Is More Regulation the Answer? How About Personal Accountability?
The overwhelming consensus seems to be that the current crisis in the financial markets is a result of too little regulation.
Well, I've seen regulation, and I doubt it. Would the regulators have seen this any better than the professionals in the markets did?
I am working on my own take on what happened. It won't be finished for a long, long time, but currently the elements look pretty simple to me: a failure to recognize the magnitude of overpricing in US real estate, and its implications for the financial system and global investment.
It's another bubble. But a huge bubble, the vastness of which few seem to have understood.
How would regulation help?
My approach - and as with many of my approaches, this one will never see the light of day - is to modify the system of limited liability for those who manage corporate fiduciares.
In other words, put the personal assets of those individuals who manage other people's money at some degree of risk.
Will that mean no one will work in the sector any more? Absolutely not. The rewards will still be too compelling. But there will be a downside, and maybe it will concentrate the minds of those who do this work - who are among our best and brightest.
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Wednesday, October 08, 2008
Monday, September 15, 2008
McCain-Biden
Today - with the markets in turmoil - it seems we should be governed by folks with a little seasoning. I like Mr. Obama and Mrs. Palin but they each sure could use another decade or two of accomplishment. How about we stick with the old guys?
As I read the Twelfth Amendment, the electors are directed to vote separately for President and for Vice President, and of course there is no reference to party. Not sure how the standard ballot works to permit this, but I bet the populace could be educated on how to write it in.
McCain-Biden
Go with the Grownups
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Today - with the markets in turmoil - it seems we should be governed by folks with a little seasoning. I like Mr. Obama and Mrs. Palin but they each sure could use another decade or two of accomplishment. How about we stick with the old guys?
As I read the Twelfth Amendment, the electors are directed to vote separately for President and for Vice President, and of course there is no reference to party. Not sure how the standard ballot works to permit this, but I bet the populace could be educated on how to write it in.
McCain-Biden
Go with the Grownups
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Thursday, August 07, 2008
True Free Markets (2)
There is one commodity that looks like it's properly priced: petroleum!
Which points out the laughably disingenuous way that politics is conducted here, and probably everywhere.
Our national candidates are both smart enough to know that higher petroleum prices are much more like a solution than a problem. But neither of them believes the American electorate has enough intelligence to understand the point. And so neither will come out and admit it.
They could be right. An interesting guy who was a senator from Connecticut, Lowell Weicker, famously took a position in favor of higher gas prices. And later lost to... Joe Lieberman. An interesting guy who was President of the United States, Jimmy Carter, famously took positions in favor of conservation and nuclear power. And later lost to... Ronald Reagan.
Depressing.
I like to think, however, that there could be someone out there with the persuasive power to tell the truth to the electorate and get away with it.
*********************************************************************************
There is one commodity that looks like it's properly priced: petroleum!
Which points out the laughably disingenuous way that politics is conducted here, and probably everywhere.
Our national candidates are both smart enough to know that higher petroleum prices are much more like a solution than a problem. But neither of them believes the American electorate has enough intelligence to understand the point. And so neither will come out and admit it.
They could be right. An interesting guy who was a senator from Connecticut, Lowell Weicker, famously took a position in favor of higher gas prices. And later lost to... Joe Lieberman. An interesting guy who was President of the United States, Jimmy Carter, famously took positions in favor of conservation and nuclear power. And later lost to... Ronald Reagan.
Depressing.
I like to think, however, that there could be someone out there with the persuasive power to tell the truth to the electorate and get away with it.
*********************************************************************************
Tuesday, August 05, 2008
True Free Markets
If I had to boil the proper function of government down to two propositions, they would be:
1. Protect the people.
2. Free the markets.
No sane person argues with the first, but the second seems to be kept way in the background.
There are so many corollaries, but this post deals with one: price the externalities.
The bureaucracy in my perfect government would consist largely of economists who would look to see where the pricing functions of the markets are failing. For example, in cases where producers are causing damage without paying for it.
There is plenty of policy judgement inherent in this: what's the damage, what does it cost, how wide is the net. An example: is the true cost of petroleum being captured? What about the cost of the military operations that are deemed necessary to maintain supply sources?
Or, what about the multi-source pollutants that go into the Mississippi River, are carried downriver, and create dead areas in the Gulf? Agricultural producers, I would imagine. Is this cost priced into their products?
Cap and trade is a good stop on this road. First we have to reach an enforceable consensus on the cost of carbon dioxide emissions, but if we do and we get it right, then use the government to capture the cost so it is priced into products.
This is not the sole answer to all social ills. There are special problem areas, like capitalism's evident failure to match economic value of individual labor with our moral sense of what people should have. Better pricing and efficient markets do not solve this. But leave that for other posts.
