Why Regulation Is Good For Growth

Tyler Durden's picture

From Azizonomics

I have in the past criticised regulation for throwing up barriers to entry and taking away opportunity from the youth.

But it turns out that regulation (the more the better) can be an engine for growth.

From Paul Krugman:

As some of us keep trying to point out, the United States is in a liquidity trap: private spending is inadequate to achieve full employment, and with short-term interest rates close to zero, conventional monetary policy is exhausted.


This puts us in a world of topsy-turvy, in which many of the usual rules of economics cease to hold. Thrift leads to lower investment; wage cuts reduce employment; even higher productivity can be a bad thing. And the broken windows fallacy ceases to be a fallacy: something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment. Indeed, in the absence of effective policy, that’s how recovery eventually happens: as Keynes put it, a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plant and equipment.


And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.

So by forcing private firms and individuals into spending money on things they don’t believe they need, government can create demand, which will lead to jobs via the magic of Keynesian multipliers.

Central planners know better than individuals and businesses. That is because they tend to be better educated, having attended the best schools and universities. Central planners tend to think about the bigger economic picture, while businessmen and individuals tend to have small parochial horizons. They are simply not qualified to know how to spend their money.

Bastiat was wrong — anything that creates spending during a depression will have a good effect on unemployment and aggregate demand. Austrian economists and libertarians carping on about opportunity cost should look at the opportunity cost of not forcing businesses to spend. During recessions, businesses tend to hoard cash, causing a fall in aggregate demand. This means prices fall, and the value of debt rises as debtors struggle to make payments on falling incomes, which can lead to mass defaults. The cost of not creating the spending would be falling demand and greater debt deflation. Well-educated central planners understand that under such circumstances government must do all it can to get the economy flowing again to stabilise price levels, and the best way to do that is forcing businesses and consumers into spending their cash on things they would not otherwise need or want, as well as by creating inflation.

It is also imperative that well-educated central planners do all they can to alleviate the damage that citizens are doing to our environment. The common businessman does not think about environmental concerns. He only thinks about maximising profit, like a common jungle beast. And we know what happens when this primal force is unleashed upon the world — we get economic depressions. It is the job of the well-educated central planner to correct his dangerous and deleterious behaviour. This can be done through levying taxes, by passing laws to mandate spending, or by laying smart regulations.

The biggest problem with “free” markets is the stupidity of the common people. How can they possibly know what they want, or what they want to achieve when they have not attended prestigious universities like Oxford, Harvard, or Yale? Without help from central planners working with fact-based information derived from simulations, mathematical models, and empirical studies the common people will never be able to make informed economic choices. Thanks to the genius of central planning for the common good — as well as the hard work and self-sacrifice of central planners — the common people are liberated from making difficult economic decisions. They can concentrate on what they are qualified to decide — what to have for lunch (so long as its contents have been approved by central planners for consumption), what to name their children (so long as it comes from a list of names pre-approved by central planners), or what to watch on television (so long as the transmission has been approved by government censors).


Happy April Fools’.

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Burr's 2nd Shot's picture

I always suspected M$B was Paul Krugman.

redpill's picture

Look, we gave economic liberty a chance, it just doesn't work.  It's time to turn the reigns over to the people who are actually qualified to make economic decisions for all of us, like Mr. Krugman and Mr. Bernanke.  Only then can we get out of this malaise.

economics9698's picture

John got one of his blogs in here, I want one!

spiral_eyes's picture

And I promise you all —

With central planning, nothing will ever go wrong.

malikai's picture

Now we need MDB to show up and declare his love for Austrianism and Libertarians.

Pinto Currency's picture


Krugman is so busy publishing b.s that he doesn't realize is that there is a run on tar and feathers rapidly developing.

AldousHuxley's picture

Central planning works. but the side effects are poor and dumb become poorer and dumber because their ignorance and poor decisions are subsidized. Commoners are happy until the smart and hard working give up because they don't see their efforts being rewarded and everyone loses.


Even graduates of Yale are subsidized because because now even elites buy into that shit that was for the lowerings.They all go into wall st. to gamble rather than create industries.


The biggest problem with “free” markets is the stupidity of the common people.


that's because people want to be lazy and stupid.


common people are why Sarah Palin is popular because half of common people have less than IQ of 100 and they make decisions on emotions rather than logic which gets them into trouble. Do you really want to reward the ilks of white trash Sarah Palin and expect that she will be able to outwit evil genius like ex-KGB "I never smile" Putin?



Ripped Chunk's picture

Ass faced fuck

Happy April 1 Senior Superiority Plus to the 5th

LowProfile's picture

Your ZH handle is an incalcuable insult to the man.

Ripped Chunk's picture

How dare you name yourself after a great author who actually had vision?

Today is a good day to drown yourself.

Mugabe's picture


common people are why BARACK HUSSEIN BARRY SOETORO OBAMA is popular because half of common people have less than IQ of 100 and they make decisions on emotions rather than logic which gets them into trouble. Do you really want to reward the ilks of black third world trash  BARACK HUSSEIN BARRY SOETORO OBAMA and expect that she will be able to outwit evil genius like ex-KGB "I never smile" Putin?





LowProfile's picture

You are no better.

Take your NWO Left vs. Right BS somewhere else, precious few buy into that here.

Ripped Chunk's picture

Why thank you Mugabe you bag faced cunt piece of shit.

Bagbalm's picture

Economic liberty failed to send the right money to the right people. All fixed now.

Ripped Chunk's picture

Because if the person who got ripped off actually wins a settlement they spend the money? And perhaps a few crooks get put in jail. Nah, crazy talk.

