A simple topic for four of us to spend an hour discussing. The conclusion of my opening remarks:

one sort of maybe fictional type scenario would be that you would get a sudden sovereign debt crisis in the United States that would take place in an environment where the political feelings are frayed–there’s a lot of controversy; people no longer see the legislators and the executive as having legitimacy for solving their problems. They take to the streets. There’s fighting; there’s violence. And at that point the people are ready to turn to some kind of dictator to resolve the violence. So that’s kind of a fictional scenario. There’s certainly you can see either economic or political ways to avoid it. But that would be sort of my one pessimistic scenario relative to maintaining our open access order. Which, if we do maintain our open access order, I think eventually we do recover prosperity and we sort of maintain freedom.

John Cochrane worries about

the vast attempt of our government to control economics from the big Dodd-Frank and Obamacare down to the small regulations against Uber and occupational licensing for hairdressers, and so forth. This enterprise has vast power. It’s increasingly politicized. And right now it’s used already to silence opposition to the regulatory fiefdoms. What bank dares to speak out against the Dodd-Frank Act? What health insurer dares to speak out against Obamacare?

It seems to me that strong regulation often has the support, or at least the acquiescence, of incumbent business interests. The question is whether potential new competition is thwarted. Lee Ohanian, another speaker in this session, is pessimistic on that score.

Another recent study found that the decline in community banking accelerated considerably in the last few years, reflecting economies of scale in managing new regulation associated with Dodd-Frank. Small Business Administration says that lending to small businesses has declined by about 20% since 2008, which was of course the year of the Great Recession. And in 2013 only 1 new bank entered the banking industry. So you look at the outcome of Dodd-Frank–declining competition, fewer banks, lack of entry, higher costs, regulators with broad mandates who make vague and far-reaching rules–this represents a sharp departure from the clear and specific limits on government.