On the first day of this long July 4th weekend, I’m reading a book that is quite timely, which just came in: “Towards an Imperfect Union,” by Dalibor Rohac. It’s excellent, simply excellent, and I’m learning a great deal.
The author includes the following: “The role of EU membership in facilitating pro-market reforms in postcommunist countries illustrates perhaps the most important function performed by the bloc: its role as a commitment device. In his epic poem The Odyssey, the Greek poet Homer gives us an excellent exposition of the idea. On the journey back home after the fall of Troy, Odysseus and his men reach the land of the Sirens, “crying beauty to bewitch men coasting by,” who then crash on the rocky coast of their island. In order to resist the temptation, Odysseus instructs his crew to do the following:
“‘Therefore you are to tie me up, tight as a splint, erect along the mast, lashed to the mast, and if I shout and beg to be untied, take more turns of the rope to muffle me.’
“The picture of tying Odysseus to the mast, pictured in the famous painting by John William Waterhouse [below], is to make it impossible for him to yield to the temptation presented by the Sirens. In other words, it serves as a commitment device. In the same way, policymakers in modern democracies sometimes need to tie their own hands to keep them from yielding to various temptations. Changes in policies, especially those that make societies better off, can be thought of as contracts between policymakers and the population.” <emphasis in original>
So, how does this relate to money-weighting?
Well, while reading this passage I immediately thought of those who virtually have themselves tied to the mast, so that they won’t be tempted by the lure of money-weighting. Those individuals who refuse to cave in; who refuse to be open to the opportunities that money-weighting provides.
Fortunately, there are many braver souls who have allowed themselves to listen to the wisdom extolled by those of us who have been championing money-weighting for going on two decades. Thus, the requirement by the U.S. Government Accounting Standards Board (GASB) for public pension funds money-weighting (via the IRR) annually, the soon-to-be requirement for money-weighting north of our border (i.e., in Canada).
Unlike the siren song depicted by Homer, listening to the reasonableness of money-weighting won’t result in death, but in a new life!
Oh, and as for the book, look for my review in this month’s newsletter. And, I recommend the book: excellent!
And, a Happy July 4th to my American friends. A quick old joke:
- Do they have July 4th in England?
- The typical response: “no.”
- Well, do they then go from July 3 to July 5?
Ha, ha. (Okay, not too funny; funnier when I deliver it live). [Some “cornball humor” perhaps to go with the corn on the cob you’ll be enjoying at a picnic this weekend]