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August 17, 2012

Comments

You shouldn't be surprised that a Bush acolyte has proposed loosening regulations on financial advisers of this sort. These are the people that bilk low-information investors into transactions that aren't necessarily in their best interests.

That said, he still would've been a better pick than Paul Ryan, as the nuances of things like this are much less understood by middle class independents than Ryan's overt plans to do away with Medicare and privatize Social Security.

"Nearly every activity that creates pollution also creates value, so yes, we don’t want to over-regulate here."

If you're going to play the valuation game, you have to balance both sides of the equation. Do you value clean air and water? Do you value workers' rights not to be exposed to toxins? What level of negative externality are you willing to tolerate to allow profit-seeking value creation to avoid accountability?

For instance, the BP Deepwater Horizon explosion destroyed or degraded the value of other Gulf marine enterprises and their products (as well as killing 11 men) while in the pursuit of value creation. So which is a better system, a lengthy, heavily-flawed and manipulated court system dominated by lawyers and their rent seeking, or a regulatory regime which works to prevent such disasters in the first place by putting justifiable burdens and accountability on the activities of the offshore oil extraction business?

My point is, you can't arbitrarily assign value to some creations while entirely ignoring the *inherent* value of other things, such as clean air, safe working conditions, et cetera. It's intellectually dishonest, just as NIMBYism is.

"Electricity generation is a value-creating business, so we don’t want to over-regulate that."

Would you be okay with your neighbors incinerating their garbage to generate electricity, for instance? They're creating value, after all, but your living situation is smoke- and noise-filled. What is your bright line for 'over-regulation,' exactly?

"Manufacture of automobiles is a value-creating industry, so we don’t want to over-regulate that."

Is the production of cameras and LCD displays and the computer systems that run them not also value creation?

If you've ever been backed up into by an 18-wheeler, as I have, you MIGHT value the idea of a prole truck driver having the visual capability to prevent destroying the life, health and property of others. Do you oppose mandatory seat belt inclusion?

On the that point you cite, Portman doesn't even make sense when he says that it is contradictory for the Payment Advisory Board to cut reimbursement rates without reducing benefits while not "finding new ways to increase value". A reduction of costs for the same level of benefits is DE FACTO value creation in the form of maximization.

This just goes to show that Rob Portman either doesn't understand value transference, or he's trying to protect those (wealthy doctors and for-profit hospital administrators, in this case) who take advantage of asymmetric information to transfer value. I'd bet it's the latter.

Still, his cagey act is much easier to buy than Paul Ryan's appeal to the godly virtues of suffering in retirement.

And exactly why aren't you examining Paul Ryan's proposed tax plan which would see Mitt Romney, who produces no value through work, pay nearly nothing on a eight figure income?

[HS: Most of your post is about externalities. I agree that the creator of externalities should be taxed for the externalities, otherwise it's value transference. I am also aware that leftists like to vastly exaggerate the externalities of environmental damage and cannot be trusted to honestly and scientifically measure those externalities. I support the HONEST and scientific and conservative measurement of externalities, then companies producing those externalities are charged an appropriate fee.]

The number of commission salespeople in financial services who could get an engineering degree could probably be counted on one hand. They're just not smart enough, though they have excellent sales and personal skills.

The EPA needs to be smacked down. Hard. Granted, Sackett may have gone a long way towards fixing that. Their core mission is legit, but they've gotten completely out of control.

The backup cam rule might actually be economically beneficial. Hard to say, but I'd like to see financial analysis before passing judgement, and I wonder how much of the cost to automakers comes from no longer being able to demand purchase of a $2000 stereo/nav package to get one.

As for the medicare board, you know as well as I do that all that's going to do is create a massive self-perpetuating bureaucracy that will almost certainly cost more than any savings from preventing "ripoffs". The question isn't whether the government is getting ripped off, but whether getting ripped off is more expensive than the proposed measures to prevent it. My guess is it isn't.

