Optimization and its Discontents in Regulatory Design: Bank Regulation as an Example

Simon, William H.

doi:10.2139/ssrn.1533446

Cited by 7 publications

(8 citation statements)

References 12 publications

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“…VaR risk management models operated through daily price sensitive risk limits that required banks to reduce exposure when the probability of losses increased as a result of falling prices. The efficient markets position, thus, placed so much confidence in market processes and prices that it put those prices at the very centre of regulatory practice, reflecting a basic norm of optimization (Eatwell ; Simon ).…”

Section: Macroprudential As Radical (Transformative?) Third Order Chamentioning

confidence: 99%

The gradual transformation? The incremental dynamics of macroprudential regulation

Baker

2013

Regulation & Governance

118

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This article focuses on the transformatory potential of macroprudential ideas following the financial crash of 2008, examining how they are being mediated by existing institutional contexts and how and why the task of building a new body of technical macroprudential knowledge is proceeding slowly. It is argued that the movement toward a form of macroprudential regulation has a distinctly incremental dynamic that means any macroprudential transformation will be a gradual process that is likely to span a decade or more. Using Peter Hall's framework of three orders of policy change across substantive and temporal dimensions, the article argues that the macroprudential ideational shift can be compared to third order change. In this sense, it was intellectually radical and took place rapidly in a period of around six months. However, intellectual radicalism does not automatically translate into a radical change in regulatory practice, because of a variety of countervailing political, institutional, and informational variables. In this respect, the task of developing first and second order macroprudential policy is proving to be a much more politically contested process. Furthermore, macroprudential policy is being developed by cautious technocrats who rely on the gradual accumulation of data and evidence to justify policy. The result is a distinctly incremental dynamic to macroprudential policy development that displays many of the features of a process that historical institutionalists refer to as "layering."

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Section: Macroprudential As Radical (Transformative?) Third Order Chamentioning

confidence: 99%

The gradual transformation? The incremental dynamics of macroprudential regulation

Baker

2013

Regulation & Governance

118

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“…In discussing the limitations of the economic, "optimization" perspective with regard to financial regulation, Simon (2010) argues that "[a]n economy in a state of financial collapse may satisfy the sparer definitions of optimality that require only that assets be allocated to those who value (pay for) them most" (10). That is to say, a market may be efficient but still spell social ruin.…”

mentioning

confidence: 99%

Regulating-for-Welfare: A Comparative Study of “Regulatory Welfare Regimes” in the Israeli, British, and Swedish Electricity Sectors

Haber

2010

Law &Amp; Policy

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The regulatory state and the welfare state are two institutions that are central to the analysis of the characteristics of capitalist democracies. The regulatory state is seen as focused on market failures and trust-busting, while the welfare state is said to shield citizens from the negative redistributive effects and externalities of the market. This article explores the relations and boundaries between the welfare state and the regulatory state in the electricity sectors in the United Kingdom, Sweden, and Israel. It demonstrates the emergence of social policy within the context of liberalized, privatized, and (de)regulated electricity sectors. This article finds that the boundaries between the regulatory state and the welfare state are blurred in Israel and the United Kingdom but not in Sweden. These findings may imply a connection between the welfare state and the regulatory state, suggesting that a strong welfare state is needed in order to maintain regulation-for-competition.

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“…9 Not included in this total is one of the five pieces selected for the 2013 special issue on regulation after the crisis, namely Henriksen (2013), which examines the relationships between policy models, paradigm shifts and the constitution of agency; what is included in this total is one of the 'regular articles' in this same issue (Helleiner and Thistlethwaite 2013). Also not included in the total is a piece which examines two paradigmatic views of regulation and the contrasting ways in which these might inform an analysis of the reform of bank regulation (Simon 2010). 10 All of these appeared in the special issue, Regulating Finance after the Crisis: Unveiling the Different Dynamics of the Regulatory Process (Moschella and Tsingou 2013).…”

Section: Resultsmentioning

confidence: 99%

Crisis, What Crisis? Regulation and the Academic Orthodoxy

Tombs

2015

Howard J Crim Justice

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What can criminology or socio‐legal studies tell us about the causes of the financial crisis – a failure of regulation, at the very least – or ways in which further such crises might be prevented, mitigated, responded to? The article begins by setting out the emergence and dimensions of the academic orthodoxy on regulation – a series of shared assumptions regarding feasible and desirable forms of regulation. Then it undertakes a quantitative and qualitative content analysis of work on regulation and the crisis to assess the extent to which this orthodoxy has been reassessed in the light of events since 2007.

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Optimization and its Discontents in Regulatory Design: Bank Regulation as an Example

Cited by 7 publications

References 12 publications

The gradual transformation? The incremental dynamics of macroprudential regulation

The gradual transformation? The incremental dynamics of macroprudential regulation

Regulating-for-Welfare: A Comparative Study of “Regulatory Welfare Regimes” in the Israeli, British, and Swedish Electricity Sectors

Crisis, What Crisis? Regulation and the Academic Orthodoxy

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