Asymmetrical Information

Plus no more NAFTA?

And is there any real case to be made that California's recent energy crisis was a result of deregulation? From the little I followed it, I had the impression that too much government involvement was a more likely suspect.

"Mr Dean really believes that the cure for our economic ills is tighter telecoms regulation."

Surely you can do better than this flippant, and inaccurate, characterization of Dean's position. The view that economic regulation has a proper role in a well-functioning economy, and that the deregulatory trend of the past 25 years has gone much too far, is a serious one, with both strong economic reasoning and massive empirical evidence behind it. If you want to engage that view with serious arguments, do so, but don't be so condescending.

Mark:

What is one to make of this portion of the article, then?

Dean indicated that he would re-regulate

utilities, large media companies and any business that offers stock options. Dean did not rule out "re-regulating" the telecommunications industry, too.

That goes far beyond what was previously regulated, since businesses that offer stock options include large portions of the IT industry (including both start-ups and long-standing firms), and also large portions of the Fortune 500.

Yea, it's rather easy to just cast it off with a clever flick of the keyboard and some standard rhetoric.

How about some actual analysis and critisism?

Mark, I don't think there's a serious argument out there that telecoms deregulation has gone "too far" in any way that has a large impact on the economy. It certainly doesn't seem to be doing much for telecoms firms, but I can't say their fate breaks my heart. One might plausibly argue that the deregulatory structure should be altered, but I'd find it very hard indeed to make a coherent argument for a return to the days of Ma Bell, or even a move in that direction.

Since he doesn't really offer any specific proposals it's difficult to figure out what there is to criticize. The opposite is true as well; since he really hasn’t put a proposal on the table, there is nothing to "agree" with.

You say you want a revolution? Well, you know…
We'd all love to see the plan.

I certainly hope that among Dean's new regulations will be one mandating a minimum size to blog entries so as to "encourage" actual analysis and criticism. Prohibiting condescension would also be nice, or maybe it could be allowed but be subject to a special tax.

Remember, blogging is a privilege, Jane.

It's clear (to me) from reading the article that Dean is hardly advocating the return of Ma Ball -- what he's really calling for is for increased oversight of certain industries.

Given corporate america's demonstrated habit of getting away with as much as they can and then some at the expense of the consumer (c.f. Enron manipulating energy markets at the height of the California crisis; GE dumping toxic waste into the Hudson; the recent mutual fund scandals; Dick Grasso's pay packet), I can't say that it's a bad thing.

I think that perhaps his idea of regulating any industry that uses stock options as compensation might be a little over the top, but it would be remarkably effective as a brake on the use of stock options to overpay top executives.

When did this place get infested with boring, snarky trolls?

Blogging is a privelege, Johnathan? So's commenting on one, no?

Actual analysis and criticism, JohnC? Since Jane was talking about her predictions of what Dean was going to do, and what Dean actually did (now) to apparently disconfirm her prediction, what exactly are you asking for? What Dean said substantially backs up Jane's claim that he thinks regulation will help "fix" the economy.

Does Jane need to provide (pages of? how much do you want?) "analysis and criticism" for her to be able to talk about Dean, in this way, and in this context? I don't think that's a reasonable demand at all.

Dean sounds like he wants European levels of regulation. The type of regulation that produces economies with double digit unemployment, anemic growth and miniscule innovation. The type of regulatory environment that eventually descends into an epidemic of corruption where doing anything requires the payment of huge bribes to a labyrinth of regulators and the politicians who control them.

Sounds like utopia to me.

"Dean sounds like he wants European levels of regulation."

Yeah, he sure said that!

[quotes]In an interview around midnight Monday on his campaign plane with a small group of reporters, Dean listed likely targets for what he dubbed as his "re-regulation" campaign: utilities, large media companies and any business that offers stock options. Dean did not rule out "re-regulating" the telecommunications industry, too.

He also said a Dean administration would require new workers' standards, a much broader right to unionize and new "transparency" requirements for corporations that go beyond the recently enacted Sarbanes-Oxley law.[/quote]

Shocking! Utility regulation - unheard of! Media concentration rules - good thing the FCC doesn't do that! We certainly don't regulate telecom in any way, either.

Only new things I see here are in the second paragraph, and the stock option thing.

