Dear Mr. Guest,
I am afraid I cannot support your request to join your petition to Congress, and I must express my disappointment that this letter has emerged from Consumer Reports Advocacy.While each paragraph between links is riddled with error stemming from an apparent misunderstanding of the situation at hand, I am most opposed to your claims that there were “no cops” and “no rules” in the financial markets due to deregulation.
In fact, much of this crisis is due to the various complexities and perverse incentives created by the extensive regulation and government interference in the financial market. It is not that there were “no cops” and “no rules,” but that there was strict enforcement of bad rules. You would see your goals more quickly realized if you were to advocate the removal of bad rules, rather than creating petitions asking for concerned citizens to blindly request their politicians to “do something.”
Of all organizations that should understand the emergence of voluntary regulatory agencies in markets, I would think Consumer Reports should be at the top of the list.Firms clamor for your approval and parade it in front of consumers when they receive it. These reputation and brand building effects have made America home to the safest and affordable products in the world. Your intentions to undermine it have caused me to cancel my subscription with Consumer Reports, but if you are successful in your endeavors for government regulation, I will have no better options.
Professor of Economics
Indiana University, Bloomington
Wednesday, October 15, 2008
A Letter to Consumer Reports
In response to an e-mail petition from Jim Guest (from Consumer Union, the non-profit publisher of Consumer Reports), I replied with the following letter: