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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (7873)	12/23/2005 1:08:42 PM
From: neolib	Read Replies (1) \| Respond to of 541974

Regarding your post, your issue is a failure to accept negative numbers in assets. Under the current system, if I buy an asset today for price X, you are calling that the 'price'. Yet the value going forward of that asset is anything from zero to + infinity, because the current system (generally but not totally) places a lower limit of zero on most assets, i.e. they may become worthless but not a liability. This is your hangup. All I'm saying it that perhaps we should examine the removal of that lower limit as a means of encouraging better or more responsible behaviour, rather than relying on regulation to say one can or cannot engage in activity Y. This approach is hardly so difficult to imagine, as it already exists to some degree in liability law. If I design and sell a product which is later found to cause injury, the price of the transaction is not the historical price I sold the item for, it now includes the cost of the jury award to those I damaged. What I'm proposing is a market mechanism to allow such legacies to be bought and sold in a free environment. Take tobacco. The history of risk has moved from many years ago thinking it was relatively harmless to finally accepting it as a major health problem. The companies which make and sell these products have seen a shift in their financial risks associated with this. Under the current system, those risks are limited to producers, and a negative floor is placed under them. This causes a certain set of market dynamics in terms of the company, its stock holders. The liability is determined by the court system. The government may or may not intervene with regulatory steps, possibly even eventually banning tobacco. What I seek to knock out is the last step. The courts will always determine liability. In my system, there are two main differences: 1) negative numbers are allowed, and 2) it is simple to buy and sell the risk. The question you should consider is what happens as a result of those two changes. I maintain that both will tend to sharpen peoples assessments of risk, and promote a more healthy system.