Jason,

I'm glad you seem to agree that the European model of higher taxes and greater regulation is disasterous. Yet you want to move us closer toward that model.

I guess you don't want the economy to go blind. You just want to jerk it around until it needs glasses.

Sorry 'bout the multiple trackbacks. Technical problems.

"--and the stock option thing"

Wow. All you regulation boosters toss this off without a care. How many companies offer stock options? How widely has Dean hinted he intends to spread the regulation net?

And you chide Jane for a lack of analysis, well, where is yours? Where is your glowing prose detailing how re--and expanded-- regulation will fix all our economic woes?

I think it's sad-but-funny that someone with a history of well-reasoned, respectful posts is rewarded for her diligence by amassing a group of trolls who wait to pounce when they think she's finally being flippant.

Among highly-read and highly-commented-on weblogs there seems to be a correlation between shrillness of rhetoric and toadyness of commenter. Blogs like this one get all kinds of dissent (some respectful, some not) because of the tone of the poster, while blogs that live on smear and ad hominem attack (one particular "moderate" lefty comes to mind, though he's by no means the only one) end up with a one-sided comments section because the people who disagree quickly realize they have better things to do or read.

Coupla things...

Sigivald: I think you need to recalibrate your sarcasm detector. If I'm wrong, Jonathan is insane.

Jason:
"Only new things I see here are ... the stock option thing."

And that doesn't strike you as particularly huge? Apparently there are not many limits on the Dean Re-regulation Plan.

Overall:
From the article - "California is proving it does not work," [Dean] said. "I think the reason the grid failed is because of utility deregulation."

Unless I missed something, the California grid didn't fail, it just didn't have enough power (for several reasons). If he was talking about the failure in the Northeast, he's confusing the issues badly.

So which is it? Is Dean a boob when it comes to understanding the issues, or does he have a hard time expressing himself without mixing different subjects in the same thought? Either way, I don't want him making decisions about regulation, re- or otherwise.

Oh lord, Dean didn't mean he wants to regulate every company that offers stock options; he meant he wanted to regulate the offering of stock options. Note that you're attacking a summary.

Dean's comments are vague, wrong, and gratuitous.

Vague, I don't think I need to clarify. And when candidates make vague noises about the need to regulate, for example, media companies, my first amendment rights start itching.

Wrong, because while lots of people are arguing about the specific regulatory structure of various industries, I don't know anyone who's making a compelling case that telecomms, for example, requires more regulation (rather than different regulation). And those arguing that big media need more regulation are almost invariably, in my experience, really arguing that Big Media Needs to Be Forced to Conform to My Political Views, and/or Big Media Needs to Be Forced to Supply Me Something, Below Cost, Which I Like But Few of My Fellow Citizen/Consumers Enjoy. Neither of which I find compelling. As for "companies that issue stock options" -- huh? What is he proposing, exactly, and why? Perhaps, Mark, you can point me to some work that suggests that "companies that issue stock options" should be more strictly regulated -- not that the accounting treatment of stock options should change, but that we should impose a new regulatory structure on companies that use options-based compensation? These seem to point to a disturbingly FDR-like predilection for illiterate tinkering.

And gratuitous, because he doesn't *need* to do any of these things at this stage in the campaign. The parts of the base this appeals to are already sewn up. What's the point, unless Howard Dean indeed believes a big part of his job as president will be to add another level of bureaucrats to run around telling our companies to be good boys and girls?

Then, Jason, I'm sure you can refer us to exactly what GOV Dean said?

Yes, it's a summary, but unless you have a transcript of what Dean said EXACTLY, the idea that he wants to regulate corporations that issue stock options, in line w/ the rest of the paragraph, is AT LEAST as close as your spin.

And, btw, exactly what would be the basis for regulating the use of stock options as part of compensation? What is illegal, as opposed to distasteful or excessive or what-have-you, about using stock options THAT IT MERITS NEW FEDERAL REGULATIONS?

Another thing; if I say the following, in a discussion about energy deregulation.....

"California is proving it does not work. I think the reason the grid failed is because of utility deregulation."

.....did I just say that in the California energy crisis the electricity grid failed? Reading comprehension is tough for out of context quotes, admittedly, but the answer is "no." He's obviously talking about two specific instances where he thinks deregulation has failed - the California energy crisis, and the northeast corridor power grid failure.

