Free Markets, Families and Regulating Fraud

Free Markets, Families and Regulating Fraud

I've been reading several calls for prosecution of fraud on Wall Street lately. No, these aren't coming from the Occupy Wall Street crowd. Instead, top economic and business commentators and scholars are noting the dearth of prosecution and the role this is playing in our economic challenges. This is a fascinating debate and I only have time to capture enough to spark your interest in hopes that you will check out some of the sources I post.

For starters, I've been interested for some time in the notion that many seem to ascribe to that if we want a free market then we don't want regulation. This post by Barry Ritholz (who has been noted as one of the top 15 economic journalists) captures some great thoughts by leading free market economists on the role of regulation and prosecution of fraud. Here are a few quotes:

There is a widespread myth that free market supporters are against regulation or prosecuting fraud. In fact, Adam Smith - the father of free market capitalism - was for regulation of banks, and believed that trust is vital for a healthy economy. Because strong enforcement of laws against fraud is a basic prerequisite for trust, Smith would be disgusted by the lack of prosecution of Wall Street fraudsters today. Smith railed against monopolies and their corrupting influence. And Smith was pro-regulation, so long as the regulation benefited the little guy, as opposed to the wealthiest:

In addition to Adam Smith, Ritholz also notes that more contemporary free market economists are also for regulation and prosecution of fraud as a means to keep the free market working properly. Incuding Richard Posner, Alan Greenspan, Ludwig von Mises and even Friederich Hayek.

Read the article in its entirety on Mark and Aaron Zimbelman's blog, FraudBytes

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