Imminent Crucible's picture

...or, "The Conscience of A Sociopath".

Krugman and his shifty eyes. He gives me the creeps. Charlie Manson looks more reliable.

GeneMarchbanks's picture

April Fools! I get it...

cossack55's picture

Not at all. I now feel so free and liberated I cannot see the bonds forged upon my person in the form of never-ending debt.

Winston Churchill's picture

April fool in intent maybe.

Krugman probably believes exactly that though.

Has to be true to be a really funny spoof.

jcaz's picture

Yep-  Krugman is a Yale boy, so either he's being sly, or going MDB on us......

Vampyroteuthis infernalis's picture

Krugman is like rest of the ivory white tower dwellers. Some ass hole told them this crap was the truth years ago and since they live isolated, shallow lives, they believe. Educated idiots. Our world is populated with them.

madcajun's picture

The above is a perfect example why you must stay off the crack. It fries the brain.

A Nanny Moose's picture

Perhpas Kruggybear should try it some time. He might have an epipanhy.

ISEEIT's picture

You neglected to mention Princeton?

What up with that?

vmromk's picture

Regulation ? Who needs regulation when we have the DOUCHEBAG in chief Bernanke at the helm ?

FUCK YOU, Bernanke.

Jonas Parker's picture

I thought Obama was the "Douchbag-in-Chief" and Bernake was merely the "Douchbag-in-Thief".

Zola's picture

I actually thought this was MDB first Zero Hedge Post. But it is not a joke actually... It is a very important question The biggest problem with “free” markets is the stupidity of the common people  because at the end they will kill the free market by electing the wrong kind of people..

KickIce's picture

Actually more on our education and value system rather than the markets.  I guess you can get into chicken/egg arguement with this one.

a couple of Thomas Jefferson quotes:

Enlighten the people generally, and tyranny and oppressions of body and mind will vanish like evil spirits at the dawn of day.


 Whenever the people are well-informed, they can be trusted with their own government.


CH1's picture

electing the wrong kind of people..

Ummmm... dude... all elections elect the wrong kind of people.

Vampyroteuthis infernalis's picture

CH1, I think that is what Zola was getting at.

smb12321's picture

It has nothing to do with being dumb (electing "wrong" people) and everything to do with the change in societal views. The incessant pounding by the MSM that Candidate 1 will "give you free _____ (fill in blank)" while mean old Candidate 2 says we can't afford it has taken its toll. Given the lack of critical thinking and vested interest (gov't check / no taxes) what would one expect to happen?  

When folks blast Ron Paul for "far out" ideas I respond that once ALL Americans considered his ideas the norm.  Don't spend more than you make; follow the Constitution and prosperity comes from saving, a strong currency and peace.  The fact that so few Americans (much less politicians) believe in those things says it all.

three chord sloth's picture

You forgot the space aliens. Space alien attacks have a glorious Keynesian multiplier.

BobPaulson's picture

Seriously though, the UFO thing is not far off. The pigmen like to honey pot Zero Hedge and other sources of intelligent discussion with troll posts that advocate violence, racism or extreme conspiracy theories to discredit it. Then the mind controlling MSM can create sentences like "Whackos and nutjobs who believe in stuff like alien abduction, ESP, illuminati and gold standard currency post of Zero Hedge" or "Folks like Charles Manson, Clifford Olson and Ron Paul avocate withdrawl from Iraq". The association created in the phrase program the sheep to think anything not from the MSM cannot be trusted as valid sources of information.

Kobe Beef's picture

People who believe in the MSM are more lost than those who believe in alien abduction.

KickIce's picture

If there's one complaint I have against ZH it's that nobody ever uses any sarcasm.  Of course the elite are smarter, look what a well-oiled machine the US has become.

Ripped Chunk's picture

Yea, lot's of oil. I agree with that

The Alarmist's picture

And getting better every day with elite solutions, e.g. NDAA, PATRIOT, SOPA, PIPA, etc., to fix all the problems of the world, which seems to be the commoners being empowered to think and act on their own rather than to have their information channeled to them and to have all their decisions pre-ordained by their superiors.

UP Forester's picture

Everybody knows that in a centrally planned economy, the squeaky wheel gets greased....

Arnold Ziffel's picture

You may have heard about that Trillion$$$ student loan problem (with the 35% delinquent rate)?

Here's where the loan money goes:

Fans burn couches, flip cars after Kentucky's win


LOUISVILLE, Ky. (AP) — Riot police used pepper spray in small amounts for crowd control as thousands of rowdy fans swarmed into the streets near the University of Kentucky campus, overturning cars and lighting couches ablaze after a victory over cross-state rival Louisville in a Final Four matchup.



Jonas Parker's picture

Interesting, since the University of Kentucky is in Lexington... The MSM AP must have a geography problem.

wee-weed up's picture

The MSM AP has MANY serious problems. Geography is only a minor one.

Fix It Again Timmy's picture

If the government had a 5,000 page document regulating shoe laces, I would feel much safer.  Unregulated shoe laces can maim, injure and kill!  I hope Congress does something about this!

SilverIsKing's picture

Laces won't be regulated. They'll be banned.

We first need to wait for the Velcro manufacturers to pay off the right politicians.

akak's picture

When shoe laces are outlawed, only outlaws will still wear shoe laces.

The Alarmist's picture

What about slip-on shoes?

akak's picture

Wearing slip-on shoes is the mark of anti-Velcro conspiracy theorists and homegrown anti-government terrorist extremists, and all patriotic US citizens are encourage to report such suspicious activity to their nearest Department of Homeland Security office as part of the "See slip-ons, say something" program.