The Economist - USA (2020-08-29)

12 The EconomistAugust 29th 2020

Lettersarewelcomeandshouldbe

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Letters

TheDemocraticticket

KamalaHarris,youclaim,

“comesfromtheDemocratic

Party’scentre”,is“notparticu-

larlyideological”,andnever

strays“toofarfromwherea

majorityofvotersare”(“What

KamalasaysaboutJoe”,August

15th).Hervotingrecordinthe

Senateindicatesotherwise.

Accordingtoucla’s VoteView

website,MsHarris’svotesare

moreleft-leaningthanthatof

anyothersenator, except

ElizabethWarren.Hervoting

recordisfurthertotheleftthan

evenBernieSanders,theonly

avowedsocialistintheSenate.

roberthelbing

Monrovia,California

Yourotherwiseexcellent

leaderrepeateda general

misunderstandingaboutlife

expectancy.ForanAmerican

maleatbirth,lifeexpectancyis

76 years.ButatJoeBiden’sage,

77,a malecanexpecttolivean

extratenyears.SoMrBidenis

statisticallyverylikelytolive

outa four-yearterm,atleast.

drdeborahhammond

Tacoma,Washington

It mightbetruethatif MrBiden

losesinNovember,MsHarris

“wouldbefirstinlinenext

timeround”fortheDemocratic

nominationin2024.History

suggestsotherwise.Ofallthe

vice-presidentialcandidates

ona losingticketinthepast 50

yearsonlytwowentontobe

nominatedbytheirpartyfor

president:WalterMondale,

whohadactuallyservedas

veep,andBobDole,andhehad

towait 20 years(from1976,

whenhewasonthelosing

ticketwithGeraldFord,to1996,

whenhewontheRepublican

nomination).

jameskennard

Melbourne

Whichever way you slice it

Your leader calling for more

resources to support vaccine

research for the coronavirus

gave the analogy that if a

person needed to eat pizza to

survive he would over-order

pizza, so some would go to

waste (“A bigger dose”, August

8th). The analogy is flawed.

Eatingpizza,evenforsur-

vival,isa classicprivategood.

Butfundingforvaccine

researchisfundamentally

different.Increasedspending

onvaccinesmeansthatwewill

financesomefailures,butthe

knowledgethatsuchfailures

givesusisincrediblyvaluable.

Supportforresearchisnotlike

aninsurancepolicyofover-

orderingpizzatomakesure

everyoneisfed.It isactuallya

productiveinvestmentgiven

thepublic-goodofscientific

knowledge.Theknowledge,

unlikeuneatenpizza,won’tgo

towaste.

johngershman

Clinicalprofessorofpublic

service

RobertF.WagnerGraduate

SchoolofPublicService

NewYork

Britain doesn’t rule the waves

With reference to fishing rights

in the uk-eutrade negotia-

tions (“On the menu”, July 25th)

it is worth emphasising that

under international law, Brit-

ain can never revert to becom-

ing an independent coastal

state. This nationalistic trope

was eagerly seized upon by

Brexiteers. Unfortunately for

them there is a binding inter-

national treaty obligation on

post-Brexit Britain to allow any

surplus fisheries within the

United Kingdom’s 200 nautical

mile exclusive economic (fish-

ing) zone to be shared with

fishermen from other coun-

tries, especially those who

have traditionally fished in

British waters.

This obligation is contained

within the unConvention on

the Law of the Sea. Non-com-

pliance may result in the

British government being

brought before a Conciliation

Commission. While concilia-

tion sounds friendly, a similar

commission established as a

result of an application by the

tiny state of East Timor

ultimately led to mighty

Australia being compelled to

negotiate a maritime boundary

treaty that, inter alia, provides

for the equitable sharing of any

offshore hydrocarbon re-

sources found in the seabed

between these two countries.

It ishardlysatisfyingto

thinkthatmuchofthe

supposedBrexitdividendwill

nowprobablyneedtobespent

onmoremaritime

enforcementvessels.

davidong

Professorofinternationaland

environmentallaw

NottinghamTrentUniversity

Postmen’spensions

“Lawoftheletter”(August8th)

reportedonthestateofthe

UnitedStatesPostalService

andhighlighteda simpletruth

aboutfinancialtransparency:

thecostofdefined-benefit

retirementplansforpublic-

sectorworkersisunknowable.

Costsgenerallyexceedfore-

castsandreturnsgenerallylag

behindthem,soinitialesti-

matesareoftentoolow.Since

defined-benefitplanskickthe

canoftheliabilityintothe

future,thefullcostoffunding

thosepensionsbecomes

someoneelse’sproblem.

Defined-contribution

plans,however,makethecost

transparenttoday.Under-

standingtruecostswillhelp

public-sectororganisations

likethepostofficepricetheir

servicesbettertopromotea

sustainablebusinessmodel.

stevenkirkpatrick

Portsmouth,RhodeIsland

The greenshoe option

Buttonwood perpetuated a

common misunderstanding of

the greenshoe option when he

said that in an initial public

offering “the banks retain the

right to issue more stock to

‘stabilise’ the market”, and

echoed complaints that this is

a “rapacious practice” (August

1st). In fact, the greenshoe

option was designed as a stop-

loss option for underwriters,

who over-allot shares of up to

15% in the new issue (go short)

in order to “stabilise the

market” in the immediate

aftermath of anipo.

They do this by buying any

stock from the ipothat might

“come back” and put pressure

on the share price, thereby

covering their short position.

The expectation is that there

will be a bid, by the underwrit-

ers, at or close to issue price for

30 days. So, if stock is offered

back at prices below the issue

price, the underwriters can

cover their short position and

sop up loose stock. However, as

we all know, if the share price

goes up rather than down, the

underwriters lose on their

short position and the poten-

tial loss is unlimited.

The greenshoe option gives

the underwriters the right to

buy more shares from the

company’s “treasury” (not sell

investors more shares than

initially planned) in order to

cover their short position. It

was created to ensure that

underwriters do not lose mon-

ey in providing this valuable

service. That is only fair.

What is not fair, and what

annoys issuers, is when the

stock softens in the after-

market and the underwriters

fail to provide support in the

market, preferring to wait for

30 days and exercise the op-

tion. Underwriters do this

because it is more profitable

for them to buy from the com-

pany’s treasury than to buy

from the market.

nelson smith

Toronto

Get him to the church on time

Bagehot was slightly optimistic

about Boris Johnson’s nuptials

(August 15th). Although the

prime minister has indeed had

a busy year, he hasn’t

remarried (yet).

leny morrison

Linlithgow, West Lothian

The kiss of death

So Donald Trump has threat-

ened to kill TikTok if Microsoft

doesn’t buy it (“Unproductivity

puzzle”, August 8th). Isn’t it

usually fatal for an up-and-

coming social-media firm to be

bought by Microsoft anyway?

j.j. gasparotti

Laguna Beach, California