Robin Hanson is surprised to find that people know that voters don’t control regulators and that people are happy about this state of affairs.

He looks for really complicated reasons for why people feel this way. He also tries to fit the answer into the farmer/forager paradigm, which is a concise example of why I find him almost unreadable.

There is a much simpler answer that doesn’t involve farming or foraging. The answer has two parts: 1) The average voter doesn’t know shit about banking and 2) The whole notion of having voters somehow write banking regulations is absurd (how would it even work?).

4 Responses to Regulators

  1. Handle says:

    Next up, voters decide the precise composition of the concrete in the levees in New Orleans. A little cement over here, some aggregate … oh, wait, that would be completely insane.

    Most normal people prefer, and are happy with, civil engineers making those decisions not because they are farmers or foragers but because they’re humble enough to admit the limits of their competence and want capable, responsible people to be in charge when the safety and security of themselves and their families is at risk.

  2. All true enough. The problem arises though if regulators don’t know shit about banking either. To put it another way, given that voters don’t know shit about banking, their assumption that we need oh so expert Smart People ‘regulators’ running around declaring this and that is, itself, highly suspect as well.

    This applies to all subjects on which voters are (admittedly) too stupid and end up delegating. It’s untenable to say voters are too stupid to write rules on a subject yet turn around and implicitly say they’re smart enough to know which subjects need to be delegated, and to whom. There is an assumption being used here to bridge that gap, and the assumption is that surely Smart People must know what the hell they’re doing. You know how I fell about that assumption.

  3. Alex J. says:

    Who said anything about voters (banking-consumers?) writing their own regulations? Different regulators could create their own regulations, and announce which banks are in compliance with them. The individual banking consumers could then choose which banks to patronize. They would be unlikely to actually read the different sets of regulation, instead would go by reputation, expert advice, firm longevity etc. to pick the best one. The average consumer doesn’t have to be an expert, so long as the marginal one (that is, a speculator who can short the bank’s stock) is informed.

    The point is not “banking regulations for everyone!” the point is to have options, even the option to cede the decision to someone else. I mean, just maybe, the NRSROs should be out of business right now.

  4. Lester Hunt says:

    It’s been a while since I read the Robin Hansen post, but I thought he was concerned about the “autonomy” of the regulators — that both voters and elected officials have no direct oversight. Not exactly a stupid concern, in a democracy. They are an unaccountable aristocracy.

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