I think you miss Portman's point on the Independent Payment Advisory Board. First of all, it's another government bureaucracy, which is the last thing we need in health care. Also, as Portman indicates, it has a contradictory mandate of cutting provider reimbursements while not reducing benefits. Hmmm, how's that one supposed to play out? It's a classic case of the President and Congress offloading tough decisions to unelected bureaucrats with no political accountability. If it were designed to prevent fraud and abuse, it might be worthwhile, but that's not the point. There are a lot of problems with health care in this country, but a lack of government bureaucrats is not one of them.

On a different note, your loyal readers haven't heard much about your vacation. Where did you go? Have a good time?

Half Sigma,

"I support the HONEST and scientific and conservative measurement of externalities, then companies producing those externalities are charged an appropriate fee."

You do realize the the cost of environmental clean up (making things whole) is much much higher than the cost of regulations designed to prevent environmental destruction in the first place, correct? Plus the act of cleaning up doesn't *create* value, it merely attempts to *restore* lost (or transferred) value. This doesn't even include opportunity costs.

The regulatory model, on the other hand, allows for value creation while minimizing value destruction. You should be supporting this, not contriving ways around this reality, particularly with your political-spiteful obsession with the imagined acts of leftists.

Leftists don't exaggerate environmental costs, they just place a HIGHER VALUE on a pristine environment than you do. It's about values as well as valuation. These disparities should be sorted out through democratic governance and negotiation, but with the outsized ability of big business to monetarily influence legislators and legislation, this usually doesn't happen until there's a highly public disaster like Exxon Valdez or Deepwater Horizon.

Do you think leftists exaggerated the costs of offshore drilling externalities in light of British Petroleum destroying billions in value of other Gulf industries such as fishing and tourism?

You *know* there are hidden costs to such activities, but you seem to prefer the tedious act of sorting them out *after* they become a problem rather than avoiding the problem in the first place.

This way of doing things will come to be seen by future generations as absolutely idiotic. But if you make a buck in the meantime, why should you care?

Is there anyone in any industry who offers "help" on paid commission and can generally be trusted not to be scum?

I thought there was a reason big boxes like Best Buy went to no commission employees

"Commissioned people in the financial services industry offering investment “advice” are the world’s worst scum, and any regulation is appropriate. The worst that could happen is that people find working these jobs to be unprofitable, and they decide to do something more useful with their lives such as work in engineering where they can develop real products that improve people's lives, creating real value."

When I was in life insurance sales I saw enough crap to last ten lifetimes. And supposedly the brokerage industry's even worse. The financial services industry (which includes life insurance) is set up in a way that even basically honest salespeople are turned bad in short order, if they want to survive. It's not just that everyone's on straight commission. They're also under relentless quota pressure, and typically get zero help from the companies in developing a book of business.

The mediscare board is nothing but a lie and a scam (not to mention a giant, bloodsucking bureaucracy soon to come). They will ration care by setting payments below costs. The rest of us will pick up the cost, or the care will be unavailable, and when costs get transferred we pay more because of the inefficiency.

The giant lie is that they will say that Medicare provides all these services, but in reality they won't be available. And of course what is covered will be entirely political. AIDS coverage will be gold plated, because liberals love Gay People, Diabetes coverage will be slashed, because liberals hate fat people.

"Commissioned people in the financial services industry offering investment “advice” are the world’s worst scum, and any regulation is appropriate. The worst that could happen is that people find working these jobs to be unprofitable, and they decide to do something more useful with their lives such as work in engineering where they can develop real products that improve people's lives, creating real value."

I wouldn't extrapolate from your brief experience as a cold caller that all financial advisers are scum, and, in any case, the financial industry is already highly regulated. Without knowing the details of the regulation Portman mentions, I'd be wary of speculating on its merits or lack thereof. But I do know that when Portman was a Congressman, he (and his Dem colleague Cardin) took the lead in retirement plan legislation, and if the regulation he's talking about refers to this, it may not be as cut and dried as you think.

