The Reregulation Mantra

Submitted by Bill St. Clair on Thu, 16 Oct 2008 10:30:45 GMT  <== Politics ==> 

John Stossel at TownHall.com - why deregulation was not the cause and regulation cannot possibly be the solution to the economic "crisis". [root]

Is deregulation is the culprit? It can't be. There was no relevant deregulation in the last 25 years. Meanwhile, highly regulated institutions eagerly bought risky government-guaranteed mortgages, stimulating excessive housing construction and an unsustainable price bubble.

Deregulation wasn't the problem, and reregulation isn't the solution.

It's intuitive to assume that regulation prevents problems, but it's rarely true. First, how would regulators know what to do? Leaving aside the bias they might have and the brutal fact that regulation is physical force, how can a small group of people understand the workings of a market sufficiently to regulate sensibly? Markets, especially financial markets, are far more complicated than any mind can grasp. They consist of many millions of participants making countless decisions on the basis of unarticulated know-how and intuition. To attempt to regulate such activity requires knowledge no one can possess.

...

Markets are never perfect. They are made up of people making their best judgments, and people's judgments are never perfect. Yes, under some circumstances market activity such as speculation and short-selling could harm innocent bystanders. But those who say government is the best protector are wrong because the knowledge problem is an insurmountable obstacle.

There is only one genuine protection for the public: the discipline of profit and loss. Nothing concentrates the mind like the prospect of bankruptcy.

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