Self-regulation
Self-regulation is to regulation as self-importance is to importance. The notion that markets, including financial markets could be self-regulating, by properly incentivising CEOs and Boards of Directors and through market-discipline, is prima facie suspect. We decide to regulate markets because of market failure. Then we let the market regulate the market. This is an invisible hand too far. The concept of self-regulation is especially ludicrous for financial markets. Finance is trade in promises expressed in units of abstract purchasing power (money). It scales up and down ferociously quickly. If Airbus or Boeing wishes to double the size of its operations, it takes 4 or 5 years to put in place another set of assembly lines. If a bank wishes to scale its balance sheet and operations ten-fold, all it has to do is to add a zero in the right places. Given enough optimism, trust, confidence and self-confidence, financial activity can, through leverage, be scaled up alarmingly quickly. Once optimism, trust, confidence and self-confidence disappear and are replaced by pessimism, mistrust, lack of confidence and fear/panic, the scaling down of bank activities can occur even faster. Such an industry cannot be left to its own devices.
O incrível é que idéias tão absurdas tenham permanecido por tanto tempo como "intocáveis". Excelente o artigo de Buiter, que tenta puxar os europeus para o campo da "super-regulação" das finanças tendo em vista o encontro do G-20, enquanto os EUA permanecem presos a ideia de maiores e mais coordenados estímulos fiscais. Em realidade, a mensagem de Buiter é "vamos regular rápido enquanto eles estão caídos".
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