When thinking about regulation, it is helpful to have some regulatory principles. Here are my proposals: Keep it simple. Simple regulation is cost-effective regulation. Simple regulation minimizes both regulatory costs to the government and compliance costs to the regulated firms, costs eventually borne by consumers or taxpayers. Complicated regulation invites lawsuits and encourages efforts to… Read more

Almost everybody pontificating about financial regulation seems to be recommending increased capital ratios, increasing the ratio of firm’s capital to assets. It is also true that financial regulation around the world includes minimum capital ratios. The reasoning seems to be that if you increase a financial institution’s capital, it is less likely to fail, but… Read more

This is a question that I’ve never seen asked, at least not in the popular press, but it seems important to me, and I’ve been thinking a lot about it lately. For one thing, how can you possibly write good regulation if you don’t know what you are trying to do? It could be that… Read more

I was in Peoria yesterday to give a talk to the City Council. Peoria is a suburb of Phoenix, but it is intent on having its own identity and economy. The City has a population pushing 150,000 spread over an amazing 180 square miles. They like their open space in Peoria. It’s a great looking… Read more

Ventura California’s City Manager, Rick Cole, has had two recent pieces at newgeography.com, here and here, titled “The War for Jobs.” In these pieces, he outlines some important changes in California cities’ environment, and what Ventura is doing to attract or grow jobs, because, as he says, governments don’t create jobs. Rick’s right. Governments don’t… Read more

The Wall Street Journal (WSJ) and Larry Summers are having a heated exchange over the impacts of unemployment insurance on jobs, and they are both being stupid. The WSJ claims that extending unemployment insurance is causing unemployment, and that their opinion is consistent with Summers’ past statements. Unemployment insurance can exacerbate unemployment in times of… Read more

I recently gave a talk and itemized my principals for bank regulation. They are: • Keep it simple • Preserve correct incentives • Minimize political influence • Maximize market feedback • Minimize moral hazard issues • Regulation is not protection Our friends at KERN Economics have come up with a plan that meets all of… Read more

Two articles today give us an idea of how hard it is for governments to cut back. The first one, in the Los Angeles Times, reports that the city’s Mayor, Antonio Villaraigosa, is recommending that the city “Slash city services.” In the second article, Dan Walters discusses the politics of California’s Governor’s proposal to cut… Read more

Below are two quotes from this article: “We’ve actually walked through this horrible recession with our economic base unscathed,” said Stephen Levy of the Center for Continuing Study of the California Economy. “The core of the California economy is still in place,” said Chris Thornberg of Beacon Economics in Los Angeles. With all due respect,… Read more

Vince Reinhart released a fascinating piece on February 25, 2010. I highly recommend reading it in its entirety. Here, I’d like to talk about two paragraphs: How will the Fed raise the short-term market interest rate? The old-fashioned way of tightening monetary policy is to shrink the amount of reserves outstanding by selling assets. Over… Read more