People do lost of things for free, so it's clearly not that simple. The world is a lot less black and white than you give it credit for, that's why regulations need to exist.
Do you believe in the free market?
- Thread starter rcoobc
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I think you have been reading too much freakonimcs lol which to the untrained eye seemed amazing use of econometrics to push a viewpoint in the end was like most stats - riddled with holes.
You forget to mention that there needs to be controls on capital flows and letting companies shift costs around through transfer payments.
Once again, you are putting forward assertions with no background logic. If anything, I think I have a more realistic viewpoint than someone who has a doe-eyed opinion of government regulation without assessing the practicalities.
The ironic part is that the same people championing less taxes are usually the companies who are big government contractors.
I've actually never read Freakonomics! An example of why capital controls don't work is Cyprus. When the government was about to shut down the banks, most institutional and high capital investors were tipped off a couple of days beforehand to get their money out of Cyprus.
Not do away - improve.
That tipping off was illegal -so you can't assess the control based on illegal activity. But if we use that logic then does that mean the secondary market for shares ie stock markets are poor ways to invest because insider trading goes on and loads of tips happen and there is share manipulation?
Not necessarily. But it has to play a part when we talk about how effective the regulation is. If a regulation fails to do what it purports to do, then you're probably attempting to regulate something you shouldn't. Insider trading is a contractual issue between the employees and their companies, I can't see how introducing criminal penalties makes sense to begin with.
It's the same as the drugs prohibition debates, governments are trying to regulate something they shouldn't; and not only does it not work, but it creates massive social problems, some of which are nearly bringing down entire countries.
I can imagine you in 1840 going: "Yeah, how dare people assume or want their governments to allow them to own slaves. The vast majority of people want to, and civilisations have had them since the birth of Jesus."
Fantasy world indeed.
You heard it here first, folks. Government funded education and roads are literally as bad as slavery.
I love how you then ironically added "fantasy world indeed", as if you didn't just confirm to everyone who isn't a libertarian that you are indeed living in a fantasy world.
No, the implication was that the reasoning you were using is just as retarded as those that anti-abolitionists used. To be honest, you're not actually contributing much to this discussion so far, all I've seen you talk about is Ayn Rand and how supposedly crazy libertarians are.
Insider trading is a contractual issue and not criminal. Thats truly wrong. It distorts the market.
How would you describe your economic perspective / outlook - any particular school of thought?
Bow down Godwin's law, make room for Andrew's law.
Happily, it's not my responsibility to improve your reading comprehension. But, then I suppose you're quite big on personal responsibility in the first place.
I should add that your example was inaccurate. My country actually banned the slave trade well before 1840. You're an American, though, aren't you?
So you believe in zero regulation / control ?
It does distort the market, that much is true. But so what? Markets adjust very quickly, and it can actually have a positive effect by bringing information to the market faster.
I don't have a particular school of thought, but I've been influenced by the early Austrian school, early Keynes, public choice theory and people like Steve Keen in recent times.
No, but I would say I'm very sceptical over the motivations and effectiveness of it.
Oh, my bad! Didn't think there were a lot of British libertarians (or classical liberals, if you wish).
Where have you studied economics?
Lets say insider trading is legal, you argue that the market will quickly adjust to incorporate this material non public information quicker. But how so?
Currently as an insider lets say I know the quarterly figures are poor and I dump my shares early - this under current law is considered fraudulent and rightfully so. Currently the share prices essentially encapsulates all our votes on the price of the shares based on the public information available. Now if we assume that many people have insider information which they act upon against say me who does not. How would I react? It would cause more volatility because the premise that we are working on the same information available is broken which will lead to greater volatility or market participants leaving the market ergo lower liquidity if there are fewer buyers or sellers.
So in your version it would actually be worse for everyone.
I believe that you think that if everyone with insider information acts upoin it then the value of that information will drop as the market adjusts it away but the market will not adjust it away - it becomes a self fulfilling prophecy, You will get panic buying and selling.
The University of Manchester. And the market would adjust, even if the distribution of information is asymmetric, because most traders I know are extremely good at technical analysis. With the right experience, it's not necessary to have all possible information to make educated guesses about market movements because of the amount of data available from trading platforms. That being said, there are very few trades where information isn't asymmetric, so I don't see what your point is.
Panic buying and panic selling aren't necessarily bad things, they are just normal market phenomena given certain variables converge; some people make money and some people lose money. There's nothing particularly interesting about it.
It would lead to market failure as I highlighted because only people with skills, data and insider information would participate in the market reducing liquidity. If you the market is always volatile or very hard to determine prices then institutional investors would pull out thus starving companies of vital funding when they want to raise finance through equity funding.
I take it you work as a trader?
Nah! I'm an amateur trader at best, but I've got a couple of interests here and there.
