Monday, June 22, 2009


Murphy vs. (Hernando) de Soto

In this month's Ideas on Liberty, I take on Hernando de Soto's WSJ op ed calling for stricter regulation of derivatives. An excerpt:
Regardless of what caused the crisis, government efforts to regulate derivatives will only lock in undesirable aspects of the current market and ensure that politically connected players reap artificial gains. It is absurd to ask politicians to promote financial integrity and sound accounting. They are the worst violators of these principles on the planet.

Bob, great post.

We got increasing financial risk because pervasive regulation of public firms - stemming from the grant of limited liability to shareholders - actually generated widespread moral hazard, on which you touch the tip of the iceberg. Individuals were sble to reap large rewards, while shifting risks to counterparts, firms, shareholders and taxpayers.

The answer actually lies in forcing market participants to take greater responsibility for their own transactions, and less reliance on a supposedly all-knowing government.

I have explored this in a number of posts at my blog.
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