Ok, I think this story of why MBS might not be a good thing makes a lot more sense. The question then becomes, how good is the US government at picking policy goals that have more benefits than costs (including implementation costs and increased risks). If it’s not very good, then the existence of a highly developed financial industry might make things worse by tempting the government into adopting more bad policy goals than it otherwise would have (i.e., by providing the government with a tool that it thinks it can use to do good). Does this seem right to you, and do you see any other major critiques of the financial industry that doesn’t fall into this category?
I think this is the main problem. And for domains like finance that concentrate wealth a lot (enabling capture of the political decisionmaking system), the system has to be designed extremely well to avoid runaway alignment problems.
Ok, I think this story of why MBS might not be a good thing makes a lot more sense. The question then becomes, how good is the US government at picking policy goals that have more benefits than costs (including implementation costs and increased risks). If it’s not very good, then the existence of a highly developed financial industry might make things worse by tempting the government into adopting more bad policy goals than it otherwise would have (i.e., by providing the government with a tool that it thinks it can use to do good). Does this seem right to you, and do you see any other major critiques of the financial industry that doesn’t fall into this category?
I think this is the main problem. And for domains like finance that concentrate wealth a lot (enabling capture of the political decisionmaking system), the system has to be designed extremely well to avoid runaway alignment problems.