SecondThoughts

Paulson's Injustice to the Trial and Error Economy

Seems naive. It seems that Conerly describes a three-step "trial and error" free-market "solution" that dramatically failed. Yet, he seems to think this is OK policy because "it will be years before those investors touch that hot stove again." Yeah, that's naive. Adam Smith's theoretic construct of competitions rests on, among others, the twin assumptions of perfectly rational households and businesses relying on a constant stream of perfect information. It is through these twin portals that effective government rules and regulations pass. Households and businesses need to be protected from their own foolishness (lack of rationality--ability to be tricked) and from the fact that they don't know everything there is to know pertaining to the economic/financial decisions they make on a daily basis. Government regulation sets parameters within which these economic agents operate. This doesn't in any sense prevent Conerly's entrepreneurial experimentation.

"Stated income loans", Conerly admits, are "pretty stupid" retrospectively; I think that they were pretty stupid prospectively and a good "regulation" would have precluded their implementation, through experimentation or otherwise. Relatedly, people who fail to report cash income to the IRS face the consequence of not being able to prove their income.