It's a matter of principle though. You don't restrict the freedom of individuals to protect them from other individuals that are bad actors. You go hard and strong after the bad actors. What other examples of laws outside of finance can you cite where individuals are restricted in order to protect them from other bad actors? It's absurd and not in the scope of what government should be doing.
>What other examples of laws outside of finance can you cite where individuals are restricted in order to protect them from other bad actors?
Pretty much any consumer safety or mandatory licensing law.
Even something as simple as buying a beer - we insist that legal adults are not allowed to buy a beer until they are older.
We insist that adults must be over 21 to buy a handgun in many states, or that (in other states) they must show that they are sophisticated gun owners by passing a firearms safety course.
We let people with special licenses and training (pharmacists) buy opiates openly, yet deny individuals the right to do so without receiving written permission.
We don't allow non-specialists to buy certain kinds of explosives, but we allow others with credentials to do so. The same applies to all kinds of things, up to and including varieties of river frogs (!).
We insist on documented "informed consent" for things like surgery, again to protect vulnerable people from bad actors.
We don't let adults buy many kind of fireworks out of fear that they will harm themselves or others, yet if someone can prove (through obtaining a license) that they are competent, we let them buy and fire huge commercial fireworks.
In short: there are an enormous number of similar restrictions. A lot of them exist because the previous state (no law) caused enough damage that restrictions were added.
But none of your examples use the reductionist & discriminatory "how big is your bank account" standard as a proxy for a person's responsibility.
What if you had to be rich - far beyond the sticker & insurance price - to buy a car? ("You're not a millionaire? We've decided you should only be allowed to take the bus.")
Rich to buy a beer? Rich to buy a gun?
Rich to buy a bunch of OTC medicines? (Poor people would still need a prescription - from a doctor, or perhaps, under the "rich makes smart" standard, just a rich sponsor.)
Rich to buy fireworks?
Rich to buy certain books, with dangerous knowledge? (Similar to how it is only by private investing that you get a full practical education in how such investments/firms work.)
A simple example: if you are poor and are on medicaid, it’s not possible to have a vasectomy without a 30 day mandatory waiting period to make sure that you are certain. If you are rich and have health insurance (or pay out of pocket) it’s completely fine to do it the same day.
That's still not 'wealth' but rather 'ability to pay the costs'. While correlated with wealth, that's not the same bar, and ability-to-pay is far more rationally related.
An entity paying – actually forgoing other possible expenditures of the same money, as in this example Medicaid or some other 3rd-party payor – should have some level-of-control. There's a budget constraint in effect - other priorities they are responsible for will suffer if this one is chosen.
But anybody, regardless of wealth, for whom it's important enough to scrape up the costs can skip that hurdle, in your example. There's no extra legal burden, of thousands of dollars of costs, added by the state just because they're poor. There's no extra complications the government forces onto the counterparty – the doctor – just because the patient is poor, thus deterring the otherwise-mutually-desired activity from happening at all.
(Of course, there are such complications if Medicaid actually pays – hence many doctors avoiding Medicaid-reimbursed patients/treatments.)
And in the end the poor patient still gets the treatment - unlike the permanent freeze-out of unaccredited investors – unless & until they bank $1,000,000.
Every one of your examples are of the case of protecting the individual from hurting themselves or others. This is quite different from the question, which is to cite a law that restricts someone in order to protect them from others.
I agree that some of the examples GP gave don't quite fit, but their insight about consumer protection laws is key.
Say a consumer protection law that prohibits an appliance company from selling me a cheap heater that isn't up to code. That law restricts the appliance company's freedom, but it also restricts my freedom to contract with the appliance company. The law is restricting my freedom to protect me.
(Personally, I'm fond of Matt Levine's "stupid investment license" proposal, but I would not be in favor of an "unsafe heater" license)
But they aren't restricting your freedom. They would be restricting your freedom if some people could buy those appliances but not you. Saying they are restricting your freedom using your example is like saying your friend was put in jail, and thus they are restricting your freedom to hang out with that friend, which IMHO is a bad interpretation.
They're restricting my freedom in the sense that, in the absence of government, I would be free to contract with the seller of the non-certified heater.
