Andrew Smithers – författare

The current consensus economic model, the neoclassical synthesis, depends on aprioristic assumptions that are shown to be invalid when tested against the data and fails to include finance. Economic policy based on this consensus has led to the financial crisis of 2008, the 'Great Recession' that followed, and the slow subsequent rate of growth. In The Economics of the Stock Market, Andrew Smithers proposes a model that is robust when tested, and by including the impact of the stock market on the economy, overcomes both these defects. The faults of the current consensus model are shown to result typically from an unscientific methodology in which assumptions are held to be valid despite their incompatibility with data evidence. Smithers demonstrates examples of these faults: the Miller/Modigliani Theorem (the assumption that leverage does not affect the value of produced capital assets); the assumption that short-term and long-term interest rates, and the cost of equity capital, are co-determined; and the assumption that the decisions of corporate managements aim to maximise the present value of corporate assets ('profit maximisation') rather than the value determined by the stock market. The Economics of the Stock Market proposes a model that includes and explains the stationarity of real returns on equity, based on the interaction of the differing utility preferences of the managers of companies and the owners of financial capital. These claims are highly controversial, and Smithers proposes that the relative merits of the neoclassical synthesis and this proposed alternative can only be properly considered through public debate.

Living standards in the UK and US are in danger of falling. A decline in growth due to poor productivity and an unfavourable change in demography has weakened the stand of liberal democracy, and voter dissatisfaction is encouraging populist policies that threaten even worse outcomes. Whilst living standards once grew faster than productivity they now grow more slowly, and the working population is no longer growing faster than the population as a whole. To avoid falling living standards the productivity problem must be addressed.Andrew Smithers argues that faster productivity does not depend, as many suggest, on technology; it also relies on investment. Current growth theory is based on a faulty model which has induced pessimism about our ability to encourage more growth. Productivity and the Bonus Culture sets out a revised model which demonstrates that weakness in productivity is the result of the bonus culture, and suggests ways to change this flawed system so that investment is encouraged and growth returns.

In 2000 one of the world’s foremost economists, Andrew Smithers, showed that the US stock market was widely over-priced at its peak and correctly advised investors to sell. He also argued that central bankers should adjust their policies not only in light of expected inflation but also if stock prices reach excessive levels. At the time, few economists agreed with him, today it is hard to find those who would disagree.In the past central bankers have denied that markets can be valued and that it did not matter if they fell. These two intellectual mistakes are the fundamentals cause of the current financial market crisis. In addition, a lack of understanding by investors as to how to value the market has also resulted in widespread losses.It is clearly of great importance to everyone that neither these losses nor the current financial chaos should be repeated and thus that the principle of asset valuation should be widely understood.In this timely and thought-provoking sequel to the hugely successful Valuing Wall Street Andrew Smithers puts forward a coherent and testable economic theory in order to influence investors, pension consultants and central bankers policy decisions so that thy may prevent history repeating itself. Backed by theory and substantial evidence Andrew shows that assets can be valued, as financial markets are neither perfectly efficient nor absurd casinos.