Cafe Hayek - Latest Comments in Bear Stearns debacle

Re: Bear Stearns debacle

Methinks — Fri, 28 Mar 2008 14:23:43 -0000

Tell us how the FDA was responsible for the successful development of aspirin.

Not a good example. Aspirin preceded the FDA.

Let's see how if Muirdiot will even attempt to provide proof that the existence of the FDA results in more pharmaceutical innovation. And let's see if this proof is anything more than the usual convoluted bullshit. Somehow, I doubt it.

Re: Bear Stearns debacle

Sam Grove — Fri, 28 Mar 2008 13:57:03 -0000

There's not? Which country has the most innovative approach and successful production of new pharmaceuticals?

Correlation and causation are two distinct things.

Usually, you call for government to protect us from corporate power, now you seem to be calling for government to protect corporations from liability.

Tell us how the FDA was responsible for the successful development of aspirin.

Not to say that aspirin is entirely benign, but if it were to be brought to the market today, a pharm company would have to spend hundreds of millions of dollars to gain FDA approval, a cost which necessarily must be passed on to consumers.

Tell us why the 'morning after' pill, or even birth control isn't available over the counter.

Re: Bear Stearns debacle

Methinks — Fri, 28 Mar 2008 12:45:25 -0000

Which country has the most innovative approach and successful production of new pharmaceuticals?

Prove that this results from the existence of the FDA and not from the lack of price controls that exist in Europe.

Re: Bear Stearns debacle

muirgeo — Fri, 28 Mar 2008 12:26:18 -0000

"I don't even know how things would work out, specifically, in a free market."

Sam

That's my point. With no real world examples it seems a faith based belief to me.

Re: Bear Stearns debacle

muirgeo — Fri, 28 Mar 2008 12:24:01 -0000

"There is no evidence of any NET benefit from having an FDA to replace liability."

Sam

There's not? Which country has the most innovative approach and successful production of new pharmaceuticals?

Aaaand....Which one has an FDA? And an NIH?

Re: Bear Stearns debacle

Sam Grove — Fri, 28 Mar 2008 10:52:06 -0000

It has been stated that as many as 100,000 people die each year due to medication errors.

That doesn't stop people from taking medications.

The FDA denies experimental use of drugs to attempt to save the lives of those with a medical death sentence and who are willing to take the chance.

Re: Bear Stearns debacle

Sam Grove — Fri, 28 Mar 2008 10:16:20 -0000

So in the free market who will be the first to try the latest drug claimed to cure insomnia when the last one another comopany came up with took 20 deaths to find out it's wasn't such a good idea.

Are you trying to score a point or make one?

Have you any idea how many people die each year because they are unable to have access to drugs, in use in other places, because they have not received FDA approval?

You don't think pharmaceutical companies should bear risks for their decisions?

Why do they bother? They take the risk for the promise of profits. If they aren't sufficiently cautious about the promises they make for their product, then they suffer the cost. This makes them cautious.

There is no evidence of any NET benefit from having an FDA to replace liability.

When people die because of FDA decisions, no one at the FDA has to bear the cost. In fact, when government policy fails it tends to justify more government and greater subsidy. "Oh, it wasn't done right" or, "They didn't have enough funding.", etc.

You make a lot of claims about how things would work in a free market, but these are based on what I consider to be flawed premises. I don't even know how things would work out, specifically, in a free market.

What I do understand is that attempting to 'fix' things or make things work via political agency often produces perverse results, wastes resources, and produces a government so powerful that it enables some people, like the current administration, to use our resources are used in ways to which I have great moral objection.

There is no utopia. I make no claim for utopia. I don't even know what utopia would or should look like. I just operate from my comprehension of human behavior and motivations.

I understand that people are self interested. That's why I do not trust people with political power. Especially those with good intentions. Most especially, those who desire political power.

The idea that government and bureaucracies selflessly serve the common good is entirely lacking in either conceptual construction or historical evidence.

Re: Bear Stearns debacle

muirgeo — Fri, 28 Mar 2008 09:42:39 -0000

A free market must allow people to suffer the consequences of bad or erroneous decisions.

Posted by: Sam Grove

So in the free market who will be the first to try the latest drug claimed to cure insomnia when the last one another comopany came up with took 20 deaths to find out it's wasn't such a good idea.

That's how it would work with out an FDA (yes we can do better) and I suspect such inovation would suffer.

Would we have such clean air without catalytic converters?

Sam, I think you live in a world of non-market innovation that you take for granted based on assumptions that do not fit with historical facts.

