Maybe Vernon Smith says the following elsewhere in his body of work; maybe not. Anyway, another difference I see between the two kinds of markets is how discretionary spending is, and this affects the stability or instability. In #1, e.g. for food and utilities, spending is not very discretionary. Hence, pretty stable markets. In #2, e.g. for durable goods and investing, spending is very discretionary. Hence, the potential for instability is much higher. Whether one buys stocks or bonds, or a business does capital spending, or how much banks loan, it is typically very discretionary and can be deferred. Putting more money in stocks and bonds, capital spending by businesses, and banks making loans show occasional herd-like behavior. Bubbles may form as a result. The opposites -- selling stocks and bonds, refraining from capital spending, and banks not lending -- show occasional herd-like behavior, too. The opposites accompany bubble-bursting.

Spontaneously, 'no'.  I can't read your mind. Are you asking if the nature of the property might imply some different legal procedures, e.g. what are the respective rights of buyer and seller of a ream of paper versus a stock or bond?

I'm sorry if I wasn't clear. The stabilty and instability I meant was macroeconomic. It wasn't at all about dangerous chemicals, safe substances, property rights, or legal procedures. Nondurable consumer goods--about 75% of private sector economic activity -- is very stable. All of the macroeconomic instability comes from the other 25% -- the investment sector and capital spending.

Luke,

This is a case of being hung by your own metaphor.  Stock and bond transfers are voluntary transactions and there should be no laws that make any such actions illegal (assuming no fraud or theft are involved).  Whereas dumping actual toxic chemicals into people water or air is damaging property that the polluter doesn't own and should generate either criminal or civil liabilities.

It is true that a stock could suddenly be seen as 'toxic' and large numbers of people could want to get out of it at once, and it is true that that could cause collapse of some financial markets for a period of time - and lots of instability and harm - but it wouldn't be the job of the government to step in and deprive people of the right to sell their lawfully owned property, or set price floors, or interfer with the timing of sales.

The idea of the government providing security or stability at the expense of individual rights is a slippery slope we need to get off of, not more deeply into.

If there is an action being taken that does not involve initiating force, threatening to initiate force, stealing or commiting fraud, then no individual right is being violated and there is no justification for a law against that action.  The market places will over time provide as much security and stability the as people want to buy, and have enough knowledge and experience to judge as valuable to them for the price.

I agree with what Steve says. My different take follows. I don't see how different laws about stocks and bonds could reduce macroeconomic instability. I believe there is going to be some instability simply because of herd behavior by humans. On the other hand, government intervention is a cause or catalyst for a lot of macroeconomic instability, a main one being fiat currencies backed only by debt and tax revenues.

Markets crash, markets boom.  It is government involvement that causes what would have been a simple market readjustment into a fully blown out crash of epic proportions.  

Reality cannot be ignored.  The government seems to think so though.  Regardless of what measures the government takes it is only delaying at best the inevitable, the only thing it will accomplish is making it all that much harder when it does crash.  And of course it will after the fact attempted to manipulate and "run the economy" after the fact making the recovery even slower and prolonging even more misery...

(Edited by Jules Troy on 11/20, 8:44pm)

Life is kind of a search to find that thing you are good at-- the things that bring you a sense of pleasure in the accomplishment of them -- and do them or it to the best of your ability.  It being...realizing that pleasure of accomplishment.   Hopefully, not defined for you by others.   An often imperfect search, like all things mortals attempt.

Or not.

Now imagine being that guy we've all known; never got close.    Has achieved mostly resentment of those who have.

What would his economic models lool like?   Would they emphasize consumption and production of value, or just one or the other?   Would they even ackowledge the pursuit of 'that thing?'

Would he get healthy by pushing 'pure endowment' models and imagine a world made only of consumption?

I think some would and do.

regards,

Fred