The people who this kind of rhetoric appeals to are NOT sure things for Dean anywhere outside of New Hampshire. Check the polls if you don't believe me. This is just him jostling for votes with Gephardt, and playing to his strengths as the pugnacious outsider.

Also, from the same article:

"Dean, who talked at length about the historical ebb and flow of regulation, said there is a "danger" to pushing his re-regulation movement too far.”

All Dean is saying is that the pendulum has swing too far in favor of deregulation in recent years. I don’t think that’s unreasonable.

With regard to telecoms, all the article said is that he “refused to rule out” new regulations. It didn’t say he was actually proposing anything. The other areas he mentioned were utilities, media ownership, and stock options. Even some conservatives agree that there are regulatory problems in these areas.

As usual, Dean is saying things in a way that makes him sound more lefty than he actually is.

Whatever, do go on with your Media Research Center playbook.

Jane

First of all, Dean is proposing a broad reversal of the deregulation wave of the past 25 years. Telecom regulation is only one piece of a broader agenda, defined in the article as a "new social contract for the 21st century," and at one point in the article it seems to be almost an afterthought--less a priority than other issues like securities markets. So to focus exclusively on telecom regulation, as you do, is, as I correctly noted, to portray Dean's position inaccurately.

Second, as for the absence of "a serious argument out there" for re-regulation--just for starters take a look at an excellent book I mentioned in another comments thread, "Everything for Sale" by Robert Kuttner. I referred to your OP as "flippant" because of the final sentence in particular, in which you concluded that "Mr Dean really believes that the cure for our economic ills is tighter telecoms regulation," and in particular that "really believes" part--clearly your words imply disdain and condescension towards Dean's position. Equally as clearly, his position is not deserving of such disdain.

Third, when you equate re-regulation with "a return to the days of Ma Bell," my irony-meter went haywire (for the obvious reason that AT&T was broken up by antitrust regulation).

Mark,

Reading just a few of Kuttner's pieces from the Boston Globe and Tapped, we find the following:

He believes that the following industries should be reregulated:

Airlines
Telecoms (the telephone industry, specifically)
Electricity.

http://www.commondreams.org/views/082700-101.htm
http://www.prospect.org/print/V13/16/kuttner-r.html
http://www.commondreams.org/views01/0617-01.htm

So, evidently he, at least, views re-regulation as not, in fact, contradictory with what happened when they broke up Ma Bell (and one gets the impression, reading his stuff, that he rather regrets the break-up).

Throw in banking and accounting (which he also calls for massive re-regulation on), and one almost wonders if HE didn't write Dean's comments in the first place.

Now, why Kuttner's support therefore should remove a position from disdain is beyond me. Evidently you view him as being far more credible than I do (and perhaps than Jane does).

I certainly hope that among Dean's new regulations will be one mandating a minimum size to blog entries so as to "encourage" actual analysis and criticism. Prohibiting condescension would also be nice, or maybe it could be allowed but be subject to a special tax.

Don't forget to declare the above paragraph on your 1040 next April.

Remember, blogging is a privilege, Jane.

Unless you have a plan to bring the entire IT infrastructure to its knees the instant Jane stops fulfilling your expectations (in which case I know some folks at a .gov address who would like to invite you over for afternoon tea), then blogging is a right of anyone who can purchase the goods and services necessary to establish and maintain a website.

Comment sections, on the other hand, are a privilege granted to others by the rights holder, as illustrated by the incremental increase in the Jane Galt bandwidth bill she voluntarily incured in order to rebroadcast your persnickety sniping.

Mark, you're really not helping your case with me by bringing Robert Kuttner into it. I respect his right to his opinion, but I think his arguments about industrial policy have been pretty thoroughly demolished by, among others, Paul Krugman. If Bob Kuttner is going to be writing Howard Dean's economic policy agenda, that makes me more, not less, concerned.

Easy, anony-mouse. I think folks have already decided that was sarcasm. Not that I blame you for misconstruing, though. Jane seems to have acquired quite the pack of tiresome commenters lately, and some of our old lefty friends have gotten shriller than they used to be. Something must be upsetting them...

