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Anti-regulation is antithetical to modern economies

obvious Child

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All too often we see people saying "less regulation." More then a few took choice words to the financial reform bill recently passed in the house.

This seems somewhat odd. In modern economies, we have this notion of specialization of labor. People specialize in what they do well and society produces higher rates of returns due to better allocation of resources and time. The problem with being an expert in one field is that you don't know many others. Regulation in effect prevents or at least attempts to prevent the abuse of asymmetrical information. The stock broker is not allowed to engage in certain practices against a plumber. Likewise, the door maker is not allowed to lie about selling second doors as first to the mechanic. Each profession knows its profession well and others poorly. Removing regulation effectively allows each profession to abuse their better understanding of against others.

Being overly anti-regulation effectively means you want everyone to know everything as regulation is not present to prevent the abuse of asymmetrical information. A mechanic would have to learn the inns and outs of door manufacturing to know that the second rate door he's being sold actually is a second rate. A plumber would have to learn complex financial transactions to know he's being scammed. This is a huge drag on modern economies. Furthermore, being overly anti-regulation often requires a belief that people are inherently good and will do the right thing without ulterior motives for the sake of others. The USSR tried that. And failed. Miserably.

While more regulation does not equate to better outcomes, the mantra of less regulation always suggests that the speaker is ignorant to several basic economic principles as well as observable human behavior.
 

spud_meister

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but but but but......free market economics will look after everything, won't they?
:roll:
 

drz-400

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All too often we see people saying "less regulation." More then a few took choice words to the financial reform bill recently passed in the house.

This seems somewhat odd. In modern economies, we have this notion of specialization of labor. People specialize in what they do well and society produces higher rates of returns due to better allocation of resources and time. The problem with being an expert in one field is that you don't know many others. Regulation in effect prevents or at least attempts to prevent the abuse of asymmetrical information. The stock broker is not allowed to engage in certain practices against a plumber. Likewise, the door maker is not allowed to lie about selling second doors as first to the mechanic. Each profession knows its profession well and others poorly. Removing regulation effectively allows each profession to abuse their better understanding of against others.

Being overly anti-regulation effectively means you want everyone to know everything as regulation is not present to prevent the abuse of asymmetrical information. A mechanic would have to learn the inns and outs of door manufacturing to know that the second rate door he's being sold actually is a second rate. A plumber would have to learn complex financial transactions to know he's being scammed. This is a huge drag on modern economies. Furthermore, being overly anti-regulation often requires a belief that people are inherently good and will do the right thing without ulterior motives for the sake of others. The USSR tried that. And failed. Miserably.

While more regulation does not equate to better outcomes, the mantra of less regulation always suggests that the speaker is ignorant to several basic economic principles as well as observable human behavior.
Things like licenses can be done by the market and by the government, and in areas where signaling your expertise is important they are beneficial to the market. I think the whole idea of good regulation is to set up the frame work and let the market do the rest. Take cap and trade for example. We want to limit pollution so we can set a quota, and create a market for the liceses so they get distributed as efficiently as possible.

IMO the main goal of regulation is to make a fair system of cooperation. After that you try and do it as efficiently as possible.
 

Gabriel

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Things like licenses can be done by the market and by the government, and in areas where signaling your expertise is important they are beneficial to the market. I think the whole idea of good regulation is to set up the frame work and let the market do the rest. Take cap and trade for example. We want to limit pollution so we can set a quota, and create a market for the liceses so they get distributed as efficiently as possible.

IMO the main goal of regulation is to make a fair system of cooperation. After that you try and do it as efficiently as possible.
Regulation doesn't have to be regarded as an impediment to the market. Even though it costs the companies money, insuring they do their work safely and effectively without cutting corners is very important. For example the oil spill in the gulf.. or deregulation of banking.. consumer market being full of unknown and unregulated chemicals.... The companies that need to be careful should have more then their stock holders in mind and should be worried about their dealing effects on the people of the country they are working in or from.

