Thanks for the comments… I think you’re generally raising a bunch of valid points.
A few more thoughts on this:
First, perverse incentives are already present within the current system. Indeed, they’re likely ubiquitous and inherent in any optimization process—it’s just a matter of how powerful they are and the scale.
There is already a lot of regulatory capture and “revolving doors” between regulators and industry (c.f. 2008). In theory, nuclear regulators should want the nuclear industry to flourish, because their job and job prospects depend on it. In practice, it seems hard for me to see how implementing this would increase perverse incentives. Again, if you do this on an industry wide basis (the department of nuclear security is funded by an ETF of nuclear companies), it seems hard to see how regulators can substantially affect the stock movements of a whole industry.
It seems like a related but slightly separate problem.
Also note that this strategy is neutral wrt the absolute level of funding of the regulators. Rather it helps with prioritization within regulation (i.e. the government can buy $10bn or $100bn in stocks and disburse them to fund regulators).
Second, generally, I slightly disagree that limited resources for regulators is not one of the major problem (again see 2008 - where regulators are always way behind industry in terms of staff, resources, analytic capacity, etc. - the same seems to be true for the tech industry, where there aren’t sufficient funds to hire top talent with deep understanding of the sector). Again, this strategy doesn’t really speak to the absolute amount we should spend on regulation—just that it’s a better way to cut the pie.
Hm… but I actually just had another idea of how to fund regulators perhaps reducing perverse incentives and also optimizing more for negative externalities.
Consider that the EU has fined Google $10bn. I think currently this is disbursed to go into the general budget.
But maybe one could buy Google stocks (or a technology ETF) with that money and use the dividends to fund digital regulation.
This way regulators would be incentivized to reduce negative externalities (through fining companies and the industry), but then also they’d be held back to completely wreck industries or companies, because they’re financed by the overall health of the industry after the fine.
Thanks for the comments… I think you’re generally raising a bunch of valid points.
A few more thoughts on this:
First, perverse incentives are already present within the current system. Indeed, they’re likely ubiquitous and inherent in any optimization process—it’s just a matter of how powerful they are and the scale.
There is already a lot of regulatory capture and “revolving doors” between regulators and industry (c.f. 2008). In theory, nuclear regulators should want the nuclear industry to flourish, because their job and job prospects depend on it. In practice, it seems hard for me to see how implementing this would increase perverse incentives. Again, if you do this on an industry wide basis (the department of nuclear security is funded by an ETF of nuclear companies), it seems hard to see how regulators can substantially affect the stock movements of a whole industry.
It seems like a related but slightly separate problem.
Also note that this strategy is neutral wrt the absolute level of funding of the regulators. Rather it helps with prioritization within regulation (i.e. the government can buy $10bn or $100bn in stocks and disburse them to fund regulators).
And then it can’t do all the prioritization without human input: perhaps we do not need to regulate the $4 trillion global restaurant industry as much as the $4 trillion dollar global chemical industry. But I think there’s currently not much quantitative prioritization going on wrt how much regulation capacity should be assigned to different companies within an industry. So this is just to finesse current funding levels.
Second, generally, I slightly disagree that limited resources for regulators is not one of the major problem (again see 2008 - where regulators are always way behind industry in terms of staff, resources, analytic capacity, etc. - the same seems to be true for the tech industry, where there aren’t sufficient funds to hire top talent with deep understanding of the sector). Again, this strategy doesn’t really speak to the absolute amount we should spend on regulation—just that it’s a better way to cut the pie.
Hm… but I actually just had another idea of how to fund regulators perhaps reducing perverse incentives and also optimizing more for negative externalities.
Consider that the EU has fined Google $10bn. I think currently this is disbursed to go into the general budget.
But maybe one could buy Google stocks (or a technology ETF) with that money and use the dividends to fund digital regulation.
This way regulators would be incentivized to reduce negative externalities (through fining companies and the industry), but then also they’d be held back to completely wreck industries or companies, because they’re financed by the overall health of the industry after the fine.