Don’t be fooled again.

One way we’ve been bamboozled by the myth that regulating financial markets is bad is by allowing ourselves to be convinced that “hedge funds” and the like are just too sophisticated for simple folks like us to understand. So we don’t even try to understand them. What happens? They steal us blind.

In 2005, law professor David Skeel, in “Behind the Hedge,” simply explained what hedge funds are, why and how they are unregulated, and their pernicious effects on our economy. I wish I could say now, three years later, that his conclusions showed him to be hysteric:

[T]here is a cost greater than lost dollars for all these practices . . . . It is the danger that investors will lose confidence in the markets because the markets are rigged. “People will not entrust their resources to a marketplace they don’t believe is fair,” an American Bar Association task force said 20 years ago in a study of insider trading, “any more than a card player will put his chips on the table in a poker game that may be fixed.” The same holds true today. If investors’ faith in the integrity of the markets is shaken, some will pull their money out, meaning less money will be available for American corporations to invest in ways essential to the nation’s prosperity. Investors will also be unwilling to pay as much for stocks or bonds in initial or subsequent public offerings, making it more difficult for companies to raise money for expansion or the creation of new technologies and products. The effect on the markets, and on the American economy, would be devastating.