Be Our Guest is an open invitation to NOL‘s readers to participate with us. Pretty much anything is on the table. The latest article comes from the Freeconomist, who is following up on his earlier piece about making Brexit worthwhile via information asymmetries. His new piece is on financial regulation through the prism of Brexit. Check out this excerpt:
I do not want to write a lengthy discussion on the question of which alternative is the least costly in dealing with the incentive problems arising from the implicit subsidy by the taxpayer. There are good reasons to believe an incremental, decentralized and evolutionary system of market-based regulation to be superior to centrally designed government regulation. (4)
But even if this is the case, private regulation arising as a response to the incentive problems resulting from explicit and/or implicit government guarantees is still costly. Indeed, the evolved system of private regulation in the UK banking industry was giving the appearance of a restrictive cartel. If my analysis is correct, this “cartel” served a useful social function, namely to deal with the incentive problems created by the implicit government guarantee. Nevertheless, it also involved costs.
At the root of the problem are the taxpayer guarantees.
Please, read the rest. It’s another excellent piece of work.
And don’t be afraid to submit your thoughts to us.