Britain's Economy Is a Disaster and Nobody Is Entirely Sure Why

[Admiral Yi]

The whole 'too much regulation' mantra reeks of ideology-driven bullshit. The problem is not the quantity of regulation. Is whether it is good or bad and how it is enforced.

Agreed.  It's the mirror image of the "too little regulation" mantra.

[jimmy olsen]

The thread title is a little confusing. 
It's not a big mystery why the UK economy is lousy - the mystery is the sharp dip in the productivity numbers.

I just used the title the original article used.

[Sheilbh]

The Buzzfeedication of the Atlantic

[Valmy]

The whole 'too much regulation' mantra reeks of ideology-driven bullshit. The problem is not the quantity of regulation. Is whether it is good or bad and how it is enforced.

Well that is true.  The regulation aspect is complicated.  Obviously you need some regulations.  Hopefully they are commonsensical, reasonably easy to comply with, accomplish what they are there to do, and are consistenly and fairly enforced.

[Martinus]

The problem with regulation is that while it stiffles growth, to a degree, it also curbs excesses which cause global financial crisises like the one of 2008. So it is not a binary choice - do we implement regulations now to prevent another crisis despite the fact that it may hinder the recovery - or do we wait until the economy gets better, but risk the fact that by that time the political will to regulate will be gone and the "if it is working why fix it" mantra of the 2000s will return.

If we were operating in a world where political decisions are taken by wise men who are not influenced by public sentiments and lobbying of interest groups, but only by the good of the polity, then I would say lay off regulations for now and implement them later. But sadly this is not the case.

We are like a doctor who gets hold of a terribly sick patient for a while but knows that once he begins to recover, he will skip the hospital and return to his unhealthy habits - so our only shot at curbing those habits is while he is in a trauma and in our power.

[Valmy]

The problem with regulation is that while it stiffles growth, to a degree, it also curbs excesses which cause global financial crisises like the one of 2008. So it is not a binary choice - do we implement regulations now to prevent another crisis despite the fact that it may hinder the recovery - or do we wait until the economy gets better, but risk the fact that by that time the political will to regulate will be gone and the "if it is working why fix it" mantra of the 2000s will return.

If we were operating in a world where political decisions are taken by wise men who are not influenced by public sentiments and lobbying of interest groups, but only by the good of the polity, then I would say lay off regulations for now and implement them later. But sadly this is not the case.

If they are too corrupt to create regulations when they are actually needed, and lay off when growth is needed, then why then would they expected too be wise enough to create regulations that would be effective at curbing these excesses?

[crazy canuck]

The problem with regulation is that while it stiffles growth, to a degree, it also curbs excesses which cause global financial crisises like the one of 2008. So it is not a binary choice - do we implement regulations now to prevent another crisis despite the fact that it may hinder the recovery - or do we wait until the economy gets better, but risk the fact that by that time the political will to regulate will be gone and the "if it is working why fix it" mantra of the 2000s will return.

The one thing you said that is correct is that implementing regulation is not a binary choice.  Then you went on to create a binary choice.

[DontSayBanana]

Um what he was saying is it SHOULD be small (well...smaller) potatoes when some banks fail, instead of an existential threat to an economy like it is right now in the UK.  And how is it ridiculous that excessive regulation makes it tougher for the little guy?  Of course it does, compliance is not cheap to say the least.  That does not necessarily mean that is the only reason but to say it is ridiculous seems to go against what is plainly obvious.  Surely it is not a suprise increasing the costs of doing business does indeed increase the costs of doing business.

Difficult for smaller businesses is one thing, but he all but said regulation is intrinsically anti-competition.  He conveniently steered away from mention of (admittedly sometimes paradoxically) pro-competition regulation.  Also, he's completely wrong about market's effect on supply and demand- the bigger a producer gets, the cheaper its supply becomes, and the cheaper it can afford to render products and services.  He paints the market model as a network when it really functions as a hierarchy.

[Valmy]

Difficult for smaller businesses is one thing, but he all but said regulation is intrinsically anti-competition.  He conveniently steered away from mention of (admittedly sometimes paradoxically) pro-competition regulation.

I think he was only referring to this one particular industry in this one particular country, banks in the UK, and how the way they have been regulated and that impact on creating the circumstances where the country had to bail them out.  I do not see how he conveniently steered away from any particular sorts of regulations since those sorts of specifics were not discussed in this short speech.

Also, he's completely wrong about market's effect on supply and demand- the bigger a producer gets, the cheaper its supply becomes, and the cheaper it can afford to render products and services.  He paints the market model as a network when it really functions as a hierarchy.

I don't follow.  When did he say economics of scale do not function?  And how does the market function as a hierarchy and what does it mean for it to function as a network?  Also we are talking about banks here, it is not like smaller banks are known to charge more fees and have poorer interest rates.

[Warspite]

Two issues get conflated, by both sides, in the deregulation debate.

The first question is whether it is appropriate - ie, is there too much or too little. The second is whether the regulators are able to be effective. Plainly, when the best talent is as a rule hoovered up by the regulated, as in finance (no one wants to work for the FSA if they can help it), then the regulator is always going to be one step behind whatever the legislation.

Thus a failure of regulation can often have little to do with the actual amount of regulation.

Personally, I think the issue in the UK is of limited resources of the regulator. Not sure how you fix that.

[jimmy olsen]

Personally, I think the issue in the UK is of limited resources of the regulator. Not sure how you fix that.

Give them more resources.

[MadImmortalMan]

The mismatch between the desirability of City jobs vs the desirability of regulation jobs has to be astounding. I don't know, but I'd bet the gulf is huge.

[Martinus]

Personally, I think the issue in the UK is of limited resources of the regulator. Not sure how you fix that.

I thought the revolving door between the City and regulators was quite busy in the UK. You will never have parity in terms of salaries but at least government jobs are not paying pittance (unlike, say, in Poland).

[garbon]

We are like a doctor who gets hold of a terribly sick patient for a while but knows that once he begins to recover, he will skip the hospital and return to his unhealthy habits - so our only shot at curbing those habits is while he is in a trauma and in our power.

That's odd. I don't want a doctor who forces me to abide by his decisions.

[Josquius]

yet the obvious question was asked despite an obvious answer being right there

Did you read the article?

Of course.