"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary." ~ H.L. Mencken
Does Regulation Prevent Fraud?
?As the failure of the hedge-fund firm Manhattan Capital demonstrates, both government regulators and market players can make mistakes resulting from cognitive biases. Responding to such mistakes by strengthening government watchdogs, although often recommended, reduces both the watchdogs? and the public's incentive to learn, thereby creating a vicious spiral of regulation, regulatory failure, and even more regulation.? Paper by Chidem Kurdas.
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