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For example, to trade securities, sell insurance, or sell real estate you need to get a license. To get a license you need to take exams and pay money to be certified. Most people won't go through that effort and so the larger companies make a lot of money from the lack of competition.

My favorite example of mandatory entrenchment are the Series 6/7 exams for finance. I think the exams make perfect sense for licensure - but you aren't allowed to take the exam unless you are currently employed by a licensed broker. It's a legally enforced old boy's club.

Are you saying it should be easier to start your own broker/dealer business? Or just that people ought to be able to take the series 7 without being sponsored in order to make themselves more hireable?

Yeah, I'm just complaining about sponsorship. I don't remember there being much else in the way of what I consider to be superfluous barriers to entry.

I agree that the sponsorship requirement to sit for the test is backwards, but if you are talking about barriers to entry for creating a new broker/dealer, the series 7 is a small inconvenience compared to everything else†. You have all the FinCEN stuff plus capital requirements as well as various recordkeeping, auditing and reporting requirements. It's a huge pain in the ass.

†http://www.sec.gov/divisions/marketreg/bdguide.htm

Yeah, they are a pain in the ass and could be improved greatly I'm sure. I'm just saying capital, record-keeping and AML requirements are not completely without a public-serving point, unlike the sponsorship requirement.

mmmm barriers to entry. Collect that market power! I submit that anymore, about the only barriers to entry left in any industry are regulatory barriers to entry. Do you know how scarce cabby badges are in NYC?

That's an interesting way to put it. You're basically saying that Bitcoin will be regulated, either because the regulations will be good for society (in which case society will advocate for them) or bad for society (in which case society may not advocate for them, but those with political power will).

Yep, pretty much.

I think the (2) has an unnecessarily biased phrasing. The capacity to deal with regulation, whether that regulation is good, bad, or otherwise at the macro level, is just one of the many economics of scale that can be harnessed by large companies. Because of (1), regulation is inevitable, and once you have almost any regulation at all, a competitive benefit accrues to larger companies, who can consolidate the regulatory compliance function in a way smaller companies cannot.

This is a perspective that is often overlooked on HN, understandably, but the fact is that startups are in many ways extremely inefficient businesses. Most business functions, from accounting to training to regulatory compliance, simply don't scale down very well, for reasons that have nothing to do with politics.

large businesses thrive on being able to manipulate regulation to their benefit.

that's what "Large Companies Thrive On Regulation" hints at.

It is not just that large companies are more efficient at dealing with regulation; Large companies actively lobby for regulation as a way of protecting themselves from (smaller) potential competitors.

It may be that regulation for the public good is inevitable and desirable, but one cannot assume a priori than any particular regulation exists for that reason.

I don't think, on the net, large companies lobby for regulation more than they lobby against regulation.

Appeal to authority and all that, but..

"the pressure on the legislature to license an occupation rarely comes from the members of the public . . . On the contrary, the pressure invariably comes from the occupation itself."

Milton Friedman

"…as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefits."

George Stigler

In my opinion, the synthesis of the two points is that society shouldn't advocate for regulation (no. 1) precisely because of the inevitability of regulatory capture (no. 2). Of course, people can disagree over which point is really more inevitable. I think no. 2 is more inevitable, so it would be wiser to resist no. 1.

Bitcoin will be regulated because the power of the state demands it, and aside from the state's vast power, the regulators actually have the reasonable argument that while they may corrupt, venal and malicious at times, giving their power to completely random-ass anonymous people wouldn't be an improvement.

IE, The power of unregulated bitcoin is not "power to the people" but power to Silkroad founder and from there one would guess the Zetas and so-forth.

Makes sense.

In the end it's about choice. Would you rather trust the Zetas or Uncle Sam?

How did regulation stop the latest market bubble related to the housing bubble and false ratings for derivatives?

I don't think scams are going away any time soon and there's dear little you can do other than to protect yourself with common sense.

> How did regulation stop the latest market bubble related to the housing bubble and false ratings for derivatives?

Deregulation starting in the Clinton era?

Deregulation didn't cause the false ratings.

During the housing bubble, common sense (or at least the conventional wisdom) was that "real estate prices only go up" and "buy now or be priced out forever"

These are real sentiments that I heard from real people who while they were wrong (and I felt they were wrong at the time) aren't completely stupid.

Just to clarify: you obviously don't need to be licensed to trade securities on your own behalf. Anyone can open up a retail account and trade. You do need a license to trade on behalf of other people (brokering), but I don't think that's unreasonable.

I have to say that the situation here is much more specific.

SAP consultants make a lot of money but they aren't necessarily regulated by the Federal Government.

What makes finance something that "needs regulation" and an important target for regulation, is that it doesn't just make money but literally defines "what money is". From tulips to penny stocks and Madoff, the dangers of "unbounded finance" are clear.

But one should note the state, by its control what we believe is currency, plays in many ways the same game as the Ponzi-schemers, with the relative limit that it's trying to keep things going a bit longer.

Either way, it's reasonable to say that this magic will be wrested back (if they ever lose it), by those already maintaining an existing monopoly on force and violence (in where you say this monopoly is Hobsian or La-Fimilia-Zeta-ian).

You're saying that something will be regulated because similar things have been regulated in the past.

That's like saying we will never achieve flight, because all we have is cars, and anything car-like can't fly.