It is libertarians pushing for smaller government and regulatory implements in government.. they have managed to do alright with deregulation but have failed miserably with big government. I won't use this as a podium to pound on libertarians but it should be identified as the primary group pushing for deregulation and have a bi-partisan effect.. but more influence in the republican tea party.

Canadian banks are heavily regulated and guess what happened with their banks in this crash? They survived the assault of the market relatively unscathed. They were not allowed to do unregulated banking practices such as derivatives and credit default swaps.
 

phattonez

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The examples that I saw in the first post all sounded like fraud. I don't think that anyone is calling for fraud to be legal.
 

lizzie

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What we need is sensible regulation, not manipulation, and government manipulation is what we seem to have.
 

Deuce

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The free market has always proven to be slow to fix its own abuses. Take just about any recall, usually the company was aware of the issue for quite some time before any action was taken. Only after some publicity or government intervention will they actually step up and take the financial hit.

Every industry needs regulation and oversight to some degree, because in any sufficiently large group of people there will be a handful who will do anything and everything to make a buck. Up to and including decisions that kill people.
 

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Regulation works.. look at the Canadian banking system now touted to be the most sound banks in the world.. They didn't even need to be bailed out from the recent colapse of the global economy caused by deregulation.
 

Gabriel

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The free market has always proven to be slow to fix its own abuses. Take just about any recall, usually the company was aware of the issue for quite some time before any action was taken. Only after some publicity or government intervention will they actually step up and take the financial hit.

Every industry needs regulation and oversight to some degree, because in any sufficiently large group of people there will be a handful who will do anything and everything to make a buck. Up to and including decisions that kill people.
Clearly American banks were.. under regulated.
 

Deuce

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Gabriel

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The wrong regulation can be just as bad as under-regulation.
Again you should consider how regulated the Canadian banks are comparatively speaking. It turns out they are heavily regulated. As for improper regulation compare and contrast the disparities between the Canadian regulations and American. I have no other opinion with regards to improper regulation, I would assume that means poorly administered or conceived methods.
 

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I have no other opinion with regards to improper regulation, I would assume that means poorly administered or conceived methods.
Fannie and Freddie, nuff said
 

Gabriel

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Fannie and Freddie, nuff said
Fail, even the Federal Reserve has admited deregulation and derivatives as the culprit.

EDIT: Derivatives represent 600 trillion dollars that have a combined value of zero.
 
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phattonez

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What is this even the Federal Reserve? Of course the Federal Reserve would say that as it shifts the blame away from them. The Fed isn't exactly a bastion of free market thinking.
 

Gabriel

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What is this even the Federal Reserve? Of course the Federal Reserve would say that as it shifts the blame away from them. The Fed isn't exactly a bastion of free market thinking.
The Federal Reserve is a privately owned bank.
 

Gabriel

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:lamo

Seriously, what else can I say about this statement?
"Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders."


– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s
 

phattonez

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What other bank has the government privilege of being able to print new currency? How exactly is that a private institution? What other bank gets to decide regulation for the other banks of the country?
 

Gabriel

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[video=google;-2550156453790090544]http://video.google.com/videoplay?docid=-2550156453790090544&hl=en&emb=1#[/video]

[video=google;-466210540567002553]http://video.google.com/videoplay?docid=-466210540567002553#docid=-4020719354420953428[/video]
 
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phattonez

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I'm not going to watch a 47 minute long video for this thread.
 

Gabriel

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I'm not going to watch a 47 minute long video for this thread.
I recommend you take the time to watch these sometime. They aren’t going to disappear.
 

Gabriel

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[video=google;-466210540567002553]http://video.google.com/videoplay?docid=-466210540567002553#docid=-4020719354420953428[/video]
This is a particularly interesting video and very in depth.
 

phattonez

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I'm not watching these videos. Either summarize or quit posting them because I guarantee you that no one is going to watch them all the way through.

As for Canada, it's kind of biased when you only look at the 7 richest countries. Poland has been doing well for quite some time now and their goal is much more economic liberalization. Like I always say, yet people always do it, correlation does not prove causation. I mean, if tight regulation explains why Canada has recovered, then what's wrong with Europe (excluding Poland)?
 
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