Regulation. We’re told that it would have saved us from this and that event associated with the current economic downturn.
Well, probably not.
First off, remember that we have had regulation during this period. Clinton upped regulatory oversight of businesses; so did Bush.
Next, the mere fact that there are regulations doesn’t make them effective. Take Bernard Madoff. What Madoff engaged in was a swindle — not a hard-to-control best-intentions-turned-wrong investment fiasco but an actual, intentional fraud.
But as columnist Steve Chapman recently observed, the federal bureaucrats whose job it was to regulate investment businesses investigated Madoff “at least eight times in 16 years,” never, ever “coming close” to the fraud.
”So what,” Chapman asks, “makes you think that future bureaucrats, no matter how vast their authority, will be able to do better?”
Another thing about regulation is that there are several kinds.
When the founding fathers talked about regulating trade, they didn’t mean micromanaging trade to get specific outcomes. The founders meant “to make regular,” as in establishing standards . . . like what is the difference between sound investments and elaborate frauds.
That’s hard enough. Micromanaging a million businesses, to prevent certain unfortunate outcomes, is pretty much impossible.
Past performance is a good indicator of future performance. Just adding a bunch of regulators? That’s no help, since we haven’t discovered any new magic since the last batch failed.
This is Common Sense. I’m Paul Jacob.