It is mandatory to have car insurance (to protect others) unless you are rich (if you can prove you have assets to cover a $250k claim, you don’t need insurance). Obviously varies by state.
Most of your examples are designed to prevent unqualified people from hurting others, the main exception being the regulated drugs one.
This raises the question of whether a similar system could exist for investments. Do you think there could be a "prescription" investment where you'd need a sign-off from someone with certain qualifications who'd consider your financial position and what you were planning to do?
I'm OK with these sorts of "in defense of us all" regulation, but I think the wealth test in particular is a bit perverse. I think this "anti-classism" critique is better than the libertarian critique.
We didn't have rules, then something extremely bad happened to make people say, "that should be illegal." So it's made illegal. A generation passes and young people look at said regulations, think, "that's a stupid rule," and they revoke it. Goto 10.
Investments that require you to be accredited are often pretty bad ones. All the great opportunities get cherry-picked by those with the right networks. What most people will be investing in are the scraps that all the smart investors passed on. That's how accredited investors get burned and go back to boring old index funds.
If you open these markets up to average Joes, it's going to be a bloodbath. Fox News will switch from running ads to invest in gold to ones for scam companies with fraudulent books. Elderly women will get hounded by phone salesman. We'll go back to the way it was in the 80s.
The problem with caveat emptor is society as a whole gets screwed as well. We all get to live with the economic collapse brought on by the situation.
> A generation passes and young people look at said regulations, think, "that's a stupid rule," and they revoke it. Goto 10.
See the concept of "Chesterton's fence":
> In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”
First determine and be able to explain why something was put in place. If you cannot explain why, you have no right to tear it down. If you can explain the original reason, you may then be able to explain why it may no longer be needed.
My preferred solution is UBI + no gambling with the UBI rule. Similar effect in this area (ignoring all the other wonderful benefits a UBI has) but without the nastiness of a net worth rule.
Yeah it's all gambling. I'm doing a 180 and saying net worth floor bad, can't spend UBI on it good. The "it" in both cases is supposed to be held constant.
You need an rx for many things that would be fine otc for paternalistic reasons, that have no “abuse” potential. My post was about rx requirements not prohibition of recreational drugs.
let's say you want to permit gambling, because people should be free to gamble. Even in the case of permitting it, there are still legitimate reasons to have regulatory systems. For example, if you go to a casino to play craps, you as a consumer have an expectation that the casino is giving you fair dice. Now we could say that such a thing shouldn't be regulated, let the market decide or whatever, but now every time you go to a craps table you have to test the fairness of the dice yourself. So every time someone new comes to the table, they're testing the dice. It would be ridiculous. Even if you ran an entirely fair organization, everyone would be coming to the table and testing the dice because they don't trust the ecosystem, and your ability to have a fun and care-free gameplay experience becomes hampered by bad actors creating an ecosystem of poisoned consumer expectations; it would not only harm players, but it would also harm proprietors that wish to host games with fair dice. Or you can just say "you know, maybe casinos should not have the freedom to give people unfair dice".
Absent government regulation doesn't necessarily lead to the scenario you described of everyone having to test the dice all the time.
Third party certifiers could (and many believe would) emerge as trusted testers. For example, if you own a casino you can request certification from the "Fair Dice Association." They can then certify that your dice are fair. I as a consumer know they're reputation, and I trust their due diligence.
This also has the benefit of utilizing free-market competition to drive down costs and ensure quality. It also avoids granting an authorization of violence, which some people believe is wrong whether it's a "government" or not.
This isn't purely theoretical. It already happens. SOC 2 certification from the AICPA is a great example.
The problem here is that somebody has to pay the Fair Dice Association and generally it ends up being the Casino. It also generally pays better to be a dealer than a dice certifier, so certifiers are often weighing the possibility of future employment when inspecting the dice. Finally, the risk of repetitional harm has proven, in practice, ineffective at preventing malpractice.
This isn’t purely theoretical. It has happened repeated in recent history. Arthur Andersen signed off on obvious accounting fraud at Enron due to conflicts of interest. During the GFC, credit ratings companies graded low quality MBS derived securities as ‘triple A’ without bothering perform anything beyond a cursory examination.
