October 01, 2015

Those creating regulations that can be cheated provide the cheaters competitive advantages.

Sir, Michael Skapinker writes: “Devising a system to detect when a car is being tested surely required planning, expertise and a specific decision. It must have required forethought. It is not something you can drift into through incrementally deteriorating behavior”, “Volkswagen, its software and the psychology of cheating” October 1.

Indeed and we must blast Volkswagen for doing that. But, is it not also the responsibility of regulators to make absolutely certain that cheating cannot happen? Otherwise they will be providing the cheaters with a competitive advantage to win over those who do not cheat. At the end of the day, though Volkswagen needs to be punished, severely, let us not forget that it all happened thanks to lazy regulators who thought it was enough to regulate and no would cheat or game it.

Exactly the same happened when bank regulators allowed banks to hold very little capital against what was perceived as absolutely safe, and the securities backed with lousy mortgages to the subprime sector were dressed to the nines, wearing false AAA ratings.