6 ms·

Yes, I can see your reading of it now. But I think it would be disingenuous of him to make that claim, given the repeal of Glass-Steagall and the large reductio

by bonaldi 17y ago

Yes, I can see your reading of it now. But I think it would be disingenuous of him to make that claim, given the repeal of Glass-Steagall and the large reductions in regulation that allowed the problems in banking to be exacerbated (though this claim is itself questioned by other economists). A position that regulation either failed or was absent from banking adds a third choice, which isn't far from Krugman's: 3) better government intervention and fewer problems.

jerf 17y ago
Have you seen the charts of the amount of banking regulation per year, as measured in lines of regulation? I wish I could Google it up. The repeal of Glass-Steagall isn't even a blip in the graph, IIRC. It might be lines of above-average importance, but net-net the Bush administration continued piling on the regulations at pretty much the expected rate; I doubt a Democrat would or could have done much more. The other major problem is that it wasn't regulation that failed, it was regulators. Many regulations that already existed weren't enforced. Looking at the rate of regulation increase it isn't hard to see why. How do you propose to solve this problem with more regulations? There's a real engineering problem here or even a computer science-style information theory problem with information flows totally exceeding the ability of the processing nodes to handle. Clearly, adding more processing work to be done isn't the answer to that problem, and we probably can't afford enough processors to make even our current set of regulations actually get enforced.
- krschultz 17y ago
  Lines of regulation is not a good measure. A lot of banking regulation is related to well, banking. Glass-Steagall is specifically related to investment banking which is a whole other ball game, and to call the repeal of that act insignificant because it isn't that "big" is patently absurd.
  - jerf 17y ago
    The repeal is not insignificant. My point was to counter the idea that banking had some sort of massive deregulation in the Bush era. One law repealed + massive growth in other regulations is hardly "deregulation".
    - btilly 17y ago
      Ever heard of regulatory capture? That's where a regulated group attempts to get control over the regulators, so they can then regulate their own industry for their own benefit. It is universal that regulated organizations will attempt this, and usually they succeed. After a regulated industry undergoes regulatory capture you will see is a steady growth in the amount of regulation, and a simultaneous decrease in how much the regulation prevents that industry from doing what it wants. The regulations are added because they benefit the industry in some way, for instance by creating barriers to entry for potential competitors. That is what happened in finance. Glass-Steagall really kept companies from doing what they wanted to do, and got dropped. But we got new "regulations" like the optional alternative way of calculating net capital ratios introduced in 2004 that allowed the 5 major broker dealers to double their leverage. The result? More lines of "regulation" that reduced how much actual regulating there was. Oh right, and a few years later a bunch of failed broker dealers. See http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/ http://www.nysun.com/business/ex-sec-official-blames-agency-... for verification of that. Therefore a steadily increasing number of lines of regulation is not evidence that there wasn't major deregulation in the same time period.
      - ZeroGravitas 17y ago
        Also, "deregulation" is a buzzword intended to frame the debate and make you believe that they are reducing regulation and therefore creating some kind of free market. Most so-called deregulation could be better termed re-regulation, it's just changing the rules to benefit different parties, not abolishing them. (Having said that, btilly above uses deregulation in its new derogatory sense, much like the euphamism downsizing had to be replaced with rightsizing once everyone realised it still meant redundancies. Relatedly the depression was named that by people who thought it wouldn't be as bad as a proper recession, now depression means a really bad recession)
Perceval 17y ago
Your option three reminds me of T.S. Eliot's review of George Orwell's classic Animal Farm. Eliot wrote: “After all, your pigs are far more intelligent than the other animals, and therefore the best qualified to run the farm – in fact there couldn’t have been an Animal Farm at all without them: so that what was needed (someone might argue) was not more communism but more public-spirited pigs.” http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/article5993099.ece http://entertainment.timesonline.co.uk/tol/arts_and_entertai...
tlb 17y ago
It's easy to wave your arms and ask for "better" government intervention, but the government's already doing the best it can. It has ups and downs in each department as attention shifts, but on average it probably won't get any better over the long run. Economic systems need to be designed so that mediocre government regulation doesn't lead to catastrophes.

