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iserlohn

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About iserlohn

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  1. And there is regulation in that market, but it's not the government that's enforcing it.
  2. Contract law underpins every transaction, regardless of whether it is buying a newspaper from the newsagent, or commissioning a project worth 100 millions times as much. It is the regulation that allows for large-scale markets to happen. If you get rid of it, something similar to it will develop in it's place. I don't know where you get the idea that contracts are very unstable. It is just a mechanism to standardise commercial transactions, no more, no less. And yes, it is a form a regulation, necessary regulation.
  3. Regulation means what it says it means. Even the Austrian school admits that a basic amount of coercion is needed to ensure that contracts are enforced. When you accept that market regulation is not binary and is more of a continuum, you will understand that the concept of a "free market" is only relative. What is the minimal amount of regulation that a market can run properly with? In the past 20 years, we have been so pre-occupied with de-regulation that a lot of regulation was scrapped because of the idealogical climate at the time without first critically analysing what the effects that would have. When things go wrong, the fundamentalists blame the lack of ideological purity in the market (regulation of money supply and credit for example). That is absurd.
  4. I'm not arguing for more regulation, I was just emphasizing that basic regulation is necessary when a market scales. This isn't the market intervention or product regulation you are talking about, it's the market framework and the basic rules of trading. Some people disagreed with this, for what reason I do not know. The reactive wing of HPC seems to be in full force constantly. In any case, addressing what you said, your point that specific regulations on markets can inhibit choice. Your argument that the heavily regulated securities markets are in fact monopolies may not be entirely correct, but it does have some monopolistic elements. However, one has to look at the intent of the regulation and what it is trying to achieve. With securities, you are buying an abstract share of a legal person, itself a creation of law, so statutory regulation of such activites do not seem that far fetched, does it? If people were able to sell and buy this freely without any common standard, there would certainly be problems with 'mistake' (I'm using the legal definition here) and fraud. There is a reason why contract law and other law regarding trade exists, and not all of it is because the government wants its nose in every pie. The world is full of grey and not every government action is tyrannical. The problem with the current securities regulation is not that there is regulation, but that the regulators are not independent. They are influenced heavily by major participants in the market and hence create regulation that does not work, and almost always compounds the problem. In an ideal world, securities regulation should be straightforward, and that people wishing to set up such markets should be able to do so at reasonable costs, as long as certain standards are met. This is easy to say, but hard in practice, because some of these things get very technical legally. That is why there should be reforms and independence on regulator independence. In any case, your point about regulations engineering false trust is valid. The ratings system for example is the one of the big scams in financial regulation. Gauging risk has always been more of an art, even for actuaries determining individual risk in populations. In financial systems, it's more like weather prediction. The fact that there has been so much trust placed on something so flimsy is a testament to bad regulation. So it must be changed. In this case, there should be fundamental changes on how instruments are packaged and sold to focus on transparency, not by hiding everything behind a ratings label. However, arguing that all regulation is negative and detrimental is counter-productive. That was the point I was trying to make, hence shouted down by all the free-market zealots that roam on here all day.
  5. When there is no trust, there is no market, plain and simple. Trust relationships can be simple, ie. directly between people, or complex, ie. involving intermediaries and third parties. When a market scales (ie. what I said in my original post), a certain amount of regulation is needed in order to maintain trust in the market (through the regulator) as you will not be able to know everybody that you trade with. In some cases, the de-facto regulator is the intermediary handling the transaction (ie. eBay), in a more general sense, the state plays a role in the regulation of all commercial transactions through contract law and statues. That is why order for any large-enough market is needed. Markets can only be free when all the parties agree to a standard, and when the market gets to a certain size, it needs some people to enforce this standard. These people may or may not be the state, and they may not be one particular entity. There are many markets which are multi-polar regulation-wise, but this fundamental aspect of any large market has to be there in order for it to function at all. At this stage, we are not even talking about the effectiveness of the market, only the fundamental principals. There is an awful lot of study done into this and even a rudimentary understanding of game theory would be enough to explain the basic principles.
  6. When you are stating that the whole cybercrime economy is a market, then you are the one that is mistaken. Please get some introductory education in economic concepts first. Without basic regulation, markets cannot exist. It is not a question of whether there should be regulation, but what in the market should be regulated, and what should not.
