"How can people so lacking in self-regulation be expected to contribute to an orderly, sensible, or decent economy?"
We are sure that Peter Michalson sincerely desires a society that is "orderly, sensible [and has a] decent economy" as he laments about those hedge-fund managers that he has counseled in psychotherapy. We also think that most people want the same as he does (when expressed in such generalities) - and we include ourselves in that group. However, we strongly disagree with the implicit assumption of his article that what exists in the United States now - or at any time in the past - is a free market.
What so many individuals, Peter included, describe as "the free market" is anything but. It is now, and has always been, a top-down (and therefore necessarily government) regulated market, less in the US at its very beginning but much more so starting in the 20th century. By not directly controlling production amounts and prices, as was done in communist countries before that approach was clearly shown to fail (as Mises and others had predicted), the US has maintained and promoted the illusion that its economy is free. However, the enormous number of regulations at all levels cause vast alterations of the amounts and prices of goods and services produced from what would be the case without those regulations and thus, are merely an indirect and somewhat disguised form of production and price control. And because of this illusion, with each new market incident (something harming certain sectors of participants, which was most often brought on by some government regulations) that occurs, there are numerous claims that it is a result of "the free market" and that more regulation is therefore required.
However, all observation of natural systems in reality shows that neither chaos nor runaway increases/decreases are the norm. Rather, except for completely unforeseeable and uncontrollable events, all such natural systems are in a state of stability enabled and maintained by self-regulating negative feedback. In its natural state, society (the system encompassing all humans and their relationships/interactions) is such a stable system, which furthermore could be made quite impervious to external chance events by means of the enormous potential ability of humans to forecast, plan and prevent outside events from greatly disturbing that stability, or, at the least, to ameliorate the effects of uncontrollable events by gradual transition to a nearby state of stability (different values of the social parameters not far from the old). This potential stabilizing ability has been enormously enhanced by the advances of science and technology, but is prevented from being full utilized by the constant interference of governments preventing people from learning, in little steps as they grow-up, just how this societal self-regulating negative feedback can work to the benefit of all.
What is desperately required for the betterment (optimally increasing lifetime happiness) of both individuals and society (the ultimate purpose of which is also for the betterment of individuals) is that they and it learn how to be self-regulating. As a psychotherapist, presumably Peter promotes this to individual humans through his practice. What he does not appear to realize is that the same self-regulating negative feedback that is necessary to promote responsibility in human individuals will also enable the stability of human society, if only it is allowed to do so rather than constantly being pushed and prodded (like a gyroscope constantly being jostled will never return to its natural state of stability).
Regulation of society does not require the imposition of choices by some outside or above authority any more than a human individual always requires a parent or other human acting in a paternalistic manner. Any person is somewhat self-regulating or s/he would not continue to live for very long and s/he has the capacity to become more optimally self-regulating - as Peter appears to promote in his profession as psychotherapist, if only s/he is allowed to do so. Just because some do not, or do not consistently act in such a manner, does not mean that individual self-regulation of behavior is not possible and will not become the norm if individuals are consistently enabled, allowed and even required (by simply not being bailed out) to face, experience and self-repair all the consequences of their actions rather than constantly being helped to escape the harms (and the consequent learning experience) engendered by those consequences.
Just as with the internal homeostasis of the physiology of an individual, the interactions of society can be self-regulating when people discover, understand and agree to act according to certain foundational principles that are inherent in their essential human attributes.
"To function well, every human system (whether the marketplace, governments, or institutions) needs regulation (rules of play) enforced by legitimate authority. Sure, referees and umpires can often be annoying. But as any sensible sports fan knows, a football or baseball game requires regulation."
This is one more false and misleading analogy used by many authors defending government interference in human interactions. Society is not a human system, in the sense of being constructed by humans, as with a game or even an organization of some humans within society. Rather, society is the naturally occurring system that comes into existence when humans interact according to their inherent evolutionarily determined human attributes (and which has therefore existed since humans evolved). As with any naturally occurring system, it must be capable of self-regulation or it would never have come into existence in the first place. The regulations needed by society in order to achieve optimal lifetime happiness for each and every human are already inherent in the personal and interpersonal attributes of human beings. All that has to be done is for humans to introspect, discover those attributes and fully apply them to their lives.
The analogy of a game needing rules is additionally not applicable to society, since a game and its rules (however strange) are voluntarily entered into, whereas humans do not voluntarily enter society. Furthermore, with society there is no inherent logical or prior voluntarily accepted status of "player", "referee" and "spectator" as there is with a game.
"We know regulation is needed because at a basic level we each require it. We need the wise intervention and guidance of our inner authority (whether that’s the mind, the will, or the self) for successful self-regulation. We are each a unit of a greater whole, and regulation is needed at both the personal and the social levels."