On the one side, the issue of private benefits vs social benefits has been ignored since the the "Lucas Revolution" who basically assumes that (through rational expectations), social outcomes are just the summ of many representative agent benefits/losses.
However, there is the old debate on who would be more willing to invest in a new project: a small price taker investor with full information but zero economic benefits (and who needs to invest to stay in the market) or a monopolist who argues that returns from investments are uncertain and thus needs extra profits to finance that investment??
The funny thing about Greenspan (and others) is that he believes in one side or other of theory according to the circumnstances.....
j
> This just in from the Chairman:
>
>
<http://www.federalreserve.gov/boarddocs/speeches/
2002/200209252/>
>
> >No one can deny that fully informed market
participants will
> >generate the most efficient pricing of
resources and the most
> >efficient allocation of capital. Moreover, it
could be argued that,
> >if all information held by individual buyers
or sellers became
> >available to all participants, the pricing
structure would more
> >closely reflect the underlying balance of
supply and demand. Thus
> >full information would appear to be the
unambiguous objective. But
> >should it be?
> >
> >Take, for example, the real estate developer
who conceives of an
> >innovative project that will significantly
raise the value of the
> >land on which it will be situated--provided
that the site possesses
> >suitable characteristics. Suppose further that
it is costly for the
> >developer to determine whether a given site is
suitable. If he or
> >she discovers a suitable site and is able to
quietly purchase the
> >land from its current owners without revealing
the value of the
> >project, the developer makes a substantial
profit, and the community
> >overall presumably benefits from improved land
use.
> >
> >But what if, before the purchase of the land,
the developer was
> >required to disclose his or her purchase
intentions and, in
> >particular, the value enhancement created by
the project? The
> >sellers then seeing the bigger picture would
elevate their offers
> >sufficiently high to extract the full value of
the innovation from
> >the developer. Under these circumstances,
would any projects go
> >forward? Clearly not, because developers would
be unwilling to bear
> >the cost of evaluating potential sites knowing
that they would reap
> >none of the benefit of discovering suitable
ones. A requirement for
> >fuller disclosure of the potential, heretofore
undiscovered value of
> >the land would engender neither more
disclosure nor improved land
> >use.
> >
> >An example more immediate to current
regulatory concerns is the
> >issue of regulation and disclosure in the over-
the-counter
> >derivatives market. By design, this market,
presumed to involve
> >dealings among sophisticated professionals,
has been largely exempt
> >from government regulation. In part, this
exemption reflects the
> >view that professionals do not require the
investor protections
> >commonly afforded to markets in which retail
investors participate.
> >But regulation is not only unnecessary in
these markets, it is
> >potentially damaging, because regulation
presupposes disclosure and
> >forced disclosure of proprietary information
can undercut
> >innovations in financial markets just as it
would in real estate
> >markets.
> >
> >All participants in competitive markets seek
innovations that yield
> >above-normal returns. In generally efficient
markets, few find such
> >profits. But those that do exploit such
discoveries earn an abnormal
> >return for doing so. In the process, they
improve market efficiency
> >by providing services not previously available.
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