Why Regulation Fails Regularly
Most people cannot conceive of a world without regulations. I can’t
either. But I can conceive of a world that most would think
ridiculously defunct of oversight.
We tend to view the world in terms of what exists now, instead of
what could or should exist. A good economist never ignores the
institutional framework, because it provides the incentives to which
economic actors respond. A great economist, however, goes beyond the
existing. He examines the institutional framework from a normative
perspective. Why did the existing framework evolve? What political and
business interests produced it? Can patches to the system improve it?
Do we need a completely different approach to regulation?
A particularly incisive post on this comes from Cafe Hayek:
Thomas Sowell has said that economics helps you understand that there are no solutions, only tradeoffs.
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