Former German Chancellor Angela Merkel has written a book full of insults about incoming US President Trump. You'd think, given the weakness of Germany's economy and military, that its not in the best interests of the nation to attack America's new leader. What's amusing about her book is the line that Trump “looked at everything like the real estate developer he was before he entered politics” - as a zero-sum game. “For him, all countries were rivals in which the success of one meant the failure of another. He didn’t think that prosperity could be increased for all through cooperation.” Which only goes to show that Merkel doesn't know what property developers do. That is, construct new buildings, renovate old ones and sell, lease and rent those buildings.
In terms of contribution to value-added GDP, construction & real estate is one of the biggest industries in the world. The Former German Chancellor is utterly confused about real estate development being a zero-sum game: developers are not rivals. One's success does not mean another's failure. The stock market is different. A founder of modern finance theory, Eugene Fama, is quoted as saying of share traders, "Active investment is a zero-sum game. Passive managers don't play the game. They buy something resembling the market as a whole, or some segment of the market, and don't respond to the actions of active managers". What he's saying is that for active share traders who try to beat the market return, the gains for those who succeed in doing so are exactly offset by losses for ones who fail.
For a person with the status of Merkel to incorrectly characterize what property developers do, showing such an ignorance about that industry, putting in writing they have the same mentality as active share traders who sit on computer screens all day, is remarkable. Next time she visits Germany's Parliament in the Reichstag building, with its Norman Foster architect designed glass dome, maybe she should take a look and admire it - and contemplate zero-sum games again.
Professor Robert MacCulloch holds the Matthew S. Abel Chair of Macroeconomics at Auckland University. He has previously worked at the Reserve Bank, Oxford University, and the London School of Economics. He runs the blog Down to Earth Kiwi from where this article was sourced.
No comments:
Post a Comment