  7. Can I tap into your abundant supply of insightful comments?
  8. You can no more fix a broken market by adding more participants, than to fix a broken restaurant by adding more chefs. The market is a unstable system that operates effectively (by finding the equilibrium) in a narrow range of conditions. This has to be maintained actively. One of these conditions is the transparency of the market products and participants. It is also the one which caused this current crises, and one which is easily remedied by straightforward regulation.
  9. Of course Bakaara market has central regulation. There are people with guns that collect taxes from stalls. They are normally affiliated with some sort of power structure. Central regulation does not have to be carried out by governments or states. You just need someone to enforce rules and regulations dealing with the trade at hand. The cybercrime economy is an economy not a market. Individual forums and IRC channels (which are big enough) might constitute markets, but as you can imagine, they are regulated by the administrators and moderators. You can only do business with people when there is trust between the parties. This can either be through personal experience or through the trust of a intermediary. However, this model doesn't scale well and in the end market participants have to abide by common rules to ensure that transactions are between trustworthy people. Hence the need for regulations.
  10. Absent of the government, there is always somebody to take its place in order to keep order (and hence regulate transactions). In Bakaara, you still have rules of conducting transactions, and militias who control the prime locations in the market, and control over 'taxes'.
  11. One is quite heavily regulated and the other is criminal. Which one are you talking about?
  12. First, please stop putting words in my mouth, I never said that we need money for a market to exist It's not the size that we're talking about, it's the nature. Mere interaction between people is not a market. Promises which may constitute consideration in contract law is often deemed to be a "social arrangement" by the courts if the parties did not have intent on creating legal relations. There is a reason for this. In common law jurisdictions, contracts are binding upon the parties when there is an intent to trade (for a specific product, or service) and when there is an exchange of promises (ie. consideration). When the contract is formed, whether it be oral, or written, or implied through action, both parties have to abide by the law, which is just one form of regulation. Without the law, there is no market. Everything is fair game as there are no rules. Who will enforce the contract, who will arbitrate? Who will keep order when people improperly use force? When we accept that the market is not the natural order, but rather that trading is an activity that is made possible by social order, then we can start to understand where markets fit in the grand scheme of things. What is baffling is the number of people that put blind faith in markets. It's the same type of people that believe in anarchism. Just because trading is a mutually beneficial emergent behaviour when a certain set of conditions in society arise, does not make unfettered trading in all it's glorious forms the natural order nor a panacea for our ills. As is proven time and time again, markets do not work in every situation, and there are a range of conditions in which only if they are met can the market be effective. In our little crisis in the past year or so, a big part of the problem is moral hazard, asymmetrical information and understanding of the risk of instruments being sold. This, like the relative power that participants have in the market, can be solved through regulation, easily. Don't jump to the conclusion that I'm anti-market. I'm not. On the contrary it is those that sing the praises of market mechanisms being able to find the optimal equilibrium in everything that is blinded by their own zealotry. I am merely pointing out the widely accepted fact that in order to preserve a market-based society, one has to temper the extremes and keep it within the boundaries of effectiveness.
  13. Even though some economists model how marriage and relationships work using economic theories, it does not make it a market. Sex is quite complicated anthropologically. Sex could be coerced through violence, and power gained by sex. However, it is certain that what some people consider a "market" in relationships would not even remotely look like a "market" if it were not for well developed laws and customs in society. This itself is a form of regulation. As much as libertarians and anarchists would like you to think otherwise, civilised society with its modern benefits and characteristics only survives with rules and enforcement of rules. Likewise for any market. The reason is that a market only function effectively in only a narrow range of conditions. Market participants must be relatively balanced in power, there has to be sufficient volume, information on transactions and participants should be transparent, and that barriers of entry be kept to a minimum. These conditions are not self-optimizing, thus the need for regulation. The question should not be whether there is too little, or too much regulation. The question should be whether a piece of regulation does what it was supposed to achieve. If it does, we should keep it. If it doesn't, an alternative approach should be put in place. What we want is not more regulation, or less regulation, but good regulation so that we can put the market back into the zone in which it can be effective.
  14. To prove your point, maybe you can give an example of a large scale market that works without central regulation?
  15. The problem is that people have been advocating that the market takes care of everything. It does not. The market is a complex system that is prone to fluctuations and is not self-correcting. In fact, it tends towards the amalgamation of participants in the long-term and the obfuscation of the market mechanisms (ie. risk) for competitive advantage. This has been shown time and time again. It would be nice if everybody did business in the town market, but it's not like that any more. The capital markets that you now see are nothing like the basic premise, and that is to mask the fundamental attributes of a system that is unstable when scaled.
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