Can Government Solve the Paradox of Choice?

This is the first of two videos filmed for the Institute for Humane Studies ‘Learn Liberty’ series.
It summarises an argument I advanced here on Pileus last year in a post entitled ‘The Burden of Too Much Choice’.
Hope you like it. MP

One thought on “Can Government Solve the Paradox of Choice?

  1. Just look at what happened when bank regulators decided to help bankers to choose!

    Suppose you have credit ratings that are absolutely perfect in terms of measuring the risk of default, and banks use these to choose who to lend to and at what rates.

    But then came the regulators, and to help them choose, imposed capital requirements based on perceived risks. And these functioned like a hallucinogen, a veritable LDS; increasing the banker´s sensitivity to risk, so that he perceives the good credit ratings in a much brighter lights, and the not so good ratings takes on an even scarier appearance.

    The consequences of the above, was easy to project:

    A growing excessive bank exposures to what is officially perceived ex-ante as not risky, like the triple-A rated securities and infallible sovereigns, leading to a dangerous overcrowding of the safe-havens and;

    A growing bank underexposure to what is officially perceived as risky, like in lending to small businesses and entrepreneurs, equally dangerous, because of the lost opportunities to create the next generation of jobs for our grandchildren.

    And a couple of years into this humongous crisis our bank regulators still don’t see it… Holy moly!

    Occupy Basel!

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