Regulation

  Doug Muir has occasionally discussed various conversational markers that indicate whether the person you are talking to is serious.  If he is up for it, I’d love to compile them and post a list.  He has suggested, among other things, the use of the word “socialism” to describe public policies that don’t actually involve nationalizing private companies and the placement of the phrase “international community” inside scare quotes. 

One vague marker of unseriousness is the claim that regulation is useless, because all regulations can be avoided.  As a specific warning, it is useful to keep in mind that regulations can be subverted.  As a general principle, it is deeply unserious.  I recently had a conversation in Baltimore, for example, in which somebody claimed that the only way one could regulate modern financial markets was a ban computers.  This showed ... well, I’m not sure what it showed.  But it wasn’t serious. 

(To be fair, the person who said it did not show the expected hypocrisy that normally flows from those who make such a claim, in which regulations seem to be simultaneously useless and destructive.)

That said, modern regulations often produce ironic effects.  As sympathetic as I am to what the government was attempting to do, this story actually made me chuckle.  Of course, a grump might say that the purpose of the regulations was not to limit bankers’ pay but to better align incentives, and such a grump would be correct.  An even grumpier grump might say that paying bankers’ in equity doesn't solve the underlying moral hazard, and such a grumpier grump would also be correct.  Finally, the most grumpy of grumps might say that if you’re gonna limit bankers’ pay, then you might as well go ahead and limit bankers’ pay and stop all this futzling around with compensation schemes.  And that grump would also be correct.

But still.  Even for a lib’rul, the story is pretty funny.  No?

Comments

[Joe Berne]

To be fair, the gentleman in Baltimore (I was at the table) claimed that banning computers was the only way to regulate specifically high frequency trading, not modern financial markets in every possible sense. That's not to say that he was right or wrong, but it's a different claim.

[Noel Maurer]

IIRC, it was the spouse of the gentleman in question, but the point still holds. Mea culpa! I believe that your point doesn't alter my argument, but I would, wouldn't I? It seems to me that that governmental authorities could limit high-frequency trading through measures far short of banning computers ... but nonetheless in excess of what the person in question considered possible in terms of intrusiveness and draconianess.

That's a better way of making my point --- when someone argues that regulation is impossible, they are almost certainly wrong. When someone argues that regulation would need to be stronger than is politically feasible in order to be effective, then they are making a serious argument.

Nonetheless, I misrepresented the argument and therefore weakened my point, for which I deserve and accept reproach.

Good pizza, though. And Amma and I, we're pizza snobs, so that's saying something.