[logfromblammo]

Your question is fundamentally unanswerable. We cannot isolate the operation of the SEC in the market as a variable, any more than we can swim twice in exactly the same river.

With respect to the question, "can the SEC protect Americans from financial fraud?" the answer is no. Fraud occurs frequently, and of greatest recent notoriety and severity are the examples I alluded to. The SEC cannot protect; it can only punish. Just like Chief Wiggum.

As always, in free markets as well as regulated ones, you have to do your own research into your trade partners before deciding to trust them (caveat emptor). The SEC is just part of the institutional stagecraft that keeps the market from becoming paralyzed by mutual suspicion.

And since we cannot have two markets, one for control and one for experimentation, we cannot say with any reasonable certainty whether the malfeasance eliminated by the SEC is of greater or lesser magnitude than the malfeasance enabled by it. But we can say that the latter is most certainly not zero.

[dllthomas]

It's not "fundamentally unanswerable" any more than any other question about a complex system over which we have limited control. It's hard to answer - this is not the same thing. That the question is hard to answer is no reason to substitute irrelevant alternatives. The appropriate thing to do is 1) answer it as best we can, and 2) recognize that there remains substantial uncertainty.