Hi Chris,
I'm sorry you thought I was being patronizing. I had no reason to think that you've studied finance. Also, I don't know why you think I've "assumed away externalities."
I made a fairly limited set of points. The first was that a great deal of empirical evidence suggests that corporate managers tend to make poor use of money that is left lying around, so distributing it--whether as dividends or in the form of stock repurchases--tends to prevent it from being wasted. The second was that Lynn Stout, William Lazonick, Steven Pearlstein, and David Larrabee fundamentally misunderstand the concept of maximizing shareholder value: they mischaracterize it as something like "pumping up the stock price at the expense of the health of the corporation." My point is that damaging the health of the corporation generally causes the stock price to go down, not up.
I didn't say that corporate managers are always right; in fact I said the opposite. I didn't say that corporate managers don't lobby for things that will benefit their corporation at the expense of the rest of society; in fact I said the opposite. And I didn't say that we should assume away externalities; in fact I didn't say anything at all about externalities.
--Brad