Well, Dean's comment on CA was stupid and wrong. There never was a problem CA's grid save for some congestion at the transmission level. The problems in CA were more fundamental. That is the government completely fucked up in designing that market, and then was slow to react. Sure the electricity generators were gaming the market, but gee...what do you expect when you give them a market structure that assures the suppliers that demand is totally unresponsive to price changes?

The man is clearly ignorant of what happened in CA.

Jason:

"He's obviously talking about two specific instances where he thinks deregulation has failed"

Sorry, but there's nothing "obvious" about that at all. It's a poorly structured statement. IMHO, you're seeing what you want to see in his words (which we're all doing a bit of, since there were so few actual words to read).

And I have to ask: Was there a recent spate of deregulation in the East Coast power market? From everything I read at the time, the grid failure was a result of a lack of upgrades due to heavy regulation that acted as a disincentive to investment. Again, that's just my understanding, I'm open to correction/support. If my understanding is correct though, Dean's comment makes even less sense.

But, if I assume that your interpretation is correct, Dean's comment still bothers me. I am certain that whatever deregulation might have taken place has no relation to the sort we saw in CA, yet Dean still dislikes both. Should I interpret that to mean that he sees evil in deregulation everywhere he looks? Is deregulation a scapegoat for him?

Of course, none of us can really argue with any kind of authority until we've seen a more detailed transcript. I've seen enough to get worried, though.

Does anybody really believe the California energy market was DE-regulated. I lived there at the time and PG&E was not allowed to pass on the increased cost of electricity to residential customers. This removed the market incentive to conserve and drove PG&E into bankruptcy. Does that sound like a deregulated market? As for the blackout, which is what I assumed Dean was talking about, I don't believe that power transmission has ever been deregulated. I could be wrong. One more thing, Dean could have been talking about CA on both accounts. Part of the problem in CA was that the transmission line capacity was too small for power to be sent from SoCal to NorCal. Thats why there were rolling blackouts in the Bay area but not in LA.

Jim English
Chicago

"Third, when you equate re-regulation with "a return to the days of Ma Bell," my irony-meter went haywire (for the obvious reason that AT&T was broken up by antitrust regulation)."

Except of course that AT&T was broken up at around the same time as the wave of de-regulation started. (Indeed, was largely started by Carter, continued by Reagan.) The days of regulation *WERE* the days of Ma Bell. I strongly question people who believe that "more regulation" will lead to fewer monopolies. Regulatory capture is a real issue indeed, and regulatory agencies often prefer to work with monopolies.

If Dean means more intensive anti-trust prosecution, that's one thing. He should say so, and distinguish it from simply "re-regulation."

A Kuttneresque passion for re-regulation is not outside the bounds of civilized debate, to be sure, but it is something that I and many others find to be a wrongfully misguided opinion. I think that Megan is well-justified in at least calling it a large move to the Left-- more to the Left than the economic policies of Carter or Clinton certainly.

Katherine -- Indeed. It's all so much clearer to me after many hours and several cups of coffee :-)

Dean doesn't know very much about the issues he was discussing. Hence, his response to them shows his natural inclinations. His inclinations are not to tinker with regulations or deregulate, they are to "re-regulate," which indicates he has a great deal of faith in powerful central government. So the question are his inclinations, not the specific proposals he made in a late night interview.

Do his inclinations scare me? Yes, absolutely.

Perfectly timed to make me forget about the newest Dubya offense against free trade. It's a choice between the lesser of evils and Dean has reinforced my choice.

The IT industry brought massive, sustained improvements in the price and capabilities of its offerings. It is also among the least regulated industries in existence.

Coincidence? I think not.

If we want to ever see the World of Tomorrow we were promised as kids, it is vital that we regulate everything at the same level that we regulated IT. Particularly aerospace (100 years after the Wright Brothers' first flight and we're still all using groundcars? How pathetic), medicine (we're going to need that anti-aging treatment within the next 40 years or so or we're all screwed), and broadcast media (retaining government ownership of the entire spectrum is a bad idea, and it gave the Feds a neat end-run around the First Amendment, delayed the introduction of wireless phones by a couple of decades, among other things).

Ken, "the government" does not own the broadcast spectrum. The people do.

Uh, he may have meant that the government controls the allocation of broadcast spectrum (and with that, spectrum deemed particularly useful to special government purposes is guranteed to be denied to all others).

