Ideology- More Important than Theory Or Reality

The report by Sir John Vickers into how to reform banking so that we never again have to face a choice between bailing out bankers and risking a domino like collapse of the entire economy has made a number of recommendations- most prominently that retail and investment banking should be ring fenced  from one another.

What a brilliant idea, in order to avoid banking crises we should ensure that all banks either do nice safe low risk retail banking (like Northern Rock for example) or engage purely in risky investment banking so there would not be a knock on effect to the wider economy if they did collapse (like Lehman Brothers).

The Roosevelt administration brought in a similar law during the Great Depression- and bank collapses continued at a rate of 1 a week throughout the 1930s.

In theory spreading risk widely (by engaging in multiple sectors) should make banks sturdier.

And in practice none of the combined banks have actually suffered the kind of collapses that sent the economy into freefall in 2008 but they are the ones we should break up it seems.

So it neither works in theory or reality but in terms of ideology it is a winner.

Quote Of The Day

“I’ve never understood why we allow our print media to support a particular political viewpoint.”

Sue Marsh at "Liberal Conspiracy".

Fear Of The New

It can be bizarre to see how irrationally wedded to the status quo people are.

For example when US liberal blogger, Matthew Yglesias, draws attention to the insane use of occupational licencing in the USA- for things like cutting hair- hordes of commentators pour on arguing that it would be incredibly reckless to to allow people to become barbers and hairdressers without satisfying a regulatory board or otherwise they would be over run with " Lice, hepatitis, using hazardous substances".

I've never been given hepatitis by the people  who have cut my hair despite the lack of a similar regulatory regime in the UK. Whilst I wouldn't go as far as say Milton Friedman and end licensing for all professions including medicine, it is clearly a silly and wasteful practice in most cases.

Irrational fear mongering about the new brings me on to the impending referendum on the Alternative Vote. While there are legitimate causes for concern about AV*, the claims being made by the NO2AV campaign are scaremongering on a par with """"" unless you licence hairdressers you will get Aids".  The evidence that it provides a massive boost for extremists can easily be shown to be false simply by looking at Australia where it is already in place and fewer minor parties have representation than in the UK.


* It seems likely that it will produce even more disproportionate results than FPTP on occasion for example.