Axiomatic

WHY BUYERS LOOSE OUT...
"Where opportunities increase faster than regulation, buyers are offered increasing visible advantages, but become subject to increasing invisible disadvantages."

This applies to many modern markets because many of the "opportunities" generated by technical advance have advantages for the seller, but disadvantages for the buyer, however these disadvantages remain invisible to buyers because of the limited time they have to research their many small purchases.

Explanation - Tabulate advantageous and disadvantageous to sellers and buyers against their visibility or invisibility to the buyer, and then give producers the opportunity to change some of these characteristics. The favored end-points give buyers "visible advantages" and "hidden disadvantages".

Corollary - any benefit from unregulated opportunity is "hit and miss"
"Where opportunities increase, but regulation does not improve, then it is not clear whether buyers benefit or not."

Corollary - much beneficial regulation is nevertheless unpopular
"Regulation is likely to be opposed by both sellers, who see their advantages slipping away, and by buyers who see only price increases"

WHY THE FUTURE LOOSES OUT...
"Where opportunities increase faster than far-sighted regulation, long term disadvantages and near term advantages replace long term advantages and short term disadvantages, even when not justified by the prevailing interest rate."

Explanation - This is because the future is less visible than the present, for example to managers and investors.

Corollary - long term gain is likely to need increasing, far-sighted regulation
"Where opportunities increase faster than far-sighted regulation, it is not clear whether there is long term gain".

WHY THE ENVIRONMENT AND BYSTANDERS LOSE OUT...
"Where opportunities increase faster than regulation, apart from imposed re distributive measures, advantage moves from the environment and non-participants, to participants in a market."

Explanation - Controlling participants, select opportunities which transfer advantages from the environment or bystanders to themselves, or which transfer disadvantages from themselves to the environment or non-participants.

Corollary - No trickle down
"Not only is there no net trickle-down (apart from re distributive measures), but there is an increasing need to control trickle-up"

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General Corollaries

- Beneficial regulation
Increasing benefits to consumers, or any sustainable, or widespread societal benefit requires both increasing opportunities and increasing regulation.

- Need for regulation to be global
Where "trickle-up" becomes international or global, or disadvantages are hidden to international or global consumers, regulation must also become international or global.

- Inevitability of problems
Since regulation cannot be framed until the opportunity it is designed to control has become clear, regulation must necessarily lag, risking the new opportunity creating a problem.

- Instability is a problem
Since problems are inevitable, anything which is likely to magnify a problem is a problem in itself.

- Inevitability of crises
There is no limit to the consequences of a problem (or the number of problems which can occur simultaneously), leading to the inevitability of "crisis".

Periods without problems are likely to be periods without innovation.

Areas or countries without recurrent problems are areas where innovation is absent or at least lags.

Limitations

The above is meant to be predictive, and quantifiable, but only on a statistical basis.

Systems of regulation also have distortions. The existence of the distortions listed above cannot therefore be taken as proving that regulation produces less distortion than competition.

The three market distortions listed above are not meant to be an exhaustive list. For example, those arising from monopoly (or oligopoly).

Open issues

How do we define the "new opportunities", to which the regulatory requirements above apply, together with their benefits and problems; and how can we use this definition to distinguish between these and other changes which may not require an increase in regulation?

What is the rate and magnitude of benefits and problems due to innovation in different sectors of the economy, and different geographical areas?

What is the distribution of the magnitude of benefits and problems? For example, is this "normal" or some more severe function, such as the "inverse cube" suggested for stock market returns?

Is there a class of opportunities which to not give rise to regulatory problems?

What is the optimum level of innovation, for instance for the UK financial sector?

POLITICAL CHALLENGES To encourage people to think of ways to overcome the technical and political problems. I suggest ...



Give everybody a "right to work" I.e. compensate for the employment-destroying effects of the minimum wage, by giving every unemployed person at least one job offer - but without stigmatizing people by giving them non-jobs, or prejudicing other people's existing jobs.

