Saturday, March 5, 2011

Howard Marks On Regulation

Via Howard Marks (H/T Value Investing World).
The bottom line as far as I’m concerned is that you can enact a law or rule and tell businesspeople precisely what to do, but you can’t make the economy or companies comply with policies and social aims. Regulations are limited in their scope and effect, and like a balloon, when you push in one place, self-interested behavior pops out in another. As these articles indicate, those who enact regulation sometimes get it right at first glance, but they’re rarely able to anticipate and control the response of those being regulated or the second-order consequences of the rules.
Errors and misdeeds will occur as long as imperfect, self-interested humans stray into excessive risk-taking. And as long as these things lead to bubbles and resulting crashes, the willingness to dispense with regulation and rely on free markets will never be complete, regardless of regulation’s limitations.
Click Here to Download: Howard Marks on Regulation

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