Legislation, decrees, and interventions reflect the views about how the economy is affected by financial institutions and instruments held by our rulers and their court intellectuals. Behind all but the crassest special-interest legislation lies some theory about how markets behave and how they affect the economy and therefore the common good. Legislated changes, such as the reforms that took place during the Roosevelt years and the deregulation mania of the late 1970s and 1980s, reflect some theory. If the theory is at variance with the way the economy behaves, the reforms will do little good and may do great harm.
If with the passge of time the behaviour of the economy changes, the intellectual foundation of particular legislation may be undermined. At that time, legislation, and the institutions and usages that it created, can lose its legitimacy. The regulated financial structure was thus legitimised by the financial debacle of 1929-33, and the deregulation mania occured in the 1970s and 1980s after a long run without a fully realised debacle.
Thursday, 29 January 2009
I said I wouldn't post it, but