Create a risk-free "instant access" and money-transfer system Make current account balances and other instant access "electronic money" as safe as physical pound notes. Make it impossible that the government's deposit guarantee scheme will ever again be called . Open up the deposit and money transfer market to new low-cost entrants. Isolate the "real economy" on which we all depend, from banking and other problems, E.g. by giving the Bank of England direct control of the money supply. Allow savers and borrowers to establish a fair, equilibrium, "market" interest rate. Improve the availability, and increase the maximum amounts that can be transfered using the "Fast Transfer" system.
100% reserve banking	Increased reserve banking

Make regulation keep up with increasing opportunities WHY BUYERS LOOSE OUT... "Where opportunities increase faster than regulation, buyers are offered increasing visible advantages, but become subject to increasing invisible disadvantages." This applies to many modern markets because many of the "opportunities" generated by technical advance have advantages for the seller, but disadvantages for the buyer, however these disadvantages remain invisible to buyers because of the limited time they have to research their many small purchases. Explanation - Tabulate advantageous and disadvantageous to sellers and buyers against their visibility or invisibility to the buyer, and then give producers the opportunity to change some of these characteristics. The favored end-points give buyers "visible advantages" and "hidden disadvantages". Corollary - any benefit from unregulated opportunity is "hit and miss" "Where opportunities increase, but regulation does not improve, then it is not clear whether buyers benefit or not." Corollary - much beneficial regulation is nevertheless unpopular "Regulation is likely to be opposed by both sellers, who see their advantages slipping away, and by buyers who see only price increases" WHY THE FUTURE LOOSES OUT... "Where opportunities increase faster than far-sighted regulation, long term disadvantages and near term advantages replace long term advantages and short term disadvantages, even when not justified by the prevailing interest rate." Explanation - This is because the future is less visible than the present, for example to managers and investors. Corollary - long term gain is likely to need increasing, far-sighted regulation "Where opportunities increase faster than far-sighted regulation, it is not clear whether there is long term gain". WHY THE ENVIRONMENT AND BYSTANDERS LOSE OUT... "Where opportunities increase faster than regulation, apart from imposed re distributive measures, advantage moves from the environment and non-participants, to participants in a market." Explanation - Controlling participants, select opportunities which transfer advantages from the environment or bystanders to themselves, or which transfer disadvantages from themselves to the environment or non-participants. Corollary - No trickle down "Not only is there no net trickle-down (apart from re distributive measures), but there is an increasing need to control trickle-up" ---- General Corollaries - Beneficial regulation Increasing benefits to consumers, or any sustainable, or widespread societal benefit requires both increasing opportunities and increasing regulation. - Need for regulation to be global Where "trickle-up" becomes international or global, or disadvantages are hidden to international or global consumers, regulation must also become international or global. - Inevitability of problems Since regulation cannot be framed until the opportunity it is designed to control has become clear, regulation must necessarily lag, risking the new opportunity creating a problem. - Instability is a problem Since problems are inevitable, anything which is likely to magnify a problem is a problem in itself. - Inevitability of crises There is no limit to the consequences of a problem (or the number of problems which can occur simultaneously), leading to the inevitability of "crisis". Periods without problems are likely to be periods without innovation. Areas or countries without recurrent problems are areas where innovation is absent or at least lags. Limitations The above is meant to be predictive, and quantifiable, but only on a statistical basis. Systems of regulation also have distortions. The existence of the distortions listed above cannot therefore be taken as proving that regulation produces less distortion than competition. The three market distortions listed above are not meant to be an exhaustive list. For example, those arising from monopoly (or oligopoly). Open issues How do we define the "new opportunities", to which the regulatory requirements above apply, together with their benefits and problems; and how can we use this definition to distinguish between these and other changes which may not require an increase in regulation? What is the rate and magnitude of benefits and problems due to innovation in different sectors of the economy, and different geographical areas? What is the distribution of the magnitude of benefits and problems? For example, is this "normal" or some more severe function, such as the "inverse cube" suggested for stock market returns? Is there a class of opportunities which to not give rise to regulatory problems? What is the optimum level of innovation, for instance for the UK financial sector?