I've been called anarcho-capitalist because I generally think that capitalism works and often regulation doesn't, but of course there's a need for some regulation to prevent untenable outcomes in a free market. There are three troublesome parts to any regulation:
1. Regulations are often specifically lobbied for and against by the most powerful entities specifically to lead to those undesirable outcomes. Megacorps are demanding minimum wage, for example, because they know they can have workers more productive than that minimum wage, and by forcing wages up they reduce the number of jobs, driving wages down further up the scale. At the same time, a good regulation that silently helps to prevent monopolies by opening markets to competition will be lobbied against because companies want to have monopolies or near-monopolies so they can charge more and abuse workers and customers.
2. Regulations often have an effect of helping institutions forget the reason for a regulation. Let's say hypothetically (what am I, a rubber tree plantation?) that there's a regulation saying that you must have vulcanized rubber tires on your cars. Let's say that basically everyone was using vulcanized rubber because even though it's more expensive there are safety benefits that protect the companies from lawsuits. Then let's say that either major companies find a loophole allowing non-vulcanized rubber or someone comes in and legalizes non-vulcanized rubber. Because the regulation existed there was no point in remembering that you used the vulcanized rubber for reasons that benefit you. I think this was part of the real danger of deregulation that led in part to the 2008 financial crisis. The government eliminated regulations that banned obviously bad behavior, companies engaged in obviously bad behavior, and they all got burned at the same time. Had those laws never existed, the companies would have known through institutional memory that the practices were bad, but the fact it was just illegal caused carrying on that memory to be moot, and when they were lifted everyone rushed into the dangerous practices.
3. Regulations are not always limiting. Banks for example have a lot of benefits that are regulations. They can print money at massive ratios and that isn't fraud. They have massive insurance and they have a lender of last resort created by the government. Their deposits are insured. Some investments are insured. And then there's the fact that any time the banks fuck up we all pay trillions making them whole through tax money. This absolutely picks winners and losers -- The government says "we won't let these guys fail" even if they do something unacceptable, and so they can take massive risks a normal company can't because they are insured to unlimited levels.
The solution then has to be competent regulators, and extremely careful and strict rules about who is allowed to become a regulator. The first situation in general is the cause of the second and the third. The revolving business/regulator/business pipeline makes bad regulation inevitable.
1. Regulations are often specifically lobbied for and against by the most powerful entities specifically to lead to those undesirable outcomes. Megacorps are demanding minimum wage, for example, because they know they can have workers more productive than that minimum wage, and by forcing wages up they reduce the number of jobs, driving wages down further up the scale. At the same time, a good regulation that silently helps to prevent monopolies by opening markets to competition will be lobbied against because companies want to have monopolies or near-monopolies so they can charge more and abuse workers and customers.
2. Regulations often have an effect of helping institutions forget the reason for a regulation. Let's say hypothetically (what am I, a rubber tree plantation?) that there's a regulation saying that you must have vulcanized rubber tires on your cars. Let's say that basically everyone was using vulcanized rubber because even though it's more expensive there are safety benefits that protect the companies from lawsuits. Then let's say that either major companies find a loophole allowing non-vulcanized rubber or someone comes in and legalizes non-vulcanized rubber. Because the regulation existed there was no point in remembering that you used the vulcanized rubber for reasons that benefit you. I think this was part of the real danger of deregulation that led in part to the 2008 financial crisis. The government eliminated regulations that banned obviously bad behavior, companies engaged in obviously bad behavior, and they all got burned at the same time. Had those laws never existed, the companies would have known through institutional memory that the practices were bad, but the fact it was just illegal caused carrying on that memory to be moot, and when they were lifted everyone rushed into the dangerous practices.
3. Regulations are not always limiting. Banks for example have a lot of benefits that are regulations. They can print money at massive ratios and that isn't fraud. They have massive insurance and they have a lender of last resort created by the government. Their deposits are insured. Some investments are insured. And then there's the fact that any time the banks fuck up we all pay trillions making them whole through tax money. This absolutely picks winners and losers -- The government says "we won't let these guys fail" even if they do something unacceptable, and so they can take massive risks a normal company can't because they are insured to unlimited levels.
The solution then has to be competent regulators, and extremely careful and strict rules about who is allowed to become a regulator. The first situation in general is the cause of the second and the third. The revolving business/regulator/business pipeline makes bad regulation inevitable.
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