Self-recommending, but here is an excerpt:

In a complex world where nobody really knows what will succeed until it is tried, competition that pits people’s ideas against each other is the only way to test these ideas. Competition among capitalists spreads society’s bets among different, fallible ideas about where profit–and loss–might be located. For this reason, herd behavior among capitalists may cause systemic risk. But regulations, by their very nature, homogenize the behavior of those being regulated, automatically increasing systemic risk.

Keep in mind that many recommendations in the wake of the financial crisis are for more homogenization in regulation..