Regulation has a point

from Bonddad's blog:

1.) There's a fundamental belief that regulation is bad and deregulation is good. That's a horrible over-simplification. It's important to remember that at the base of capitalism is greed. Some greed is a good thing -- it can inspire people to make better products more efficiently which means the end result costs less. That's good and I think it's safe to say we all like better products cheaper. Too much greed compromises ethics. That's bad. There are plenty of situations in the last 25 years that demonstrate that. For example, the S&L crisis, Enron and Worldcom and now the housing mess. The line between the good and bad effects of greed is very fine and it moves regularly.

2.) There is such a thing as too much regulation. Red tape is a bad thing if it gets in the way of innovation or development. A classic example is the lack of building new refining capacity in the US since the 1970s. Like it or not, the US uses a ton of oil products and our demand for oil products has increased greatly since the late 1970s if only by reason of population growth. Yet we are still using the same refining plant developed when my parents were in their prime. That's a problem. And no -- this is not a call from Bonddad to pollute or cause a ton of environmental damage. But it is a call to deal with the situation in a far better way then we are dealing with it now. Frankly, that probably means developing a national energy policy -- which we should have done 30 years ago.

3.) The government's role is to play referee. Before his resignation, Eliot Spitzer was one of the best things to happen to Wall Street in a very long time. Why? Because he enforced the rules -- which is something that has to be done. Here's s simple question: how many food recalls have there been in the last three years? A ton. Why? Because the government isn't enforcing the rules. I don't know about you guys, but I like the idea of my food being safe to eat. Maybe I'm different. But when the CEO of the latest company to initiate a meat recall said in open testimony on Capital Hill that he was using sick animals I almost become a vegetarian (almost). That's the end result of not enforcing the rules. That does not mean we make it impossible to do business. But we do need to make sure the rules are followed and that means enforcement.

More after the click ...

My comment:

That about sums it up. There can be too much regulation but there can also be too little regulation. There can also be too little enforcement of existing regulation.