Self Regulation is No Regulation

Self regulation is all too topical these days. There is a phrase used by those who favour self regulation. It goes along the lines of “It is inconceivable that X would do Y because of Z”. Firstly, always beware of any statement that begins with “It is inconceivable”. Generally that which is stated so confidently to be inconceivable is exactly the opposite. “It is inconceivable” is an excuse for the denial of logic and reason.

So, in the above, X is the group looking to justify self-regulation.Y goes something like “to perform an action that leads to short-term gains but leads to the potential for long-term large loss”. Z takes the form “because to do so would be so obviously against their self-interest as to be absurd”.

And yet the examples of the failure of self-regulation are pervasive.

It is inconceivable that American banks would profligately lend vast amounts of money in the form of property mortgages o people who cannot make repayments in order to generate short-term profits and bonuses because in the long-term this would lead to the virtual collapse of the banking industry. Piiiing. Wrong. It happened.

It is inconceivable that the British government would reduce regulations that would ultimately allow matter from diseased animals to be incorporated into feed for herbivorous cattle that would lead to be spread of brain diseases in order to reduce regulatory overhead because to do so would lead to collapse of the British meat industry. Never happen.

It is inconceivable that the life assurance industry would mis-sell pension products in order to generate short-term profit and bonus gains because it would lead to vast claims for compensation in the future. Britain in the 1980s and 1990s.

It is inconceivable that fishermen would overfish in order to make short-term money at the expense of long-term collapse of fish stocks. An so the collapse of the Newfoundland cod fishery.

And so on. The examples are legion.
Self regulation is no regulation. People, individually and collectively, ineffably pursue short-term gain and are incapable of taking into account any long-term implications of their actions. Short-term gain is better than long-term prudence. Those who pursue and justify self-regulation do so because they realise it means no regulation. Entities that are allowed to regulate themselves will not. The conflict between pursuit of their role as advocate of self-interest and self-regulation is fundamental and cannot be resolved. Self-regulation is not existent. It is flimsy onion-skin covering concealing gross self-interest.