No I don't think most regulations are good for society in aggregate, including building codes. What if we had software codes to make sure we write secure software, would that be a good or a bad thing?
Take this payments law for example. Its intended objectives are admirable but I don't believe it will accomplish them nor benefit consumers in the long run.
By artificially imposing a high barrier to entry (licensing fee), the consequence will be to encourage the formation of monopolies.
Furthermore, payment companies will have a lesser incentive to secure their service or build a reputation of trust since consumers will be led to believe that "all payment companies must be secure since they are all approved by the government". What was once an important competitive advantage will lose a lot of its importance.
There are probably other perverse effects I could think of but my point is that things are much more complex than they might seem.
> No I don't think most regulations are good for society in aggregate, including building codes.
Nearly every large earthquake proves you wrong on building codes. Compare deaths for a given magnitude quake in areas with strong building codes vs. areas with weak or no building codes.
Alcohol has some societal benefits. Some people find it pleasurable, it helps some people overcome anxiety in social situations, and it helps programmers cope with the horrors of programming in Java.
I don't see what societal benefits structurally unsound buildings provide.
You're right but in this case, the detail doesn't really matter. The point is you need a lot of capital to enter the market.
Once you are licensed, nothing prevents you from committing a fraud except for the potential risk of losing your bond. This risk could be insignificant given a large amount of money to defraud.
All this law does is guarantee that from now on, only rich people are allowed to commit fraud.
What I mean is that this law which is intended to prevent fraud does nothing of the sort. All it does is guarantee that the people who commit fraud were able to pay the bond. What's the point? If they do commit a fraud, they'll probably steal much more than the value of the bond anyways. All this regulation really does is stifle competition, I'd eliminate it altogether.
The risk that the bond mitigates is not that your money transfer enterprise is a criminal conspiracy. It is that you are incompetent. The concern is that after the first or second instance in which you lose a 5-figure sum of money for a client, you'll pack up and leave town.
I think we can agree that's a far more likely scenario than premeditated fraud.
Incidentally: $500k is the floor of the bond value needed. It scales up to $7MM with transaction volume. Personally, I think they should uncap it altogether.
His point is that the bond is too large, and that's _just_ for California. In the linked quora post, it was specifically pointed out that there are 43 other states where one has to do the exact_same_thing where the bonds vary from $10k-$1M.
You don't actually have to pay the $500k. A new business with no history (good or bad) might pay $25k to post a licensing bond.
I don't have anything to say about the 43 other states that want bonds to conduct money transfers in them, but some of the coverage here seems a tad breathless.
tptacek: Perhaps it is breathless, but I think many of us find it interesting. States noticeably absent from Paypal's licenses:
New Mexico,
South Carolina,
Georgia (heavy banking industry),
Rhode Island,
New York (heavy banking industry),
and Nevada (heavy gambling).
I might put together a spreadsheet this evening if I have time.
> All this law does is guarantee that from now on, only rich people are allowed to commit fraud.
So you're fighting for the little guy to be able to commit fraud too? FWIW the rich guy is not just risking losing the bond, but also going to jail. That's the threat, the bond is just so customers can get paid.
Why require bonds for anything? Bonds aren't going to keep construction companies from committing fraud. They won't keep movers from making off with people's goods, or folding up shop when they get in traffic accidents. For that matter, why require millions of dollars of insurance coverage to work on infrastructure projects? It won't keep me from committing fraud, if that's my real goal.
I have nothing against private insurance. I have something against laws which make it mandatory. I think people should be free to decide for themselves what risk they are willing to take. For instance, the choice to do business with a relatively unknown payment service which offers low transaction fees or great customer support, at the risk of losing money.
I have a hard time getting too worked up about the prospect of squelching the money transfer company that can't afford 1/10th of 1 FTE to post a bond. That same company can't afford to secure their software (software security for a money transfer application is almost certainly more expensive than the cost of a 500k surety bond).
Meanwhile, if you're against basically all licensing and bonding, you're naturally going to be against this one too. Personally, I think that if we're going to require bonds to move furniture, it seems sane to require a bond to move cash.
I wouldn't do business with a payment company that can't afford a 500k expense. Requiring insurance for moving furniture is also important to me, I wouldn't let a company move my furniture without them offering a solid warranty.
What I question though is whose role it is to impose those requirements, the government or the customer? I believe it should be the customer's role.
> Personally, I think that if we're going to require bonds to move furniture, it seems sane to require a bond to move cash.
It is sane, but why not let companies choose whether or not they want to get licensed and let customers choose whether or not they want to take the risk of doing business with an unlicensed company. Note that I do not object laws that deal with misrepresentation, lying, breach of contract, etc.
Anyways, as you said, it's more a question of principle than anything particular about this specific regulation.
Ok, meanwhile, we're howling at the moon about requirements that are, in the scheme of how the government already regulates mundane businesses, totally business-as-usual.
If you don't believe in regulations at all, you don't believe in this regulation. Fair enough!
But if you're basically happy that we have an FDA and an FDIC and an NTSB and an FAA (as artificial examples; substitute your favorite California regs bodies): how is it unreasonable or surprising that California would want money transfer companies bonded? You can't build back porch decks without bonding. You can't move pianos without bonding. You can't sell cars without a license bond. But we want people to move cash without them?
Reasonable people, I suppose, can disagree about whether the bar for accepting and moving cash from people should be as high as the bar for re-siding a garage. But I don't think reasonable people can call the bar a conspiracy against the public.
Don't mistake me: I do not think there is any sort of conspiracy going on and I actually believe the government's intentions are good. I simply believe they are wrong in how to achieve those intentions.
> But if you're basically happy that we have an FDA and an FDIC and an NTSB and an FAA (as artificial examples; substitute your favorite California regs bodies): how is it unreasonable or surprising that California would want money transfer companies bonded?
I might seem pretty emotional about this, but in fact I'm not even American ;). Among the things you mentioned, I only know about the FDA and I do think Americans would be better off without it, for pretty much the same reasons I outlined previously (as a side note, I believe Health Canada bases its own regulations on the FDA). Milton Friedman explains it better than I can here: http://www.youtube.com/watch?v=OazixMEY9I0
So you're against the requirement to carry car insurance?
What happens when someone runs over you with a car and they have no liability or personal injury protection with which to compensate you for your medical bills and they have no money and therefore are judgment proof? Too bad, so sad? Shouldn't have been walking down the street?
Yes, this happens now, but now it's a criminal act to drive a car without insurance so you're breaking the law by potentially putting other people at risk.
I'm curious why someone thought this was an invalid point (I just modded it up). Aren't the principles involved in staking money for insurance, because you might cause damages that you can't repay personally, pretty much the same as those involved in staking a bond because your business might damage its customers?
Take this payments law for example. Its intended objectives are admirable but I don't believe it will accomplish them nor benefit consumers in the long run.
By artificially imposing a high barrier to entry (licensing fee), the consequence will be to encourage the formation of monopolies.
Furthermore, payment companies will have a lesser incentive to secure their service or build a reputation of trust since consumers will be led to believe that "all payment companies must be secure since they are all approved by the government". What was once an important competitive advantage will lose a lot of its importance.
There are probably other perverse effects I could think of but my point is that things are much more complex than they might seem.