Company retirement plans (401(k)s, etc.) are one area where financial advisors do some good work, in educating low-wage workers about the importance of saving for retirement. While a lot of that may seem like common sense to you, it's like a foreign language to lots of low wage workers. I've seen the looks on their faces during these sorts of presentations.

There are a couple of other issues to bear in mind here. The first is that current government regulations include a bit of social engineering designed to encourage company management to get its low wage workers saving for retirement, for example, by yoking contribution percentages of high wage workers to those of low wage workers. The second is that I suspect some of the fiduciary regulation is backed by registered investment advisors trying to build a moat between themselves and commissioned registered reps, even though, in practice, there's little difference in their incentives or how they get paid in certain contexts (e.g., they're both getting a vig on assets under management if they sell a 401(k) plan: the registered rep gets paid by the mutual fund companies, and the RIA takes his own fee).

HS libertarianism: gov controls on soda cup size, food stamps for all, Keynesianism, wealth transfer schemes combined with (wink, wink) high taxes on gov-connected wealth-transferers, price-controls for medicine for old people and slow gov takeover of all medicine. HS socialism can't be any worse.

Funny, when it's a Republican in the White House or a Republican majority Congress, none of these democratic-initiated regulations ever get nullified; in fact, the Repubs just add more regulations (or government agencies a la TSA). Guess there really is no difference.

@HS: "I agree that the creator of externalities should be taxed for the externalities ... I support the HONEST and scientific and conservative measurement of externalities, then companies producing those externalities are charged an appropriate fee."

It isn't always that easy. Markets and price signals are the preferred solution, but they don't work for all situations. The hard cases are the externalities that can't be offset with money. No amount of money can compensate for death or injury. The regulatory state may be the only viable mechanism for managing some externalities.

A good example of the waste of the EPA is some of the clean up rules. The EPA makes everyone clean up a site to the point that if civilization collapsed and someone moved onto a site to become a subsistence farmer, that the soil is clean enough to be used for agriculture. What is ironic is that the EPA forces everyone to assume that people will live to 70 years of age after civilization collapses.

The end result is that millions are spent on consultants, lawyers, and clean up companies on land that is worth only a few thousand dollars.

One of the reaons that the U.S. has been decreasing manufacturing is that the EPA has made it too expensive to be involved in an industrial process.

"Leftists don't exaggerate environmental costs, they just place a HIGHER VALUE on a pristine environment than you do. It's about values as well as valuation. These disparities should be sorted out through democratic governance and negotiation, but with the outsized ability of big business to monetarily influence legislators and legislation, this usually doesn't happen until there's a highly public disaster like Exxon Valdez or Deepwater Horizon."

The government can't be trusted to determine value on economic activity because the liberals who occupy DC's various regulatory agencies have a stake lying/overvaluing leftist policy objectives in order to divert more taxpayer money to their pet projects such as the racial diversity industry or the (non-existent) Global Warming crisis.

Public sector value transference is a greater threat to the middle class than is private sector value transference/malinvestment.

"Do you think leftists exaggerated the costs of offshore drilling externalities in light of British Petroleum destroying billions in value of other Gulf industries such as fishing and tourism?"

The left has lied about the benefits of their policies in order to enrich their own think tanks, university departments, unions, and government agencies.

The government apparatus lied about the health benefits/value of high carb low fat diets in order to create an obesity epidemic that could be used as an excuse to set up more leftist government agencies dedicated to fighting obesity.

The government lied about the value of carbon emission reduction in order to divert funding to corrupt government investments in clean energy, such as Solyndra.

The government lied to millions of American students about the value of non-marketable college degrees in order to enrich their leftist liberal arts partisans.

@John: One problem is, the way the govt. regulates externalities, companies are "punished" with fines, paid for by their customers and investors, and those who actually commit the nefarious deed get off scott free.

So we should let industry dump toxic waste into rivers, and if the people downstream don't like it, they can go to court and sue for damages? Yeah, that sounds good.

