Sorry, back to the drawing board then, and design a system that works in the real world. It's probably not too far off from what we have now, and should be reasonably free, no doubt about that, but it should be designed to muddle along with the muddly creatures that comprise its actors, rather than some sort of idealized system that will never come to fruition. Those apes tend to have both collectivist and individualistic tendencies, and ignoring one in favor of the other is a bad idea.
Leftists are saying that the problem was that the system was too free. Libertarians are saying that the main problem lies with the corruption and inefficiency of regulation. Neither point is trivial, neither point can be dismissed as ideological rhetoric.
There are those libertarians who will always blame the government for every problem until we live under Rothbardian anarchy. You may think that position is idiotic, and you are welcome to do so. However, the leftists who blame every problem on "the unfettered free market" sound equally idiotic to my ears in a world with regulatory agencies with multi-billion dollar budgets and hundreds of thousands of pages of rules controlling trillions of dollars of capital every day.
So, don't dismiss all claims of misregulation even if some of the critics are unhinged. After all, if something is wrong there, we would expect it to have large effects. My old firm spent at least a seven-figure number each year to comply with regulatory rules, and it wasn't very large.
We see some competition between governments in areas like the European Union that have free trade and free movement. This has resulted in tax rates being lowered and business being liberalized across the EU. However, the European Union cooperates on some things, such as financial regulation, so we won't see any competition between different models there.
I think the US is much too large in terms of people, GDP, and land area to be efficiently governed by one entity. The law is crusted over with special interest regulation and really needs a rethinking. However, I doubt that is likely to change any time soon.
And I agree with you that trial and error is a good way of proceeding. The problem is that the visibility and the severity of an error are not always correlated. It is easy to fix visible problems but not get closer to an efficient model.
Sure. We've found a model that works pretty well, and a whole lot better than various recent experiments, so it's a fairly safe bet. Who wouldn't want to copy that?
> US is much too large in terms
Difficult to say. It's not run worse than plenty of smaller countries, and has one huge advantage: it's an ironclad free trade area.
I've felt that way for a while now. People need to feel they have sovereignty, so "states" should never get too large. Also, as Taleb said in The Black Swan about mergers: the lower diversity means that when one fails, it's catastrophic. Instead of 300 million people trying to decide on Red or Blue, we could have 50 states that catered to every style, much as in Europe.
Regulations should be more dynamic. If it looks like someone has found a loophole, they shouldn't be afraid to plug it before it becomes a problem. But they should also be more active in modifying and "optimizing" existing regulations, so long as they don't do it too often.
The left are simply claiming that this was caused by market liberalisation. Increasing market liberalisation would make it worse. The free marketeers are then countering by saying it was never totally free. You can't use that situation to judge anything.
What I hear Lewis saying is that we are over-regulated with ineffective regulation. All the institutions are there, but they don't really do anything to protect the markets from financial meltdowns like these. If you're still asking what are the weaknesses of the system, and what are the points of failure I'm not sure you read the article.
Our financial system is a wreck; it's time to change tack. If you want to sail with the wind, it helps to know which way it is blowing.
The devil you say, David!
What, pray tell, do you think the black market is?
Also we need vigorous antitrust enforcement so that the failure of no one company can bring down the economy. AIG come to mind, but also the telcos, oil companies, and Rupert Murdoch,
For the examples you site about companies too big to fail: firstly no company is too big to fail. Secondly, those industries would be more competitive without regulation, subsidies, the SEC, and the FCC.
Finally, it makes your whole comment hold less weight when you single out Rupert Murdoch while commenting on an open forum on the internet. Communication and broadcasting tools have never been more competitive and free.
There are many kinds of businesses that exploit faults in the public and market, yet don't even have any relationship with branding. Companies have better resources and access to more information about the areas they function in than the public does (whether as individuals or groups), and many businesses don't market to the public at all, even if they deal with the public. Debt collection firms, for example, have all of these features.
The public does have a mechanism to counteract the actions of companies, and that's representative government and regulation. It's obviously imperfect, but it is the mechanism the public has.
So why can't consumers get e.g. cheaper text message rates?
I'm not sure I buy the whole "truly free markets will save us all" argument, but the particular text-messaging argument has a very simple explanation in terms of government monopolies and the cozy relationship between entrenched players and the government.
http://en.wikipedia.org/wiki/Tragedy_of_the_commons#Modern_s...
> municipalities control where you can build cell towers
Substitution sometimes works just as well as attacking any one product's pricing model.
