Back in the Middle Ages, no-one took any notice of Copernicus when he said the Earth was not at the centre of the universe.

Stewart Wallis, executive director of London-based “think-and-do-tank” the New Economics Foundation and one of the thousands attending the World Economic Forum in Davos, can sympathise.

“I don’t mind being called an idealistic idiot,” he told Reuters, with reference to a philosophy he summed up as “the macro-economic text-books are works of fiction”.

Undaunted by the non-believers, he will continue to spread the word and in Davos addressed the assembled money-makers on the importance of “gross domestic happiness”, as opposed to gross domestic product.
His new economics aspire to demonstrate “real economic well-being” through sustainable living, a focus on the local, not the global, and a more equal distribution of wealth.

The foundation’s latest survey of National Accounts of Well-being, based on around 40,000 interviews across Europe, found overworked, tired, bored and lonely Britons were near the bottom of the league.
Increasingly, they might be ready to give new economics a try. To that extent, Wallis’ time has come.

But there is work to be done. Regardless of the world economic crisis, convincing the people of Davos, both visiting and permanent, of the need to jettison old economics remains a challenge. The Swiss in general come very near the top of the well-being league, with their perfectly groomed ski pistes, quantities of chocolate and discreet wealth.

How do you keep VIPs — hundreds of them — happy?

You can’t, especially at the World Economic Forum. There’s no point in pulling that “Don’t you know who I am?” line here at the annual Davos gathering, which is attended by hundreds of the biggest corporate and political bigwigs.

Aides to Pakistan’s Prime Minister Yousaf Raza Gilani (including Commerce Minister Makhdoom Amin Fahim) and officials traveling with Kazakh President Nursultan Nazarbayev were visibly upset after they were refused entry into the opening plenary session. Before the same event, Senegal’s president Abdoulaye Wade and his aides were made to stand around for 15 minutes or so.

Later in the week, Belgium’s prime minister, Herman van Rompuy, was pushed aside by bodyguards to make way for British Prime Minister Gordon Brown.

Every morning, there are long queues at the security screening on the way into the conference, and CEOs who are used to whizzing past barriers must wait patiently for their turn like the rest of us.

“The forum has outgrown this place,” one participant told Reuters.

Many of the bankers blamed for the world financial crisis have been conspicuous by their absence from this year’s World Economic Forum in Davos.

They haven’t just missed conventional debate on how to prevent a re-run. They’ve also skipped the chance to hear Richard Olivier, theatre director and son of acting legend Laurence Olivier, draw comparisons between the masters of the universe and Shakespeare’s murderous tragic hero Macbeth.

“Macbeth didn’t set out to be evil,” Olivier told Reuters. On the face of it, he was the kind of bright, ambitious young man who could be trusted with big investment decisions. Equally, Lady Macbeth, who stands for “the familial culture of an organisation” thought she was just nurturing his career.

The positive role model is the low-key Malcolm, who, after all the bloodshed, quietly and without ego, ushers in a new order at the end of the play.

Olivier’s sessions in the Swiss ski resort have also focused on sustainability, with the help of Shakespeare’s comedy “As You Like It,” which distinguishes between the oppressive world of the court and the creative, collaborative forest.

“People cut off from nature will make unnatural decisions,” is the message it holds for the chastened business elite, says Olivier, whose company Olivier Mythodrama gives Shakespearean lessons in business leadership the world over.

He is suitably modest about audience reaction, but his wife Shelley Olivier says he receives ovations that would have made his father proud.

Business and political leaders congregating in the ski resort of Davos took a break from rosti, raclette and other Swiss cuisine as Japanese clothing maker Uniqlo sponsored a Japanese lunch and gave the conference hall a Tokyo-style makeover.

The six-course lunch, packed neatly in a black bento box, contained: seafood and vegetable tempura, Japanese vegetables, asparagus with beef, tofu with miso, shrimp, tuna, Japanese omelet, sushi topped with fish and grilled marinated salmon.

Participants later snapped up Uniqlo’s “manga” pop culture T-shirts handed out for free, while Japanese Prime Minister Taro Aso — here on an 8-hour trip — enjoyed a photo-op with an exhibition of T-shirts with embedded video footage of modern works by Japanese artists.

An eminent scientist who studies the brain and economics thinks that the financial industry in essence became addicted and insensitive to both risk and reward.

“The finance industry was adapting to the level or risk,” said Gregory Berns a professor at Emory University in Atlanta and a leader in the relatively new field of neuroeconomics.

“It is an insidious process, and you are not aware of it. You are addicted to returns, you are addicted to risk, you are addicted to cocaine - its all the same as far the brain goes.”

The part of the brain which is rich in dopamine is active in giving people a buzz when they do something they value. Getting money can give this buzz, as can taking risks. But sadly shortly after we reach a level of wealth we need more to get the same kick, just as we become used to the risk taking which formerly would have been exciting and might have caused us to trim our sails.

Berns describes the process of becoming habituated as like adjusting to a new level of light, at first it seems bright but then you adjust.

“You get used to it. The brain is constantly gauging relative amounts. The brain does not have a mechanism ever to be satisfied.”

The implication he said, is that the trader, banker or even small investor needs some structure from outside to impose limits.

In other words, regulation from on high.

And of course regulating banks to take the “right” amount of risk, enough to keep money flowing, is much more difficult than just telling them not to drink at all.

It’s as if governments were going to hold support meetings for alcoholics in bars, with the object being to just have one quick one.

A tough task.

