An article in The Monthly by Noel Pearson, http://www.themonthly.com.au/node/1785, makes me regret the political career he almost had. He explains a main-stream issue, the GFC, with a much more obscure one, The Anthropomorphic Fallacy – the habit of “ascribing human traits to a non-human entity”. This is a guy who deals in practicalities so bear with him (/me).

Who’s to blame for the GFC? Noel suggests someone as exalted as Alan Greenspan might be it – [paraphrase] “The models were all right, it was the data that was wrong”. Or if not him than maybe the former Citigroup CEO, Chuck Prince, and others like him, who knew the music was bound to stop, but were too punch-drunk to do the same.

But clearly no single individual can be to blame for the greatest failing yet of our modern economic model. Instead, if Noel has it right, the blame lies in the common notion that the modern corporation operates according to a collective self-interest. This leads us to expect it to behave accordingly - predictably, humanly, and, in our interest. But they don’t.

Much of modern economic theory is built on the notion of a trust-based contract between owners and managers - The Principal-Agent Theory. Needless to say, that trust has been tested. This raises an interesting dilemma. Where do you put your trust (money) next?

Consider this: is a shareholder of News Ltd (a “controlled company”) better off because Rupert is as much an owner as a manager? Or is management at Macquarie Bank (a “widely held company”) better off because you as a shareholder don’t know enough to dangerously interfere?

Family businesses shut down the dilemma – their owners are management. For the rest, the dilemma remains. Little wonder then that people like Noel are calling for more and better regulation. In the meantime, use your trust wisely.