by bonaldi 17y ago

jerf 17y ago

Have you seen the charts of the amount of banking regulation per year, as measured in lines of regulation? I wish I could Google it up. The repeal of Glass-Steagall isn't even a blip in the graph, IIRC. It might be lines of above-average importance, but net-net the Bush administration continued piling on the regulations at pretty much the expected rate; I doubt a Democrat would or could have done much more. The other major problem is that it wasn't regulation that failed, it was regulators. Many regulations that already existed weren't enforced. Looking at the rate of regulation increase it isn't hard to see why. How do you propose to solve this problem with more regulations? There's a real engineering problem here or even a computer science-style information theory problem with information flows totally exceeding the ability of the processing nodes to handle. Clearly, adding more processing work to be done isn't the answer to that problem, and we probably can't afford enough processors to make even our current set of regulations actually get enforced.

krschultz 17y ago
Lines of regulation is not a good measure. A lot of banking regulation is related to well, banking. Glass-Steagall is specifically related to investment banking which is a whole other ball game, and to call the repeal of that act insignificant because it isn't that "big" is patently absurd.
- jerf 17y ago
  The repeal is not insignificant. My point was to counter the idea that banking had some sort of massive deregulation in the Bush era. One law repealed + massive growth in other regulations is hardly "deregulation".
  - btilly 17y ago
    Ever heard of regulatory capture? That's where a regulated group attempts to get control over the regulators, so they can then regulate their own industry for their own benefit. It is universal that regulated organizations will attempt this, and usually they succeed. After a regulated industry undergoes regulatory capture you will see is a steady growth in the amount of regulation, and a simultaneous decrease in how much the regulation prevents that industry from doing what it wants. The regulations are added because they benefit the industry in some way, for instance by creating barriers to entry for potential competitors. That is what happened in finance. Glass-Steagall really kept companies from doing what they wanted to do, and got dropped. But we got new "regulations" like the optional alternative way of calculating net capital ratios introduced in 2004 that allowed the 5 major broker dealers to double their leverage. The result? More lines of "regulation" that reduced how much actual regulating there was. Oh right, and a few years later a bunch of failed broker dealers. See http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/ http://www.nysun.com/business/ex-sec-official-blames-agency-... for verification of that. Therefore a steadily increasing number of lines of regulation is not evidence that there wasn't major deregulation in the same time period.
    - ZeroGravitas 17y ago
      Also, "deregulation" is a buzzword intended to frame the debate and make you believe that they are reducing regulation and therefore creating some kind of free market. Most so-called deregulation could be better termed re-regulation, it's just changing the rules to benefit different parties, not abolishing them. (Having said that, btilly above uses deregulation in its new derogatory sense, much like the euphamism downsizing had to be replaced with rightsizing once everyone realised it still meant redundancies. Relatedly the depression was named that by people who thought it wouldn't be as bad as a proper recession, now depression means a really bad recession)

Perceval 17y ago

Your option three reminds me of T.S. Eliot's review of George Orwell's classic Animal Farm. Eliot wrote: “After all, your pigs are far more intelligent than the other animals, and therefore the best qualified to run the farm – in fact there couldn’t have been an Animal Farm at all without them: so that what was needed (someone might argue) was not more communism but more public-spirited pigs.” http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/article5993099.ece http://entertainment.timesonline.co.uk/tol/arts_and_entertai...

tlb 17y ago

It's easy to wave your arms and ask for "better" government intervention, but the government's already doing the best it can. It has ups and downs in each department as attention shifts, but on average it probably won't get any better over the long run. Economic systems need to be designed so that mediocre government regulation doesn't lead to catastrophes.