The death of retired football player Junior Seau begs several questions about rules and regulations.
It has been suggested that the reason for his suicide stemmed from the numerous concussions he received over a lifetime of playing. It also has been hinted that he shot himself in the chest to allow researchers analyze the neurological impacts of brain trauma.
Everyone knows football is a violent but profitable sport that has spurred ever more rules, complexity and equipment improvements.
However, what have all these changes created? Have they spawned more violence and unintended consequences?
It could be argued that improvements to equipment have made players feel safer and thus more likely to hit and be hit harder. Rules to protect receivers and quarterbacks may induce other tactics to harm players, for example, the bounty scheme set up by the unfortunately named Saints.
Teams that try to win at any costvia intentionally harming others or enhancing their own performance with drugs produce the greatest gains. Teams that dont, lose.
The growing popularity of football only adds perverse incentives for players, teams and the National Football League, the regulating agency.
What we have is moral hazard, bringing us to financial markets and the euro zone.
Since the advent of financial markets, institutions have endeavored to manipulate them.
Likewise, financial players successfully rallied to repeal the Depression-era Glass-Steagall Act, which was passed to prevent exactly what happened a scant six years ago. And 12 years ago. And 20 years ago.
Now we have the Dodd-Frank Financial Reform Act. Its authors, who no doubt had good intentions, were cajoled by financial players. JPMorgan Chase & Co., which recently reported $2 billion in losses, wrote a provision designed to allow banks to engage in precisely the same behavior that nearly brought the system down in 2008. These firms are always looking for a competitive edge, to win at any cost, but protected by some padding.
Various acts provide insurance against catastrophic financial collapse, but that gives financial institutions a perverse incentive to continue to take on risk. They will always live on the edge under the current and future environment.
The euro zone is likewise on the edge of brinkmanship. The current crisis promises to be a test for the European experiment: A clash of competing ideologies with no real economic ties.
However, the use of a single currency, the euro, masks the true nature of these economies, and prices are not allowed to adjust to reflect various risks, competencies and performance. All that is loathsome to economists but politicians, well ...
And so here we are: U.S. financial systems continue to be broken with no clear incentive to be prudent and the euro zone is near collapse.
Lets just keep improving the pads and adding meaningless rules with loopholes you can drive a truck through. Yeah, that should do it. Just keep the revenue rolling in.
firstname.lastname@example.org Robert Tino Sonora is an associate professor of economics at Fort Lewis College and the director of the Office of Business and Economic Research at Fort Lewis College.