Watch interviews with top business and world leaders including the following:

• Abdullah Al-badri
• Jose Gabrielli
• Donald Kaberuka
• Eric Anderson
• Carl Bildt
• Sue Gardner
• Kevin Kelly
• Rick Goings

Climate change — and the need for governments to reach a deal in Copenhagen on limiting climate-changing emissions — has been one of the central themes of this year’s World Economic Forum in Davos.

And despite concerns that the economic crisis could push climate change down the agenda, businesses are salivating at the opportunities offered by going green.

Previously sceptical politicians and NGOs welcome business’s enthusiasm.

“Quite a lot of business has got it, and really understands that this has got to happen and are talking about really innovative things,” Barbara Stocking, CEO of Oxfam.

“If they’re that almost enthusiastic about making the changes then that makes me feel rather better than I did,” she told Reuters.

What do you think? Does business get it?

An eminent scientist who studies the brain and economics thinks that the financial industry in essence became addicted to and insensitive to both risk and reward.

“The finance industry was adapting to the level or risk,” said Gregory Berns a professor at Emory University in Atlanta and a leader in the relatively new field of neuroeconomics.

 “It is an insidious process, you our are not aware of it. You are addicted to returns, you are addicted to risk, you are addicted to cocaine – its all the same as far the brain goes.”

The part of the brain which is rich in dopamine is active in giving people a buzz when they do something they value. Getting money can give this buzz, as can taking risks. But sadly as soon as we reach a level of wealth we need more to get the same kick, just as we become used to the risk taking which formerly would have been exciting and might have caused us to trim our sails.

Berns describes the process of becoming habituated as like adjusting to a new level of light, at first it seems bright but then you adjust.

“You get used to it. The brain is constantly gauging relative amounts. The brain does not have a mechanism ever to be satisfied.”

The implication he said, is that the trader, banker or even small investor needs some structure from outside to impose limits.

In other words, regulation from on high.

And of course regulating banks to take the “right” amount of risk, enough to keep money flowing, is much more difficult than just telling them not to drink at all.

It’s as if governments were going to hold support meetings for alcoholics in bars, with the object being to just have one quick one.

A tough task.

James Saft is a Reuters columnist. The opinions expressed are his own.

Nassim Nicholas Taleb,  the author of  “The Black Swan: The Impact of the Highly Improbable”, has a simple proposal to as he puts it, “save capitalism and free markets from the banks.”

Nationalise the banks, limit the rewards to those who work in what he calls the “utility” part of the system and have a completely uninsured second leg that can take all the risks it wants and lose its shirt, he said in an interview in Davos at the World Economic Forum.

“They rigged the game. We pay them for their profits, there is no clawback so their incentive is to hide the risk they are taking.”

“Which is why eventually as someone who loves free markets,  a total nationalisation of the part of the business that requires insurance and does clearing and payments needs to happen.”

“I am angry with U.S. policy. What we had is exactly the opposite of socialism, they got TARP to pay their bonuses and to take more risk.”

He describes his plan as Capitalism 2.0. It would have a barbell structure, with the insured utility-like part on one end and the free market bit with privatized risk on the other.

He describes banking bonuses as asymmetric because the banker gets the upside but does not share in the liability which ultimately may be funded by taxpayers, as we have seen.

Taleb, who as you may have noticed doesn’t mince words, is no fan of private equity.

“ Private equity has absolutely no reason to exist. The private equity holder has all the upside and the banks all the downside.” He’d have no objection to a system where private equity funds itself via hedge funds, so long as neither party had any recourse to government insurance.

And a bit like an Old Testament prophet, Taleb is angry and wants those he thinks are responsible to suffer.

“I want them poor and they deserve to be poor.You can’t have capitalism without punishment.”

Oh, and another thing, he wants Bob Rubin, who trousered millions while chairman of Citigroup, to cough up.

“I want Bob Rubin to return his $110 million dollars to the American taxpayer.”

James Saft is a Reuters columnist. The opinions expressed are his own.

Is it actually distintermediation if the thing being disintermediated has ceased to function?

Henry Kravis of Kohlberg Kravis Roberts said in Davos that, as in essence banks aren’t playing their role of intermediating debt capital for buyouts, he would be going straight to the source, doing deals directly with investors who want to fund debt for deals.

Of course many of the institutions that used to fund buyouts, CLOs and CDOs for example, no longer exist and many like hedge funds have lower appetite. He acknowledged that leverage has “come down tremendously,” which might get the prize for biggest understatement of the week.

But, like Steve Schwarzman of Blackstone earlier in the week, he maintained that lower asset prices for deals originated now would help returns.

“You might be able to buy it with less leverage and you can still get the same returns because of the purchase price you are paying.”

I hope he means the same returns as old-fashioned vintage deals rather than the returns of 2006/07 originated ones.

Schwarzman earlier in the week on same subject:

“Private equity buying assets at bottom of the cycle.. if you just put one to one leverage on you should make 3-5 times your money doing that.”

Now we just need to figure out when the bottom of the cycle is!

My other question is how badly the recent vintage deals will do, many of which look very vulnerable. Private equity people are right to say that they have $400 billion of commitments, and that in the current environment that capital will be able to demand a very high (relative) rate of return as capital is scarce. But there is going to be a lot of very messy business to be done in the meantime with existing deals, and lots of potential for conflicts with existing investors who will be concerned with today’s bread rather than tomorrow’s jam.

Jim Saft is a Reuters columnist. Any views expressed are his own.