Larry White (for whom I worked one summer) argues that financial regulation benefits from diversity.
I am not arguing for the world to replicate the American system of 200-plus regulatory agencies. Far fewer will suffice for most countries. But the next time that someone advocates a single financial regulator and its simplicity, remember that there is another side to that coin: where are the safety valves? Where are the alternatives? What about errors? How will innovation occur? In government (as well as in the private sector) a golden rule is that more competition and less monopoly is likely to be beneficial.
This is similar to a point of view I head MIT biologist Eric Lander express about medical research. He felt that having research spread among a number of agencies, although messy on paper, helped keep the overall process more open and better able to mitigate individual mistakes.
Discussion Question. How does this argument for diversity of regulation relate to the argument over the benefits and costs of federalism?
