On Mon, Sep 14, 2009 at 9:55 AM, Bruce Bostwick <[email protected]> wrote: > I believe that's the only rational assumption around which to design any > regulatory strategy. One of the assumptions is that the regulation must > evolve with the market and take exactly that sort of gaming the system into > account.
But in practice government bureaucracy does not manage to keep the regulations -- the huge number of complex regulations, which interact with each other in unpredictable ways -- in sync with the market players. Government is far too slow to keep up, and not nearly clever enough to reign in millions of highly-motivated individuals all trying to accomplish their goals. > > At this point I have to ask exactly what your concept of regulation *is*, > because it seems to be very different from mine. I think my view of regulation is less theoretical and idealized than yours. I do not see regulation as behaving at all as the designers expect. The systems involved are far too complex to be understood and predicted. In most cases, regulation causes more problems than it prevents. Here is an example of what I am talking about: Cause and Effect - Government Policies and the Financial Crisis Peter J. Wallison http://www.rgemonitor.com/financemarkets-monitor/255258/cause_and_effect_-_government_policies_and_the_financial_crisis | Although the media are full of talk that we face a "crisis of | capitalism," the underlying cause of the financial meltdown is something | much more mundane and practical--the housing, tax, and bank regulatory | policies of the U.S. government. The Community Reinvestment Act | (CRA), Fannie Mae and Freddie Mac, penalty-free refinancing of home | loans, tax preferences granted to home equity borrowing, and reduced | capital requirements for banks that hold mortgages and mortgage-backed | securities (MBS) have all weakened the standards for granting mortgages | and the housing finance system itself. Blaming greedy bankers, | incompetent rating agencies, or other actors in this unprecedented | drama misses the point--perhaps intentionally--that government policies | created the incentives for both a housing bubble and a reduction in the | bank capital and home equity that could have mitigated its effects. To | prevent a recurrence of this disaster, it would be far better to change | the destructive government housing policies that brought us to this | point than to enact a new regulatory regime that will hinder a quick | recovery and obstruct future economic growth. _______________________________________________ http://mccmedia.com/mailman/listinfo/brin-l_mccmedia.com
