Do not think about, write about or deal with human behavior until determining the effects of incentives.
“It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense… They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.” Adam Smith, The Wealth of Nations, Book II, Chapter III
Lehman Brothers were watched constantly by federal overseers, but the firm went bankrupt.
Freddie Mac and Fannie Mae had 200 federally-mandated keepers with nothing to do but watch over them. They required massive government bailouts. If anyone has examined a mortgage repayment protocol, he will realize it’s a real feat to lose money on a mortgage because in the first few years, most of the payments are interest so the property must lose a substantial portion of its value to be a losing proposition for the lender.
Bernie Madoff’s dealings were all approved by federal regulators. He ran a Ponzi scheme for years. and ruined thousands of people.
The answer to these failures is–more federal oversight.
No one watches one’s money more carefully than the person himself. The person providing government oversight loses nothing when he fails. The answer to failure is not to do more of the same.
Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies
