My Faults My Own

One's ponens is another's tollens.

Three Modest Proposals, Instead of Divesting...

The modest proposal comes after a bit of serious economics, because, well, you have to eat your vegetables before you get any dessert.

Also: Global warming is real and anthropocentric; we're going to need to stop it; we're going to need to stop using fossil fuels. If you don't believe these things, then I'm not going to try to convince you here. If you do believe these things, and also think that I'm wrong here, I'd be really, really, glad to hear it.

All of that said, the majority of this post is either intended as satire or double-satire; the only thing that I'll admit to honestly believing is that no one, not even Divest, is above a little tongue-in-cheek mockery.

Also, despite my use of the narrative first person, I am in no way involved with the Divest movement, at Harvard or elsewhere, except that sometimes I give them unsolicited financial advice.

Recently, Milo King, on Gains From Trade, asks: What is the economic impact of divestment? A few years ago, and seemingly unrelatedly, the HPR came to the same conclusion, namely:

Because the stock market is efficient, selling off stock for reasons unrelated to that company's profitability will cause more amoral investors to step in and kindly take your depressed-price shares, reaping the spread for themselves. No long-term depression of prices, no pain felt by Exxon et al., and now the shareholder voting those shares has worse morals than you did. Oops.

Consider, for example, the widely-acclaimed divestment from South Africa, in protest of apartheid...

Despite the prominence and publicity of the boycott and the multitude of divesting companies, the financial markets' valuations of targeted companies or even the South African financial markets themselves were not easily visibly affected. The sanctions may have been effective in raising the public moral standards or public awareness of South African repression, but it appears that financial markets managed to avoid the brunt of the sanctions. (...)

...and recall that that was not just universities, but also retirement funds, mutual funds, municipal investors, and a variety of other institutions, in the climate of UN-imposed economic sanctions (which...presumably did not help their resiliency?).

Long story short, lots of people sold SA stocks, declaring loudly they did so for principled reasons, so other investors knew that there was no fiscal risk in buying those same shares. The obvious conclusion, then, is...

(Proposal 1)

I mean, come on! If HMC's going to divest because of moral objections rather than market considerations, we shouldn't tell the world that! Let's quietly sell them off, let the market assume that we're acting on information relevant to profits rather than morals, and then prices might actually go down. If we make a show out of telling everyone what an uninformed (wrt finances of the company in question) decision we're making, we'll throw away our chance at faking people into thinking you have market-relevant information they should be reacting to!

The next step is to take the meetings between the Divest leadership and President Faust to some location more covert than on her way to work, like...the inside of Mass Hall?

(Proposal 2)

Okay, but seriously. Divest Harvard and friends would like for HMC to sell some shares of Exxon. HMC doesn't want to sell any shares of Exxon. But, as far as this'll have any effect on Exxon, it doesn't matter who sells their Exxon, only that someone does. (That is, sells the proper number of shares, whatever that is.) So maybe we should be lobbying someone else who might prove a little more willing to listen?

I mean, it was a good show good show, but if storming piggybacking into Mass Hall didn't work, maybe we should pivot to an easier target.

(Proposal 3)

Well, that still sounds hard. But wait! How about us Divest folks get together and sell our shares of oil companies? Won't it be the easiest thing ever to convince us to sell, since we already believe that it's the right thing to do?

But Ross, we don't own any shares of oil companies!


Hold on; there's a financial instrument designed for exactly this use-case -- the short-sale![1] So, rather than trying to convince HMC to part with its painstakingly-crafted well-diversified portfolio, we can make the sensible investment of short-selling oil companies! (Not with our own money, of course -- I'm talking about the escrow fund we're setting up.)

After all, what better way to convince Harvard to sell than by leading by example? Besides, it'll be a great chance to see in action just how effective divestment can be.

And so, in conclusion, I present to you the new battle plan of the Divest Harvard movement, backed up by solid logic and economics:

  • Go completely underground, including secret handshakes, using Tor from on Harvard's campus, and conducting talks exclusively during "24-hour sit-ins of Mass Hall".
  • Immediately renaming the movement from "Divest Harvard" to "Divest Someone...Anyone?". This has the added benefit of claiming the legal standing to sue anyone irresponsibly still investing in fossil fuels.
  • Short-sell oil stocks. How much? Lots, probably leveraged at 7:1 or something. Preferably all of the oil stocks. May need to make allies among quantitative trading interns in the Math or Stat departments to figure out how.