One of the most important things to know about disaggregation is that you must still maintain some sort of feedback loop if you want the disaggregated parts to work together. For example, if a factory that makes nuts and bolts splits into a factory that makes nuts and another factory that makes bolts, the two new factories must work together to make certain the sizes, shapes, and material work together.
We see this problem in the US drug industry. The drug companies create new products, but the government decides if the prodcuts can be sold. While in theory this might enhance drug safety, in practice the government agency has entirely different goals than the drug company and the people who consume drugs: the bureaucrats' main goal is the preservation of their careers. Their performance is not measured in terms of profit earned or lives saved; their performance is measured by how well they follow the rules and whether or not a product they approved harms anyone. As a matter of course this means that the government demands draconian, hideously expensive testing and then refuses to let even the safest drugs be released for sale unless they're "better" than existing drugs; this makes no sense if the goal is safety, but the real goal is to avoid possible bad publicity. Complete disaggregation, in this case, leads to fewer lifesaving drugs.
Bear this in mind as the Obama administration attempts to create new regulatory agencies. One proposal would create a consumer oversight agency with broad powers to regulate any new financial products intended for consumers — an agency that would be completely disaggregated from the people who provide the products and the people who consume them. Without any doubt, this new agency will stop financial innovation dead in it tracks.
Topics: · finance · government
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