More Jeffrey Friedman

The point is that government regulation, by reducing diversity, actually makes markets less robust. This is counterintuitive. Instead, the conventional wisdom is that regulation makes markets more robust.

This observation deserves to be made more precise. What specific kinds of regulation are we talking about? Government backing of property rights? Antitrust?

Jeffrey Friedman's remarks resemble a point that has been made by the anarchist social philosopher Anthony de Jasay:

"When a social state of affairs, instead of being collectively decided, is left to emerge from a large number of individual decisions, the effects of the latter tend to be normally distributed: a few prove disastrous, a few are superbly good, and most are middling. The likelihood of the resulting state of affairs being totally disastrous or wholly superb is negligible. When, however, one collective choice is responsible for a state of affairs, no normal distribution can be relied upon."

http://www.againstpolitics.com/2008/12/01/the-bell-curve-of-individual-choice/

Michael F. Martin is about right questioning the type of regulation.

If robust markets are healthy markets able to withstand adverse conditions, then Arnold’s point is relevant: reducing diversity makes markets less robust. Conversely, the argument falls flat: as it follows that in re-constructing healthy markets regulations that increase diversity would make markets more robust.

@Loof,

How can regulations increase diversity in a market? Aren't they generally rules forbidding certain practices? Doesn't that necessarily restrict the kinds of enterprises and behaviors that make up the market?

What am I missing?

@Chris Koresko

If there are multiple imperfections in a market - and there usually are, and at least some are non-regulatory imperfections, like assorted market failures - removing one doesn't make the market more perfect.

For instance - patents and copyrights can increase the diversity of ideas through the granting of a limited monopoly of some rights over said idea. This restricts certain practices, obviously, and the whole concept is arbitrary, especially over term length. Nonetheless, it can improve diversity.

@david
What evidence do you have that things such as patents and copyrights increase diversity. Of course a term productivity to length would result in a parabola, but everyone assume that at zero the slope is positive. No one can assume such a think, the whole slope could be negative if term length of IP are greater than zero. People always concoct these scenarios that might make a super efficient government beneficial to the world. They almost never show evidence that scenario is what we are experiencing, let alone given the failures in governments, that the whole system is beneficial.

@Matt - I said "can". I am aware of the growing libertarian support for ending intellectual property legislation, and I look forward to observing a colorful fight between them and the Ayn Rand camp from the sidelines.

But regardless of the evidence, I was making a theoretical point against Koresko's theoretical point (over whether restriction necessarily restricts diversity). I am not an expert on the vagaries of existing IP legislation.

Even you concede that the slope "could be" positive, and this is indeed the mainstream assertion.

Chris Koresko asks:
How can regulations increase diversity in a market? Aren't they generally rules forbidding certain practices? Doesn't that necessarily restrict the kinds of enterprises and behaviors that make up the market?
What am I missing?

What’s missing is the positive side of regulations that many years ago were supposed to develop free and fair competition for healthy markets; as opposed to the free-for-all filthy markets nowadays where foul competition can occur, especially with no regulation or de-regulation.

Yes, the rules forbid certain practices. Relative to diversity the main thing you’re missing is the competition law (Antitrust in the US considered old-fashioned nowadays). Regulation was supposed to stop practices restricting competition between businesses, particularly with cartels and monopolization. The classic case in US law was the Sherman Act (1896) but no politician had the guts to really enforce it until Teddy Roosevelt did in 1911. Standard Old was found guilty of monopolizing the oil industry and was divided up, diversified, into competing firms.