Saturday, April 28, 2007

Government Regulation

William J. Polley has a very intelligent grasp of economic reality, here and here; but equally, Cactus at Angry Bear, here and here, has many fine points to make about market structure. What difficulty I have with both attitudes comes from their lack of use of the elements of Supply and Demand in the discussion. Here is where one will find the real development of markets.

We all have a rudimentary grasp of externalities, asymmetric information, and criminal intent which impacts upon any market structure. Demand in a market may be defined by Public willingness to participate in a market, a variable context based upon the needs and desires of the Participants in that market. The simple existence of the Competitors, Craigslist and Ebay, acknowledge that those needs and desires vary among Participants, who will migrate to the markets best suited to their personal needs. Supply can be expressed as those Traders willing to adopt a pattern of regulation which suits the level and type of Participants they would service. Here again We have reached a simple estimate model of Supply and Demand.

The Reader should at this time question the imposition of Government regulation, stating this would exist outside the Supply/Demand model, but does it? The Answer is that Government regulation does not extend beyond this Supply/Demand model. Government regulation appears only the most stringent of regulatory controls on a Market, based upon the degree of security desired by the Participants, and the desires of the Traders to promote the image of security in their market structure. Government regulation, in order to be passed, must possess the support of the majority of Participants in the market structures. Here is the essential truth: Government regulation is nothing more than another market structure to ensure the degree of security felt by Participants, though the reality may possess more threat than imagined. lgl

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