Hello George:
"I agree that we have not developed even an adequate descriptive model of how for profit corporations' systems react to changes in regulation enforcement and market changes."
Perhaps that is true because we are incapable of knowing what an individual may do, let alone a corporation, when confronted by unexpected and even expected change.
One thing I know for sure is that the experts will scratch their heads and say "We didn't see that coming."
"However, I think that an economic system that expects recessions every decade or so needs to be redesigned by re-engineering our strategic design."
Oh my god, I hope you did not mean what you wrote,
Any attempt to rescind the business cycle will lead to disaster but we all know that the experts will scratch their heads and say "We didn't see that coming" when the change fails to achieve its goal
"The theory that the corporation can be controlled like a machine system has failed too many times."
Who espouses that theory?
"Yes, our system model has control limits and monitoring of output, but as you point out short-run thinking may create longer-run disaster."
Then don't mess with what we have.
"The regulators failed to anticipate the long-term consequences of new creative accounting rules that allowed 1/3 junk mortgages to be bundled with 2/3 healthy assets and priced as all healthy packages."
I don't think that is true since the people who regulate the regulators, i.e., Congress, denied the regulators the laws they needed to avoid the crisis.
"These packages were traded and re-traded until the ridiculous price was too much to trade without laughing out loud."
Yet many graduates of the best schools continued to buy them until the bottom fell out.
"Regulators should have blown the whistle and did, but the lobbyists convinced the appropriate congressional committees to not be concerned about it."
We are on the same page now. The lobbyists were Fannie and Freddie Mac, Acorn, community organizers, and others with their extreme political agendas.
"One question that occurs to me is: How do you design and implement a system that puts service above self and allows ethical employees to be heard without personal negative consequences?"
You don't.
"Clearly, we need an improved quality control regulatory and reporting system."
Actually we need people with backbones who are not afraid to be called racists when they call a heart a heart.
"The one you suggest needs to be given teeth and bite."
Law makers make the rules and they are not about to create system that takes their teeth out of the process.
"Why not regulate analyst's reports on corporate performance to cover details, such as, the action taken by Walmart may raise last quarter's earnings by X%, but will like damage earnings 2-3 years from now?"
The problem is not the data the problem is the conclusions we draw from the data. Are you suggesting we make it illegal to draw the wrong conclusions? I want to be in charge of deciding what are correct conclusions.
"Perhaps, we need to train our analysts to stay on top of creative accounting with bundling junk and trading it as high quality."
Perhaps we need to teach the buyers of junk not to buy junk-that is much easier than trying to fix the unscrupulous among us.
"Also, lobbyists need to be regulated."
Why are politicians so easily corrupted?
Perhaps politicians need to be regulated? Oh they are, but the voters keep returning them to office for multiple decades.
"A recent study found that the corporate ROI for investing in lobbyists was 22,000 percent, yes, 22,000 percent!"
I see that as an indictment of politicians not of lobbyists.
"This exchange has been most helpful to me in my understanding of our jerry-ridged corporate control system and how to retrofit a better one."
After all these years the evil doers are still doing their evil things but I cannot imagine what evil things the evil doers will do when confronted by a new, untried system designed by well-meaning academics who cannot fix their own bureaucracies and then changed by our malevolent politicians.
We need to reject change for change sake.
We need to reject change if it interferes with the profit motive.
We need to reject change if it interferes with doing business.
Perhaps what we need to do is punish those that broke the laws by writing bad loans. Oh wait, that was government policy.
We need to prevent government from sticking their dirty little fingers in the loan business.
We need to prevent the government from reducing the risk of making bad loans.
Bob