Hi David,
I can't say that buying back shares is not an equally poor investment. You asserted, "There’s little doubt that capital used to fund many buybacks over the past decade has been diverted from more worthwhile investments," and you cited William Lazonick's argument that both share buybacks and dividends have "left very little for investments in productive capabilities or higher incomes for employees." What I said is that, based on an enormous number of empirical studies conducted over the past 28 years, what CEOs do with money that they DON'T return to shareholders (either in the form of dividends or in the form of share buybacks) tends to be worse than distributing it--that is, exactly the opposite of your argument. That doesn't mean you're wrong: it's possible that this is a particular example of a situation in which the best use of the money would be something other than returning it to shareholders. But you can't just assert it: you have to offer some evidence that it's actually true. It would be really, really great if you would provide empirical support for your argument. I don't think you can.
Similarly, we shouldn't simply "accept the notion that the investments they are passing up are stupid ones." The essence of capital market discipline is that investors (and non-investors, including equity analysts) near-continuously pass judgment on whether corporate managers are doing a good job of distinguishing the good uses of money from the bad ones, and implementing the good ones. In fact, that's exactly why your argument is silly: if repurchasing shares is actually a stupid use of money, then the value of each share will go down. That is, if additional R&D (or higher employee pay, or whatever else) would have been a better use of the money, then diverting it to repurchase shares will actually hurt corporate managers because a significant share of their compensation is tied to the value of an asset (company stock) that becomes worth less as a result of their stupidity.