Of course, we have a government by the people, so theoretically "we" are controlling that spectrum, although I suspect that relatively few people have cast votes with a mind to specific complaints against the FCC.

On the other hand, I can't think of any other entity I would prefer to see controlling that kind of resource. For comparative assessment, witness the shenannigans Verisign has tried to pull on domain registration from time to time, in spite of the fact they're still accountable to ICANN.

1. Strengthen dollar so Americans with the most disposable income of any nationality can buy lots more low margin foreign goods, which then allows them to buy more of our cutting edge, high margin goods/services and helps us keep exporting at high margins, which supports our high standard of living.

2. Completely reform all Federally generated economic statistics and forecasts to produce reliable numbers that producers, consumers and investors can use to reduce risk and inefficiency and increase asset values. Honest reliable forecast information would force institutional and individual investors to return to structuring portfolios for short, medium and long ranges, rather than the present short term analyses only.

3. Reregulate current producer markets to promote 10-20 producers in each sector who must compete on product and thereby reverse the trend of 3-6 player cartels in most sectors.

4. Reregulate all infrastructure industries to quasi public entitites except when it can be expected that private ownership would produce pricing efficiencies sufficient to off-set the cost of private sector's required returns on management and capital. Few infrastructure industries would stay private. Certainly not Bill Gates desktop infrastructure monopoly. Nor the oil cartel which gave up on market competition back in the 1930s and has operated as a private olgiopoly created by gov. regulation since that time. Almost no private infrastructure monopolists/oligopolists can now justify the cut they take based on the efficiencies they create. DEFINITELY keep the private sector as far from health insurance and utilities as possible. Private return on investment simply builds in another huge cost in delivering infrastructure goods and shows almost no long term production efficiencies when corresponding cost shifting is netted out.

5. Don't privatize or go to national insurance. Instead, create a single national clearing house for electronic claims transmission, a standard fee structure, and a standard claim form for ALL claims, not just Medicare. Recognize that there is nothing wrong with the current system other than paper flow redundancies and insufficient resource allocation by society. Wake up people, we've got a high median age for a couple decades and its going to be expensive to pay for it. Pull from defense and pay for it.

6. Reread J.K. Galbraith's book on how to run a regulated economy (his example is WWII) during a time when a nation is being massively reformed for new activity. Create a WWII styled managed economy with a 5 year sunset clause and then let the new reregulated market economy described above start to function.

7. Rewrite history to eliminate any references to reduced telecommunications costs brought about by the deregulation of the industry.

8. Round up all those who believe that America is a "free country" and send them to re-education camps.

9. Institute National Paul Krugman holiday.

Jason,

Looks Joe Lieberman has taken a page from the Media Research Center playbook. He trashes Dean's regulatory ideas, too. He said, "We don't need to cripple the economy with a whole new set of re-regulation as Howard Dean proposes."

Why would anyone pay any attention to an obvious stooge for the evil right wing like Joe Lieberman?

10. Stop accepting simplistic historical notions suggest telecom cost reductions could only have been achieved by the reconcentration/recartelization approach followed to date.

11. Reject once and for all the indolence of Schumpeter's creative destruction and admit that calling destruction is still just destruction. creative construction is what the usa economy needs far more than another wave of destruction and consolidation of ownership and concentration of wealth.

12. Round up all those who believe effective risk reducing regulation is inconsistent with democracy and freedom and get them to admit that virtually all of their individual success and prosperity would often be impossible without the vast body of new deal regulation that allowed they and their parents to climb up out of political, wealth and capital assymetries that characterized the usa economy prior to the immplementation of new deal institutitions.

13. Listen to Krugman when his arguments fit the facts, which they often do, ignore them when they do not, which they occassionally do not, but remember that Krugman is only one repentant free trader and that there is a much richer legacy of keynsian economic theorists than Krugman saying that the bush approach coupled with cartelization deregulation is foolishness aimed at grabbing oil and adding futher to the assymetries of wealth.

14. Make all who naively and simplistically understand and support cartelization deregulation of the last 15 years, acknowledge that it is nothing more than a rationalization for irresponsible cost-shifting that swells the bottom line of a few and does not accomplish any cost, production or pricing efficiecies that could not be just as effectively achieved other ways if the cost shifting were quantified and added into supposed accomplishments of cartelization deregulation.