The regulatory state is the worst possible system, except for all the others.

Finance is a slam dunk on regulation. With the exception of venture capital there is very little value created by the industry. Its most useful products are simple decades old instruments that are already low margin and co
competitive. I would take a hacksaw to all financial innovation with the goal of reducing finance as a % of GDP equal to its long run average.

Industries where things actually made are trickier.

"Do you think leftists exaggerated the costs of offshore drilling externalities in light of British Petroleum destroying billions in value of other Gulf industries such as fishing and tourism?"

They failed to consider the benefits of offshore drilling, so yes, they (environmentalists, not all of whom are leftists) exaggerated the net cost. Though fishing on a subsistence level is always possible, the two industries you mention wouldn't exist without oil. What damage there is will eventually dissipate (see Ixtoc), and deviation from established procedures should certainly be punished, but we get a lot of benefit from offshore drilling and all other oil development. It's foolish to pretend otherwise.

It's not that hard to recognize bad products that are low value and need to be regulated or banned. Many of the problems with regulatory bodies could be improved by taking regulation seriously. Hiring top talent (whatever the price) then giving them the authority, resources, and respect to do their jobs right. Thats how they do it in Singapore, a county routinely cited as the freest in the world.

The Undiscovered Jew,

If the left really cared about pristine environmental conditions, then the left would not support open borders and unlimited immigration.

What the left like is finding any excuse to control others and to give themselves more power. They rate a pristine envrionment when it gives them more power and do not care about the environment (when it comes to immigration) because open borders and unlimited immigraiton gives the left more power.

Managerialist faggots like John genuinely need their throats slit.

The regulatory state causes more death and suffering than any oogie boogie pollution. All this emotional appeals bullshit about "OMG RIVERS OF TOXIC SLUDGE AND POISON GAS WILL MURDER YOUR CHILDREN IF WE DON'T SURRENDER ALL CONTROL TO THE MANAGERIAL STATE" is idiotic fucking fearmongering. The extent of regulatory power that the EPA has is insane.

"What the left like is finding any excuse to control others and to give themselves more power."

Yes. Specifically, it gives them more power to "transfer value" to the liberal institutions where the left works such as universities, government agencies, think tanks, non-profit lobbying agencies, public sector unions, etc. This is why the left fights so fanatically to defend against even the slightest reduction in governmnet power: because reducing governmnet influence reduces the amount of money available to pay the salaries of SWPLs.

The left depends on creating bad policies and making current problems worse because the agencies SWPLs work for justify their funding on implementing or proposing policies to "fix" social problems that are either caused by the left or exacerbated by the left. And when their policies fail the left the blames the private sector or whites and demands more funding for their failed programs.

@ Undiscovered Jew

You forgot to mention that the parasitical Left need another group of parasites to do their bidding. What is "left" of the Left if NAMs aren't part of the equation?

Yes, externalities are exaggerated for the purpose of employing workers in value-transferring government agencies. Remember, the decision to internalize an externality is itself a cost-benefit decision. Most of the time, an externality is worth allowing because the underlying production is so valuable. Off-shore oil drilling vs. subsistence fishing/tourism in the Gulf is an example.

@El: "Managerialist faggots like John genuinely need their throats slit."

Hey HS, is this the level of discourse you're going to permit in your blog comments? I'm OK either way, I just want to understand the Rules Of Engagement so I can calibrate my own level of vitriol appropriately.

@El: "OMG RIVERS OF TOXIC SLUDGE AND POISON GAS WILL MURDER YOUR CHILDREN IF WE DON'T SURRENDER ALL CONTROL TO THE MANAGERIAL STATE"

By any chance, are you an extreme libertarian computer programmer? You seem to have a very simplistic binary view of things. Out here in the real world, there are policy choices in between "surrendering all control" to Big Business or Big Government.

[HS: It was the kind of inappropriate comment I normally would have deleted, I guess I missed it.]

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