Monday, September 03, 2012

Wrong feedback

JP Morgan's Jamie Dimon was recently grilled by a Senate subcommitte re a $2 billion trading loss at the company.  If you are not a stockholder or have any business affiliation with the company, why do you care?  Why do U.S. Senators care?  Because everyone in the room (including Dimon) assumed that large losses are now subject to taxpayer bail-out.  That is where we are in 2012.

Today's NY Times includes "At Least Fun In the Sun Isn't Banned For Now ..." which takes some digs at nanny-state regulations proposed, and many adopted, in California.  It's a silly piece that looks for contraditctions with the area's supposed "frontier menality" heritage.  Blue-state California is, of course, anything but frontier-minded.  Look at California's legislature.

In modern America, we are linked by the ever more popular presumption of socialized losses which does make every other private act a potential "externality". There is a feedback loop here. If taxpayers foot the bill for my bad health habits, they can argue that my behaviors are their business. 

Where do feedback loops end?  It's hard to say and it can be bad.


Speaking of bail-outs, here is a must-listen conversation between Neil Barofsky and Russ Roberts