Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Saturday, January 30, 2010

Regulation, Regulation, Regulation

It's hard to beat Krugman if you're looking for down to earth reality on any topic he chooses to address.

Those who think that “too big to fail” is the essence of the problem have to explain why Canada, with basically just five banks, has avoided crisis. Those who blame the Fed for keeping interest rates too low too long have to explain why Canada, which basically had the same interest rate experience we did, didn’t have anything like the same problems.

So what’s Canada’s secret? Regulation, regulation, regulation. Much stricter limits on leverage, much stricter limits on unconventional mortgages, and an independent consumer protection agency for borrowers.
(Emphasis added.)

Without regulation, the fox is in charge of the hen house, and - sooner or later - the wolf will be at your door.  It's twue, it's twue.


J said...

Strictly in terms of economics, regulation seems prudent and preferable to the laissez-faire casino--at least for most ordinary citizens, not to say po' folks. Of course, regs of whatever sort might not be in the interest of the wealthy, or even upper middle class.

That's one problem with the idea that econ. must relate to ethics-- though providing a necessary argument for ethical obligations, of any sort presents a formidable challenge, as Hume pointed out over two centuries ago. We are not required to write out a check to Sally Struthers favorite charity, even when she stands in some 3rd world slum with tears in her eyes...change the f-ing channel, dawg. Or even Haiti, tho' I think anyone with moderate income should donate).

People vote their pocketbook--tho' as you pointed out a few days ago, they might not know what's best for 'em, whether in terms of politics or economics (so much for that frat-boy business major myth of the "rational man")

But there's a wrong side to excessive regulation and grandiose govt. plans. The history of stalinism proves that. Really,econo-men could argue for an Irrational Man standard (actually Veblen's ideas sound a bit like that. A car is not just a car, but like a sign of success, a meme....a totem).

Jazzbumpa said...

Even without getting into ethics, there is the practical matter of what is best for society. I firmly believe that an overly top-heavy wealth distribution is not good. Wealthy people sit on their money; poor people, of necessity, spend it. That keeps businesses humming.

Also, the top-heavy pyramid is unstable, leading to some bad end depression, or blood in the streets.

Rich people vote their pocketbook. Other people get caught up in hot button issues like abortion and gay marriage that are ultimately meaningless.

the "rational man" is an irrational idea.

Of course regulation can go to far. But let's go back to Keynes, and sure, Veblen too. An unregulated economy is wolves in
charge of the sheep.


J said...

Most middle class and poor vote their pocketbook, as well, I suspect. Many voted for Obama in hopes he would improve the economy, or he at least managed to sell that line (until the bailout, perhaps). We'll see: really, Hillary, while a bit hawkish (not so much more than BO) leaned slightly to BO's left in terms of econ., taking on corporations, h-c. She insisted on public option, for one and never praised Reagan, or shook the hands of conservative baptist preachers.

There are other issues--ie. avoiding world war--but econ. a priority.

That said, I don't always disagree with those who object to Keynesian bureaucrats. A libertarian and anarchist might agree in their opposition to LBJ bureaucracy. After a few decades of inept politics from left and right, we have reasons not to trust elected officials of whatever party to take care of matters . Even old-school leftists--including Marx really--did not bless the Gub-mint per se.

Woodrow Wilson was like the last real progressive Pres./admin, and a bright boy as well (tho' not perfect--). FDR is taken to be liberal but his recovery plans were tied to banks and companies, and he and his keynesians loved bureaucracy--tho' compared to like Clinton, FDR quite authentic.

JFK really was quite rightist, tho' again the myth takes over the reality. LBJ did help out some po' but starts 'Nam; few differences between LBJ and Nixon, really. Both rats (and Nixon actually raised taxes at times--).

As Cactus's charts show, the tax rates were still high under IKE, even kept fairly high under Nixon. They started to cut under Ford, then really slashed under Raygun. Yet.....trickle down does work for some people. Even some leftists, or at least non-conservatives benefitted under Reagan; I agree Reaganomics is wrong--completely wrong-- but since the wealthy have more discretionary money to spend, some people--say small businesses in nice areas--stand to win. In terms of the aggregate it might not be "good", but laissez-faire does "work" in some areas: ie the mercedes dealers in Palo Alto probably support laissez-faire. But the hyundai salesmen in Fresno (not to say the dirt poor) might want regulations, better social programs, welfare, etc.

That's what's f-ed up about economic generalizations.