[ExI] EP and Peak oil
rafal.smigrodzki at gmail.com
Tue Apr 1 21:48:12 UTC 2008
On Mon, Mar 31, 2008 at 6:18 PM, Lee Corbin <lcorbin at rawbw.com> wrote:
> For example, the most efficient means of capital formation in
> western civilization appears to be the development of the limited
> liability corporation. Unfortunately, without supervision from
> some sovereign state (you see, I hate to the use the "g---" word),
> company managers take advantage of stock holders to such an
> extent that sooner or later funds dry up, thus retarding economic
> growth. Institutions such as the SEC are therefore necessary,
> so far as I have been able to determine.
There is good evidence that private stock exchanges are superior to
government organizations at enforcing proper accounting to alleviate the
agent-principal problem in limited liability corporations. Stock exchanges
rely on long term persistence to attract customers, and that means both
companies and shareholders. As long as there is sufficient transparency and
alternative conduits for information (e.g. press, blogs, whistleblowers), as
well as competition between exchanges, the owners of stock exchanges stand
to gain by discouraging dishonest companies from listing. If the misbehavior
of one company on their list becomes public, all other companies suffer,
since potential shareholders will look for another exchange that is not
tainted by scandal, and their volume of trade as well as income, will go
down. Companies also want to have high liquidity of their stock, which means
they prefer exchanges with lots of potential investors, and so there is a
strong incentive to maximize volume of trade over long periods of time.
Self-regulation of industries to minimize transaction costs (which entails
combating fraud) is a natural development in any situation with competition,
transparency and long-term persistence. Laugh at me if you want but the
Chinese stock exchanges are an example of emerging self-regulation.
The biggest problem with the government here is that it frequently pre-empts
the development of such self-regulatory mechanisms, and imposes complex,
costly, one-size-fits-all rules with poor feedback and frequently is subject
to "regulatory capture" - the gaining of control over regulators by some of
the regulated entities. A prime example is Sarbanes-Oxley, which imposed
huge costs that disproportionately afflict smaller businesses, and thus
serve to limit the competition against entrenched large companies - exactly
the companies that lobby the government and hire former SEC employees (the
"revolving door" phenomenon).
So whenever a government official tells you to be afraid of freedom and to
give him more control of your life, be afraid of him. He is not your friend.
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