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The equity risk premium (ERP), or equity premium, is the difference in expected or realized return between an equity index and a reference asset, where the latter is usually a bond or bill portfolio considered to be “riskless.” In the modern literature and in investment management practice, ERP usually means “expected ERP” and we will stick to that convention, reserving …

Where do technological innovations come from? We have two mental images. One is of a lone genius working in a laboratory or garage, misunderstood until, at long last, the world appreciates her contribution. The other is of a team of busy bees, experts working at a corporation or government agency, the Manhattan Project being the best-known example. The life of …

Has productivity growth slowed in the U.S. and around the world, as is the conventional wisdom? Or is that just an illusion, caused by the difficulty of measuring the quality improvements (instead of quantity improvements) that constitute the bulk of productivity growth? In a provocative interview, Horace (“Woody”) Brock, an economist, strategist and consultant to many of the world’s leading …

Richard Bookstaber has authored two superbly written and thoughtfully argued books on the flaws of the financial system. His first, A Demon of Our Own Design (2007), was focused on the system’s complexity and foresaw the global financial crisis of 2007-2009. His latest book, The End of Theory, argues that economics as currently understood is poorly designed to understand the …

In a burst of silliness, index funds have recently been compared to Communism, called un-American, and regarded as proof of our essentially lazy nature. But those are softballs. In a harder-edged attack, cash flows into index funds have been blamed for pushing the prices of a few favored stocks up to astronomical levels, distorting markets and making indefensible capital allocation …