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Comment by cjcorliss on Age-Weighted Voting · 2019-07-23T21:59:04.736Z · score: 0 (2 votes) · EA · GW

Bryan Caplan's book "The Myth of the Rational Voter" explains that voters being merely ignorant or irrational is not a big issue. The uniformed voters will make random mistakes in voting that cancel each other out, and elections are still decided by the median informed voter. If that is true, younger voters' greater ignorance (/higher intelligence) will cause them to contribute less (/more) to the pool of informed voters.

What we should really care about are biases, where people are consistently making mistakes in one direction, that are common across the population (or the age group in this case). Age might be a factor. Caplan proposes four biases: Anti-market bias, Anti-foreign bias, Make-work bias, Pessimistic bias.

https://en.wikipedia.org/wiki/The_Myth_of_the_Rational_Voter

Comment by cjcorliss on Effective Impact Investing · 2019-03-13T21:55:38.100Z · score: 1 (1 votes) · EA · GW

Thanks for the reply and sorry for the delay. I can see how my second point was unclear. Let me reframe it by saying that the evidence does not support that impact investing has been, in the past, effective at providing corporations an incentive to adopt ESG. The evidence that ESG factors produced above market returns is evidence that fund flows did not raise the price of ESG factors, thus provided no incentive for corporations to adopt ESG (above whatever profit maximization incentives already existed).

On the first point, you are arguing that ESG is not priced into current prices, and that ESG factors will produce higher returns in the future. I guess I disagree. I know there are a few factors that have long track records of overperformance (value, momentum, low vol). I do not think there is sufficient evidence to claim that ESG is a similar factor. It just seams like conjecture at this point. I would say I believe in weak-form efficient market hypothesis. Basically you can get above-market returns, but it is a lot of work, and simple theories are unlikely to work.

Comment by cjcorliss on Effective Impact Investing · 2019-02-28T23:51:25.291Z · score: 2 (2 votes) · EA · GW

The claim that impact investing does "not entail a reduction in financial returns" is inconsistent with two other claims in the report. The first is that good ESG practices reduce a company's cost of capital. The company's cost of capital is its weighted cost of equity and debt (stocks and bonds). To put it another way, the company's cost of capital is the same as the investors expected return. If a company's cost of capital is lowered, then the ex-ante returns that an investor receives will be lower.

The second inconsistent claim is that divestment has been successful in providing managers an incentive to adopt good ESG practices. In fact, if companies with strong ESG bonafides provide a superior ex-ante return, then the corporation would have an incentive not to adopt ESG policies. It is only when ESG provides lower ex-ante return to investors that corporations will have an incentive to adopt these policies.

These points are explained in more clarity and depth by Cliff Asness here: https://www.aqr.com/Insights/Perspectives/Virtue-is-its-Own-Reward-Or-One-Mans-Ceiling-is-Another-Mans-Floor