Sunday, December 11, 2011

Case for financial regulation


Well, enough said and enough written on pros and cons of it. Here are some examples which highlight why do we need regulations!

If one compares purely free market capitalism with a game without any referees and govt. controlled socialism as a game where referees decide every move, it's trivial to understand that both seem ridiculous! In the first case, it leads to chaos and the second seems boring to watch!

Manufacturing has improved many-fold by being able to identify when a process is out of control and needs intervention by using Statistical quality control. “Statistical process control (SPC) is the application of statistical methods to the monitoring and control of a process to ensure that it operates at its full potential to produce conforming product. Under SPC, a process behaves predictably to produce as much conforming product as possible with the least possible waste”. Does not sound too bad, does it?

Another example of control or regulation is thermostat. It allows to start heating or cooling depending on the defined threshold limits. Imagine if there was no thermostat!!

Let's take some human body related examples. Hairs, nails keep growing and need continuous maintenance to keep them in shape. Ask a woman and you will know how important is manicure and pedicure!

A house needs constant cleaning so that it is dust and germ free. Trees and lawns need continuous trimming to keep them within control as well.

The following medical monitoring instruments/tools help us to take action when our health or disease goes out of control. Blood sugar monitoring meters, ECG, EEG, the list can go on...

So, in almost every aspect of human living we continuously monitor and regulate 'things' as otherwise it gets out of control and becomes un-manageable. That being said, there is a possibility of bureaucratic controls creeping in by the name of regulation! That's always a risk. 

But, not having regulation will be like not installing traffic signals for the fear of having to stop at red light and taking the risk of getting into an accident!

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