@Ohrnconsulting, if I'm reading you correctly (or your interpretation of Bookstaber, I should say), then pure laissez-faire economics is TOO free-for-all, but beware interventions that are too new, too complicated, and above all, too poorly understood by the market to anticipate the consequences. Those get really messy really quickly!
The logic feels Goldilocks (j-u-s-t right) in theory, but boy, is it a fine line to walk. Makes me wonder if Glass-Steagall was the cure or the disease...
Simplicity can be another word for elegance.
When all systems are working then a natural balance of complexity can surely surface. Unfortunately, we decided long ago to jump in and "help". Bookstaber makes the point that many/most of the rules, regulations, etc that we've put in place were put there for good and valid reasons. However, he goes on to say, putting in rules and regulations creates more complexity and (he highlights) often with unknown or unintended consequences.
Given our interventions, I don't see the superflous dropping away; rather, we will likely just create more complexity. (Did someone say Dodd-Frank??)
Doctors took my 96 year old grandfather off of most of his medications and guess what... he had a much better quality of life.
That's radical thinking for a doctor. Can we think like that?
Thanks for this introduction to an intriguing line of academic reasoning, David. It reminds me of behavioral economics--a paradigm shift that makes me want to look at the same old problems in a new way.
I wonder though, if the system itself doesn't determine what degree of complexity is appropriate in a "what the market will bear" kind of sense. Different organisms, i.e., market situations, may tolerate different degrees of complexity at different times. That which is superfluous will drop away as unnecessary.
Too simplistic?
Glass Steagall Act - decoupling the financial system
Value Hiker
10/16/2011 12:50:50 PM
It looks like that 1933 Glass-Steagall Act served as a decoupling factor to the financial system by separating the commercial banks and investment banks.
The repeal of the Glass–Steagall Act by the Gramm–Leach–Bliley Act effectively removed the separation that previously existed between Investing banks and Commercial banks.
Now wonder some senior analysts at Wall Street talked about the repetition of Great Depression in 1999 after Gramm–Leach–Bliley Act was signed into law. It turns out the GLB act directly help cause the 2007 subprime crisis.
Re: Too Complex
mInvestor
10/15/2011 11:16:24 AM
What you said are true, I can't agree more. Entrepreneur spirit and free market are keys to our society. And they are going to help us to ge through the current problem.
Unfortunately not everyone is on the same page. Some people are asking more regulation. Like putting more bail out plan and adding more regualtion to businesses. Those people who"are occupying wall street". If you listen carefully, they actually got many different opinions. Some of them are completely different.
I don't think those politicans would help us, nor those financial experts. I tend to think the market itself and the entrepreneur spirit in our blood will pull us out from this mess.
Re: Too Complex
Phoenix
10/14/2011 1:59:24 PM
I also feel that it is important to make things easier for small start-ups to improve their businesses making it more sustainable. Small businesses could be offered tax relief for the first two or three years or until they make a certain amont in profit. This would ensure that the company only gets burdened with taxes for the first few years if it made a high enough profit.
Some times it does seem like that. the complexity of the system some times seems like the deck is so stacked against the small business owner. I would Like to see a lot of that change, I think that would be a bigger boost to our economy then almost anything else we, as a nation, could do right now.
So accurate. Then the poor business is penalized for failure to comply with regulations they need a full-time attorney on staff to keep straight...
Even some small businesses who have funding are are able to hire consultants to do some work for them get caught off guard by the system.
I know of a small business owner from Rhode Island who had a start up, it didnt pan out and when she went to disolve the business was hit with a large amount of fees and was told that if she did not pay them the state would go after her legaly. Its hard enough for a business owner to call it quits I dont think the system needs to rub salt in it....
Lost America
cat tail
10/13/2011 12:14:39 PM
We need to rediscover not only the entrepreneurial drive but the work ethic and innovation that made America great. We can do it again. But we have to start trying,
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