Quote Of The Day

I was at lunch with colleagues today, and the question was raised as to why regulators couldn’t see the financial crisis coming due to all the “creative” financial instruments. To me it was clear, and I threw out a slight paraphrase of an old saying:

Those who can; produce. Those who can’t; regulate.

Now, it’s undoubtedly more complex than that. Just as they say generals spend time preparing for “the last” war, I would say that regulators try to address “the last crisis”. While they were trying to solve the incentives that created Enron with SarbOx, people with money on the line were looking for ways to exploit the rules of SarbOx. The system is structured to reward those who find the loopholes in the system.

But I think it’s also clear that the leading lights of the world aren’t drawn to the comparative low pay of government employment. Those who are willing to risk more get the bigger rewards.

The problem is the system. If there were LESS constraints, there would be less of a presumption of safety in the market. That presumption of safety and stability is one of those things that allowed people to become so highly leveraged. If we didn’t live in a world where we assumed that the SEC makes us safe, might we take a little more care in how we invest?

  • http://publiusendures.blogspot.com Mark

    Kind of O/T, but speaking of regulation, I would love someone here at Liberty Papers to talk about this (not because it’s my writing, but because it’s something that legitimately needs more attention):

    See also this:

    …There’s also a bunch of related materials if you look around the internets.

  • http://thelibertypapers.org/ Brad Warbiany


    I passed it along to my fellow contributors… Not sure if it will be addressed or not (and I may or may not have time to do so myself).

    One point I would make, though, is that I hope the lead issue is not overly presented as the key to this. At least when it comes to any company manufacturing electronices for worldwide distribution, they’re already using lead-free processes — as the Europeans have banned lead solder as of about mid-2006. There is a free-rider aspect to this policy that has largely eliminated lead from most US domestic electronics production as well.

    This isn’t to “steal the thunder” of this bill, of course, as it appears some of the labeling and certification requirements will be just as bad as advertised, but the lead aspect is probably not a big deal in the grand scheme of things.

  • http://publiusendures.blogspot.com Mark

    The lead aspect of it is not an element that anyone really cares about much one way or another (although there is a specific issue with regards to some of the products for older children…but for the most part, no one really cares if they mandate an elimination of lead because there are alternatives in most cases). The real issues are the testing and retroactivity issues, which do nothing to improve safety and impose disproportionate costs on small and medium sized businesses, who were completely shut out of the legislative process.

    To give a picture of the extremes of this issue, a manufacturer of unfinished, hand-made wooden toys will need to lay out hundreds of dollars in testing fees just to prove that the toys don’t contain lead (which of course is physically impossible). One of the people I interviewed for the article, who sells primarily hand-made, wooden toys, told me that 80-90% of her suppliers are either planning to close because of the regulatory costs or are considering it.

    Anyways, thanks for passing it on. It just seems to me to be an issue that bespeaks the perils that occur where regulatory capture meets well-meaning legislators. But more importantly, it’s an issue where there is an increasingly large opportunity to prevent the worst effects.

  • http://publiusendures.blogspot.com Mark

    I should add – the certification issue is also a problem, but more because of the draconian penalties for paperwork error than because of the marginal burden of certification.

  • Cokehead

    You’re talking about overregulation. Just letting the free market run roughshod over everything else isn’t really a good idea. Maybe I just support regulation a little more because the lack of it ended up getting me salmonella from peanut butter; but I don’t know, really.

  • nubwaxer

    thankfully no one seems interested in this right wing extremist tripe or else the comment section would be circle jerking their liberty patriots. you can’t claim ownership or moral superiority of your liberty patriot. it’s like the claim of being pro-life when there is not an equivalent anti-life group. there are the equivalents of pro-choice (liberty patriot) and anti-choice imposiition of authority and control over someone else’s freedom to choose what’s right them. i’m an atheist democratic socialist who wants to tell you to get off your high horse that wants to imply that i am less of a liberty patriot than you. it’s very insulting.