Quick rant: Not to be taken too seriously

[gyges_ring]

I love the phrase "failure of market capitalism." It's such a brilliant phrase. Because, of course, as it currently seems to be being used, it's actually wrong. Market capitalism has spectacular failings in its theories at times, but human crisis and catastrophe aren't among them. Crisis and catastrophe are supposed to be part of market capitalism

Comments

[ataxi]

I absolutely agree. "Regulation" eh? What specific regulation? It's about as clear as "keeping the bastards honest". The Glass-Steagall "thing" (as I'm going to refer to it, lacking deep understanding) where commercial and investment banking were separated in the US seems to have been a key area, because ordinary people give two shits about investment banks (well, to some extent) but commercial banks that lend to ordinary people need state guarantees.

If you haven't read the Rudd essay, you probably should. It's an interesting collage. The first 50% is a fairly convincing Tale of the Crisis, a narrative that works us around to our present position painting neo-liberalism as the bad guy, because of its obsession with deregulation*. Post-Depression economic history is broken up into two halves, Keynes-Thatcher and Thatcher-Now.

The latter part of the essay tries to stick it to the Liberal Party, rather less convincingly -- about the worst that Rudd can manage is that Costello and Howard were ideological fellow travellers of US low-regulation fanatics, not that they did much evil themselves (beyond the well-documented failure to spend on health, education and infrastructure, which suck for us economically but don't tie directly to the current situation).

There's also practically direct quotation from PJK's Lateline spiel of the other night, leading me to believe that Keating must have either participated in drafting the document (unlikely?) or cherry-picked a bit of it so as to be "on message".

As far as ideas for regulation are concerned, I wouldn't mind someone coming up with something that deals directly with the moral hazard problem. We have a situation where asset bubbles are somewhat bad for nearly everyone, but actually extremely good for certain people (due to short-term incentive payments in the finance industry etc.). Perhaps those incentives should be paid over the longer term, concordant with the frequency of the economic cycle and conditional on stable value. Again, however, I don't remotely have the expertise to judge how to implement such an idea.

* more vagueness