Regulation Is Not Fungible
November 20, 2011 7 Comments
Comments here have reminded me of one of my biggest pet peeves in finance commentary: In many peoples’ minds, the cliff’s notes version of The Financial Crisis™ can be summarized by one thing, not enough regulation. End of story!
Mostly this implicitly bespeaks a lazy view of ‘regulation’ as if it is fungible: no one ‘regulation’ is really distinguishable from any other (more specifically, we’re all just too lazy to speak/think about any single regulation in particular, and we think that’s fine and shouldn’t prevent us from spewing our uninformed lazy opinions). You just draw (or put back) some undifferentiated blob of regulations from the Great Regulation Vat Of The Universe. As such, the only thing ever worth discussing is how much ‘regulation’ you have at any given time. The assumption that goes hand in hand with this one is the notion that ‘regulation’ and ‘bad things happening’ are mutually exclusive. After all, regulations are supposed to prevent bad things! That’s what they’re for! Thus, if a Bad Thing happened, it automatically follows that there wasn’t enough ‘regulation’, and the way to stave off future Bad Things, is of course More Regulation.
With these axioms, clearly the only thing to ever ponder or discuss in the face of some legislative or other proposal (after some Bad Things happened) is: Is it a regulation (or would it increase regulations)? If so, then it must a good idea and only evil people would argue against it.
Obviously this sort of idiocy doesn’t merit even the amount of brain cells I’ve already thrown at it, but it’s particularly noxious coming from people discussing the financial sector, because when it comes to finance, to apply these assumptions (let’s call them the Fungibility Assumption, and the Regulation/Bad-Thing Exclusion Principle) makes it especially clear that such people don’t know what the f**k they’re talking about.
So as fair warning let me just admit that anyone who opines on the financial sector and claims it “isn’t regulated enough” has marked themselves as a phony moron in my mind. I’m sure I could be convinced that there need to be some different or other regulations, but ‘more’ is not a synonym for this, and in any event you still need to individually defend any given regulation on its merits to be making an actual point. But keep in mind that I am here to state that the financial sector is, right now, probably the most fascistically- and hugely-regulated industry on earth (the rivals in my mind being military and perhaps health care). Indeed, I sincerely believe that, under current regulation, essentially no one working in the financial sector in any nontrivial capacity fully knows (or could possibly know) the entirety of the rules and regulations that apply to them, and virtually any person working in finance could be plausibly arrested and charged with this or that crime or violation. In any given case, it’s really only a question of whether the government feels like it (and has the bandwidth).
But of course, when I complain about this state of affairs, and point out that it violates the concept of Rule Of Law to the core, all the ‘regulation is fungible’ people get confused and alarms go off in their head. After all, I sound like I’m arguing for Less Regulation!
No. I’m arguing for whatever regulation there must be, to be sane regulation. I would prefer clear and purposeful laws, with an identifiable connection between means and ends, with a logical connection between the alleged problem they are meant to solve when argued for, and the actual effect they would have. For the Rule Of Law, in other words.
I know, I know. Dream on.