Market Bubbles Maybe Socially Efficient? (An Oppossing View)
For the sake of argument I’m linking to this article suggesting that financial deregulation could prove effective under certain circumstances. I don’t happen to agree with the authors. In fact I am of the belief that a process of inefficient capital allocation is detrimental to most participants (with the exception of middle men and fortunate speculators). Using this type of thinking I remember watching Thomas Friedman on Charlie Rose advocating the creation of a new bubble in green technologies. I have to disagree with this type of logic- over investing in something as well as having extremely liberal regulation is likely to result in lower ROI and larger chances of permanent capital loses.(Here’s the kicker who’s capital would be lost? Mostly that of pension funds, institutional investors,etc . Who do they manage money for? The idea of having better technology and lower purchasing power doesn’t sound optimal.)
P.S. I’m an advocate for renewable energy and green technologies but I believe that social progress should be balanced. Whats the purpose of working out your biceps if the rest of your body is weak.
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Introduction (Via Vox.Eu)
The financial sector is prone to crises, which are typically associated with serious effects on output and employment. This column weighs the costs and benefits of financial deregulation that spurs temporarily high growth that then collapse and suggests that bubbles may be socially efficient.
Excerpts (VIa Vox.Eu)
his shows that financial deregulation would be desirable under the Rawlsian criterion if one can find suitable social protection mechanisms, and that the effectiveness of those mechanisms should be explored as part of the grand design of new financial regulations – especially before enacting new regulations that would stifle the dynamism of the financial sector.
Click Here To Read About Why Market Bubbles Maybe Socially Efficient
