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All Else Equal: Making Better Decisions
Ep49 “Making Regulation Work” with Jay Clayton
Oct 16, 2024
Join Jay Clayton, former chair of the U.S. Securities and Exchange Commission, as he sheds light on the complex world of financial regulation. He discusses how good intentions behind regulation can lead to unintended consequences and stifle innovation. Jay highlights the struggle regulators face in a politically charged environment and the impact of excessive rules on public firms. This conversation dives into the necessity for effective oversight while balancing competition and the importance of addressing core problems before seeking new solutions.
27:24
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Quick takeaways
- Regulation often leads to unforeseen consequences that complicate market outcomes, creating cycles of additional regulations that hinder innovation.
- The politicization of regulatory bodies like the SEC distracts from their core mission, resulting in inefficiencies and an overburdened regulatory landscape.
Deep dives
Regulation as a Double-Edged Sword
Regulation can lead to unforeseen consequences that may be more detrimental than the issues they aim to address. When regulators intervene in a dynamic market, they often find that their actions can change the behavior of individuals and businesses, complicating the intended outcomes. This can result in a cycle where additional regulations are enacted to mitigate unforeseen issues, leading to an over-regulated environment. The complexities of these interactions mean that measuring the success of regulation is challenging, as the counterfactual—what would have happened without the regulation—is seldom observable.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode