The common sense conclusion drawn from the troubled economy is that there is a lack of regulation in the financial market and that this lapse has let traders and investors take unnecessary risks.
More regulations and stricter regulations are needed to right the market. And, if the regulations work for the financial market, why not apply this protective blanket over other industries.
Protected markets will stop the unpredictable swings of the market, so the rationale goes.
This common sense approach has its risks, as well, according to MARTIN NEIL BAILY and MATTHEW J. SLAUGHTER, this could lead to strangulating over-regulation, and a serious impediment to the exponential gains of the Singularity.
In their op-ed in the Wall Street Journal, the economists say that productivity has slowed to a fraction of the speedy pace of the late 90s and early 2000s. Here are their readings:
After averaging 2.7% productivity growth from 1995 through 2002, annual growth of productivity in the nonfarming business sector has slowed dramatically — to just 1.7% in 2005, 1.0% in 2006, and 1.4% in 2007.
In a soon-to-be released report, which will be available here, the authors state that the cure to this productivity slowdown is smart regulation, not more regulation.
Maintaining the productivity benefits of product market competition requires sound choices in areas including trade and investment, regulation and infrastructure.
But this doesn’t have the same ring as the alarm bells going off in the media today.
The key to economic growth rests in improved productivity, which means letting people innovate, invent, produce and trade in a free environment. A free environment doesn’t mean an unregulated market. Intelligent regulations and transparency will only add confidence to the market and, therefore, improve productivity.
Smart regulation and free, fair trade are probably not the directions most Americans, and citizens of the world, are ready to follow, but, in fact, it might be the wisest to stabilize the economy and prepare for continued growth. Exaggerated emotional reactions–both fear or greed–lead to bubbles and crashes.
In these times, we need unconventional wisdom. Or maybe just some uncommon sense.