Re: Bear Stearns debacle

Sam Grove — Fri, 28 Mar 2008 06:42:26 -0000

Muigeo assumes that the failure of Bear Stearns is an example of market failure.

To us free marketers, this failure is market discipline. A free market is not a guarantee of ideal human behavior or success. A free market must allow people to suffer the consequences of bad or erroneous decisions.

This is a lesson for all people.

A government bailout is subsidized relief for bad decisions and a violation of market functioning.

Re: Bear Stearns debacle

Methinks — Fri, 28 Mar 2008 06:20:49 -0000

Couldn't I use the same felonious argument to say why have police? Sure police can be corrupt too but better to have them then not. - Muirdiot

Before we answer any more of your stupid questions about the financial industry's "wizardry", I want to see you answer my question:

How is it that you couldn't get into vet school but managed to be accepted to medical school and are now licensed to practice on children? That seems like kind of a screwed up system to me. Why would we let people not smart enough to worm dogs graduate med school?

Go on. Let's see an explanation, "doctor".

Re: Bear Stearns debacle

Methinks — Fri, 28 Mar 2008 06:17:47 -0000

More regulation will mean that large sections of the population simply won't have access to credit. This group will include the young, the lower income brackets and anyone without an exceptionally high FICO score.

We've already tried that.

Re: Bear Stearns debacle

andy — Fri, 28 Mar 2008 01:21:45 -0000

Were there any similiar big failures or massive scandals from 1940 to 1965 like we've seen since Reagan.

In the beginning of 1950's the system was fully cleansed of bad companies, it takes some time for bad decisions to show.

Maybe I'm wrong but I get the impression that good oversight during that time keep failures and corruption to a minimum increasing confidence in the markets and spurring stable strong economic growth.

Look, this is like saying that if you jump from a skyscraper, there is no problem in the 100's stock. Nor in the 50's. Inflation causes these problems to be hidden - but these problems are build up for a long time. There was no incompetence in 2006. The incompetence was all done in 2007. No, there was incompetent lending in whole 2002-'s period, but low interest rates have hidden it. And the same is valid for the 1950's, money supply expansion simply prevented these failures to materialize. It has absolutely nothing with 'good oversight', because you just cannot guarantee that the oversight is going to be good.

You may guarantee that the oversight will kill the finance industry. Yes, if you don't produce, there are no failures. But if the enterpreneur cannot reliably predict that his businessplan is feasible, how the regulator can?

Re: Bear Stearns debacle

Mesa Econoguy — Thu, 27 Mar 2008 19:51:44 -0000

As always, Pink Floyd lyrics provide the answer:

Me:

Money, it’s a hit –

Don’t give me that do-goodey-good bullshit

Here.

Muirgeo:

Encumbered forever, by desire & ambition,

There’s a hunger still unsatisfied

Our weary eyes still stray to the horizon,

Though down this road we’ve been so many times…..

Here.

Re: Bear Stearns debacle

Mesa Econoguy — Thu, 27 Mar 2008 18:20:57 -0000

Were there any similiar big failures or massive scandals from 1940 to 1965 like we've seen since Reagan.[sic.]

Posted by: muirgeo

The 1930s were THE failure.

Maybe you’re wrong?

Dumbass:

The Great Depression.

How stupid are you? Wait, don’t answer that.

Doctor, my ass…. Your patients must be dead by now.

Re: Bear Stearns debacle

Sam Grove — Thu, 27 Mar 2008 17:09:36 -0000

Couldn't I use the same felonious argument to say why have police? Sure police can be corrupt too but better to have them then not.

Sure you wanna go there?

"Employing FBI "Return A Record Card" data, this study examines the impact of municipal police strikes on reported rates of burglary, robbery, larceny, and auto theft in 11 U.S. cities. Relationships reflecting the view that police presence is essential for crime prevention and social order are examined for variation duration of police strike, city size, and offense category. Overall, analysis yields very limited support for the police presence argument, suggesting that strikes have neither a significant nor a systematic impact on rates of reported crime. Implications of findings for the formulation of police policy are discussed."

link

Re: Bear Stearns debacle

Sam Grove — Thu, 27 Mar 2008 16:40:49 -0000

Had our government not had a decades long record of acting as a hammock, liability minded airlines would have prevented 9/11 from ever happening.

Not to mention the official policy of giving in to hijacker demands.

Re: Bear Stearns debacle

grunyen — Thu, 27 Mar 2008 16:08:18 -0000

I'm just an undergrad marketing student looking forward to a master's in economics next, so I'm no expert...

