Henderson on Jonathan Macey
By David Henderson
Advocates of free markets and deregulation are often accused of being apologists for big business. The main reason for this seems to be that we defend the rights and accomplishments of big businesses that achieve great things under economic freedom. But we have always been careful to defend economic freedom, not big business per se. If I were to recommend one book to disabuse people of the idea that being pro-freedom necessarily means being pro-big business, that book would be Jonathan R. Macey’s The Death of Corporate Reputation. But that is only one of many things that recommend the book.
Macey, a professor of finance at Yale University, is a long-time observer and analyst of both corporate finance law and actual finance as practiced on Wall Street. He has written profusely on the topics covered in this book. His broad claim is summarized in the title of this book and in the subtitle: How Integrity Has Been Destroyed on Wall Street. Macey is a harsh critic of both government regulators and private financial actors. He argues that government regulation has failed and that perverse regulation, combined with changes in technology and information costs, has reduced the value of reputation in financial markets. He makes his case sector by sector, taking on accounting firms, law firms, credit rating agencies, stock exchanges, and the Securities and Exchange Commission. He sometimes overstates his case. At times, I found his evidence better than his theoretical argument, and one piece of evidence–on the legendary junk-bond king, Michael Milken–actually undercuts his argument. But his big-picture reasoning and conclusions are broadly convincing and his case gets stronger as the book progresses.
These are the opening two paragraphs of my review of Jonathan Macey’s new book, The Death of Corporate Reputation. My review, titled “Perverse Incentives in the Financial World,” is in the Winter 2013-2014 issue of Regulation. Read the whole thing here.