To be honest, I'm not convinced that a reduction of liquidity in stock markets would be a bad thing. However, I don't think the market would be volatile at all. Major price movements only come about when there is a fundamental problem with a certain sector or asset. An example is that Facebook IPO (or to a lesser extent the Manchester United IPO); it started out very high, but there was an obvious problem in that Facebook is an incredibly high expense business with very little monetisation potential because people aren't going to pay for a service like that. So the price dropped very quickly. Institutional investors knew this, but they were the ones who bought the initial shares and made a killing. So it's highly unlikely that institutional investors would exit the market because, more often than not, they are the beneficiaries of insider information.
This self interest point reminds me of friend at uni who after a media studies lecture concluded all films are derivatives of westerns.
Any scrap of similarity is evidence to point, regardless of any other possibilities.
Even in suicide you can argue the self interest I am sure, but that does not prove any point whatsoever.
Any scrap of similarity is evidence to point, regardless of any other possibilities.
Even in suicide you can argue the self interest I am sure, but that does not prove any point whatsoever.
Jeez, you're making good points but that size text is too much man, my eyes hurt
DFreshKing said:
I don't see how you can argue that people commit suicide out of anything other than self-interest.
Does self interest include doing things for family members?
You'd say the same thing about people not commiting suicide too though, surely?
I know this is the crux of it, but its a bit of a pointless argument.
As i said a pointless argument. People often wish to die to avoid being a burden to others, that is not self interest. Plus the basis for the theory is genetic disposition to aid survival, suicide is not congruent with that even if you can semantically argue suicide is a self interest act.
If anything suicide is a selfish act and you have already been at pains to point out that is not the same as self interest.
Well yes. I don't see why it's pointless. Once you have that model determined (the self-interest model), you can have meaningful discussions about how people would interact in the market instead of creating systems which don't correspond to the model, eg socialism.
You really haven't been reading what I'm saying at all. But before that, most people who commit suicide have some kind of mental illness which impairs their ability to do the normal cost-benefit analysis of actions.
And yes, self-interest =! selfishness.
You are an efficient markets hypothesis guy where you believe the market is informationally efficient. But that has been debunked.
The more people who are participating in a market and acting on price signal leads to a better pricing of the said instrument - when there are fewer participants this leads to a higher probability of pricing error.
Those institutional investors you mention who made a killing are Hedge Funds, most pensions funds can only buy shares once they become public and are in the ftse 100 - or whatever other restrictions they have - many are obliged to buy. So your key point is weak.
Also the share price of Facebook was going to fall as the number of shares that were available increased as insiders were able to sell once their lockup period had expired- there was tranches in November last year if I recall correctly.
So simple question - Raj Rajaratnam who was recently convicted of insider trading with Rajat Gupta ex head of Mckinsey should never have been indicted in the first place?
You know about front running? Whats your take on it.
These models break down when people carry out selfless acts and the impact of moral hazard.
http://www.guardian.co.uk/business/2008/oct/24/economics-creditcrunch-federal-reserve-greenspan
I will not be reading any more it is pointless.
You cannot accurately model something when all outcomes are determined as having one root cause.
Your model is complete with absurdity of it all.
Model
self interest = everything
Look you can't have a free market which will self regulate and not be open to abuses. Its in our nature to be greedy and to take shortcuts. Deregulation is the reason we have been in this shitty global economy going on five years now. You wouldnt let kids be in a school without any teachers, patients in a hospital without nurses or doctors and you certainly shouldnt let corporations, banks and wall street etc run wild without checks and balances. On top of that huge multinationals should not be getting away without paying taxes. It all seems pretty straightforward to me but maybe I am missing something.
There in no real free market. What government won't influence any commodity flows unless they are under the yoke of some Corporate Tyranny or Military Dictatorship. Simply put; Protectionism works, Mercatilism works, Dirigism works, Imposing currency controls is absolutely imperative. The almost lunatic credulity of free markets fanatics, especially Ayn Rand votaries, with their false illusion that it is the best vector and guarantor of human progress and prosperity.
Anyone who chooses to predicate their politics and policies on the ramblings of Ayn Rand should be locked up as far as I am concerned
She is as batshit crazy as her followers - she died penniless claiming Government benefits from an institution she loathed - how ironic.
I'm not understanding this...your sentence seems to be missing something...what about their lunatic credulity?
Yep, something thats always glossed over it seems
Oh yeah. Given the complete failure when "free-market" policies have been implemented; Latin America, Russia et al. There always was and will be massive state intervention in capitalist economy for the benefit of corporate and finance sector.
Do these free market zealots believe things like tax-payer finance research and development, intellectual copyright, tax havens, state bailouts, so-called trade agreements, corporate charter liability laws don't tilt the "market" in their favor?
A massive nanny state will always be there for the powerful.
I understand that, but the part of the post I bolded still makes no sense to me. Is it missing a conjunction beforehand or a clause afterward? Sorry.
It's just a poorly phrased sentence, I think. Knowing that, the meaning is clear enough.
