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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Sunday, April 18, 2010

Looting: The Economic Underworld of Bankruptcy for Profit

Just a couple days ago I took another swipe at Mish for his total inability to see that inept regulation resembles lack of regulation.

Of course, Krugman gets it, and he's not alone.

Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society's expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.

It's not the technical difficulty - I mean this really aint rocket science - that keeps Austrians and Libertarians from realizing that robust regulation is absolutely necessary to keep capitalism functioning.  It is their wilfull inability to recognize reality.
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3 comments:

BadTux said...

In the end, Libertopians are just like utopians of all colors -- like Communist utopians, their ideas fail when attempted to put into action because, well, people just don't behave that way. Short of changing human nature, there's just no way to have a system (Libertopia) where it is assumed that people will not loot "just because". And Libertopians have no way in their ideology to change human nature, instead they cover their eyes and say "I see nothing! If I don't see a problem, it's not real!" despite the fact that, err, every time its' been tried, this problem arose...

Ideologues. Bah humbug. The only ideology that isn't total bull excrement is pragmatism. But that's an ideology that, to the Communist or Libertard, is like garlic to a vampire...

- Badtux the Pragmaticl Penguin

Jazzbumpa said...

The thing that's distressingly amusing is that they will assert with great vehemence that TEH LIBRULLS are denying reality. Ever read the comments at Krugman's blog? Some of them actually accuse him of intellectual dishonesty. It's amazing.

But the real sewer-pipe of conservative bilge is the comments to WSJ blogs. I've only been there a couple of times, and then had to both hug a squid and scrub my cerebral cortex with a Brill Pad.

WASF,
JzB

camilyn said...
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