From: chased@rbbb.Eng.Sun.COM (David Chase)
Newsgroups: ca.politics
Subject: Re: Picking and Choosing our References
Date: 20 Aug 92 22:11:46 GMT
Organization: Sun Microsystems, Mt. View, Ca.
NNTP-Posting-Host: rbbb

In article <1707iiINNitf@hal.com> howard@hal.com (Howard Gayle) writes:
>In article <l90h36INN6cd@exodus.Eng.Sun.COM>, chased@rbbb (David Chase) writes:
>> There's some recent talk that perhaps the
>>people who manage publicly-held companies don't act in the best
>>interests of the people who own the companies, and actually erect
>>barriers to help maintain their control of the companies.

>Adam Smith made the same observation about 200 years ago.
>Fortunately there are corporate raiders to keep managers from
>getting totally out of line.  Without government-legislated
>limited liability corporations, I think this would be less of a
>problem.

Actually, where I learned about most of this was helping a student
(Jerry Davis) at Stanford process data to study the spread of takeover
defenses through the corporate network.  He was rather amused by the
way otherwise conservative anti-regulation sorts on corporate boards
suddenly felt that government regulation was necessary to stem the
tide of "destructive takeovers".

>There is a form of argument that is fairly common.  (I emphasize
>that David Chase is not making it here!)  It goes as follows:

>1) Define some ideal free market, with "pure" competition, no
>   transactions costs, or whatever.
>2) Show that reality differs from the ideal.  Call the
>   difference "market failure."
>3) Conclude the necessity for government interference.

The argument I was making (or implying) was more towards carefully
examining some of the more extreme applications of "free market"
versus "regulations".  This comes up whenever you are faced with a
commons dilemma or other social dilemma -- either you regulate access
to the commons, or else you figure out how to privatize the commons.
Sometimes the overhead of administering the privatized commons
(weighing the cow's cud to determine how much grass was eaten, to
construct a ridiculous and disgusting straw-man) swamps the gains from
more efficient use of the commons.

One real-world example illustrating this is pollution credits; if it
weren't for the costs of transaction and verification, this works.
However, if much of your pollution is caused by hundreds of thousands
of mobile sources (like cars), it looks like you've got to be fairly
clever if you are going to get economic efficiency (i.e., a fairly
direct correlation between money and pollution) without being swamped
in (expensive) paperwork.  Similarly, it isn't clear who benefits, and
whether or not the benefits are deferred, and whether or not the
benefits are "deserved" (isn't that a well-defined word?) or should be
paid for.

By the way, this is not an argument that the current smog-check system
is particularly efficient.

On the other hand, between large polluters, pollution credits clearly
work to reduce pollution, because the number of transactions is vastly
reduced.

Oh well.  I guess we should return to our regular NAMBLA-bashing.
Hey -- why don't you pay molestors to leave your children alone?  No
government interference necessary...  (it's a joke, honest)

David Chase
Sun