Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
RR. If you want people to engage in a discussion, it is best not to start off by insulting them. Any comments of yours which refer to the poster, their style, mindset or attitude don't deserve a reply. Ad hominem arguments don't win the battle of ideas. I've made an exception this time, since you seem not to have been around much and perhaps you've forgotten.

Also just because a person has opinions doesn't mean that one is obligated to discuss them. I don't debate flat earthers, no matter how sure of their beliefs they are.

Don't worry about me Robert. I was just trying to give some advice to you since it seems that you wanted more response to your diary. Actually if you notice I also give compliments as easily.

As far as your well designed and enumerated flow diagrams, this does not address the questions I had in my post above.

I guess maybe I should respond to your points with my own Utopian flow diagram:

  1. Planes need to be serviced regularly.
  2. Servicing is important for maintaining fuel efficiency and the general safety of the planes.
  3. Customers will decide to purchase flights from Airlines that provide not only the services they want but also safety features.
  4. Independent businesses will evaluate the safety records of the airlines to show which provides the best overall safety for the dollars spent. This independence is more independent than a government organization that can be politicized since its record is also on the line.
  5. Insurance companies will evaluate risks based on these independent reports as well as their inspections of repair logs. Thus they will encourage the most cost effective solutions for solving safety issues.
  6. All parties have a self serving interest to maintain high levels of safety without pricing the services out of range of normal people to afford.
  7. Thus the firms that are able to provide the best services at the highest value win in the market and those that can't should change or move their resources into something they are better at.

Again, regulation for regulation sake is neither efficient or actually help consumers. I hope you think about the following statement:
Good regulations promotes market efficiency and Bad regulations destroys markets.

Rutherfordian ------------------------------ RDRutherford
by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Tue Apr 15th, 2008 at 01:31:33 AM EST
[ Parent ]
Utopian indeed, but highly presumptuous upon the perfect and long-term nature of the people in command...and an educated public. In this case there are few clearer examples for economist George Akerlof's discussions on information asymmetry The_Market_for_Lemons .

Given that and the horrid record that capitalism has for failing to short-term solutions when problems poke their omnipresent heads, I would go for the government role in creating logical regulations for corporate behavior, and regulations that allow for self-certification if associated with mandatory in-house training (in the field and in the ethics of holding the standard) plus mandatory outside inspections. Much like what Robert enumerated, but well into the ISO 9001 mentality.

As far as your simpering attempt to excuse your ridiculous try at cleverness while bashing Robert, give it up. Neither the bashing nor the excuse create your desired effect.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Tue Apr 15th, 2008 at 08:34:40 AM EST
[ Parent ]
siegestate, yes I believe that you get the idea of asymmetrical information problems and how they can manifest in a market. But although these problems can hamper the efficiency of a market it does not mean that no markets are formed. Take the asymmetrical markets of used cars. We still have used car markets and a variety of market solutions have been developed including some business models as well as information clearing houses.

So maybe you get what I mean by market enhancing regulations vs market destroying regulations. If it is to overcome asymmetrical information for consumers then some could be actually beneficial. Of course it could also become an undue burden to small businesses.

As far as "the horrid record that capitalism has", by what standard are you judging it? It seems that all human endeavors are not 6 sigma no matter how much we live in that Utopian world. How did the alternative system work out?

As far as bashing, ask Robert what he thinks of Economists and Libertarians.

Rutherfordian ------------------------------ RDRutherford

by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Tue Apr 15th, 2008 at 02:19:53 PM EST
[ Parent ]
Has the current example of the biggest world wide failure of self regulation (in the financial sector) in almost 100 years had no effect on you?

The private insurance, rating, underwriting, and banking sectors all conspired together. The inability to see what is before their noses is what makes dealing with utopian libertarians such a waste of time.

By the way, who is bailing out the mess - the government.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Tue Apr 15th, 2008 at 09:26:02 AM EST
[ Parent ]
Has the current example of the biggest world wide failure of self regulation (in the financial sector) in almost 100 years had no effect on you?
How do you judge "biggest"? On what basis do you consider it? And how does it compare to the other events?

For us, we are in the process of purchasing a condo for nearly 1/2 off its price from as short as a year ago. We were busy saving money and now we found a good 15 year fixed mortgage at a great rate. The overall market is down a some but is allowing me to regroup some investments. Also it is a good time for mergers and acquisitions. Just made some nice profits from Yahoo news of being bought out by Microsoft. Still have some shares and am making some profits on covered call for now. Stocks I follow...Yahoo

The private insurance, rating, underwriting, and banking sectors all conspired together. The inability to see what is before their noses is what makes dealing with utopian libertarians such a waste of time.
Do you have proof of all conspiring together. If you have been paying attention to your own diary you should have been able to see the moral hazards does not even imply a conspiracy only that people may be looking out for their own self interest which may not be the best outcome for the market.

