No Freedom Without Regulation: The Hidden Lesson of the Subprime Crisis - Hardcover

Singer, Joseph William

Hardcover

ISBN 10: 0300211678 ISBN 13: 9780300211672

Verlag: Yale University Press, 2015

Inhaltsangabe

A tour de force that corrects a misconception long embraced by both the left and the right about markets and regulation

Almost everyone who follows politics or economics agrees on one thing: more regulation means less freedom. Joseph William Singer, one of the world’s most respected experts on property law, explains why this understanding of regulation is simply wrong. While analysts as ideologically divided as Alan Greenspan and Joseph Stiglitz have framed regulatory questions as a matter of governments versus markets, Singer reminds us of what we’ve willfully forgotten: government is not inherently opposed to free markets or private property, but is, in fact, necessary to their very existence. Singer uses the recent subprime crisis to demonstrate: 

• Regulation’s essential importance for freedom and democracy
• Why consumer protection laws are a basic pillar of economic freedom
• How private property rests on a regulatory infrastructure
• Why liberals and conservatives actually agree on these relationships far more than they disagree

 This concise volume is essential reading for policy makers, philosophers, political theorists, economists, and financial professionals on both sides of the aisle.

Über diesen Titel

Über die Autorin bzw. den Autor

Joseph William Singer is Bussey Professor of Law at Harvard Law School. He lives in Cambridge, MA.

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No Freedom Without Regulation

The Hidden Lesson of the Subprime Crisis

By Joseph William Singer

Yale UNIVERSITY PRESS

Copyright © 2015 Joseph William Singer
All rights reserved.

ISBN: 978-0-300-21167-2

Contents

1. The Subprime Challenge, 1, 
2. Why a Free and Democratic Society Needs Law, 26, 
3. Why Consumer Protection Promotes the Free Market, 58, 
4. Why Private Property Needs a Legal Infrastructure, 95, 
5. Why Conservatives Like Regulation and Liberals Like Markets, 157, 
6. Democratic Liberty, 177, 
Notes, 183, 
Acknowledgments, 205, 
Index, 209, 

CHAPTER 1

The Subprime Challenge

All that makes existence valuable to anyone depends on the enforcement of restraints upon the actions of other people.

JOHN STUART MILL

Sherlock Holmes and Dr. Watson go on a camping trip. They set up their tent, have a modest repast, and go to sleep. In the middle of the night, Holmes wakes Watson up and asks him, "What do you see?" Watson looks up and sees the night sky and tells Holmes so. "What does it mean?" Holmes asks. Pondering this deep question, Watson answers, "It means the universe is vast and mysterious and our knowledge limited. It means that we only understand what we can observe and that —" Holmes interrupts him. "No, you idiot," he says. "It means someone has stolen our tent."

Things That We Have Taken for Granted

Sometimes it is important to state the obvious, to confront truths so fundamental we have forgotten to see them. The subprime crisis has forced us to remember things that we have taken for granted. Here is the most important lesson from the subprime crisis: neither private property nor the free market can exist without law. Another word for "law" is "regulation." That means that neither private property nor the free market can exist without regulation. Markets are defined by a legal framework that sets minimum standards for social and economic relationships. Private property is possible because law allocates property and defines the rights of owners; property law also ensures that property rights are not exercised in ways that harm the property or personal rights of others or that undermine the fabric of social life or economic prosperity.

These things are true but they are not well understood. Consider this puzzle. The subprime crisis happened because of inadequate regulation of financial transactions. Yet the main political movement that emerged from the crisis was the Tea Party — a group hell-bent on reducing the size of government. Why did a crisis brought on by inadequate regulation result in a political movement that abhors government? The answer is that Americans are trapped by an ideology that sees government as the enemy of freedom, and regulation as an interference with both the free market and private property. Both conservatives and liberals conceptualize regulation as a limitation of market freedoms and as an infringement on the rights of owners. But this idea, pervasive though it may be, is incoherent and pernicious. The truth is that we would have neither markets nor private property nor freedom without law. And "regulation" is simply another word for "the rule of law."

The Tea Party revolt of 2013 shut down the federal government and nearly caused the United States to default on its debt payments. The shutdown began as an attempt to overturn the Affordable Care Act (or "Obamacare"), but the underlying message was one of general contempt for "government." The rhetoric was overheated and intense; according to Senator Ted Cruz, we were facing a grand battle between those who hate government and love freedom on the one hand and those who love government and hate freedom on the other. Obamacare, he said, was an example of "force and coercion from government" and he was against it because "I value my freedom." He explained that "the free market works and government regulation does not." Senator Cruz did not argue for the abolition of government. Yet his rhetoric suggested that any regulation by government is inherently bad both because it interferes with freedom and because it imposes costs on the private sector that impede job creation and prosperity.

Libertarians like Senator Cruz strike a chord with many Americans because we do value liberty and no one likes being told what to do. And "regulations" do seem to interfere with our freedom to act as we please. But libertarians are not anarchists; they do not want the complete abolition of government. What they oppose is regulation. What do they mean by this? Libertarians of a philosophic bent argue that law should be limited to preventing force and fraud, enforcing contracts, and protecting the rights of property owners. The problem is that it is not easy to define what it means to do these things and no more.

The subprime crisis teaches us this lesson. Were subprime mortgages freely negotiated contracts or were they procured by fraud and deception? How should we interpret what their terms actually were? Did those agreements constitute an exercise of property rights or a deprivation of them? Or both? The subprime crisis reminds us that, even if we adopt a libertarian value framework and seek to minimize government regulation of both markets and property, we would still need a great deal of "regulation" to do the work a supposedly minimal state requires. Allocating and defining the rights of owners is not a simple task, nor is determining when a contract has been formed and what its terms are.

Regulation turns out to be essential both to markets and to property. This is true whether one is a libertarian or a liberal. The question is not whether to rely on the free market or on government regulation; that is a false choice. The question is, what legal framework for property and markets best enables us to exercise our liberties in a manner consistent with the values of a free and democratic society that treats each person with equal concern and respect and works to promote our legitimate interests?

It is hard to remember these basic truths because most Americans are stuck in a paradigm that treats markets and regulations as mortal enemies. Alan Greenspan, for example, had long argued that markets work well without regulation and that regulations designed to fix market imperfections inevitably fail. In the midst of the subprime debacle, when Greenspan testified before Congress on October 23, 2008, Representative Henry Waxman noted that this was the reason Greenspan had refused to act to "prevent irresponsible lending practices that led to the subprime crisis" even though Greenspan had had the authority to do so. Greenspan admitted that there was a "flaw" in the model that he had long used to define "how the world works," and that he now understood that free markets have limitations and that regulations might be needed to prevent catastrophic market failures.

Libertarians like Greenspan are not the only ones who contrast markets and regulations. Even a liberal economist like Joseph Stiglitz frames the issue this way. In writing about the subprime crisis, for example, Stiglitz wrote that "markets do not work well on their own," that "[g]overnment needs to play a role ... in regulating markets," and that "[e]conomies need a balance between the role of markets and the role of government."

Framing the issue as the correct balance between "the free market" and "government regulation" distorts our understanding of both concepts. For one thing, this way of framing the issue wrongly suggests that markets can exist without a legal...

Details zur Ausgabe

• Verlag: Yale University Press
• Erscheinungsdatum: 2015
• Sprache: Englisch
• ISBN 10: 0300211678
• ISBN 13: 9780300211672
• Einband: Gebundene Ausgabe
• Auflage: 1
• Anzahl der Seiten: 215
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar