Positive Feedback

Hold it right there!
Hold it right there!

The economy doesn’t (always) tend towards equilibrium as classical economics textbooks suggests. But things are worst when things tend towards an equilibrium that doesn’t benefit the society in general, many social phenomena that I’ve described in a previous post. The social/market forces are pushing the situation towards something no one wants; without an authority mandating stuff, no one have the incentive to help reach the collectively beneficial outcome.

In a recent article by James Surowiecki in The New Yorker, he discusses how success of big banks builds upon success and bring about the mega big banks that results in a concentrated banking system. It is thus possible that we allowed banks to grow big and stay so because the market naturally tends towards that and we have problems assessing the welfare gains from increasing bank sizes, as suggested by Surowiecki:

The trouble is that the “market” for banking is so distorted—by switching costs, by government subsidies and guarantees, and by the banks’ market power—that it’s hard to know whether big banks are adding value or are simply exploiting their oligopolistic positions.

The only problem that we know with the concentrated banking system is that they increase financial risk. That being said, regulations will have to start moving towards managing the risk that is contained in the financial system and if this really do result in policies that have to limit the size of banks then so be it. The government is the only one who can act as a dam holding up the floodwaters of market forces.


  1. Your Google Analytics account is no longer collecting visitor data.

    Its time to upgrade to GA4!

    Text “Consult” to (512) 675-1665 to begin!


    Blue Highlighted Text
    422 W Riverside Dr.
    Austin, TX 78704

    reply opt out

  2. I know your struggeling with getting leads right now. Unfortunately its about to get worse, because your competitors are now using Ai to generate leads for them.

    The good news is you can now generate leads with Ai too and better yet you can even clone yourself with Ai.

    Shoot me a text and you can learn how: +1 (805) 622-2612


    9169 W State St #1614 Garden City, ID 83714

    Avoid Marketing Messages Here:

Leave a Comment

Your email address will not be published. Required fields are marked *