It has never been, nor should it be, the purpose of the SEC to protect fools from their own foolishness. The purpose of securities regulation is to prevent fraud and other objective misconduct, primarily through ubiquitous disclosure rules, not to serve as an emergency backup financial planner for reckless or misguided investors.

Does the securities regulation apparatus have a perfect record? Certainly not. But don't fault it for not doing what it was never intended to do in the first place.

Also, the fallacy that every stock trade has a "winner" and a "loser" in the same sense as a casino game suggests a lack of familiarity with even the most basic principles of modern portfolio theory. If I own stock I don't want, and I sell it, then the fact that it goes up tomorrow does not make me "the loser" in the transaction.

Oh, the brave new world of paranoid academy! When the government does NOT stick its nose into my life to prevent me from my own folly, there must be a conspiracy somewhere. Evidently, industries dominated by the paternalistic state are now the rule, not the exception.

There are two reasonable strategies in the stock market.

1. invest, which generally means buy-and-hold for some period, with some strategy, with or without outside advice

2. trading, which can only be done well by professionals

In order for #2 to work, there have to be suckers to be taken advantage of. This works in nicely because half the brokers in the country couldn't make a living without churning their client's accounts.

The amateurs get their accounts churned so the traders can have a regular supply of suckers.

The SEC sees that the fleecing goes on within certain limits of decency.

Is this a great country or what?

Kate, for an approach that you might find more appealing, keep reading. I responded to Larry yesterday here. I was going to blame Christine's post on the fact that she is writing from Texas, then you showed up! ;-)

Isn't this a lot like the basic Ponzi scheme? A sequel to the oldtime song "I'm forever blowing bubbles" might be one about "Bursting big bubbles". Downbeat, Lawrence Welk, "A one and a two ...."

"When the government does NOT stick its nose into my life to prevent me from my own folly, there must be a conspiracy somewhere...."

Well, when the government 'sticks its nose' into A but not B, when A and B are basically the same thing... well, if yuo don't like the term "conspiracy," let's say influence-peddling that incluences gov't choices about what to regulate it. Political scientists whom I doubt you'd consider conspiracy theorists call that "capture." In fact, your fellow conservative critics of the "paternalistic state" (as you call it) regularly argue that we can't trust gov't regulation because gov't is likely to make arbitrary or corrupt choices about what to regulate.

Kate, I have to tell you that I started writing my paper thinking that I would come to the conclusion that the federal government should restrict online/active/day trading in the same way that it claims that online gambling is illegal. Trading in the secondary market has about the same positive utility as does online sports betting (they feed a primary industry). However, the government's completely pretextual and paternalistic rhetoric re: gambling brought me to the opposite conclusion: online gambling should be legal just as online trading is. I'm a libertarian now.

Christine- I am interested in reading your paper. Will you make it publically available somehow? Regards, Kim Snider