Rollerball Regulation
“Power corrupts, and absolute power corrupts absolutely.” ~ Lord Acton
If football teams claimed that they needed no referees because they could “self regulate” would ANYONE believe them? Of course not. Each team would naturally do what is in their best interest anyway. If there were no refs, it would turn into an arms race …whoever cheated the most would likely win the game. Players would eventually bring knives and guns on the field. As much as we hate referees at times they are absolutely necessary. Even the so called “good teams” would have to cheat or they would lose more and more games. Remember the old movie “Rollerball”? Nuff said.
Of course if you put 100 refs on the field, the players would be tripping over them and it would not improve the quality of the calls made. There IS such a thing as too much regulation also, but we are not even close to this scenario.
Like most important things in life “none” is bad …and “infinite” is also bad. So I don’t understand why any reasonable person believes that less regulation is ALWAYS better. There must be some theoretical optimal level of regulation where the cost to society equals the benefit to society. Adding more regulation would be bad …and taking away regulation would be equally bad.
Our recent history would seem to indicate that we are nowhere near the point of having adequate regulation, however. Let me provide a few examples to illustrate this point:
- Wall Street – Goldman, JP Morgan and others exacerbated the housing bubble by creating significant addition demand for subprime mortgages. They knowingly did this by bundling them into mortgage backed securities (MBSs) and selling this tripe to Pension, Sovereign, Hedge and Bond Funds as AAA rated securities. Then many shorted the same products. They nearly blew up the world economy and created at least $4 trillion in unneeded housing in the US alone.
- Investment Industry – Bernie Madoff was audited many times …obviously not very well. He had to go bankrupt before anyone noticed the $65 billion Ponzi scheme that lasted for 48 years.
- Oil and Gas – While the Minerals Management Service was busy supplying oil executives with cocaine and sexual favors, BP was cutting corners to speed up the drilling of Deepwater Horizon in the Gulf of Mexico.
- Nuclear Power – Though we have not had a nuclear accident in decades in this country we can see the result that lax regulation had on the Tokyo Electric Power Company (TEBCO).
- Medical Insurance – The largest medical insurance company in the US, Wellpoint systematically dropped over 6000 patients’ health insurance coverage in 2008 alone when their computer algorithm discovered they were diagnosed with breast cancer or other expensive medical conditions.
- Defense Spending – Halliburton received at least $2.5 billion in no-bid contracts during the Iraq War. Does anyone think we got a good price? Does anyone think the remaining $2-3 trillion spent on this completely unnecessary war had good oversight?
What is the common thread here? All these actions generated profit …and all the risk was born by people outside the company (taxpayers, consumers and shareholders). This is just scratching the surface …I could add ENRON, Worldcom, the Savings and Loan Crisis, Tobacco Companies, Lehman Brothers, Bear Stearns, AIG, Bank of America (robo-signing mortgages), etc. This activity is not unusual …it’s not even rare …it’s become common.
Sure there are many responsible companies out there, but we need to root out those that aren’t and stop them before they wreck the economy again or kill more people. And those responsible need to go to jail instead of having their company pay some token fine that represents a small percentage of the damage they caused or the profits they received. This simply reinforces moral hazard (i.e. heads I win, tails you lose).
For these things to get fixed requires serious regulation. I would even go so far as to state that there should be a CRA …Central Regulatory Agency. They should regulate the regulators. They could do statistical analysis looking for anomalies and following up on whistle blowers comments or other leads. They should somehow be separated from political influence (think CBO, the Fed or the CIA), so they can systematically do their job to uncover corruption and fraud. Yes, I just added more government, but don’t confuse quantity of government with quality of government. They are very different.
So let me summarize ….if you enjoy oil spills, high unemployment, wage deflation, nuclear meltdowns, loss of retirement income, dropped medical insurance coverage when you actually need it, money wasted on useless wars and their profiteers, and who knows what else we have yet to uncover …then by all means support less regulation. Maybe we can throw in some ecoli and mad cow disease while we are at it by underfunding the FDA also. However, if you would like to join the complicated world of the 21st Century then join me in telling big business that they need some referees and Rollerball is not the model we want.
The Dark Side of Capitalism
I worship at the altar of Capitalism …I consider it the most positive and powerful force of the 20th Century. I love my Mercedes, big screen TV, iPad, instant movies and 99 cent cheese burgers. I love my extended lifespan and greater income compared to past generations. I love the fact that Capitalism defeated Communism without firing a single shot. What’s not to love?
The goodness generated by capitalism is due to the relentless pursuit of profit by the corporation. This is why corporations exist …it is what they are designed to do. A corporation that does not pursue profit will eventually be out of business. Sharks are designed to eat …corporations are designed to generate profit. Bigger, better, faster, more, rinse and repeat. Incremental improvement, disruptive change, creative destruction …it’s all good.
Like Star Wars it turns out there is actually a dark side though. Competitive forces eventually squeeze all the profit out of mature industries. Additional investments in marketing or research provide relatively small returns. Investment in politicians however provides an incredible return on investment. This investment is often millions of dollars in campaign contributions for billions in corporate revenue.
This creates the great dilemma of our time. National politicians must have corporate sponsorship to run a competitive campaign or they will simply lose. Many corporations need government sponsorship to continue to generate profit. This creates a symbiotic relationship that significantly distorts markets and destroys the representative government that is intended in a Republic. And the truly scary part is that they can siphon revenue from the future through deficit spending and the sale of treasury bills.
Equilibrium will eventually be reached when campaign contributions cost more than the profit they generate (Hancock’s Law 🙂 ). In a bizarre way, this then becomes the market equilibrium. This is not a place I want to live though.
