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> "That's like saying, water is dangerous, lets require a swimming licence from anyone who wants to swim." The problem with your analogy is that a potential sw
by roc 15y ago
> "That's like saying, water is dangerous, lets require a swimming licence from anyone who wants to swim."
The problem with your analogy is that a potential swimmer's total knowledge of the water, the difficulty of swimming and so forth isn't held by someone who materially benefits from their ignorance and could materially benefit from exploiting that ignorance.
Caveat Emptor is a fine base-line. But practical experience has shown us that in certain sectors it's not sufficient. Snake oil salesmen can ruin a market by destroying the public's trust.
So it is with investments. SEC rules are generally [1] built on the practical experience of how the market operated without them.
We threw Glass-Steagal away -- an expensively won bit of knowledge about the shortcomings of the 'invisible hand' when it came to people gambling with others' money -- on the assumption that intelligent self-interested experts wouldn't do exactly what they -- almost to a person -- then did. I can't fathom being so eager to repeat that mistake while we're still knee-deep in its debris.
[1] I won't dare use a universal; but I've yet to see a rule that wasn't created as a reaction to a problem in the market. That said, I'm far from an expert on the matter.
- tomp 15y agoI think I see your point, and mostly agree with it. And I think you don't quite see my. (Of course, I might be mistaken, and it might actually be the other way around.) Consider this example: We have a nice beach. Part of this beach has huge waves, rocky, dangerous shore, and sharks. You, as the authority, have 2 options: 1) forbid swimming for everyone, and 2) warn about the dangers and let individuals decide. I can see how different people might choose different solutions, but I, don't like others telling me what to do, for my safety. Of course, if you just leave it like that, the public is going to loose confidence in that beach. But, if you put up warning signs, like "WARNING, very dangerous. Huge waves and sharks! 17 people have already died here this month alone!!!", which are probably going to deter anyone who isn't absolutely sure in what they are doing (or very drunk or very stupid), I don't see how the public might loose its trust. Especially if there is a very nice beach, perfectly safe, with a beach guard, quite near-by.
- masterzora 15y agoThe problem with this analogy is that it is generally pretty easy to look at the beach and gather the information that there are huge waves and a rocky, dangerous shore (and sometimes even the sharks) and then you are informed. If the only people who can inform you are the ones that are trying to draw money from you, though, it falls under something more similar to consumer protection than it does under closing beaches.