Tuesday, December 18, 2012

Mark Thornton on "Scandalous Regulators"

Scandalous Regulators

Regulation simply does not work. It is designed with hopes of success, but with no mechanism to achieve this success. We hope for efficiency, but what we get is bureaucracy. We hope for effectiveness, but what we get is rules and red tape that serves neither producer nor consumer. We hope for safety, but what we eventually get is chaos. Let us take a look at the prominent cases where regulation was supposedly lacking and examine the real cause of chaos.

The Bernie Madoff scandal involved Madoff’s tightly controlled firm taking client money and supposedly generating spectacular and consistent investment returns. However, Madoff was not really a great investor; he was running a Ponzi scheme where he used investors’ money to pay for redemptions by his clients. Most of the money apparently went into his own pockets.

First, how did he get away with this scheme for so long? It was not because he was unregulated. He was officially under the scrutiny of the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority, and probably other government regulatory agencies. Despite ever-increasing budgets and staff, and even warnings from outsiders, the SEC failed to act.

Second, how did he finally get caught? He was only caught after the stock market crashed and investors sought to redeem large amounts of their funds. He confessed to his sons that he was operating a Ponzi scheme and his sons turned him into authorities.[1]
I think those links will work.

Sunday, December 09, 2012

I just finished Paul Johnson's Socrates

Full title: Socrates:A Man for Our Time. 

Great book.  Johnson is a conservative, but I don't think that afflicts his writing here much.  He accepts more of the standard understanding (conventional wisdom) of the early Christian era than I do, but I like summary at the end:
Happy among people, Socrates did not seek to turn them into pupils, let alone students.  He was not a teacher, a don, an academic.  There was nothing professorial about him.  He had no oeuvre.  As Cicero said, "He did not write so much as a single letter."  There was no body of Socratic doctrine.  He spurned a classroom.  The streets and marketplace of Athens were his habitat.  Unlike Plato and Aristotle, he founded no Academy or Lyceum.  The University, with its masters and students, its lectures and tutorials, its degrees and libraries and publishing houses, was nothing to do with him.  He was part of the life of the city--a thinking part, to be sure, a talking and debating part, but no more separated from its throbbing, bustling activity than the fishmonger or the money changer or the cobbler, its ranting politician, its indigent poet, or its wily lawyer.  He was at home in the city, a stranger on campus.  He knew that as soon as philosophy separated itself from the life of the people, it began to lose its vitality and was heading in the wrong direction.  An academic philosophy was not an activity to which he had anything of value to contribute or in which he wished to participate.  The notion of philosophy existing only in academic isolation from the rest of the world would have horrified him and probably would have produced ribald laughter, too.  "That," one can hear him saying, "is the death of any philosophy I can recognize."
I could quote some of the last paragraph of the book - it gets better - but I'll leave some pleasures for you to discover on your own.  Read it.  Paul Johnson's a great writer, it's not a long book and the story of the man who brought philosophy down from the stars, and how he did it, is too important to our future to let go.

Thursday, December 06, 2012

Libertarian Redistribution?!

I need to come back to this article: http://c4ss.org/content/12961.  I like this bit:
Transactional redistribution is just a description of what happens in a genuinely freed market. Markets undermine privilege. Without the protection afforded by monopoly privileges (including patents and copyrights), subsidies, tariffs, restrictions on union organizing, protections for long-term ownership of uncultivated property, and so forth, members of the power elite, forced to participate along with everyone else in the process of voluntary cooperation that is the freed market, will tend to lose ill-gotten gains. They will retain wealth only if they actually serve the needs of other market participants. And they will be unable to use the legal system to protect their wealth from squatters (by enabling them to maintain uncultivated land indefinitely) or to limit vigorous bargaining by workers (both because workers will be freer to organize without statist restrictions and because the absence of such restrictions will give workers options other than paid employment that will improve their negotiating positions).
While unfettered competition obviously will not create mathematical equality, it will make it much harder for vast disparities of wealth to persist than at present. The state props up the power elite, using the threat of aggression to shift wealth to the politically favored. Removing the privileges of the power elite will lead, through the operation of the market, to the widespread dispersion of wealth members of the power elite are able to retain at present in virtue of the protection they receive from the political order.
The means of transactional redistribution is the market. The direct agents are ordinary market actors, while those responsible for the elimination of statist privileges that distort the market and prop up the wealth of the power elite are the indirect agents. The rationales for transactional redistribution include thevalue of freedom and the injustice of the privileges transactional redistribution corrects.