The irony is that these corporations are indeed maximizing profit …as they are designed to do. They are doing it through legislation though, not free markets. This is the dark side. These industries are not efficient or innovative …they are not providing the greatest value to society. They are in fact increasing government debt to pay for things we really don’t want or need. They have instead become a burden to society.
This is the reason we pay for over 50% of the military budget in the world. It is why our health care cost twice what it does in every other advanced country (with the same mortality rate). It is why we bailed out Wall Street after they showed obvious disregard for the well being of the rest of the world.
It is also why no one is helping the unemployed or the underwater home owners. They don’t have lobbyists to represent them.
There are only two possible outcomes…
- They are stopped. We take back control of our government and demand the separation of capitalism and state. We enforce limits on political contributions and take the corporations out of the mix entirely. This is my great hope for OWS and other Occupy protests.
- We finally reach a point where political contributions are expensive compared to the profit they generate. At this point corporations may battle each other over the shrinking influence, but it is hard to know. This world is so alien it is hard to imagine …it is hard to look around this corner.
If the latter occurs we will have destroyed the two greatest achievements of the past couple centuries. Capitalism will no longer work as a price discovery mechanism to provide the greatest value to society …and our Republic will no longer elect people who represent the wishes of the electorate.
I can think of nothing more tragic.
Words of a great Republican
Lets take a time machine back about 60 years and listen to a great American:
“I despise people who go to the gutter on either the right or the left and hurl rocks at those in the center.”
“I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity.”
“I have one yardstick by which I test every major problem – and that yardstick is: Is it good for America?”
“Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed.”
“If you want total security, go to prison. There you’re fed, clothed, given medical care and so on. The only thing lacking… is freedom.”
“Only Americans can hurt America.”
“There is no glory in battle worth the blood it costs.”
“We seek peace, knowing that peace is the climate of freedom.”
“We will bankrupt ourselves in the vain search for absolute security.”
~ Dwight D. Eisenhower
Does any political leader sound like this today? Of course not …they can’t even lie well enough to sound this good. It takes guts to tell people the truth. All the quotes listed above are still relevant today, but no politician would dare utter such things!
If politicians begin to say things like this again …pay attention! It might indicate a return of honesty and decency to politics. I’m guessing it will be another 15-20 years, but maybe we will get lucky.
I am a college senior…
I’ve seen this floating around FB. This student has made a great achievement and should be proud. I can relate, since I too worked through college, graduated Summa cum Laude and was debt free at the end.
I am still left with some nagging questions though:
1) Do you have a job after graduation? It took me 6 months in the early 90s recession to find a professional job …I am sure it could take far longer in this economy. Depending on the degree, you could be making barely above minimum wage for a long time.
2) Could you afford college if you didn’t have scholarships to pay 90% of your tuition? Should everyone not smart enough or athletic enough to get scholarships simply not go to college, since they don’t get the scholarship assistance?
3) Will your kids be able to afford college? Washington’s 529 Plan (GET) cost $3,500 for a year of college in 1999. Only 12 years later (2011) it cost $16,300. This is a 466% increase. Last year the plan increased in cost 35% alone.
4) Wall Street created false demand for subprime mortages by slicing them up into CDOs, rating them AAA and then selling them to unsuspecting sovereign, pension and bond funds. This made them very rich, but nearly destroyed the global economy. Why defend these guys …you worked hard and played by the rules …shouldn’t they?
5) Do you make over $500,000 per year in income? Then you are part of the 99% whether you decide to go sleep in a park or not. If you make less than $2,000,000 per year you are part of the 99.9%!
6) Are you even real? This looks like the sort of anecdotal, untraceable stuff that makes for perfect propaganda.
Anyway, most people are going to believe what they believe …that has become obvious lately. I just thought I would supply a little Socratic Method to this simple photo that has gotten so much attention.
The Age of Intellectual Ambiguity
“Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing ever happened.”
~ Winston S. Churchill“You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”
~ Abraham Lincoln, (attributed)“To stay young requires unceasing cultivation of the ability to unlearn old falsehoods.”
~ Robert A. Heinlein
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We have more access to more information than at any other time in history. Yet ironically, the truth has become an endangered species in this information age.
Most people only look for information that confirms their existing beliefs (which are often very wrong). In fact, people often seem to cling desperately to ideas that given even a moment of serious reflection would be tossed on the “obviously false” pile. Instead of suspending judgement, people fill the gap in their knowledge with incorrect information and happily move along with no further thought.
These false ideas are often created by those intending to manipulate you. They generally want your vote or your money. And they accomplish this often by targeting specific demographics, such as gender, culture, race, religion, political affiliation, nationality and class. And it is now applied to every serious topic there is, including politics, business, economics, science, law, sociology, nutrition, psychology, medicine, religion, military, etc. This has now permeated mainstream media making most of it either incorrect or useless nonsense.
The useless stuff is content such as celebrity gossip. It is sugary and without nutrition. On the other hand, the purposely incorrect information (or disinformation) does affect your life. This type of information is poisonous to individuals and society. It enlists the aid of logical fallacies and is often presented in an emotional manner to over ride the rational part of the brain. It convinces you to do or say things that you would not otherwise consider.
So, in some small way this is an effort to combat the intellectual ambiguity of our age. I will post articles from time to time on a variety of subjects. The common thread will be topics about things are are logically indefensible, but widely believed. I will use tools such as Socratic Method and statistics to dismantle these ideas.
My intent is only to discover the truth in the spirit of dialectic. If I suddenly discover I am incorrect …I will admit as much …and you should too. If you seek true knowledge …welcome!
New Dialectic 