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« Who Can Fix This? | Main | The Dynamics of Interventionism at Work »


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This would be a good moment to take another look as Hans Stoll's proposal for competing financial regulators.Hans R. Stoll's url: (

His proposal is expressed in "Regulation of Financial Markets: A Focused Approach," Multinational Finance Journal 2, 2 (June, 1998) pp. 87 - 99.

A slightly revised version entitled "Regulation of Financial Markets: Toward a Focused Approach," appeared in Journal of Applied Corporate Finance 14, 4 (Winter 2002) pp 122-128.

That would be way better than letting Joseph Stiglitz decide how often bonuses should be paid, or appointing him the head of some "financial product safety commission" or, worse yet, a "financial systems stability commission." I don't think a Big Player is likely to add stability!

"Historically," Stiglitz says, "rapid expansion of lending has been responsible for a large fraction of crises and this crisis is no exception." And how often has such an expansion occurred without a rapid expansion of the monetary base?

Roger's last question is one right one, as are the points Tyler raises about the problems with existing regulation. There's no doubt that we're in for some short-term pain as lots of errors get washed out, but, fwiw, I'm still of the belief that the fundamentals of the US economy remain solid and that we are in no way talking about a crisis like that of the late 20s/early 30s.

What concerns me most, as I'm currently teaching Higgs in American Economic History, is that perceptions of crisis will continue to call forth excessive governmental responses, from which we will never recover. I think we're already seeing that ratchet process start, unfortunately.

What Stiglitz says in his opening remarks is there is no frustrating to hear from a serious economist:

"not the first time that those who believe in free and unregulated markets have come running to the government for bail-outs."

This type of statement drives me up a wall. He seeks to knock down the idea of free markets...not by showing how free markets failed but rather by insinuating that those who come for bail-outs believed in free markets.

Now, whether or not that is even true, I still don't see how such a statement is successful in any way in undermining a free market argument. In fact, it simply doesn't.

Stiglitz does this a lot.

Roger's remarks touch on the one crucial spot of the unregulated market failure argument where people like Stiglitz and Krugman simply refuse to go.

Why? They never acknowledge effects on behavior that previous laws and regulations have on an ever changing landscape. It borders on coy and dishonest.

Surely people who think that the markets of the world were unfettered during the 1920s and early 1930s can believe anything!

Is anyone monitoring school courses and textbooks on that kind of content?

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