18 September 2008

Are you feeling well?

I think I have a case of the whichPoliticianIsTellingMoreLies-itis. I assume that politics has always been a race to the bottom, with politicians stretching the truth tighter than a pair of Usain Bolt's spandex on Rosie O'Donnell, but the only reason they get away with it is because we must like seeing Rosie O'Donnell in nasty-tight spandex. Seriously, if anybody says they are proud of how McCain or Obama is running their campaign, I'm going to laugh. Then I going to treat you like a elementary school student, because apparently that is when your mind stopped developing.

17 September 2008

A Balanced Regulatory Meal

A frequent Second Glance commenter has asked for my views on the financial market mess. More specifically he'd like me to reconcile my general disdain for regulation with this disaster which appears to have been caused by a lack of regulation.

I would love to opine at length on the topic, but like many of the shell shocked investment firms out there sitting up to their eyeballs in worthless securitized debt instruments, I don't really know what the heck is going on.

So, as any good libertarian would, I will avoid the direct question by stating a hypothetical that no one can disagree with. Then I will claim that the hypothetical is relevant to the current question, even if the relationship is tenuous. Then I will claim that there was never any paradox to reconcile in the first place. Here it goes:

As we all know, hindsight is 20/20. So my question is "what would we have done differently, if given the chance?" If your answer is, "we should have had the gov't cracked down on predatory lending and the proliferation of high exposure investment instruments," I would just laugh. I'd laugh somewhat nervously, partially because I don't know what the hell that really means. But I'd also laugh because the Monday morning quarterbacking only works until next Sunday.

It seems the golden phrase these days is not more or less regulation but "good regulation." Good regulation is just another way of saying let's make rules which constrain the choices of corporations with the intent to limit harm or provide benefit to some individuals. Unless you have a vendetta against the word "regulation," good regulation doesn't sound so bad, right? Who cares about corporations when the individual is at stake?!

To which I must reply with a platitude because it is so fitting yet never gets considered seriously during the "solution" or regulation proposal phase, that is, "actions often have unintended consequences." Let us say that we enact all the regulation that is supposedly needed to "keep this from ever happening again." My question would be, in the process have we created an even bigger monster, requiring even more regulations to defeat? And where does it end? And if its so good now, why didn't we think so before, and will it be good later?

This is not to say that regulation is never needed, or that it was not needed in this case. It is only to say, that we shouldn't use the fact that voluntary exchange has gone south as a sufficient rationale for enacting regulation. Especially since once in place regulations have a tricky way of making themselves permanent residents. Regulations change the rules of the game. In the new game, maybe we limit the upside by limiting the downside. Maybe it is better to sustain transitory losses, however painfully, to remove the ceiling on growth in the future.

These are a lot of tough questions, and the easy answer is to just enact smart or good regulation. The hard part is figuring out if we are doing less harm than good.