The following is the introduction about Oliver Hart’s papers by
When one company should buy out the assets of another company?
When do mergers and acquisitions maximize business value?
(This paper is a starting point for thinking about mergers, vertical integration, and other questions of corporate ownership and contract and control. Bengt Holmström of all people wrote a very nice appreciation of the paper.)
Hart was able to figure out how ownership transfers influence earlier decisions to invest in the value of company assets.
For instance, if Bayer buys out Monsanto, the incentives for the former managers to add value may go up, and for the latter managers the incentives may go down. The success of the merger may depend on whether the gain here outweighs the loss.
-> if you own an asset outright, you keep a greater share of the proceeds from improving the value of that asset. Ownership should thus migrate to those parties who have the greatest ability to improve value.
–> that is a very fundamental improvement on the Coase theorem, which suggests ownership won’t matter when there is ex post contractibility.
—-> Hart showed that for ownership not to matter there must also be ex ante contractibility about value-improving investments at earlier stages in the game, an unlikely assumption to hold.
And Hart helped devise a technical language for analyzing when too many potential veto points in a business deal can block progress.
This is again a model and series of parables about ownership and the allocation of rights, but with some twists on the earlier Grossman and Hart piece.
-> The key point is to not allow inessential agents to achieve blocking power of value creation.
->> If inessential agents owns potential blocking power, the surplus has to be split, resulting in some loss of value, due to a tougher bargaining problem, higher transactions costs, and a chance there won’t be enough surplus to cover the most significant investments
->>> Parties who create a lot of value should own things.
(One of Alex’s most interesting papers is an extension of this work)
Why a lot of value-maximizing takeover don’t happen, or why it is hard to buy up a whole city block and renovate it.
-> Maybe not enough shareholders will sell as they hopes other would sell and the raider would push the value, and so a value-enhancing takeover doesn’t always happen.
(This paper is connected to the Nobel Prize for Jean Tirole two years ago.)
How can you write a contract so a) parties will make the appropriate relationship-specific investments, and b) it doesn’t have to be renegotiated all of the time?
–>> value maximization within corporate endeavors and possible obstacles to such value maximization.
Hart, again with co-authors, also wrote a seminal paper on when we should prefer government over private-sector ownership.
<- Most of us prefer to eat in private rather than government-owned restaurants because we believe we’ll get lower costs, tastier food, and more innovation.
<- At the same time, private prisons may not be such a great idea. Prison companies will try to cut costs (“The incentive to cut costs is too strong! “), but the result may be facilities that are insufficiently humane.
–>> Sometimes the apparently inefficient bureaucracy does a better job helping to meet social goals, because the government won’t have the same profit incentive to skimp on quality along various margins.
(You also probably wouldn’t want Air Force One owned by the private sector, though you do want it to be designed and produced by the private sector. )
A breakthrough and highly rigorous means of modeling the principal-agent problem.
(It is in Econometrica and quite hard for many people to read.)
Whether all shareholders will desire that firms maximize profits if markets are incomplete and some firm shares also serves secondary “insurance” purposes of helping protect against adverse states of the world.
-> If you use the shares of a wheat-producing firm for insurance purpose, you would hope the value of the firm covary with the value of wheat in ways that differ from simple firm profit-maximization.
Congratulations to Oliver Hart!
一个非主流经济学学生的感想：Oliver Hart的得奖是自Ronald Coase和Oliver Williamson后的第三次颁给新制度经济学。新古典主义在这几十年用一种数学建模吞并的方式宣称了自己的霸权，认为只有数学才能解释和验证阐述世界的理论，认为建模即主流，拒绝即无稽。所以他们可以把这次的得奖称为主流中的主流，并在宏观经济学饱受争议之后让理论架构的微观经济学再一次成为自己的旌旗。但是不可否认的是，理论架构建模之前，并不是归纳法或者演绎法创造了这一切的源泉，而是真正贴切世界的敏锐的抽象的思考和发现。就像爱因斯坦所说，抵达真理的方向上并不是逻辑的道路，而是对经验共鸣的直觉。