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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.
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.