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It's funny how people consider government intervention and centrally managed economies to be terribly inefficient, yet nonody counts the collective revenue of f
by matt4077 9y ago
It's funny how people consider government intervention and centrally managed economies to be terribly inefficient, yet nonody counts the collective revenue of financial institutions as (at best) a necessary inefficiency of a market-based system. Same for advertisement, deadweight loss, artificial scarcity etc.
It's pretty obvious that free markets (with a few guardrails) work better than anything else we've tried so far. Yet there's so much overhead spent on managing the system, one wonders how anything ever gets done...
- runeks 9y agoFinancial institutions are not a product of the free market — they are heavily regulated by government. On top of that, the currency that has been given legal tender status by government, and the currency used as the basis for calculating capital gains tax, just happens to be issued by the central bank that’s willing to monetize the government’s debt. What a peculiar coincidence.
- mcguire 9y agoFinancial institutions are a product of the free market, but are heavily regulated ("heavily?") by the government because humans are congenitally incapable of failing to avoid moral hazards.
- Retric 9y agoFinancial institutions predate government regulations. Their general role is cash flow management (ex: Loans) or risk mitigation (ex: Insurance).
- runeks 9y agoYou’re right. I should have written “contemporary financial institutions”.
- lodi 9y ago> ...the collective revenue of financial institutions as (at best) a necessary inefficiency of a market-based system. This doesn't make sense. If every dollar of their revenue created more than a dollars worth of value for the rest of the economy, then it's a net win. To put it in a different way, consider the economic losses if you couldn't get cheap mortgages, loans, etc. from financial institutions.