Is regulation a better solution in today’s environment?

The biggest concern associated with the question “what works best?”, is which system would be more stable and able to avoid great crises.  But is it possible at all? Let’s look at the corporate governance as an example. 

It is commonly known that stock prices cannot grow forever, no matter how the growth trend looks like. The Wall Street Crash of 1929 is the best example of naïve investors believing in everlasting growth. Even more, the expected change in price, and the long term average change in value of stock is ZERO.

BUT, Shleifer and Vishny, and many others, describe corporate governance as the agents who are working in the interest of shareholders, and are supposed to keep increasing shareholders wealth. So the paradox is that the main concept of corporate governance is doing something, which is, in principle, NOT POSSIBLE. So isn’t trying to avoid financial crises the same?

We all learn from our own, or someone else’s mistakes. Thus experiencing crises and taking important lessons could be considered as process of learning and improving. Maybe the fact the free banking no longer exists means that lessons have been taken?

In today’s interconnected markets, free banking cannot exit in one single country, as this will lead business to move into that country, and a possibility of WTO intervention. So even those who believe in free banking, can see that it is hardly possible to achieve it.