In the meantime: Price the externalities. Let the markets respond and allocate resources properly.
**********************************************************************************
If I had to boil the proper function of government down to two propositions, they would be:
1. Protect the people.
2. Free the markets.
No sane person argues with the first, but the second seems to be kept way in the background.
There are so many corollaries, but this post deals with one: price the externalities.
The bureaucracy in my perfect government would consist largely of economists who would look to see where the pricing functions of the markets are failing. For example, in cases where producers are causing damage without paying for it.
There is plenty of policy judgement inherent in this: what's the damage, what does it cost, how wide is the net. An example: is the true cost of petroleum being captured? What about the cost of the military operations that are deemed necessary to maintain supply sources?
Or, what about the multi-source pollutants that go into the Mississippi River, are carried downriver, and create dead areas in the Gulf? Agricultural producers, I would imagine. Is this cost priced into their products?
Cap and trade is a good stop on this road. First we have to reach an enforceable consensus on the cost of carbon dioxide emissions, but if we do and we get it right, then use the government to capture the cost so it is priced into products.
This is not the sole answer to all social ills. There are special problem areas, like capitalism's evident failure to match economic value of individual labor with our moral sense of what people should have. Better pricing and efficient markets do not solve this. But leave that for other posts.
In the meantime: Price the externalities. Let the markets respond and allocate resources properly.
**********************************************************************************
Tuesday, July 29, 2008
Alienated
There are so many falsehoods thrown around in the immigration debate. My biggest beef is with the statement that the illegals "do the jobs Americans don't want to."
No. The illegals take jobs at wages and benefits that American citizens will not accept.
Every job should pay what it takes to hire an American citizen to do it. If that causes dislocation in the markets - if there are fewer restaurants, if walnuts get more expensive - so be it. That's what a free labor market is about.
How do we get there? It is not that complicated. The illegals are not a bunch of drug dealers and terrorists. They are people looking for work.
When there is no work, they will move on.
Require all employers to comply with the law on I-9's and W-2's and 1099's - that is, get the employees' social security numbers and report the wages, payments, etc. to the government. Then, when the Social Security Administration says, "who is this person?" - tell the person that he or she does not return to work without a letter from the SSA.
National ID cards don't bother me, but I don't think they are necessary. I think the real answer is Social Security. If we are going to gather savings for Americans, and later pay it back to them, fine. Let's just make sure we know who they are.
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There are so many falsehoods thrown around in the immigration debate. My biggest beef is with the statement that the illegals "do the jobs Americans don't want to."
No. The illegals take jobs at wages and benefits that American citizens will not accept.
Every job should pay what it takes to hire an American citizen to do it. If that causes dislocation in the markets - if there are fewer restaurants, if walnuts get more expensive - so be it. That's what a free labor market is about.
How do we get there? It is not that complicated. The illegals are not a bunch of drug dealers and terrorists. They are people looking for work.
When there is no work, they will move on.
Require all employers to comply with the law on I-9's and W-2's and 1099's - that is, get the employees' social security numbers and report the wages, payments, etc. to the government. Then, when the Social Security Administration says, "who is this person?" - tell the person that he or she does not return to work without a letter from the SSA.
National ID cards don't bother me, but I don't think they are necessary. I think the real answer is Social Security. If we are going to gather savings for Americans, and later pay it back to them, fine. Let's just make sure we know who they are.
*********************************************************************************
Sunday, July 27, 2008
Poppies
One of the biggest foreign policy failures we face is the narcotics trade. This has been true for decades. But with Afghanistan once again in play, the failure is going to have real consequences.
There are solutions, but no political will to propose them.
The obvious, immediately-available solution is to buy up the crop. Offer 95 percent of market. The sellers will be happy to sell to a legal buyer rather than an illegal one. Then do whatever you want with it for now - compost it.
The longer-term solution is one that we will simply not hear from the major political parties. Legalize and regulate the traffic.
As my friends in the Libertarian Party say, there are two words that answer drug policy:
Al Capone.
One of the biggest foreign policy failures we face is the narcotics trade. This has been true for decades. But with Afghanistan once again in play, the failure is going to have real consequences.
There are solutions, but no political will to propose them.
The obvious, immediately-available solution is to buy up the crop. Offer 95 percent of market. The sellers will be happy to sell to a legal buyer rather than an illegal one. Then do whatever you want with it for now - compost it.
The longer-term solution is one that we will simply not hear from the major political parties. Legalize and regulate the traffic.
As my friends in the Libertarian Party say, there are two words that answer drug policy:
Al Capone.
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