Thursday, August 12, 2010

Context Matters

The pipe dream that less regulation is better and that market pressures will make everyone behave has been the most damaging thing to the country in the past 30 years.

You have to ask yourself, if the market is so effective at self regulating, why did regulations ever get instituted in the first place? The context matters.

I'm happy to remove regulation whenever possible. But you have to prove to me that the problems that caused the implementation of the regulation in the first place somehow have another factor keeping them from happening yet again.

Here's one example - the smog deaths in 1948 in PA. Market pressure didn't have any impact on this company to keep it from polluting.

For Financial, think of the Savings and Loan crisis in the 80s and 90s.

A related recent example is Rand Paul and the idea that the market would pressure private businesses not to discriminate. If that were true, why didn't that come to fruition in the 100 year after the abolition of slavery? Business owners are not logical profit optimizing machines. Just like everyone else they're flawed human beings that will do things that don't make sense and can hurt the community or in this case a subset of the community.

BP's catastrophe in the gulf is another example. Often when short cuts are allowed and can increase profit (even as they increase risk) they're taken. And with a legal cap on damages, what the heck! That even sweetens the deal towards risky behavior.

Because the people who run these institutions are human and some are unethical (and there will always be some who are unethical) the only way to protect against it is with sensible regulation.

There are many, many more such examples, and believe me, I understand there are some regulations that overreach (note the use of sensible above!). But you should never just remove them without considering the original context and the goal otherwise it's just history repeating...

Thursday, June 10, 2010

Life Plan - Win the Lottery!

My middle son in 7th grade was complaining a bit about some kids in his math class being distracting and annoying. So he starts a rant about how stupid they are. Now for kids, falling into self-rightousness is very attractive and I always try to temper it when I hear it sprouting up.

So as I push back on this a little, he decides to give me an example.

He tells me how this one kid related his life plan. That he was going to drop out of high school, get a job and then win the lottery and be set for life! So I asked (knowing the answer already) "Good grief, how many people does he know that this has worked for?" And he responds with an emphatic, adamant "EXACTLY!"

So then he goes on to explain how he has a plan, AND 4 back up plans as well. I'm not sure I remember these all correctly, but it went something like this.

1 - Go to college and become a computer graphics artist and work for Blizzard.
2 - Get a law degree and become a lawyer.
3 - Learn Japanese, move to Japan and become a Manga artist
4 - Another option I can't remember...
5 - Become a professional Cello player and join an orchestra.

I had no idea he'd been putting this much thought into it, and it was great to know he recoginzed how idiotic that one kid's life plan was as well. As he gets closer to college it will be interesting to see how his ideas on this front evolve, but it's really great to see how diverse the possibilities he's thinking of are as well.

So I'll keep working to keep the self-rightousness in check, but I'll probably have to find a different example to make the point with. :)