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> There have been developments in our knowledge of the market since 1680 Yes, but the argument for regulation is that said regulation provides more benefits th

by anamax 15y ago

> There have been developments in our knowledge of the market since 1680 Yes, but the argument for regulation is that said regulation provides more benefits than the incurred costs. Considering how badly regulated markets do.... Remember, regulation is systemic risk.

rayiner 15y ago
Regulation is one solution to market failures. It's not the only solution, but in many cases it works well. The Clean Air Act, for example, has been extremely successful at addressing the negative externalities created by air pollution. Beyond that--the lesson that we're learning from modern economics research is that there are no touchstones. Humans aren't rational actors, the efficient allocation theories are predicated on unrealistic assumptions about the behavior of economic actors and the lack of transaction costs, etc. "Laissez faire" isn't any more of a guiding principle than "big brother knows best." The only way to proceed is empirically--use measurements to determine when government solutions are needed and when market solutions suffice. It's a fairly uncontroversial claim that the market naturally under invents in R&D. It's something you'll see in any basic economics 101 textbook. So why shout "laissez faire" to a government initiative addressing such a market failure?
- anamax 15y ago
  > Regulation is one solution to market failures. No. Regulation CAN be a solution to market failures. However, it is absurd to think that regulation necessarily solves market failures. > The Clean Air Act, for example, has been extremely successful at addressing the negative externalities created by air pollution. It's always interesting when an economic argument ignores either costs or benefits. While the clean air act provided benefits, that doesn't imply that we couldn't have gotten the benefits for less, let alone that every regulation in the face of claimed "market failure", or even actual externalities, is a good idea. > So why shout "laissez faire" to a government initiative addressing such a market failure? Because "government initiative" doesn't necessarily work. In fact, it tends to fail wrt R&D. Yes, the small projects, especially those run by DoD, do well. (I'll note that even that hasn't been all that good recently.) However, the big projects, especially those influenced by VCs, tend to be disasters, especially lately. Since this is one of the latter....
  - rayiner 15y ago
    > It's always interesting when an economic argument ignores either costs or benefits. While the clean air act provided benefits, that doesn't imply that we couldn't have gotten the benefits for less, let alone that every regulation in the face of claimed "market failure", or even actual externalities, is a good idea. There are several studies showing the huge benefits of the CAA relative to its costs. Banning leaded gasoline alone was a net $16 billion/year benefit. And no, there is no implication that we couldn't have achieved the benefits of the CAA for less. That's the reality of the world we live in. Neoclassical economics only guarantees us efficient market allocations in the face of demonstrably false assumptions about consumer behavior, transaction costs, lack of externalities, etc. The "laissez faire" touchstone is good and debunked. All we have left is empiricism. Use the tools we have to address perceived problems, then see if the benefits outweigh the costs. There will be no guarantees that you'll have chosen an efficient solution, but any regulation where the benefits outweigh the costs can be justified on its own merits.
    - anamax 15y ago
      > There are several studies showing the huge benefits of the CAA relative to its costs. Yes, but that wasn't the question. > Banning leaded gasoline alone was a net $16 billion/year benefit. The last time this came up, someone cited a study claiming that the CAA was responsible for 1/6th of the US economy. While I agree that there were net benefits, the 1/6th claim is absurd. While every one of these "studies" claims to be conservative, I've never seen one that actually is. Moreover, as with the space program, we may have gone through a "golden age" wrt certain kinds of regulation, where the small things might work but the big ones are one disaster after another. (That's not unexpected - we started with the low-hanging fruit.) Note that the acid-rain regulation is one of the disasters. (Yes, there was a problem, but the regulation was overkill.)

by anamax 15y ago

rayiner 15y ago

Regulation is one solution to market failures. It's not the only solution, but in many cases it works well. The Clean Air Act, for example, has been extremely successful at addressing the negative externalities created by air pollution. Beyond that--the lesson that we're learning from modern economics research is that there are no touchstones. Humans aren't rational actors, the efficient allocation theories are predicated on unrealistic assumptions about the behavior of economic actors and the lack of transaction costs, etc. "Laissez faire" isn't any more of a guiding principle than "big brother knows best." The only way to proceed is empirically--use measurements to determine when government solutions are needed and when market solutions suffice. It's a fairly uncontroversial claim that the market naturally under invents in R&D. It's something you'll see in any basic economics 101 textbook. So why shout "laissez faire" to a government initiative addressing such a market failure?

anamax 15y ago
> Regulation is one solution to market failures. No. Regulation CAN be a solution to market failures. However, it is absurd to think that regulation necessarily solves market failures. > The Clean Air Act, for example, has been extremely successful at addressing the negative externalities created by air pollution. It's always interesting when an economic argument ignores either costs or benefits. While the clean air act provided benefits, that doesn't imply that we couldn't have gotten the benefits for less, let alone that every regulation in the face of claimed "market failure", or even actual externalities, is a good idea. > So why shout "laissez faire" to a government initiative addressing such a market failure? Because "government initiative" doesn't necessarily work. In fact, it tends to fail wrt R&D. Yes, the small projects, especially those run by DoD, do well. (I'll note that even that hasn't been all that good recently.) However, the big projects, especially those influenced by VCs, tend to be disasters, especially lately. Since this is one of the latter....
- rayiner 15y ago
  > It's always interesting when an economic argument ignores either costs or benefits. While the clean air act provided benefits, that doesn't imply that we couldn't have gotten the benefits for less, let alone that every regulation in the face of claimed "market failure", or even actual externalities, is a good idea. There are several studies showing the huge benefits of the CAA relative to its costs. Banning leaded gasoline alone was a net $16 billion/year benefit. And no, there is no implication that we couldn't have achieved the benefits of the CAA for less. That's the reality of the world we live in. Neoclassical economics only guarantees us efficient market allocations in the face of demonstrably false assumptions about consumer behavior, transaction costs, lack of externalities, etc. The "laissez faire" touchstone is good and debunked. All we have left is empiricism. Use the tools we have to address perceived problems, then see if the benefits outweigh the costs. There will be no guarantees that you'll have chosen an efficient solution, but any regulation where the benefits outweigh the costs can be justified on its own merits.
  - anamax 15y ago
    > There are several studies showing the huge benefits of the CAA relative to its costs. Yes, but that wasn't the question. > Banning leaded gasoline alone was a net $16 billion/year benefit. The last time this came up, someone cited a study claiming that the CAA was responsible for 1/6th of the US economy. While I agree that there were net benefits, the 1/6th claim is absurd. While every one of these "studies" claims to be conservative, I've never seen one that actually is. Moreover, as with the space program, we may have gone through a "golden age" wrt certain kinds of regulation, where the small things might work but the big ones are one disaster after another. (That's not unexpected - we started with the low-hanging fruit.) Note that the acid-rain regulation is one of the disasters. (Yes, there was a problem, but the regulation was overkill.)