But I am writing an essay currently on pain in the market place. There were a long chain of actors leading up to this mess, from Congress, the media, the lenders, the borrowers, the appraisers, etc...

Any one of those individual groups could bear responsibility, or they all could. However, pain serves its purpose in the marketplace.

If those who acted poorly are spared the burden of the pain they created for themselves, they will continue such behavior in the future. In fact, there will be an increase in this behavior by others.

US airlines were vulnerable because they had the "safety" of knowing the government would shield them from the pain of liability from a terrorist attack. And sure enough, they were bailed out. Had our government not had a decades long record of acting as a hammock, liability minded airlines would have prevented 9/11 from ever happening.

That event was conceivably one of the worst pains a market could face. But we did not learn its lesson because the safety net stepped in yet again.

Re: Bear Stearns debacle

muirgeo — Thu, 27 Mar 2008 16:02:02 -0000

But if people can't regulate themselves why do you think they can elect somebody to regulate them for them?

Posted by: Marcus

Couldn't I use the same felonious argument to say why have police? Sure police can be corrupt too but better to have them then not.

Re: Bear Stearns debacle

muirgeo — Thu, 27 Mar 2008 15:57:15 -0000

Amen.

Posted by: Mesa Econoguy

Mesa,

Were there any similiar big failures or massive scandals from 1940 to 1965 like we've seen since Reagan.

Maybe I'm wrong but I get the impression that good oversight during that time keep failures and corruption to a minimum increasing confidence in the markets and spurring stable strong economic growth.

Re: Bear Stearns debacle

Sam Grove — Thu, 27 Mar 2008 14:57:45 -0000

Markets don't fail, they blowback.

Re: Bear Stearns debacle

Mesa Econoguy — Thu, 27 Mar 2008 14:04:49 -0000

The lessons of Enron

" As we begin to look for ways to better monitor the financial system, it's important to remember that calls for more regulation after the Long-Term Capital Management collapse in 1998 didn't prevent Enron. And calls for more rules after Enron didn't stop the financial services sector from imploding in a cloud of greed in the past six months.

And while any new restrictions might seem like a good idea in eye of the storm right now, they certainly won't prevent the next crisis -- whatever and whenever that is -- from overtaking us again some years from now, when we least expect it."

Amen.

Re: Bear Stearns debacle

Marcus — Thu, 27 Mar 2008 13:46:59 -0000

"Here is an article from 3 years ago that sounds the alarm bells loud and clear. Back then when I cited it as a reference people just blew me/it off."

That article doesn't demonstrate at all that regulators weren't cheering on the bubble.

Here's the thing muirgeo, your whole policitcal philosophy depends upon having the right person regulating the market (plus other problems I'll leave for later).

But if people can't regulate themselves why do you think they can elect somebody to regulate them for them?

Re: Bear Stearns debacle

andy — Thu, 27 Mar 2008 12:53:22 -0000

Muriego, I think we should blame Fed for doing this. What is the reason for lowering interest rate? To facilitate credit. If the Banks found that the options they have are too risky, the Fed would lower rates even lower.

If the banks didn't facilitate credit, we would have to say that monetary policy was ineffective. The banks, unfortunately, did exactly what Fed wanted.

I don't get it - you say that tighter regulation would have prevented the problem when the banks did exactly what the regulators wanted?

Re: Bear Stearns debacle

Methinks — Thu, 27 Mar 2008 09:01:57 -0000

I still want to know how the most intelligent investors and CEO's could have been so blind and utterly incompetent.

Hey, what's with the "intelligent people" all of the sudden? Weren't you calling these same people "Wall Street paper pushers" on every thread before this one? Which is it, muirdiot?

Here's the question keeping me up at night:

Re: Bear Stearns debacle

muirgeo — Thu, 27 Mar 2008 08:22:14 -0000

Marcus,

There is NO 20/20 hindsight. Here is an article from 3 years ago that sounds the alarm bells

loud and clear. Back then when I cited it as a reference people just blew me/it off.

I still want to know how the most intelligent investors and CEO's could have been so blind and utterly incompetent. (serious replies only)

As far as the Fed and regulatory agencies it seems they are often the same group of beer drinking buddies as those they should be regulating. They caved policy to the desires of Wall Street and the Bankers to be able to take more and more risk rather then earning money the boring old fashioned way.

"A Lion like greed makes the show but it needs a tamer or things become not so fun."

That's a quote from me...I just made it up. Others can use it with permission. TY