16. Remember divide and conquer is an effective tactic for removing regulatory obstacles to wealth concentration, but not necessarily an effective means of building institutions that actually produce more for more at better prices when cost-shifting is accounted for and not conveniently ignored.

17. Rewrite the Constitution to add new articles describing Federal Bureaucracy and Regulatory Agencies.

18. Ignore critical analysis of New Deal policies suggesting they extended Depression in favor of rosy view of make work programs depicted in leftist art.

19. Attempt to belittle anyone who questions your theories or knowledge of history.

Question:
Who writes government regulations?

Obvious Answer:
Government Bureaucrats

Not So Obvious Answer:
Since government bureaucrats do not generally have specialized knowledge in the area of power distribution, transmission or telecommunications amongst other highly technical disciplines that are regulated they turn to the experts in the industry in question to help craft the regulations.

Question: Since the regulations are crafted by the people who work for the various regulated industries, why would we suspect that they are designed to protect the average citizen?

Obvious Answer:
We shouldn't.

More wordy answer:
Generally, government regulations act as a means to bar entry into industries. The regulations make starting a competive company within the industry difficult because the regulations make start-up costs so high.

When Mr. Wilson decries the fact that there are only 3 or 4 companies in these industries he should understand that regulation keeps the competition out. What kind of non-draconian regulation would add competitors?

Incidently, I didn't think of this line of argument and if I could remember who did I would gladly give credit. I just think it needed to be restated here.

"Incidently, I didn't think of this line of argument and if I could remember who did I would gladly give credit. I just think it needed to be restated here."

I remember it showing up in Milton Friedman's Free to Choose.

"Reregulate all infrastructure industries to quasi public entitites except when it can be expected that private ownership would produce pricing efficiencies sufficient to off-set the cost of private sector's required returns on management and capital. Few infrastructure industries would stay private. Certainly not Bill Gates desktop infrastructure monopoly"

Wow. Just for the record, is there anything at all that is not susceptible to being called "infrastructure" and getting nationalized under your preferred policies?

"Round up all those who believe effective risk reducing regulation is inconsistent with democracy and freedom and get them to admit that virtually all of their individual success and prosperity would often be impossible without the vast body of new deal regulation that allowed they and their parents to climb up out of political, wealth and capital assymetries that characterized the usa economy prior to the immplementation of new deal institutitions."

Really? Alexander Graham Bell's individual success would be impossible without the vast body of New Deal regulation? Henry Ford's success and prosperity depended on the far-sighted policies of Franklin Roosevelt? Rockefeller and Carnegie needed the New Deal to help their parents climb up out of political, captital, and wealth asymmetries that characterized the USA?

It wasn't just the rich guys getting rich. Everyone was getting a steady stream of new wonders, and finding old wonders dropping steadily in price. Before the New Deal, everyone's standard of living was on an upward trend as new technology, improved production methods, and unfettered economic growth did more for the average American than all the welfare and regulation in history.

If you want to see such a steady stream of wonders in your own lives (or even see the end of this century), the best answer is to institute pre-New Deal policies throughout our economy.

"Make all who naively and simplistically understand and support cartelization deregulation of the last 15 years, acknowledge that it is nothing more than a rationalization for irresponsible cost-shifting that swells the bottom line of a few and does not accomplish any cost, production or pricing efficiecies that could not be just as effectively achieved other ways if the cost shifting were quantified and added into supposed accomplishments of cartelization deregulation."

Uh huh. Take a look at the computer you're typing this nonsense on. Ten years ago equivalent hardware would have cost hundreds of thousands or millions of dollars. Where exactly did all those costs shift to over the last ten years of deregulated computer production?

I thought it was from "Free to Choose" but I couldn't find my copy to check. Thanks
Ken.

more telecom regulation? From where I sit the past ten years have been nothing but more regulation as activist federal and state regulatory agencies reign unchecked. The average telecom files tens of thousands of regulatory compliance documents a year, deals with red tape unheard of in other industries, and the consumer gets what? A stronger oligarchy of entrenched old technology and a tax structure that makes our income taxes look benign.

The sad thing about a Democrat with an ideology is that he looks too much like a Communist with a hammer and sickle.

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