Now imagine what would happen if every rando could start playing in the private markets. Well you don’t have to imagine too hard, we did a natural experiment not long ago with crypto currencies. What did we get? Shameless pump and dump schemes organised openly on social media, pyramid schemes, vapourware ICOs, and all manner of other dodgy dealings.
One reason these scams were so hard to stop was that so many unsophisticated scammers and scammees people were involved. The wealth requirement at least reduces the numbers of people involved to a somewhat manageable level. I do agree though, it’d be nice to have a more equitable way to do this. I think this action from the SEC is an important step towards that as it now opens the doors to qualified people that might otherwise fail the wealth test.
> You don't restrict the freedom of individuals to protect them from other individuals that are bad actors. You go hard and strong after the bad actors.
That's fine. But you first up the enforcement and second decrease the qualifications.
I can tell you from personal experience that the SEC has a lousy record of enforcement against even serial bad actors. And the civil system is even worse.
4 of 9 startups that I have been involved with have had criminal levels of malfeasance and have gone to court and lost--however, that didn't win anybody any money. And the SEC was nowhere to be found. Perhaps I'm just bad at picking startups, but anecdata from my friends suggests that I'm batting better than most and that the fact that they got judgments against them is the unusual part and not the 50% having malfeasance.
Story time of the worst: worked for a startup that had the usual friends and family investment structure. A couple dozen people all at $50K-$100K. No big deal.
Came in to do technical work. Okay, once I got there it was clear that everybody was out of their depth and the work was going to be significantly more than expected. Not unusual, and I'm working hourly with some number of hours defrayed by stock options if I think the idea is useful.
Start down the path. CEO is spending money like water on marketing. That's not unheard of and probably not even a bad idea.
The CEO then gets a "lawyer" from Silicon Valley who attempts a maneuver to take control of the company from the investors without buying them out.
And here come the lawyers.
So, of course, at this point, a chunk of us demand both the financial records as well as the documents behind the maneuver. Denied, so we need to compel the request.
And, of course, once we get the documents, we find that the company has been bled of nearly $1.5 million in cash in what were later found to be illegal arrangements.
Off to court we go. So, what are your options?
You can sue individuals, but that means piercing the corporate veil. You can force the company into bankruptcy, but if you're found against, you can wind up with a big penalty on your hands. You can report to the SEC, who basically ignore you because this simply isn't worth their time to bother with ($10 million is the minimum to even get them to call you back).
And through all of this, you will be spending cash to your lawyers while the opposing side is spending investor cash to fight you. Or, in this instance, has cut a special deal with the "lawyers" by giving them a "retainer" of $300K and now is doing work "for free".
Oh, by the way, the clock is ticking. If you don't push the company into bankruptcy soon, that "retainer" can't be clawed back because it will be outside the time window.
Fine. File a suit to force payment due and force them in bankruptcy.
The opposing "lawyer" shows up and his sole job is to delay while doing nothing. The judge even finds in your favor and admits that he has no sufficient way to penalize the company or the lawyer. And likely won't penalize the lawyer anyway because the court system protects its own--even the scumbags.
And, by the way, a significant cohort of the investors are VERY upset with you. They like the con-man, after all. So, you aren't crusaders for justice; you're interlopers who upset the apple cart.
And, if you're vulnerable, you may get a suit launched against you by the company for "reasons". Yes, it's a nuisance and you will win, but it will cost you even more money.
The moral is: We probably would have been better off to simply let him keep stealing money from people, cut a deal for some level of payment and just walk away.
THIS is the reality you are championing for. Just so you know.
> THIS is the reality you are championing for. Just so you know.
I understand the current reality. I was in several startups myself, and got caught up in this sort of thing.
When I said:
> You go hard and strong after the bad actors
there is a lot wrapped up in that statement. Not just having more SEC involvement. More like doing whatever it takes, all the way up to refactoring our entire financial system and going after wall street and the federal reserve.
I understand that sounds unrealistic, but the financial class are mostly parasites IMHO, and will eventually kill the host if something is not done. It boils down to class warfare, which the accredited investor BS explicitly reflects.
