Additionally, it establishes the date you made the entry (critical for footnoting references to internet sources), and stores your information in the cloud, so it is accessible anywhere at any time. And, of course, you've already demonstrated that you can handle blogging software.

One alternative that has been proposed would be to base corporate taxation not on income, but on market capitalization.

The contrary position is that institutional investors do not engage in corporate governance due to fears of securities law liability such as insider trading, market manipulation, etc., and that given a safe harbor would act differently. They probably wouldn't see common cause with many "shareholder activists" of the current regime, but might show far less tolerance for directors who tolerated underperforming executives and gave them high compensation.