I am not sure who is more utopian between the two, but I can not honestly say that it must be someone else when you talk about utopian libertarians. Heck the least favorite of my candidates was Ron Paul and their is no way I am voting for the candidate for Libertarian party if the one person mentioned so far gets their endorsement.

By the way, who is bailing out the mess - the government.
You might want to elaborate on those issues.

Getting back to the topic of your diary, maybe you can peruse the following articles:
King refuses to bail banks out of toxic mess
Toxic shock: how the banking industry created a global crisis

A better article about Mervyn King is at the Wall Street Journal, and I think you can still download the PDF from my class site: http://vle.londonexternal.ac.uk/cefims/2008/s1/2008s1C225.nsf/alldocs/20080201-DOMM-7BEKAS/$file/WSJ -BoE.pdf

Bank of England Chief
Changes Tack in Crisis
Mr. King Scolded Lenders
But Had to Rescue Them;
Now He's in Jeopardy
January 28, 2008; Page A1
Mervyn King, the silver-haired governor of the Bank of England, has guaranteed himself a chapter in future textbooks on central banking. The lesson: Standing on principle is a dangerous game. In the years of financial euphoria, Mr. King stood out as a scold. In August, he admonished British financiers that "interest rates aren't a policy instrument to protect unwise lenders from the consequences of their unwise decisions." When money markets froze and the Federal Reserve and European Central Bank pumped in billions of credit, Mr. King at first refused to follow suit. "The
provision of large liquidity," he said later, "encourages herd behavior, and increases the intensity
of future crises." But events overwhelmed Mr. King's principles. In September, Britain weathered its first bank run in more than a century, on Northern Rock.
Days later, Mr. King, believing the financial system was threatened, launched the kind of cash injections he had criticized. The British press dubbed him "Swervin' Mervyn." Willem Buiter of the London School of Economics and Political Science, a former member of the Bank of England's Monetary Policy Committee, says the BOE "deepened the crisis" because of Mr. King's "strong moralistic streak."
Over the weekend, a parliamentary committee reporting on Northern Rock declared itself "unconvinced" that Mr. King's stance was appropriate, and said the BOE should have "adopted a more proactive response" to the loss
of confidence in money markets. The report also said the U.K.'s chief regulator, the Financial Services Authority, had "systematically failed in its duty as a regulator" and the whole affair had been "damaging to the financial services industry in the United Kingdom." The report recommended creating a new high-level central-bank post to oversee expanded financial stability powers, including a fund to protect deposits.
Mr. King confronted a dilemma that central bankers always face in a crisis: Let financial fires blaze until they extinguish themselves, or try to put out the fire -- even if that encourages investors to keep playing with matches. Central bankers loathe contributing to "moral hazard," a term coined by 19th-century insurers to describe the recklessness that is encouraged by protecting individuals from the consequences of their bad decisions.
Fed Chairman Ben Bernanke -- Mr. King's office neighbor when they both taught economics at the Massachusetts Institute of Technology in the 1980s -- faced the same quandary last August, but set aside concerns about moral hazard and repeatedly injected cash and cut interest rates to cushion the economy. Last week, he responded unusually overtly to market concerns with a surprise 0.75-percentage-point rate cut.
Return of Sanity
Many central bankers initially welcomed the market's downturn last summer as a much-needed return of sanity. Mr. King had already been saying that lending standards had become too lax and investors too complacent. One symptom: the ease with which even dicey debtors could borrow.
Citing a spam email he received -- "We have the solution, Mervyn, for your bankruptcy" -- he hectored London bankers and merchants last June: "'Be cautious about how much you borrow' is not a bad maxim for each and every one of us here tonight."
He cast the emerging crisis as the consequence of imprudent behavior encouraged over the years by repeated, government-backed bailouts. "I do not believe that moral hazard is just some dry academic concept," he told Parliament last September. "It is moral hazard that has actually led us to where we are....If you always provide ex-post insurance you can be quite sure that in five or 10 years' time another crisis will come. That is exactly what we have seen in the last 20 years."

Rutherfordian ------------------------------ RDRutherford
by Ronald Rutherford (rdrradio1 -at- msn -dot- com) on Tue Apr 15th, 2008 at 03:18:50 PM EST
[ Parent ]


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