Thursday, April 30, 2009

Self Regulation In Child Pornography

Many have claimed that the recent crisis highlighted the failure of market's self regulation.

In contrast, we assert that markets have merely responded to the incentives brought about by the policies imposed by the regulators.

For instance in the tightly regulated banking industry, loose monetary policies and other administrative policies that encouraged moral hazard severely distorted the industry's incentives in managing its resources, which subsequently ballooned their risk appetites by taking on more leverage by circumventing regulations and erecting a "shadow" system.

And this has been compounded by authorities who were "caught sleeping at the wheel" or who were in collusion to "game" the system or what is known as the "regulatory capture".

For industries, such as the internet service, which have been less subjected to incentive skewing regulations, the self policing mechanism appears to be taking on some good effect: for instance applied to the crusade against child pornography.

According to the Economist, ``SELF-REGULATION by internet authorities and internet service providers (ISPs) may be having some effect in combatting the worst kinds of online crime. Last year there were 10% fewer websites hosting indecent images of children than in 2007, according to the Internet Watch Foundation (IWF), which deals with criminal internet content reported in Britain. Although a worrying 1,530 sites were in operation globally, this is somewhat lower than the peak of almost 2,000 in 2006, perhaps because of more effective co-operation from ISPs and better data sharing with international authorities. The IWF notes that domains are often moved around every few days, making it much harder to block them."

To quote Jeffrey Tucker in Learning from Web Commerce, ``The key feature of most internet commerce is that government is at arm's length. If the rest of the economy were permitted to work in the same way, all of the blessings of innovation, service, self-regulation, and consumer sovereignty would be everywhere, and not just on computer screens."

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