And the other reply is right. The space is incredibly regulated. You'd be arrested for trying to compete in the restricted spectrum.
Hominem ūnīus librī timeō.
Most business take pride in what they make. Most people look for that, and look for recommendations from peers. That system is remarkably effective.
By the 1930s, muckraking journalists, consumer protection organizations, and federal regulators began mounting a campaign for stronger regulatory authority by publicizing a list of injurious products which had been ruled permissible under the 1906 law, including radioactive beverages, cosmetics which caused blindness, and worthless "cures" for diabetes and tuberculosis. The resulting proposed law was unable to get through the Congress of the United States for five years, but was rapidly enacted into law following the public outcry over the 1937 Elixir Sulfanilamide tragedy, in which over 100 people died after using a drug formulated with a toxic, untested solvent. The only way that the FDA could even seize the product was due to a misbranding problem: an "Elixir" was defined as a medication dissolved in ethanol, not the diethylene glycol used in the Elixir Sulfanilamide.
http://www.calcompnutrition.com/natural-cures-kevin-trudeau....
Many real elixirs are killing people right now, by not getting on the market fast enough to save lives because of the lengthy FDA approval process. You don't hear about that.
I would start by emphasizing that things that can kill lots of people should be regulated. Cars and planes and buildings fall in that category. But how?
An airline should be forced to get insurance for the risk of bad pilots. That might be enough to align incentives and protect people from risk. It is a slightly irrelevant issue as laws will be passed within our lifetimes that mandate a human must _not_ fly a commercial airplane. Only robots.
Driving is similar, but much easier, so more people can do it. It's harder from a robotics front, but will also be solved soon. I've worked on robot cars.
Heart surgery is where it gets interesting. By mandating a certain level of quality, you essentially place a price floor above the market price on medical care. That means a lot of people don't get it. Would you rather have a shoddy operation or none at all? As desperate times often demonstrate (e.g. delivering a baby outside a hospital by necessity), people want shoddy care over none at all.
So licensing doctors is bad. Private accreditation is enough. I will trust a doctor that has received a credential or accreditation from an institution I trust. I certainly trust Harvard more than I trust the AMA or HHS.
You should read Capitalism and Freedom by the way. Milton Friedman is an excellent author. He makes this issue crystal clear.
Regulations are just there to try and avoid the transition period of pain (and death).
Sounds remarkably similar to where we are.
Saying that doesn't make it true, it's a belief, not a fact, keep that in mind.
It's poor form to not mention that said problem always occurs.
It's also poor form to not mention that all of the monopolies/oligopolies mentioned were created and/or maintained by govt action.
Regulation is one of those govt actions. Regulation gives Walmart an advantage over every Mom&Pop because even at its best, regulation is a fixed cost that Walmart can spread over more transactions. At its typical, Walmart gets a deal that no one else gets.
While if you flip the coin you can have: The industry was not regulated enough. Recently there has been a trend to de-regulation, and letting the market free to do what they want to do, and this let us to this huge mess. The markets are made out of people, that have a herd mentality, and only view their short term interest, while ignoring the long term ones.
And there are many experiments to prove this: (insert many experiments done on how people would rather have 5$ today, then $20 if few weeks, even though the later is a much better deal).
While you fail to mention the fact that the government is not forcing anybody to actually acknowledge the rating agencies ratings, and to invest by them.
If the market was smart, why didn't reconginze the problem with the ratings, and avoid it?
Another thing that libertarians fail to mention is that in the late 20s, early 30s, a lot of this regulation, or agencies, didn't exist!! Yet the market failed to protect against themselves, and we had the great depression.
Please explain that!
He is NOT saying that regulation was the problem, and he's not saying that less regulation will solve the crisis. He's saying that blaming libertarianism, free markets and "unfettered capitalism" is a fallacy - simply because the financial market is neither of those.
Sure, it's been about a week since we played. Ready, set, go!
[insert the same discussion as always here]
We've heard a lot in recent months about how the current crisis proves that "unfettered capitalism" doesn't work and that libertarian political philosophy is (intellectually) bankrupt. Libertarians, we are told, are running scared.
The quote above is one small example of why this claim is rubbish. The banking and financial sectors have been heavily regulated for at least 70 years; this has created the kind of cartel virtually impossible to form in a free market. And what happened to the SEC is so common it has a name: regulatory capture, the capture of the regulatory agency by the special interests of the industry being regulated.
There's plenty of blame to go around: the global financial crisis has many causes. Laissez-faire capitalism isn't one of them.